Costs of Turnover in the Hospitality Industry

When you lose an employee in the hospitality industry, the effects ripple throughout the rest your business. A disruption in your staff’s daily operations, will cost you more money than you might realize. When we take a look at the details, it is clear turnover has a more negative effect than what is visible from the surface.

According to the National Restaurant Association, in 2016, the turnover rate in restaurants and related businesses surpassed 70% for the second consecutive year. This astonishingly high statistic is something that needs to be addressed by restaurants operating at all sizes.

You may be asking, what’s the big deal about consistently losing and hiring employees? How can this cost that much money? Well, the Cornell Center for Hospitality Research found five important aspects of the turnover process that clearly highlight how costly it is.

 

  • Pre-departure

 

The moment an employee makes the decision to leave until their last shift, there are steps to take. The time spent on preparing and carrying out exit interviews paired with other administrative activities during this time period builds up and costs you more than you might think. Utilizing a hiring platform, like StaffedUp, with organized applications of potential employees in place can substantially reduce the time and money you spend when you need to hire someone new.

 

  1. Recruitment

After your employee leaves, the next step is to find a replacement. The cost of promotional materials, advertising or any other recruiting sources can add up over time. There’s also the time spent on administrative activities like reviewing resumes. The costs in recruiting vary, but often depend on the quality of labor you have to choose from. It is best to have options before you immediately need them.  Having a database of potential employees can be crucial to saving time, money, and not hiring the wrong person out of desperation.

 

  1. Selection

Depending on your hiring process, this can take many steps and could be the most costly part of turnover. Interviewing, background and reference checks take a lot of time. We see again that the a low level of talent to select from will drive up costs. Having an automated pre-set qualification process can assist in the sorting and selection of resumes expediting the process. This is a key feature of the StaffedUp platform as it allows you to filter incoming applications for you to find for quality employees who will ultimately lower your turnover rate.

 

  1. Orientation and Training

While many new employees may have restaurant or hospitality experience, every company has different procedures and expectations, so, everyone needs to be trained. A lot of this depends on the position and their experience, but it is guaranteed to cost you.

 

  1. Productivity Loss

Productivity loss accounts for the highest percentage of the total costs in turnover, and it’s also the hardest to gauge monitor. There are four parts ways in which productivity is lost. First, there’s a drop in labor from the departing employee as we discussed above. Second, there’s guaranteed to be some sort of learning curve at this time. Similarly, there’s the disruption costs in turnover with current employees having to assist the newer ones. Finally, there might be a drop in your actual revenue or sales. Many people take time to get used to new positions, and won’t perform as well as your previous employees. This drop in labor quality can lead to shorter returns.

 

These five costly aspects of the hiring process are alarming and intimidating. While there’s no clear solution to some of these problems, one thing you can do is start from the source and limit your overall turnover. By finding a permanent hiring solution that can quickly find you the reliable employees based on your needs, you will see a significant decrease in turnover, reducing many of the costs listed above. StaffedUp has created a hiring software that makes it easy to get the right staff you’re looking for. For more information on how to help your hiring process visit www.staffedup.com.

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