Applebee’s restaurants used to have a turnover rate of 146 percent. This is high, even for food service. In order to counter this turnover problem, they employed a ranking system run by their managers. Under this system, employees receive one of three grades: A, B, or C. The top twenty percent are A’s, the middle sixty percent are B’s, and the bottom twenty percent are C’s. Once they are rated, managers are to work harder to retain the top eighty percent, or all the A’s and B’s. Since they have executed this plan, they have effectively reduced their turnover rate to 84 percent. Managers are thinking more about the staff they are in charge of and working to be better managers. They can earn raises or bonuses for retaining the top employees. This has created a whole new thought process for the managers. They actually care and give employees the day off on their birthdays or anniversaries. They come up with new forms of recognition, similar to employee of the month types of deals. They also have an Applebucks point system where the points earned can yield a prize in the form of a bike or a DVD player. It’s a pretty cool system, and I think it is a good HR move. One problem with this system, though, is what happens when the difference between the A’s and the C’s is miniscule. It is also important to be careful not to punish the C’s when trying to reward the A’s and B’s. While differentiation in treatment is necessary sometimes, managers have to be very careful how they do it.
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