Restaurants, more than most other businesses, face challenges when the economy shifts—particularly in terms of labor. According to the Bureau of Labor Statistics, the hospitality industry’s current turnover rate is 73 percent, while the national unemployment rate is at its lowest in a decade at 4.3 percent. But the trouble for restaurant managers is more than just the hassle of hiring new employees.
A study conducted by the Center for Hospitality Research and Cornell University found that the average cost of replacing an employee that quits or is fired—salary aside—is $5,864 per person. The study also noted that for the average full-service restaurant operator, that amount could run up to $146,000 annually.
Why so much? Many businesses forget to account for management hours lost to advertising the position, interviewing, and training a new staff person. You must also account for the cost of mistakes and any loss of customers from temporarily decreased customer service, or, alternately, the cost of overtime to balance it out.
The trouble is, these kinds of labor costs are nearly invisible on your balance sheet. But that doesn’t mean they aren’t there.
But there is good news. There are at least four ways to avoid high turnover rates and keep these kinds of exorbitant and unnecessary costs to a minimum.
1. Hire Smarter
Finding the right person from the start can save you a lot of headaches down the road. Be clear upfront about what the position entails, including hours, physical labor, and any goals you may set. Give applicants a sense of how you operate.
It’s usually a good idea to have a peer-level employee give serious applicants a tour. It gives applicants the freedom to ask questions they may not feel comfortable asking a manager, and your staff member can report back about how the candidate behaved out of your earshot.
2. Train Better
Formal and continuous training keeps employees on the job longer. When there is less confusion about what it takes to do a good job, people tend to achieve more and stay happy.
And when efficiency and customer service improve, profits improve. Investing the time and money upfront during onboarding—and then refreshing on a regularly scheduled basis as procedures change—can save you much more down the road than the initial cost.
3. Reward, Recognize, and Retain
Ask your employees about what kind of rewards are most meaningful to them. Cash is always likely to be a popular answer, but you may be surprised by what else is important to them, from paid time off to gift cards. Don’t assume. Ask.
Then, focus recognition at your restaurant on accomplishment, not longevity. Five years of service might seem unattainable to a lot of dishwashers or servers, but by recognizing achievements, you can motivate productivity and generate a lot of appreciation from your employees.
If showing excellence today can earn employees more recognition, that won’t just keep them happy; it also could have a more direct effect on your bottom line.
4. Talk to Your Staff
One thing that alarms employers about the current economy is the large proportion of millennials occupying positions. This generation now fills roles starting all the way up through management, and they view company loyalty very differently than the generations that came before.
Gallup’s Business Journal reports that 60 percent of millennials report being open to a new job opportunity right now, compared to 45 percent of non-millennials. And 21 percent of them have changed jobs in the last year.
Unlike generations before them, whose parents raised their children on a steady diet of “Because I said so,” millennials, for good or ill, were raised specifically to always ask why—and they expect a genuine answer.
That’s not a bad thing. It can be frustrating to an experienced manager to have to dive into details every time a millennial employee seeks clarification, but the benefits of doing so can be massive to your operations.
It’s not just about keeping your employees engaged. Your staff may have insight into areas of improvement you never thought of. And explaining how something works can often trigger ideas for improvements and cost savings from you.
Ultimately, happy and engaged employees stay longer, lowering your turnover rate and helping to keep your money where it belongs—in the business and in your wallet.