Chipotle’s CEO on Fighting the Tide of Quitting Workers: It’s About More Than Higher Pay and Better Benefits

·18 min read
Brian Niccol, New CEO of Chipotle Mexican Grill
Brian Niccol, New CEO of Chipotle Mexican Grill

Credit - Kim Cook—Copyright 2018 Kim Cook Photography, Inc.

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As chief executive of Chipotle Mexican Grill, Brian Niccol likes to schedule time on his packed calendar to visit the company’s restaurants and see people enjoying the food.

“I see some of these burritos and bowls that people build and I’m like, that is enormous,” he laughs.

Niccol has led Chipotle since March of 2018, and in that time, the “fast-casual” restaurant chain has grown from 2,441 locations to nearly 3,000. The company’s stock has soared 443%, compared with the S&P 500’s 73% rise over the same period. And between 2018 and 2020, Chipotle has more than doubled its annual net income to $355.8 million. Oddly enough, Chipotle isn’t Niccol’s first stint at a Mexican themed restaurant. Prior to joining Chipotle, he was Taco Bell’s CEO, after serving in a number of executive roles there.

Despite Chipotle’s upward trajectory under his leadership, Niccol’s tenure as chief executive hasn’t been without its challenges, especially during 2021. Like many restaurant chains, Chipotle has found it more difficult to hire and retain workers in a competitive labor market where employees are gaining the upper hand. In October, Chipotle employees in New York staged a strike to speak out against working conditions, a protest that coincided with organized walkouts this fall at companies including American Airlines, General Electric, John Deere, Kellogg’s, McDonald’s, and Netflix.

Niccol acknowledged in an October earnings call with investors that many Chipotle restaurants have been “missing sales” because they’re not fully staffed. The company raised wages last summer, enhanced benefits and has said it would sharpen its focus on developing talent and helping workers learn skills they need to gain job promotions. At the same time, Chipotle has increased prices across its menu to help manage the higher costs of labor and food supplies.

Niccol spoke to TIME in late November about hiring and retention, sustainability and one coming addition to Chipotle’s menu that really excites him.

(This interview has been condensed and edited for clarity.)

The pandemic has been a brutal time for the restaurant business, and Chipotle has had to confront a lot of major issues that we’ve seen elsewhere in the economy, like hiring challenges, rising prices, and workers quitting and striking over higher wages, more flexible hours and better treatment. Not to mention, customers who are sometimes on-edge and rude. How does all this look from where you sit? And how are you handling it?

Yeah, there’s a lot going on right now. And there’s probably more stress or anxiety out in the marketplace than you’ve seen in the past which compounds all those things you just talked about. So the approach that we’ve taken is a simple one: We want to make decisions for our people and for our company that are consistent with our purpose and values. I’ve found that’s worked in good times and tough times. And we’re willing to learn and grow and we’ll take the feedback accordingly. From the pandemic to the tight labor market to the challenging supply chain situation we’re in, we’ve just really relied on clearly communicating the decisions and making sure that those decisions were made consistent with our culture, which is really grounded in values and purpose.

What’s the shorthand version of that? What are Chipotle’s values and purpose?

Our purpose is stated as cultivating a better world. And then we do that through our ability to source and provide culinary driven food with integrity. And what’s behind that is the idea of doing the right thing for our people. We’re doing the right thing for our customers, and we’re doing the right thing for the planet. That’s shorthand, but when we communicate it consistently that way, it’s a simple thing. So if you just take that approach and people see that, hey, look, your decision was grounded in our company culture and purpose. I think they’re comfortable with us sometimes saying, look, we got it 80%, right. But there’s 20% we have to tweak. And I’m very transparent with that. And one thing the pandemic’s taught me is… I thought we were communicating a lot before the pandemic. Now we’re really, I think communicating at a much better clip all the way down to every single restaurant.

How are you communicating differently now?

It’s the frequency of it. The good news is we’ve got all this technology that allows us to bring together all of our restaurant managers and above on a video conference or a phone conference. And we allow for Q&A in all those sessions. We were doing that probably once or twice a year. Now we’re doing it monthly. When the COVID pandemic hit, [our core team was] meeting twice a day, every day, and then we were communicating out the next morning. So it was like, we’d make decisions in the morning. We’d evaluate those decisions by the end of the day, if we needed a course correct, or new information came in, we’d make new decisions and then communicate in the morning.

How about now? Are you still meeting that often?

Now, things aren’t changing that fast anymore. But we still have these flash areas of supply chain staffing, and then [new] regulations around COVID, as well as COVID spikes or pullbacks have caused different operating rules that we continue to have to navigate.

It’s a tough job market for employers. How do you retain employees?

We’re always trying to figure out how we can ensure that we’re developing our people correctly and rewarding them correctly, both in compensation and additional benefits. One of the biggest things that retains people at our company is the growth of our company. You can join our organization as a crew member and in short order—I think it’s in short order anyway, two to three years—you find yourself as a restaurant manager. In five to seven years, a multi-unit leader, meaning you’re overseeing six to eight restaurants. And that’s a big job if you want to stop and think about it. It’s like each of our restaurants are doing two and a half million dollars [in average annual sales]. You get eight of those, it’s a $15, $20 million business. There’s 30 to 35 employees per restaurant. So you’ve got 250 employees. That’s significant.

One of our biggest retention tools is the fact that we’re building over 200 restaurants a year. Opportunity is a very attractive retention tool. The other piece too, is we provide things like debt-free degrees, mental health benefits, English as a second language, not just for you, but your extended family. The bigger we get, the more good we can do. And most recently we’ve been really public about how we’re helping the local farm, the small family farm. That gets people even more committed. And it makes them proud of the ingredients that we serve. There’s also the emissions-based targets that we just put out there to reduce the scope one, two and three greenhouse gas emissions. I mean, that matters to young people. And a lot of our employees are young folks. They’re in their 20s.

How do you make sure you’re holding on to people who might be potential store managers and more—because it’s tough for all businesses right now?

Yeah, it is tough. We do this exercise where every quarter, we check in from the folks that work directly with me all the way down to the restaurant, which we call a four-by-four. It’s really just asking: “What are the four things you’re focused on for the business?” “What are the four things we’re focused on in developing you?” It’s a powerful tool because you take accountability then in saying how you want to grow. Your manager then is responsible to help you grow, and then you’re also crystal clear on your accountabilities on performance, because I think those things have to go hand in hand. I have found this over and over again. People like to be successful. They like to win. They like to know that they’ve accomplished the objective. I’ve found people really are energized when they know what results they’re accountable for. They can see the impact that they make on those results. And then they get to discuss how they’re doing against it. It’s a powerful exercise.

Clearly, it’s important that Chipotle remains a fast growing company. But you have a lot of competitors that are adding more to their menus and adding more to the dining experience. How are you dealing with competitive pressures?

Look, if we give a great experience for employees and we give a great experience for our customers, centered on what we do uniquely, which is food with integrity, great culinary, high customization, we’ll keep winning. There aren’t many places where you can go for less than $10 and get the food that we provide. Meaning, it’s clean in our opinion, raised the right way and then prepared with classic culinary techniques so that you get a delicious experience. And the speed at which we do it, the customization at which we do it and then the price at which we provide it, that’s our offense and that’s our best defense. That’s what we stay after. It’s like, I want every person when they have their experience at Chipotle to be like, “God, the guac is just so good.”

You mentioned earlier that a lot of your employees are young people. Other CEOs have recently noted that young workers almost require their employers to take a stance and be out front on social and political issues. Are you feeling that kind of pressure from your employees? And if so, what issues has Chipotle chosen to take a stand on?

Yeah. The expectations I’ve heard from our folks—and I think it’s the right expectation—is they expect us to have a point of view on food. They expect us to have a point of view on people development or the inclusive aspect of everybody having a chance to succeed at our company. What I have found that resonates really well with our employees are the things that we can be truly authentic with and actually make an impact on. And so that’s where we spend our time. I think we’re a leader on the climate discussion. I think we’re a leader on the idea of doing the right thing for farming around regenerative farming. I think we’re a leader on doing the right thing for the food supply chain. I think we’re a leader on frankly inclusion and the diverse nature of our workforce.

How so?

I say this to everybody: There aren’t many companies where you can show up and potentially have just a high school degree or still in process of a high school degree and we will support you to get the next capability that you need whether that is some vocation, community college, traditional college, whatever learning you want to enable you to move further along in our company. The good news is if you are passionate about our purpose and you love the idea of the restaurant business and of the culinary experiences that come with it, we can put you on a path to hopefully build your capabilities to match your ambition and that’s where we spend our time.

Can you talk a little bit more about the environmental and farming work that you’re doing around sustainability and emissions reduction?

So, on the farming side, we buy, I want to say 20 or 30 million pounds of local organic produce. The reason why that’s important? Our bonuses are tied to us growing that every year. A percentage of our bonus is tied to us making progress on this organic local food chain. And I think it’s critical that we do it.

One of the biggest things that we do for the small farmer is we give them multi-year contracts so they know that if they create the field to be organic for use growing, let’s say, cilantro, they know they have got a big buyer for years to come. They don’t want to turn a field to be organic cilantro only to find out, now what do I do with this organic cilantro? It’s a big risk for them. So these multi-year contracts, we do the same thing with animals as we do on produce. If you raise the animal correctly or consistent with what we believe are the humane practices, feed them correctly, we will give you a long term contract on the other side. That’s really powerful for a young farmer—meaning they’re new to the industry. It’s also powerful for a farm that’s thinking about generationally transferring the farm.

We also support the national young farmers coalition. I think we’ve committed over $5 million to them recently. We do grants. If somebody wants to start a hog farm and they need a sow, and they may not have the ability to get the money to get the sow, that’s where we can support them accordingly and get them started. We support some of the academic programs that a lot of these folks take in order to become successful farmers. And I can’t remember, there’s a bunch of degrees that we do as debt-free that are in the agriculture space, so we really try. The goal here is if we say it’s important, then we need to demonstrate that it’s important.

Chipotle recently pledged to cut carbon emissions by 50% by 2030. And that’s not only in the restaurants, but also across the supply chain. How will that work?

This is obviously like working all the way back with ranchers on whether there’s a better way to raise cattle. Is there a better way to harvest the produce and transport the produce? Can we put distribution centers closer to farms? There are a lot of things we can be doing through the supply chain. Also, are there different ways to provide energy in our restaurants? And one of things I love about our company is we’ve always been experimenting. We had a restaurant where we literally stuck a windmill on the roof to see if we could use wind power to supply the restaurant. It didn’t work.

But somebody was able to try it?

Yeah, to see what we can do. It’s easy to say, we’re going to experiment, learn, and frankly be better. I found, if you don’t make a target, you don’t achieve the target. So that’s why we put it out there. We can’t just say, we’re going to be better. We got to have a target for how much better we’re going to be.

How are you making sure the entire company is working toward these targets?

The climate-based targets are part of the bonus structure as well. Just like the food I was talking about. And then the third thing that’s part of it is equity and pay as well as ensuring that we’ve got an inclusive yield, meaning everybody is growing in our organization. So you go from manager to field leader, field leader to TD. We want it to be representative of the diversity we have as we move up to the organization. So all three of those. So you got people, climate and food are tied to our bonus.

How are you setting targets related to diversity?

We operate everywhere around the country and the diversity of our work force represents usually the region that we’re in. And so we want to make sure the diversity of that workforce grows with us. So if you add field leaders, team directors, executive team directors, we want that to continue to be representative of the part of the region that we’re operating in. So we monitor that as well.

Lately, many American workers have been asking for—and getting—raises. What’s been Chipotle’s experience with that over the last year or so?

We’ve always been a leader in compensation, especially at the entry level spot, so we took a look back in, I guess it was like March, April and the [labor] market was really tight. We weren’t getting the hires that we wanted to get. And so we said, benefits are great, the growth opportunity is great. But you know what? They’ve got to have the right wage to get them started. And so we took up our average hourly wage to $15 across the company and for the starting job. It’s something frankly, that we used to look at on a six month cycle and now we’re looking at it on a week to week basis, market by market, because in this inflationary environment, you’ve got to recognize what you’re dealing with. And so luckily we have the pricing power to complement our need if we need to pivot on other cost elements. Whether that’s wages or buying produce.

Are there places where you’ve had to look at bringing the starting wages up beyond $15 per hour?

Yeah, we already do that. There are parts of the country where the starting wages are $18, $19 an hour.

Are there practices that you’ve put in place during the pandemic that you think you’ll keep around, because it just makes more sense and works really well?

Yeah. I would say the thing that we’ll probably keep in place is the monthly communication. I hope the market’ll be a little bit more stable where we’re not having to look at so many elements from wages to the cost of chicken on a two to four week basis. But I definitely think one thing I’ve learned is that as a company that’s growing as fast as we are, we can’t communicate enough. And we won’t be doing obviously the twice a day conversations, but this monthly cadence of connecting with all of our restaurant general managers is something that we’re going to stay with. It just works. It’s not working because we’re in a pandemic, it works because it’s a good practice. It’s a really good practice.

What are those meetings like? Like, you’re all on one big Zoom and people are chiming in asking questions?

The way I think about it is we set aside an hour. We usually have 20 to 35 minutes where we’re speaking. And then we leave the rest of the time for Q&A. Some of it is live and others are… we allow people sending questions ahead of time too. And I’ll tell you, I think the last 20 or 30 minutes where you have the dialogue on the questions at hand is the most valuable piece of this.

It seems like you can really get a feel for what’s happening on a local level that way.

Totally. I’d like to try and get out every week and get to a certain part of the country to go visit a couple restaurants. But it’s just that. It’s a couple restaurants, and we have 3,000 restaurants versus I have all these folks on the phone or on [video-conference]. And what you find out is one person says it and like a bunch of people in the chat say, yeah, me too. Me too. And then you’re like, OK, we do have something here to address. And that dialogue is invaluable.

We’re almost at the end of 2021 and I’m wondering if you have any predictions for the coming year. What are your thoughts about 2022 right now?

I believe there’s going to be opportunities that we’re not aware of yet. I think there’s going to be more tailwind than headwind in ’22. And I believe our company’s positioned really well to take advantage of it for the benefit of our employees and our customers. There’s a lot of challenges that we’re going to be dealing with, but I’m optimistic we’re going to get through it and I think we’ve demonstrated just how resilient our company is and just how resilient our people are.

On the topic of food, do you have anything new coming to Chipotle’s menu in 2022 that we should be on the lookout for?

I’ll tell you, we’ve got this plant-based chorizo that we just finished testing. We haven’t nailed down when we’ll launch it nationally, but it performed well in tests. If you’re a queso con carne person, put some of this plant-based chorizo into that queso. Oh my gosh, man.

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