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December 17, 2015

Why Chipotle’s Trouble Might Start with Metrics

Chipotle Brandon
Fast food darling Chipotle was in the news last week following an outbreak of norovirus that sickened more than 140 customers in Massachusetts. The incident was linked to an employee who was working while sick.

Chipotle said it might be forced to raise prices to cover the cost of enhanced food safety and lost business because of closed stores and slumping sales.

The norovirus incident came on the heels of an earlier E. coli outbreak at stores in several U.S. states, compounding the company’s woes.

Sadly, the norovirus outbreak and associated business losses were completely avoidable. It would not be surprising to find its root in a decision to minimize or cut sick day costs; a decision that will undoubtedly lead to costs that far outweigh any benefits.

For an hourly wage, indeed any worker without sick-day coverage, the decision to work while sick is strictly an economic one. Forfeiting a day’s wages is an immediate and likely painful loss. Therefore, the decision to work while is sick is predictable.

In many organizations, aggregate sick day costs are measured. It’s a fairly simple metric that tracks unit labour costs. A number like this is tantalizing on a corporate balance sheet. It is easily viewed as an extravagant, and therefore expendable, “employee benefit.” Frequently, such numbers become targets for cost reduction.

Where it all falls down is on the associated costs and risks that are not so easily measured and, therefore, less frequently factored into decision-making.

Consider some of the costs associated with the Chipotle employee coming to work sick. First, is the immediate loss of sales due to store closure; then, there are direct costs associated with restoring health and safety to restaurant operations; and, there will likely be long-term costs from greater regulatory scrutiny. There may also be legal costs from customers who became ill.

Costs that are difficult to measure concern lost opportunity. These include the lost productivity of co-workers who may also become ill. Then there’s the impact to Chipotle’s reputation; it’s a brand focused on offering healthy food choices after all. Sales figures may be an indication, but it is close to impossible to measure all of the decisions by customers who will not choose Chipotle in the future.

Taken in isolation on a balance sheet, an item like aggregate sick day costs might look expendable. But, as the Chipotle experience demonstrates, this seemingly straightforward calculation is part of a constellation of costs and risks – many of which are poorly measured, if at all.

How does your organization view sick leave? Is it measured?
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Tracey WhiteAbout the author

Tracey White is a negotiator, mediator and coach who specializes in strategic planning, execution, business operations, and analysis. She combines conceptual business acumen with a focus on metrics and data analysis to support evidence-based decision-making, planning and priority setting. Her strengths include Enterprise Project

Chipotle photo courtesy of Proshob


Filed under: metrics, risk, risk management, time off, tracey white
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