Where do you stand on staff turnover?

06 April 2006
Where do you stand on staff turnover?

The businesses that took part in our first benchmarking exercise reported an average annual staff turnover of 33.4%. That compares with an average of just over 26% on the Best Practice Forum's Benchmark Index, which surveys 2,000 hospitality businesses. Staff turnover costs companies hundreds of pounds every year, and it's costing Caterer readers more than most. What can they do about it?

Staff turnover is not always a bad thing, of course. Some turnover can be beneficial because it allows staff to move up the ladder to more senior positions, giving them new opportunities. It also allows the business to bring in new blood. And some sectors of the industry - primarily pubs and fast-food restaurants - employ a lot of seasonal staff and students, perhaps on contract.

Nevertheless, high turnover is endemic in the industry. Some businesses can experience 50-100% turnover every year, way above the Best Practice Forum's Benchmark Index of 26.5% (almost exactly the same as the 26.7% international hotel labour turnover benchmark published by Horwath Consulting). At a turnover of 26.5%, more than a quarter of staff change their jobs every year; at 50%, a business is replacing half its staff every year.

Where's the cost of this?

  • Advertising for replacement staff.
  • Commission fees to agencies.
  • Management time in interviewing, inducting and training new staff.
  • Lost sales or business opportunities caused by inexperienced staff.
  • Interruptions to the flow of work in a department.
  • Low morale and low productivity.
  • Damage to your local reputation as an employer - and to your image among prospective employees.

Some of these costs are quantifiable and probably amount to £500 or so. Other costs are not, but may be more damaging to your business. Inexperienced, poorly trained staff can turn customers away - and these customers then talk about their unhappy experience to their friends. Bad news travels fast.

Why do staff leave? In this industry, the opportunities - both at home and internationally - are huge. So people with ambition will always be looking to improve their career prospects and will want to move about to gain more experience and responsibility - and to earn more money. And where pay levels do not compare well with the competition, the urge to leave and earn more may be overpowering.

Nevertheless, people remain in jobs that they like even though higher pay may be available elsewhere. A number of factors will influence this decision: if there are good employment conditions, if staff like working in the business, and if there are realistic opportunities for advancement, people are likely to want to stay.

So higher rates of staff turnover may be endemic but they're not inevitable.

The critical period is the first few days and weeks. More people leave then than at any other time. This is often called the induction crisis and it occurs when the new employee - for whatever reason - has not been integrated into the team.

This may be the result of poor recruitment, or a poor induction programme, with insufficient care and time spent on enabling the new recruit to build strong relationships with his supervisor and co-workers. Or the newcomer may just have been left to sink or swim without sufficient support.

All these are typical scenarios that can be avoided if enough thought and planning is given to induction training.

How long should the induction programme last? That depends on the complexity of the business and the job. A day might be sufficient; in other cases, a week or longer may be needed.

Of course, the older the employee, or the longer they have been in employment, the less likely they are to leave. But long-standing employees need to enjoy complete job satisfaction and have regular reviews if they are not to get itchy feet. Losing newly appointed recruits is expensive, but it is potentially more damaging to lose experienced workers. They may have built up a good rapport with regular guests, and could be a potent factor in encouraging them to return; they will almost certainly be more difficult and expensive to replace.

For every member of staff who leaves, you should conduct an exit interview. They should be asked why they are leaving and (in confidence) what they think is good or bad about the business. If a regular pattern of complaints emerges, action can be taken to improve the situation.

More information about practical ways of reducing labour turnover and improving staff retention can be found in the Best Practice Forum's guide, which costs £12.

www.bestpracticeforum.org

Enter our free benchmarking service

  • E-mail ifap@halm.co.uk
  • Quote Caterer and Hotelkeeper
  • Ask for a business profile form

How to measure staff turnover

The simplest method is to add up all the staff who have left in the past 12 months, divide it by the total number of staff and multiply by 100.
This gives you the annual percentage. It may be sensible to exclude seasonal workers on a contract. If you employ a high percentage of part-timers, a more accurate method may be to calculate them as full-time equivalents.

Want to reduce your energy cost?

Caterer readers have compared their level of labour turnover with the database average using the Best Practice Forum's Benchmark Index. The result? Readers have a higher rate of labour turnover (33.4%) than those who, with the help of the forum, have done something about it (26.5%).

Now we are inviting readers to compare another area of rapidly increasing cost - energy consumption.

The forum's benchmark index will show how your costs compare with those of your competitors, and will point to ways of reducing energy consumption and improving profit.

All you have to do is to e-mail ifap@halm.co.uk, quote Caterer and Hotelkeeper, and ask for a business profile form. This will be sent back to you either by e-mail or in the post. The form will request brief details about the size, location and nature of your business, and will ask you to
sign a Data Protection Act agreement. All the information you provide will be password-protected.

If you have already completed this form, you do not need to reapply.

The signed form should be returned to Hospitality and Leisure Manpower, the managers of the benchmark index, who will then issue you with a user name and password to access the benchmarking directly. You can then follow the instructions on the screen or complete a hard copy. Your user name and password will allow you to access the system every subsequent quarter.

For Caterer readers, there is no charge for this service.

At the moment we are benchmarking energy consumption costs. You will, however, be presented with 10 generic key performance indicators (KPIs). You then have two options:

Option 1: You can complete the information required for energy costs ONLY. In this case, you will be able to provide further data as it is requested at a future date.

Option 2: You can complete up to 10 KPIs at once, including energy costs. All the data you provide under this option will be accepted and will be used in subsequent calculations.

For this benchmark, all you will need to have to hand is the total annual cost of energy in your business, including gas, oil and electricity.

After entering your figures, you can immediately access the system, which will enable you to see the best, the worst and the average for businesses of a similar type and size. A Best Practice Forum business coach will also confirm the data you enter.

Information is input in complete confidence. To enable all readers to assess the significance of the results, Caterer will publish an industry-wide guide to the four key performance indicators. No business will be identified in any article and there is no charge for accessing this service.

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