Employment Relations Business Improvement Report MERV SALTMARSH ER & Business Improvement Manager 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 but 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 following, 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: 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 employees 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 underperform 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. What does it cost to recruit internally? Finding good people in our industry is no easy task. The table below assumes an internal management cost of $50 per hour (conservative figure). The following costs as an example could be applied as a minimum to most recruitment scenarios although higher level recruitment could equate to at least double: Why do employees leave? General trends highlight the following key points as to why employees leave:
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