There’s a particular number that bears repeating — in part because it seems so outrageous, and in part because it should shake every restaurateur to their core:
That’s the average amount per year a full-service restaurant operator could be spending on replacing full time employees, according to a study conducted by the Center for Hospitality Research at Cornell University. Seems impossible, right?
Not so. With the turnover rate in the restaurant industry as a whole on the rise once again — to 102.8 percent for full-service hourly employees (and 146.2 percent for limited service) — it’s more critical than ever to do whatever you can to buck against this trend.
Of course, staff turnover is a part of business. Employees grow, change, and find other opportunities. But when you consider that replacing each one could cost upwards of 30 percent of their annual salary, every employee you can keep and avoid having to replace is hard money in your pocket.
In terms of keeping your best and brightest — and avoiding the enormous labor costs involved in unnecessary turnover — there’s no better place to start looking for ways to improve retention than at the beginning: in your hiring process. We have five key ways to ensure you’re doing all you can to minimize the high cost of employee churn, and maximize retention over time.
1. Don’t focus on hiring less. Hire smarter.
An impulse some restaurateurs may have when a server or line cook gives notice is to ask, “Do I even need to replace them?” It’s tempting to try to make do with less to curb costs, and if you’re genuinely overstaffed, that’s not a bad question to ask.
But part of looking at your overall labor cost structure is understanding that understaffing can sometimes be as expensive as overstaffing. This is especially true when overtime pay for hourly workers starts to build up and morale inevitably goes down among overextended employees.
It’s also important to think less about if you should be hiring, and more about who. Focusing on hiring smarter is one clear cut way to help ensure longevity in your staff overall and more efficiency on a day-to-day basis.
It is of course critical to find a match for the position’s required skill sets a position. But that’s not the only consideration going into the hiring process. Think about culture fit, not just experience. Does the candidate seem to get the pulse of how things are done at your restaurant differently than at others? What’s their work style? Are they flexible enough to take the basics of what they’ve learned elsewhere and apply it with fresh eyes here? Will they be willing to learn how YOU do things?
Managers spend 17 percent of their time on average managing poor performers. That is a huge distraction from time that your managers — the most expensive people on your staff — could be spending on making your business run better. Getting the right fit from the start saves on that cost, as well.
And it’s also fair to take a moment and ask yourself, “Is the position that’s emptied out the one you really need right now at your restaurant?” Maybe you’re not overstaffed on the whole, but your serving staff is in more need than your bussers for another set of hands. Don’t be afraid to shift the priority, provided you get feedback from your managers of both front and back of house about where they see the biggest hole in your operation vis-a-vis labor.
2. Start from the inside.
In terms of finding that right person, referrals are always a great way to find candidates that come with a recommendation you can trust. That could be from one of your colleagues in the community (restaurant owners need to stick together!) or from an existing employee.
Involving your current staff in the hiring process — through referrals and/or assisting in the interviewing — is smart, if for no other reason than they can be motivated by self-interest to help you find the right person. Your employees honestly have as much at stake as you do in the process. They don’t absorb the cost of a bad hire, but they are the ones who are going to have to work alongside them, help train them, and make up for any shortcomings that went unnoticed in the hiring process.
Also, ask yourself if it makes sense to promote someone you already have on staff to the open position, and hire instead at a lower level. Not only are you solving an immediate problem (and maybe lightening the recruiting load), but you’re also sending a message to your existing employee that you are invested in them. That investment will likely pay dividends in higher morale, more job satisfaction, and better retention rate (i.e. lower re-hiring costs) for you.
3. Have a reserve of reliable part-timers.
Getting part-time or temporary workers up to speed is always a challenge, not simply because your establishment is complicated (and every restaurant is), but because there are so many things you may take for granted as a manager or owner that go uncommunicated until it’s too late. Spending training time on someone who may only be with you for a few weeks to a few months seems like wasted time — and wasted time is wasted money, as they say.
But the reality is, nearly every restaurant has needs at one time or another for part-time workers. If you build a reliable base of high school and college students, and people for whom occasional, temporary work is beneficial, you can maintain consistency over time.
Part of the challenge is maintaining the lines of communication. Make sure they know you’ll be calling them back for the next summer/holiday season/busy weekend. The more returning seasonal employees you can engage, the more your part-time help will understand expectations and procedures upfront. And the less time your managers will need to spend recruiting instead of focusing on other areas of your operation.
Just be careful not to skip training entirely. Nine or more months away from the daily routine warrants a brush-up from your temps, especially if your processes have changed at all in the past year.
4. Pay people what they’re worth.
Restaurant workers are some of the lowest paid workers, as — even after accounting for demographic differences between restaurant workers and other workers — they have hourly wages (including tips) that are 17.2 percent lower than those of similar workers outside the restaurant industry. It’s a matter of much debate in many municipalities, with minimum wage laws shifting toward higher base wages and restaurants having to adapt.
But no matter what the local regulation requires in terms of hourly wages (for tipped and non-tipped staff), restaurateurs need to be aware of what the expectation is in their particular market. Because in a time when the national unemployment rate is nearing 4 percent nationally, and at record lows for recent years in most markets, not paying competitively will cost you money.
“There are so many new jobs in the restaurant industry that there aren’t as many workers out there to hire,” said Victor Fernandez, executive director of insights and knowledge at TDn2K, a Dallas-based restaurant research firm.
“That’s causing all sorts of problems for restaurants even as they struggle with wages and fight for customers.”
Ultimately, wages are not the only way to retain employees — quality training, supportive management, and career opportunity has a lot to do with your ability to both keep great talent and keep those turnover costs down. But not paying employees what they feel they are worth is a sure way to lose good people out to someone who will.
Next step? Saving on costs by hiring the best restaurant manager. Download our free eBook “How to Hire the Best Restaurant Manager for Your Business” today: