The Brilliant Management Insight That Helps Chipotle Retain Its Best Employees

When now co-CEO Monty Moran was surveying Chipotle's 1,500 restaurants, he found a fascinating consistency: the best-performing ones all had a manager who had come up from the crew level.

Seeing that, he created a system to provide a path for internal mobility, a program of "restaurateurs." Within the program, hourly crew workers can rise up to the ranks to senior management - putting them above a $100,000 annual salary.

As Max Nisen of Quartz reports:

Restaurateurs are chosen from the ranks of general managers for their skill at managing their restaurant and, especially, their staff. When selected, they get a one-time bonus and stock options. And after that they receive an extra $10,000 each time they train a crew member to become a general manager.

The restaurateur program was designed to give in-store managers greater influence in their stores, Moran says. As a consequence, the program aids in retention. Instead of flocking to corporate management, standout employees stay in restaurants, close to crew and customers.

As Moran says, the difference between a Chipotle run by a restaurateur and one that's not is immediately apparent.

"I walk into a Chipotle and the first thing I do is take notes on how I feel," Moran tells Quartz. "Is it fun, is it upbeat, is there camaraderie, is there pride? Enthusiasm? Is the place clean, does it sound and smell good? Is the line moving fast? Do the customers seem happy? How does it feel? And if it doesn't feel excellent then I know it's probably not going to become a restaurateur restaurant."

Moran himself has selected each of the 400 at Chipotle, who run 40% of the stores. One day each store will be run by one, he says.

The restaurateur program makes Chipotle different from other brands in the fast-food game. Unlike most companies, where raises and promotions follow store sales, people ascend at Chipotle due to their ability to mentor colleagues.

Chipotle's insight into the benefits of promoting from within has been corroborated by organizational psychologists, who find that the outside hires - who often have more prestigious résumés - aren't nearly as reliable as the inside promotions.

In a 2012 study of 5,300 financial services employees, Wharton assistant professor Matthew Bidwell found that while external hires are paid about 20% more than internal employees for the same position, they do worse on performance reviews for their first two years.

As the Wall Street Journal reports, the external hires were 61% more likely to be fired and 21% more likely to quit than people promoted from within.

The big difference: According to Bidwell's research, internal workers develop skills specific to their companies, which new hires will naturally have to learn.