“Are you hiring?” For most businesses, this is a relatively straightforward, yes or no question. For those in the hospitality industry, though, you might just chuckle if someone were to ask you that. Not because it isn’t a fair question, but because there probably hasn’t been a time when you weren’t hiring. Try as we may, employee retention is one of many constant battles that the hospitality industry faces on a daily basis. Restaurant or hotel owners understand the seemingly never-ending cycle of posting job ads, running interviews, training new hires, just to have another five employees put in their two weeks right after. It’s a situation that creates stress for everyone: business owners trying to keep their business afloat; managers trying to make sure there’s enough staff working on any given day; employees who might be asked to work a double or stay to help close for the second or third time in a week.
At Payday HCM, we’re very familiar with the struggles of businesses operating in the hospitality sector. We have plenty of clients, a large number of whom are restaurants or hotel groups, ask us questions on the kinds of strategies they can utilize in order to limit or reduce turnover within their organization. As with most things, the answer often isn’t straightforward and requires an intimate knowledge not only of the hospitality industry, but also of the business that’s being discussed.
So, in this article, we’ll be going over some tips for combatting high turnover in the hospitality industry. We’ll start by outlining the dangers of high turnover and, generally, the kinds of things that can create an environment where turnover rates may be high. Then, we’ll move into some specific sectors where business owners and managers can focus their attention to try to lower their turnover rates—things like scheduling, compensation, and working conditions. Finally, we’ll go over how these strategies can be implemented and the steps businesses can take to get started on their journey towards lower turnover rates.
In this article, you will learn:
- The Dangers and Causes of High Turnover
- Ways to Limit Turnover In the Hospitality Industry
- Implementing Strategies for Reducing Turnover
The Dangers and Causes of High Turnover
Before we outline some tips service industry operators can use to help reduce turnover, we first need to look at the factors that can create high turnover.
Retention Rates and Replacement Costs
While turnover is certainly an issue in any industry, the hospitality industry—restaurants, hotels, bars, retail chains, etc.—often bears the brunt of it. The Harvard Business Review noted in a study that the average retention rate for retail chains was 52 percent, with a median tenure of just five 5 to 13 months.
And this kind of short employee lifecycle can be expensive: the estimated cost of a lost employee is around 1.5 to 2 times an employee's annual income. Even with these factors in mind, it can sometimes feel impossible to determine what is actually the root cause of high turnover and how employers, especially those in the hospitality industry, can prevent it.
What Creates High Turnover?
As prevalent as it may be, knowing what exactly leads to high turnover rates isn’t easy. If we knew what caused it, we could simply fix it. That being said, there are a few different factors and causes we can point to that can contribute to turnover rates, including:
- Compensation and benefits
- Work conditions
- Scheduling
- Interactions with management
Finding out what exactly creates turnover, not only from industry to industry but from business to business, isn’t an exact science, but these factors do directly contribute to the employee experience. Scheduling and working conditions are especially important for the hospitality industry, where long hours and variable scheduling can take a toll on employees.
Ways to Limit Turnover In the Hospitality Industry
Now that we understand more about the causes and costs of high turnover, we can look more closely at the kinds of things employers in the hospitality industry can do to help improve retention rates.
Calculating Turnover for Your Business
While high turnover can certainly be felt and putting an exact number or percentage to it may not directly contribute to improving retention, it’s still important to know how to mathematically determine your organization’s turnover rate so that you can create more concrete goals when it comes to lowering your turnover rate.
To calculate turnover, you’ll need three numbers:
- Number of employees at the beginning of a set period (month, quarter, year, etc.)
- Number of employees at the end of a set period
- Number of employees who left during a set period
You’ll want to start by adding your first two numbers and dividing them by two to find your average number of employees over your set period. Then, take your number of departing employees and divide it by the average you just calculated. Finally, multiply that number by 100 to convert it to a percentage, and you have your turnover rate.
Compensation and Benefits
Perhaps it’s no surprise that the top drivers, not only within the hospitality industry but across all businesses, behind turnover are compensation and benefits. A workplace study by Gallup found that 30 percent of employees who were surveyed after leaving a company cited actions on compensation and benefits as things that could have prevented them from leaving.
This can create a particular challenge for the hospitality industry, where tip culture and the prevalence of part-time workers affect how businesses approach things like compensation and benefits. On the flip side of this, however, there lies a relatively simple solution to preventing turnover based on these factors: offering better compensation and benefits.
This starts with minimum wage. Minimum wage will vary depending on the state and whether said state allows for a tipped minimum wage. Generally, ensuring your compensation is higher than your state's minimum wage, even if not by much, can help you reduce turnover as well as help you stand out amongst other businesses.
Benefits are another area where service industry operators can take action to help reduce turnover. In most cases, taking a job that doesn’t offer any benefits of any kind isn’t really an option for most employees. Businesses should look at all available options—FSAs, worksite benefits, telehealth services—when it comes to benefits, especially if offering a traditional health plan may prove to be too costly.
Scheduling and Work Conditions
Working conditions and scheduling are another set of factors that can have a high impact on turnover rates. Scheduling can prove to be especially detrimental in the hospitality industry, where inconsistent hours, week-to-week consistency, and employee control can all play a role in whether an employee decides to stay with an employer.
When it comes to scheduling, employers should aim to be as proactive as possible, providing employees with as much notice as they possibly can. Posting a schedule two or three weeks in advance can be a small but vital step in lowering turnover. The same applies to scheduling changes or time-off requests: more accommodating employers also experience lower turnover.
These scheduling tips also play into working conditions. It’s no secret that working in the hospitality industry can often mean performing hard work for long hours. A consistent schedule and/or understanding from management can help prevent burnout and keep employees from working too much for too long.
Interactions With Management
The same Gallup survey cited above found that 21 percent of employees said more positive interactions from management could have prevented their leaving. That means the conversations your front desk manager or lead server is having with employees on a day-to-day basis can be crucial drivers behind a high or low turnover rate.
Training can be a big component of this, whether it’s an employee’s experience being trained or the training a manager receives. If you can train your managers well and ensure they are knowledgeable on every aspect of their job, as well as empathetic to your employees, it can help to improve manager-to-employee interactions and ideally reduce turnover.
Implementing Strategies for Reducing Turnover
It’s easy to talk about ways to help reduce turnover—it’s much more difficult to actually employ and implement them. We break down some methods to help your business take advantage of the tips listed above.
Identifying Turnover Causes in Your Organization
As we’ve said throughout this article, the causes of turnover aren’t an exact science. What’s creating a high turnover rate in one business may be third or fourth down on the list for another. Ultimately, it’s crucial for you to study and analyze the factors that may be contributing to a higher turnover rate within your business.
When looking at turnover, you’ll want to analyze as many different sections of employees as you can: part-time vs. full-time, hourly vs. salaried, position A vs. position B. Looking at every possible angle and approaching the issue of turnover as a problem that presents differently across your organization is a necessary first step to improving retention.
Technology and Empowering Management
Most efforts to reduce turnover can be amplified using data analytics and technology. A powerful HRIS or employee self-service tool, combined with a capable applicant tracking system (ATS), can help provide you with comprehensive insights into your organization’s hiring process as well as more information on your business’s employee lifecycle.
These tools also help to empower frontline managers to lead the charge when it comes to reducing turnover. As mentioned above, manager interactions can be a make-or-break when it comes to turnover, so ensuring your managerial team has all the tools at their disposal to aid in your business’s effort to reduce turnover is vital.
Change the Narrative On Turnover In the Hospitality Industry
The hospitality industry gets a bad reputation when it comes to turnover. Unfortunately, for many businesses operating in this industry, there’s some truth to it. Turnover is a problem for all businesses, but it’s particularly troublesome for those in the service industry. It causes headaches for managers and leaves business owners feeling stressed out and overwhelmed. While there isn’t one simple fix, there are several different strategies that businesses can employ to help combat high turnover rates. With the tips provided in this article, you can get your business started on the journey of lowering your turnover rate and improving employee retention.
Employee retention is a broad subject, and it encompasses a variety of different processes associated with the employee lifecycle: the initial application, interview, onboarding, and new hire orientation, all of which set the stage for a new employee and can be key determinants in whether an individual decides to stick with your organization or not. Of course, a smooth hiring and onboarding process starts with a good applicant tracking system (ATS). Check out our list of the best applicant tracking systems (ATS) so you can ensure your hiring and onboarding process starts off on the right foot.
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