When HR and Operations departments investigate their company, region or branch overheads, costs like salaries, facilities, training, tools and programs all inevitably feature. However, how many organizations track what Cornell University School of Hotel Administration has termed “the silent expenses” of employee turnover?
According to Speakap’s survey of HR professionals in non-desk industries, 38% of respondents from retail, hospitality, leisure and entertainment organizations see 21% or more workforce turnover each year; 44% of respondents reported that employees stay with the business for two years or less on average.
According to the US Bureau of Labor Statistics for 2016, the turnover rate in the restaurant industry is as high as 73%.
The real cost of silent expenses
Many senior managers in retail and hospitality companies wrongly assume that high turnover is inevitable in their industry and cannot be changed. Maybe if they understood the magnitude of the cost, they would feel differently.
In its report, The Costs of Employee Turnover: When the Devil Is in the Details, Cornell University School of Hotel Administration breaks down the costs into the following categories:
- Pre-departure: the time after giving notice when employees are typically off-boarding responsibilities and the time cost of exit interviews.
- Recruitment: advertising and promotional costs of creating a pool of applicants.
- Selection: identifying, interviewing and performing background and reference checks on candidates.
- Orientation and training: the onboarding process and time for manager or HR to provide suitable training.
- Loss of productivity: this includes the diminished productivity of a leaving employee, the learning curve associated with all new employee no matter how experienced, the disruption costs of new employees who must lean on colleagues and managers, and the opportunity cost of an open vacancy.
The report reveals that even a conservative estimate of the cost of turnover is more than $5,000 per replaced employee, with as much as 70% of that figure due to productivity loss – varying according to industry and property.
The math then is simple. If your medium-sized restaurant chain has 1,000 employees, you can expect to lose at least 210 (21% from above) each year at the cost of a little over one million dollars per year (210 x $5,000).
But non-desk employee turnover could get worse
Without attention and a company-wide strategy, employee turnover could be set to get worse as younger employees comprise the increasing majority of the workforce. Our recent Speakap survey revealed that millennials make up the majority of the non-desk workforce at 48% of companies, followed by Gen X (25%), Gen Z (20%) and baby boomers (just 7%).
This presents a growing concern in light of the revelation that employees aged 24 and younger are three times more likely than baby boomers to change jobs. It’s a situation that may be felt even more critically in the restaurant industry, where as much as 60% of the workforce is between 16 and 25.
Steps to take to address the employee churn problem
High employee turnover doesn’t have to be an industry-wide inevitability. Frontline employers like Wegmans, Patagonia, In-N-Out Burger, Lululemon, Trader Joe’s, Hilton, Ikea and Nando’s regularly top best places to work lists on both sides of the Atlantic. Their employee turnover rates reflect that. So what measures can you take to try to reduce churn in your workplace?
- Frontline employees don’t jump between fast food restaurants or go from one fashion retailer to the next; if nothing demands their loyalty, they’ll go to an employer in another non-desk industry if that company provides a better salary or more flexibility. So, remember your competition for talent is broader than you might think – but so too is your talent pool.
- 76% of restaurant staff feel their team is one of the best parts of their job, so make sure you provide the right platforms and opportunities for employees to stay connected and to share news and insights with each other.
- Platform usage data from Speakap reveals that company updates garnered 77% of the total ‘likes’ on companies’ enterprise social network – employees want to be engaged by their employer, but often the mechanism or tools aren’t in place to do so.
- Speaking of missing tools and processes, 57% of HR managers in non-desk industries confess to having no feedback process for frontline employees.
- 64% of restaurant employees find schedule flexibility to be one of the best parts of their job.
- Younger employees especially value individuality – they prefer working at a retailer that allows them to wear their own clothes to work, for example, even if all other conditions are identical. If you provide employees with uniforms, given them different ways to feel individual – from adding personal touches to their workspaces to encouraging them to post an intro on the company’s employee app.
- Our recent research study revealed that the keys to turning unengaged employees into engaged brand lovers are targeted messaging, access to learning and development content, and regular feedback. Do you provide these as foundational?
- Finally, and, yes, slightly blatantly, Penn Schoen Berland reports that 42% of millennials would leave a company due to “substandard technology”.
Make sure you start measuring the silent expenses and profit killers like employee turnover and moving the needle in the right direction. The payoff could be far greater than anyone inside your business ever realized.