Turnover, Costs, and How To Fix It

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In the restaurant industry, high turnover rates remain an everyday battle. The financial impact cuts deep into budgets and lowered employee morale is often an unavoidable result. Historically, turnover in the restaurant industry has averaged at 60% but for a […]

In the restaurant industry, high turnover rates remain an everyday battle. The financial impact cuts deep into budgets and lowered employee morale is often an unavoidable result.

Historically, turnover in the restaurant industry has averaged at 60% but for a few years rates came down significantly, due in part to the recession. The National Restaurant Association found that as of last fall, only 5% of restaurateurs said retaining employees was their biggest challenge, down dramatically from 35% in 2007 (1). The logic made sense: a troubled economy meant people were less likely to quit their jobs given there were fewer opportunities available.

And while restaurant job growth is still healthily growing and projected to again outpace the U.S economy this year (1), the issue of keeping these employees will return, once again haunting restaurant owners and managers alike.

 
Money-ClockTime is Money

Given how prevalent the turnover issue remains in this industry, it may come as a surprise that there have been few to almost no studies covering the costs. But when digging deeper, it’s apparent that much of the cost is hidden, difficult to quantify and varies greatly between different types of restaurants.

We’ve found the cost is a combination of some basic math – job listing services, training expenses, uniforms. And more qualitative things like – time spent finding a new employee, scheduling around losing an employee, time interviewing new applicants, time training the new employee, and productivity lost between new and old employee – to name a few.

If we assume that turnover expense is a (conservative) 10% per employee (T) and that roughly 24 new employees are hired a year (2 per month) then we can apply this to the average national turnover rate to roughly find the turnover cost per location:

          Step 1: ($8/hr) * (20 hrs/week) * 52 weeks = $8,320/yr
          Step 2: ($8,320) * (10% T) = $832 turnover cost per employee
          Step 3: (24 new employees) * ($832) * (60% T rate) =

          $11,980 Turnover Cost per Location / Year

And this is modest compared to other studies that document this expense in upwards of $15,000 or more (3).

 
Strategies to Fix It

True, there are factors out of one’s control that greatly affect turnover rate: the economy, seasonality, higher education or relocating. But there are many strategies restaurants can implement to help keep their employees longer and happier.

 
1. BE FAIR AND COMMUNICATE OPENLY
Given how busy management is, communication is often overlooked. But maintaining an open, supportive culture is what makes a great staff.

-Give employees opportunities to speak their minds. Create a culture where people feel comfortable offering feedback. This can be through one on one meetings or even anonymous surveys. Measuring how your employees’ feel about their jobs can help you figure out what needs to change.

-Show them you care on a personal level. Offer support to employees with childcare duties and class schedules. Going the extra mile will build the needed loyalty to keep your employee happy.

-Give a clear path for advancement. Take note of employees’ interests and where they may want to go in the organization. Communicate their strengths and provide coaching and feedback.

-Be fair. Employee favoritism can kill morale. Take note on work schedules. Working both early morning and late night shifts can burn employees out and disrupt their work-life balance.

-The Exit interview. Don’t underestimate the power of this one. While it won’t save the employee, it may help fix your next turnover. These are times when employees are the most honest, so the insight will likely be invaluable.

 
Help-Wanted-PostIt2. NURTURE NEW HIRES

The first exciting moments of a new job can never be re-captured. Starting employees out right in those critical first couple of weeks should be a priority for hiring managers.

-Have a planned orientation period to show new hires that their success is important to you. Get them familiar with your organization and how they’ll be trained. Be sure they are given a job description, training manual and policy handbook, if applicable. Good people want to work for good companies.

-Have a strategy when you start an employee. For example, starting your employee on a slower day can help insulate them so they get the personal attention they need. Alternatively, some managers choose to start employees on busy nights to see how they react and whether they are able to communicate it.

-Provide adequate training and let them shadow for as long as they need to. Setting an employee on the right path with ample training will give them the confidence they need to feel good about their job.

-As an owner or manager, personally follow up with your new people. Not only do new hires provide a fresh perspective, but positive attention from an owner or manager during the first few weeks can be extremely powerful.

 
3. BENEFITS

Obviously, offering your employee competitive wages is the best way to keep them around. Studies show that about one third of all employees who choose to leave the workplace leave for a better paying position elsewhere (2). Beyond that, here are some additional strategies to consider:

-Provide shift meals to employees. Try a policy where anyone working that day can eat dinner at 3pm. Have a designated table in back of house, if possible, and use this time to connect with employees and have them connect with each other.

-Incentivize your staff. Give managers rewards for keeping staff a certain period of time, provide bonuses for staff based on sales or execution, or consider offering holiday pay.

-Offer some insurance, if possible. According to a 2010 press release from the National Restaurant Association, 4 to 6 million of the nation’s nearly 13 million food service industry employees are uninsured at any given time. To stand out, try offering insurance to your employee after staying with the restaurant a set period of time.

 
4. HIRE RIGHT THE FIRST TIME

Hiring the right people from the start, most experts agree, is the single best way to reduce employee turnover.

-Interview and vet candidates carefully, and have the candidate interview with a few different people. This will ensure they have the right skills but also that they fit well with the company culture, managers and co-workers.

-Get creative. Instead of simple interviews, require ‘try outs’ for upper level positions. This could include staging for kitchen positions or management shadowing.

-Be very clear with your job description. No one likes surprises after being hired so write up your employee’s day-to-day duties so there are no misunderstandings on what’s expected of them.

 

REFERENCES

1 – http://nrn.com/latest-headlines/nra-hiring-troubles-emerge-2013-restaurant-job-growth-rises (National Restaurant Association’s 2013 Restaurant Industry Forecast)

2 – David Pavesic, “Boost Productivity to Control Labor Costs,” http://www.rrgconsulting.com/restaurant_labor_cost_controls.htm (accessed Oct 12, 2008)

3 – http://www.shrm.org/research/benchmarks/documents/assessing%20employee%20turnover_final.pdf

 

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