Did you know... the average voluntary employee turnover rate is 12.8% for all industries, while involuntary turnover rate is 17.8%, according to Compensation Force? Employee turnover is on the rise, and it has a huge impact on your business financially and emotionally.
Financially speaking, every time a business replaces a salaried employee, it costs 6 to 9 months' salary on average, according to the Society of Human Resources & Management. What goes into this estimated cost?
- Loss of productivity: It takes time to get new employees up to speed with existing employees, and that can take time.
- The hiring process of a new employee: including the advertising, hours it takes to interview, screen, and hire new candidates.
- Onboarding: along with the man-hours involved in training programs and training the new employee. In fact, over two to three years, a business likely invests 10 to 20% of an employee's salary into training.
- Customer-facing errors: New employees are less capable at solving problems and may even create more.
- Loss of engagement: Other staff members who see their peers quit on a regular basis will disengage, resulting in a loss of productivity – or will quit themselves.
What’s Your Company’s ROOT Problem?
If employee turnover is a problem in your restaurant, take the steps to recognize the root problem. Your restaurant turnover rate is a symptom of a greater problem. In fact, restaurant expert Jim Sullivan said in a recent article published on Nation’s Restaurant News, “It’s hard to shake the nagging notion that we may be systematically treating symptoms and not root causes, resulting in the constant re-occurrence of the same issues over and over again.”
Consider these somewhat common scenarios:
- The problem: A restaurant General Manager is asked to reduce labor costs 10% each year. After discussion with her management team, she realizes that the hourly turnover rate exceeds 75%.
- The solution: She assess what part of the recruiting, hiring, and onboarding budget she could cut back on to hit the 10% reduction cost and realizes that in order to reduce this line item she needs to KEEP her current employees and invests more heavily in the recruitment process to spot employees who are trainable, have passion, and do not have common red flags of a low-quality hire, she needs to invest in reducing hourly turnover.
- The problem: A chain restaurant’s head of accounting was number crunching the previous month’s sales and saw that revenue year over year was down 15%.
- The solution: While the accountant attributed the decline to a recent snowstorm, the root of it was something completely different. It was the employees. He realized that this year’s staff were all “green” members, and had not been there longer than three months, on average.
- The problem: A restaurant host is new, and while she is super friendly, she has no idea how to properly seat a restaurant. She arbitrarily sends guests to different tables throughout the restaurant, paying no mind to the wait staff on staff or volume in particular areas.
- The solution: While originally attributed to the new and somewhat dense host, the real issue is the lack of training she was given for properly filling the restaurant up. Thus, this is another turnover issue.
The three problems are faced commonly, and have managers in a scramble to find. While seemingly three different issues – training, hiring, and sales – the root of each issue stemmed from one thing: TURNOVER.
Turnover has suddenly accelerated, especially in the restaurant and hospitality industry. In fact, voluntary turnover in the hospitality industry is the highest of all industries, at 20.7%. Sullivan said, “Our industry averages 100-percent annual turnover among hourly teams, we are also inching toward a $15 per hour wage but not getting $15 per hour skill competencies or equivalencies in return.” Competitors, regulations, the up-and-coming younger workforce, and stagnant unemployment rates have progressed the issue further in recent years.
With so many contributors to your restaurant turnover rate, it may seem like a battle that can’t be won. No one can follow it anymore; no one knows how to win; but everyone knows this much: the hospitality industry can’t continue to trend upwards with voluntary turnover rates.
Where Do You Start?
The first step in reducing restaurant employee turnover – is to identify the cause of why your staff leaves in the first place.
- Disinterest: If employees are not interested in their jobs, they will either stay away or leave.
- A high-demand employee: If the skills the employee possess are in demand, they may be lured away from your company by better pay, benefits, or title. While the employees’ decision to flee the coup is out of your control, there are things within your power to make that employee feel more empowered and productive.
- A job requisite mismatch: When you hire for a specific job, it’s important to be very transparent about the job level and duties because oftentimes employees who are under- or overqualified will soon realized there’s a skill/experience level mismatch.
- Poor working conditions: If your business’ facilities are sub-par – the worst case is the facility has health and safety provisions – your employees will not put up with the inconvenience for long and will say “adios”.
- Under-appreciation: Every employee wants to know they are valued. Management who does not acknowledge upstanding efforts or employees going above and beyond will have employees who are dissatisfied and angry – and will leave.
- Inadequate training: Believe it or not, training is a key lever in employee turnover. Employees crave guidance and will follow direction if given. Employees need guidance and direction. The lack of a training program may cause workers to fall behind in their level of performance and feel that their abilities are lacking.
- Poor pay: Low pay or unequal pay can drive employees to leave. To combat this, put together an extensive job evaluation and review plan for each employee.
- Lack of modern technology: Technology has a “shift potential” to grow a business in many ways, and lack of technology will deter employees -- especially younger ones. Instead of having old-school spreadsheets and Post-It notes, invest in cloud-based employee tools and technology that fosters collaboration and efficiency. Of course we are partial to our Employee Scheduling Software and Online Manager’s Logbook, but there are tons of different options out there!