Staff Turnover Impacts Bottom Line
With the high-level activity and the tourism period upon us, more ships, more sunshine, more visitors and holiday season which is great the added challenge of attracting, training and retaining employees is paramount. According to recent data businesses in the hospitality industry in Australia typically lose over half (55.00%) of their employees every year. Benchmarking studies of turnover of general industries usually indicate an average staff turnover rate of around 15-18% per year, the hospitality industry result is about three times higher (and three times more costly) against other industries. In some cases, staff turnover of some properties is as high as 110% per annum.
What is the cost of turnover? The cost to recruit? The recruitment impact on P&L?
Some studies have it somewhere between 50%-100% or more of the departing employee’s annual salary. Don't believe it? Whilst the internal recruitment costs can be seen in the table below it is the hidden costs that contribute to bulk of the cost and often these are overlooked as they don't stand out on the bottom-line profit and loss sheet. They include:
Risk and Exposure
Coverage.
When an employee has left a vacancy, be it a chef, manager or admin person the work that they would have been doing needs to be covered. Do you have to say no to bookings or business or stop generating business altogether? Are you paying overtime for someone to cover? Or are staff doing more paid or unpaid hours or working back to backs with no breaks? That spells burnout!!
Ripple effect.
Staff turnover has an impact on the team, including owners and management, which makes everyone less effective. Managers have to spend time recruiting, whilst at the same time trying to keep the team on track and the team has to work more hours or days to pick up the shortfall. At what point of increased workload/pressure burnout is a real issue does this result in more staff resigning?
Employee Relations Fair Work Risk
The high turnover and knock on pressure at times presents a decline in the ability to manage good bad or indifferent performances and also payment claims or applications by employee’s past and present to Fair Work. The time and effort of responding, appearing and or finalising adjustments or pay out claims is an impact on profit and loss not to mention Employer Brand. Don’t kid yourself in most cases high turnover when examined closer simply reflects the leadership and work environment.
Customer Loss. (The reason your business exists)
What happens to the level of customer experience when a business is short staffed or in a constant process of training new recruits? Gone are the days of 1 unhappy customer tells 10 others.
With customer review sites and social networking, the negative customer experience is shared with a much larger audience. Like the above what effect does having to deal with increased customer complaints have on the existing team and management given it is so in your face?
The biggest myth is that the good people will stay regardless of others leaving, well I am here to tell you that is not always the case as burnout and work pressures that impact on self and family usually mean more resignations.
Employment Brand.
Everyone in the industry could finger point at least 3 businesses that have the reputation as poor employers. Excessive turnover reduces your ability to attract the best talent and having your brand continually advertising will do nothing to generate interest from candidate’s long term. Negative outgoing employees are also now able to air their grievances to the wider public through increased exposure on social networking sites on top of word of mouth.
What effect does this have on your existing employees? Demoralised or disengaged staff consistently underperforms which further increases staff turnover as your high flyers can lose confidence in their managers and leave. This is potentially damaging in a smaller region or city as we are aware a Head Chef and or capable chefs good bad or indifferent can have an impact if negative views are shared.
Why do employees leave?
General trends highlight the following key points as to why employees leave:
Employer didn’t have a credible recruitment process
No genuine reference checking “they said they can cook you said ok when can you start!!
Team fit work behaviours not suitable but you didn’t check genuine references
Resume said they walked on water your lack of due diligence came back to bite
They interviewed well don’t we all, you didn’t check genuine references
Over promoted set up to fail you made that call not the employee ****
Pay and working conditions not fully understood
i.e.(communication/expectations/hours/inflexibility)Seek career opportunities elsewhere
Work Life Balance
Toxic Work Place (Generally relates to poor leadership)
**** Over Promoted “a great chef so I will not put them in charge!!!……and the result lost the great chef and ended up with a less than ideal manager, a common issue and the knock-on effect is significant. The reality is this happens by default or design usually in high turnover organisations but in reality, you may have set them up to fail.
What can you do?
Firstly, get your recruitment right, whilst it will not guarantee less turnover it will provide your business an improved ability to get the right fit but in addition you need to know the why! Remember this as Tasmania has small cities, regional areas and families generally preferring not to move away those that leave simply reduces the potential candidates in a high demand reducing supply market. This trend will continue and the view that if you look after good people they will look after your business generally rings true.
Unless you know this, it is difficult to address the factors contributing to turnover and build retention. A confidential exit interview should be conducted and wherever possible this is best undertaken by someone other than the direct manager. The reason for this is that if it’s poor management or leadership that has prompted the move, it’s unlikely that you’re going to learn the truth if the line manager is asking the question. The age old saying “people don’t quit jobs they quit bosses.
But even if your staff structure doesn’t allow for this it is important to find out much as possible about people’s motives for leaving. With this insight you can put structure and processes in place from the point of hire forward to address.
If the reason is pay related do some comparisons against competitors. However, it's not always pay, sometimes the conditions are the true issue but pay is blamed. Staff will often stay where they are even if pay might be slightly higher elsewhere if they have conditions that others don't/can't provide. Whilst it would be nice to give all hospitality staff every weekend and night off it isn't a reality for most businesses in this industry.
What can you do? Those willing to compromise are often the ones with better retention. THA can assist with market insight on both pay and conditions.
If the reason is career progression, is this maybe because you couldn’t provide a similar opportunity or didn't know they wanted it? Sounds simple but this can be avoided by strong internal communication and awareness of internal succession planning opportunities if they exist. You won't be able to accommodate everyone's career aspirations but your staff’s awareness of the opportunities to progress will retain considerably more employees than if you don't create the awareness in the first place.
Communication is key! Whether your business has 5 or 500 staff effective communication is critical. This starts with the on boarding of all new recruits, expectations, standard’s and remember no surprises!!Exit interviews if and when conducted when they leave you (hopefully though this doesn't happen as often). This communication needs be a two-way process, not only do people need to know what’s going on they also wish to be heard.
It can be as simple as daily briefings, weekly one on ones with their supervisor/manager, regular full staff meetings or formal and informal performance reviews and planning sessions.
Encourage ideas! Create environments where your staff actively offer ideas or at least take involvement in the ideas to improve the customer experience, processes and the team environment. Whilst a negative staff member can be your greatest contributor to staff turnover a positive staff member can be the greatest contributor to your employment brand and attracting their friends/family to join your business.
Good leadership:
It’s the overriding key and whilst all of the above points contribute to good leadership, as a manager you are also required to provide an ongoing commitment as a leader in the following areas:
Look and listen
Build relationships with your people
Recognise and reward performance of individuals where possible
Celebrate and share business success and milestones Successful leaders or managers are those that Engage
“If you cannot engage you cannot influence”
Takeaway Message??
Remember this; good recruitment, people management, coupled with the right work environment and culture and critically composed and competent leadership is the key to avoiding high level turnover, loss of revenue, customers, market brand damage and importantly mitigate employee claims and Fair Work hearings.
THA can assist
We can help in assisting with reviewing your process of recruitment, team and structure reviews and business improvement and we are only a phone call away.
