Why Chipotle’s CEO prefers promoting managers to hiring externally

Gone are the days when Chipotle was synonymous with the porcelain throne.?

Nearly eight years after its 2015 E. coli outbreaks and some five years under the leadership of CEO Brian Niccol , Chipotle has experienced a considerable turnaround . When Niccol assumed the corner office in 2018, the fast-casual restaurant was stanching a sales bleed and relying on cheesy promotions to win back customers. Since his arrival, Niccol has grown sales by 77% and more recently announced ambitious plans to more than double Chipotle’s restaurant count from around 3,100 to 7,000 in the next decade or so. That objective will require much higher worker retention than Chipotle is currently seeing. The average turnover in fast-casual restaurants is 130%, writes Fortune’s Phil Wahba . Chipotle’s turnover ballooned to almost 200% in 2021, and its facing growing unionization efforts.

The need for greater retention isn’t lost on Niccol, who acknowledges that workers must not only sign on but stay on to reach his expansion goal.? Leadership development will be key to improving employer loyalty and the company’s growth, he adds, noting that the most effective managers are those hired and developed internally.

“If I want to open 300 restaurants a year, that means I need 300 new general managers a year,” he tells Wahba. “And I want to do that with a ‘promote within’ approach.” Frontline workers can rise to the highest level of general manager in 3.5 years, Chipotle says, earning a compensation package of about $100,000 . Keeping entry-level workers long enough to hit manager status involves automating laborious, rote tasks, writes Wahba, “while sustaining the ‘you’re a chef’ cachet of Chipotle’s fresh-food ethos.” In order words, giving employees authority over and pride in their work.

“It’s a tough recipe to perfect. But that quest is clearly driving Niccol’s decisions,” Wahba says.

Leadership Tip of the Week?

?? Don’t let cost-cutting efforts fray the employee-employer relationship and trust built during years of growth. In times of turbulence, leaders often put employee needs on the back burner and fail to recognize their contributions. Instead, they should encourage managers to take an active role in their employees’ growth, continue to have career-focused conversations, and establish mentorship relationships. That way, both employees and executives are prepared for whichever direction the business pivots.

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Leadership Next

On this week’s episode of Fortune’s Leadership Next podcast, co-hosts Alan Murray and Ellen McGirt talk to Karen Lynch , CEO of CVS Health and the #1 ranked woman on Fortune’s Most Powerful Women list. Lynch talks about how far CVS has come in the 60 years since its founding and shares more about her personal passion for health, the importance of including mental health services in primary care and her journey as a woman in leadership.

Listen to the episode and subscribe to Leadership Next wherever you listen to podcasts, or read the full transcript here .?

Those are our biggest leadership stories of the week. Thanks for reading, and make sure to check back next week for more exclusive content.

-? Ruth Umoh, Fortune’s Leadership Editor?