Mexicana’s Compensation Strategy For many businesses in today’s belt-tightening economy, decisions on pay need to be strategic to ensure that employees are treated fairly and to ensure that businesses can remain viable. This requires knowing what your competitors pay their employees and knowing your own salary budget. But knowing what your competitors are paying can be both valuable and painful. As a primary stakeholder and former CEO of Mexicana (a fast growing chain of fresh Mexican restaurants) Bongani Ndlovu knew he was competing against some restaurant chains with competitive compensation systems. Mexicana is a fresh Mexican grill featuring Baja-inspired foods that are made from scratch daily. Following a trip to Cabo San Lucas on the Baja Coast in Mexico, Mexicana founders Bongani and Zandi Ndlovu were inspired with a vision to bring the freshly made Mexican cuisine with the vibrant lifestyle to South Africa. They started their first restaurant in 2008, and after just 13 years, Mexicana has more than 20 franchises in Gauteng, the Western Cape, Kwa-Zulu Natal and the Free State, as well as two stores in Namibia and two in Botswana. One of the main challenges Mexicana faces is the fierce competition for customers as well as employees. “You’ll be surprised how much of a difference having good employees in all areas of the business makes,” commented Bongani. “For the fast-casual food industry,” remarked Bongani, “you are dependent upon your people. If you don’t treat your people well, they won’t treat your customers well. If you customers aren’t treated well, you have no business.” For months, Bongani agonised over how he could develop a competitive compensation plan that not only matched the objectives of the organisation, but that also fell in line with the tight budget of each individually owned franchise unit. He stated, “We, of course, leave the final compensation decision to the franchise owner, but we do all we can to educate and persuade our franchisees to be competitive and fair. In the long run, this is how they can maintain a superior level of customer satisfaction.” Bongani pointed out that a strong benchmark for them has been Burger-Delish. Burger-Delish started in Cape Town and is known for its great compensation package. They start out all their new, entry-level employees at R70 per hour. They also offer flexible schedules to accommodate school and other family commitments, free meals and a pension plan. For permanent employees they provide medical aid, as well as disability and life insurance coverage. Their reason for paying so high is based on a strategy that lower turnover and more committed workers will lead to better service. “What Burger- Delish does for their employees is truly amazing,” commented Bongani. “We often see employees moving from one Burger- Delish store to another, but we rarely see employees leaving Burger-Delish.” In addition to responding to the need to be competitive within the market, Burger-Delish has also worked hard to ensure internal consistency in its salary structure through implementing a sound job evaluation process. This has helped to create harmonious working relationships between employees and managers. Bongani had a tough challenge ahead in trying to convince his franchise owners and managers to think more strategically about their pay systems. He needed to help them realise that paying wages and offering other compensation benefits that were better than their competitors may mean lower profit margins up front, but that the returns would be greater in the long run. He also needed to offer evidence to show that this was not just about being fair, but it was about being strategic Bongani also needed to convince Mexicana’s franchise owners and managers of the benefits of conducting job evaluations.
Critically discuss whether Burger-Delish’s compensation strategy is effective
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