Labour is a clear concern for Canadian restaurant operators and measuring employee retention can help your business and drive profitability.
A recent survey found that the number one issue for foodservice operators in our country is labour cost and the number three issue is labour shortages, just behind food cost. Given these challenges, it is more important than ever to retain quality staff.
The Tourism Industry Association of Canada (TIAC) predicts that by 2030, the foodservice industry will see an 11.8% worker deficit.. Part of the reason is linked to millennials being less likely to work in the service industry due to the perception of long hours and low pay associated with the industry.
How can we maintain high performing staff?
And why should retention be a line on your P&L?
In order to answer these questions, we asked industry professional Bruce McAdams, Assistant Professor at Guelph University’s School of Hospitality, Food and Tourism Management.
Why is employee retention important?
Employee retention affects various aspects of your operation and business.
Retention has such a big impact in your revenue that every line in your P&L should have “RETENTION” at the end of it because every aspect of your business has a direct correlation to employee retention, says McAdams.
For example, experienced cooks having their dishes served by seasoned staff will show high sales due to the seamless experience delivered to the customer.
The same way, experienced staff who know the menu and kitchen will perform better and faster than new staff, allowing owners and operators to reduce the number of employees in the kitchen.
Retention is more than just a human resources issue; it’s also a business issue.
Some areas that can be impacted by lack of employee retention include:
Quality of product
The quality of the final product is highly impacted by your staff and their knowledge of the kitchen. McAdams recalls his time as a kitchen manager at a Red Lobster where he quickly realized that only the chefs with years of experience had the ability to make plates look like works of art.
Productivity of staff
A team with a high turnover won’t be able to get out as many plates as a team that is used to working together and know the menu and workspace well. As turnover increases, restaurant productivity decreases.
Proficiency of staff
Experienced staff have the ability to take customers’ orders faster and lessen errors. This is a steep learning curve for new staff members, which does take time to master effectively.
Ability to deliver a high level of service
The importance of a good customer journey in the digital age is more important than ever to ensure a good word of mouth, especially in fast casual and fine dining establishments.
Customer wait times
This is a matter of great importance for QSR. “If you eat at a QSR on a Saturday, it’s going to take you twice as long to get your bagel and coffee as it is during the week,” says McAdams
Hard costs associated with replacing employees
These fundamentally important issues will impact your business when recruiting new staff members:
- Your time
- Posting job ads
- Having seasoned and experienced staff train new hires
What about internal vs external hires?
In 2011, an American company concluded a two-year study that determined that external manager recruits are paid approximatively 18% more than internal promotions.
But it also showed that these same external hires have worse performance in the first two years and are more likely to leave within the same period of time, putting you again in the uncomfortable position of finding a new staff member.
At the end of the year, it represents a significant amount of money lost!
With the continued increase in minimum wages and the current shortage of kitchen workers, this could put your business at risk.
How to improve your employee retention:
- Some studies show that wage and location are key (QSR study)
- Another study on millennials show that it is growth potential and dollars that make a difference
- University of Guelph’s study shows that the main reasons their graduates left restaurant management jobs are because nobody was developing them, the work of hours and quality of life wasn’t what they wanted, and their schedule was too inflexible
- Be aware that your retention will also depend on the competitiveness of your workforce
Think about the Service Profit Chain
Small and large businesses alike are well aware that the more they take care of their employees, the more likely those employees are to take care of customers, leading to better service and higher profits.
You don’t want your employees to just be happy, you want them to care about the long-term success of your organization, says McAdams.
Invest in employee engagement
Besides the fact that there is a clear link between employee engagement and profitability, this value continuously leads owners and operators to three additional outcomes:
- increased productivity
- higher retention
- employees become more customer focused
Creating Employee Engagement
Employee engagement comes from the top down. Leadership must empower their staff, promote teamwork, provide support and recognition, allow decision-making authority and most importantly, give employees a sense of feeling valued and involved.
All of the above are also extremely important when working with millennials.
Another strategy that should be implemented at the same time consists of finding employees who fit both the job and the company. On average, they will stay longer and show more engagement than others.
When creating an employee retention strategy
- It starts at the top! You need leadership to be educated on the matter and committed
- Continuously measure and reflect on where you are and where you want to be
- Look at best practices through different industries and countries
- Create a strategy and measure:
- Why people leave? Run exit interviews
- Turnover rate
- Retention rate
- Employee engagement scores
- Competitors in your labour market
We spend so much time trying to compete for customers, we sometimes forget we are also competing for employees in the labour market.
Your business needs engaged staff who will stick with you and who is invested in making your business successful. Measure your employee retention and try to create advocates, instead of just hiring hands.