"Few industries depend on their employees to the same degree as the restaurant and hospitality industry. Without great employees no operation can enjoy an outstanding reputation.”
National Restaurant Association 2000
A labor market review by Marshall & Associates:
Teresa Siriani, President of People Report, presented some very sobering facts at the recent “Northwest Foodservice Show and Lodging too!” convention.
The following is an analysis with comments on some of the facts presented. Statistics from other professional sources are also included.
The United States economy is producing new jobs far in excess of the countries labor pool growth rate. The US population average growth rate in 2000-2004 was 0.44% due to natural increase (births minus deaths) and 0.56% due to immigration. (Source: US Census Bureau) This indicates, theoretically, there are approximately one percent new workers entering the labor pool nationally each year.
The percentage of sixteen through nineteen year olds wanting or needing to work is dropping dramatically. A full twelve percent of this traditional hospitality industry employment base is simply “not interested in working." (Source: BLS). These phenomena compound our industry’s already existing critical labor shortage. National Restaurant Association (NRA) states that Oregon’s labor pool is dropping at a greater rate than the rest of the country while the projected job growth rate is one percent higher.
An overall ten percent increase in new jobs is forecasted in the US over the next decade. (Sources: BLS, NRA). Included in these numbers are restaurant job increase estimates of fifteen percent, hotels & accommodations seventeen percent. Healthcare and retirement, tourism and entertainment hospitality industry segments job rate growth will be even greater. We must keep in mind, as we consider the impact of these numbers on our businesses, that the sixteen to twenty-four year old work force increase, during this same period of time, is projected to be zero.
Collectively these facts make clear the undeniable reality of a labor crisis in the hospitality industry. Only the best and most aggressive of companies will be able to sustain quality service and products in the coming decade. Only those managers that recognize and practice outstanding labor relations can expect to hire and/or keep anything but the very bottom of the labor pool. Even with the very best of labor management practices the hospitality industry, in general, will suffer from the exponentially diminishing labor pool.
Almost without exceptions the successful large chains are evaluating all facets of their employee relations in order to ensure their survival and sustain their targeted growth rates. Many of these same chains have reported that they have been unable to open new units (some already built and equipped) due to their inability to hire adequate numbers of people, Managers and lead, skilled employees are the most difficult to find. Operators all over the country have reported having to severely reduce their projected growth plans for the same reasons. It only follows that this is causing investors to look at our industry in a new light. Chains with a history of sustained growth rates of ten to twenty-five percent a year now are hard pressed to achieve half that number. Wall Street is keeping a sharp eye on which companies will be able to deal with the labor shortage situation in a manner that will give them an edge over their competition.
With the national labor pool growth rate at nearly zero, is there an answer? The answer is, of course, yes. The hospitality industry has a here-to-fore invisible labor pool. These people are already working in the industry. The People Report’s most recent survey indicates the industry’s annual turnover rate is one hundred fourteen percent in the hourly category and thirty-two percent in management. If operators would simply reduce their turnover equal to the number of additional new jobs they need to fill they would find that they have a better trained, more motivated and loyal work force than they had ever experienced, in the past, already to go.
Does that sound too easy? If you think it does please think again. Reducing turnover is very “doable” but it requires an honest and irreversible commitment to the task. This is no place for quick fixes and flamboyant rhetoric. Danny Meyer writes, “Your restaurant can never be more successful than the quality of the people you hire. If you are devoted to your staff and can promise them much more than a paycheck, something to believe in, you will then get the best service for your customers.” Taking Danny’s remarks one step further, if you are honestly committed to your staff’s careers and do all you can do to encourage them to be the best they can be, your business will ironically become the best it can be as well.
Effective turnover control starts with a total company wide commitment to the mutual success of both the employee and the employer. It will be nothing more than a quick fix or just another program unless it is sincere and permeates the entire organization, from the owner or CEO down to the entry level employee. Everyone has to know it is for real. It has to become your corporate culture. This writer can give you his absolute assurance (based on actual personal experiences) that if it is honest and properly managed and is all inclusive, a turnover control program that includes a well documented and strictly administered career development program will not only be financially self sustaining but, if you are a typical employer, will reap benefits you can only imagine. Some of these, in addition to the obvious, are higher customer retention, more frequent customer return visits, higher ticket averages, more efficiency, less waste, lower incidences of theft, increased service quality, increased food quality and presentation, improved cost control in all categories and more. In short, if you train them properly and prove your commitment to your staff a very large percentage of them will reward you with a level of performance that will amaze you and send you to the bank with improved profits. The best news is that if you truly care about your staff your job will become fun and your customers will begin to tell you how much they enjoy your staff.
It is amazing isn’t it, that we should find the answer to our labor shortage problem right inside our own doors and that offering our employee’s genuine hospitality on the job will increase our profits.
This has been only a brief review of what is a very complex issue. The employers who aggressively and professionally pursue employee recruiting, interviewing, selecting, job/company orientations, training, holding accountable and consistently encouraging and assisting their employees to be the very best that they can be will achieve extraordinary success.
For further information on this subject contact us and submit your request. We will reply to you just as soon as we can. In order to help the largest number of people, unless your request that we do not post your question, it will appear for a short time on this web site along with our response. Every effort will be made to keep your question and our response anonymous.
The shrinking labor pool
Additional data: (Source: People Report )
Cost of turnover:
ü $2,366. Per hourly
ü $19,661 Per manager
Turnover rate:
ü Average hourly= 114%
ü Average Management= 32%
Turnover rate is escalating:
ü Job abandonment (no show and walk offs) increasing. Now in double digits
ü Hourly to Management ratio 12.5 to 1
Some of the major turnover issues identified by the recent People Report survey:
ü Lack of open communications
ü Who conducts the orientation
ü Lack of a designated trainer and or formal training program
ü Health benefits
ü Lack of philanthropic activities
ü Employee perception of how thy are valued
ü Company career development
There are many other significant issues that must be dealt with if turn over is to be managed in an effective manner. Each of the industry’s professional associations needs to play a major role in educating their membership in the critical importance of effective turnover management control. They also need to step up, track, evaluate and communicate the successful innovative practices of the industry’s leaders.
Our hospitality education institutions need to aggressively provide and promote direct educational opportunities, on this vital subject. This must be made available to hospitality industry leaders, both current and future. National and state governments need to consider the economic impact of turnover in this, the biggest private employer of people in our nation. The problem will not go away in a few years. It will continue to increase exponentially until it is dealt with in a credible manner
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