Combating the Biggest Labor Challenges in the Hospitality Industry Today
4 Min Read By James England
The restaurant industry employs nearly 15 million people in the U.S., and more than 70 percent of them leave for a new job every year. And yet, according to a recent restaurant customer experience survey conducted by Deloitte, “a staff of friendly, hospitable employees is the most important element needed for a positive experience at a restaurant.”
Labor management is at the top of every operator’s list of challenges. Unfortunately, this won’t get much easier for the foreseeable future, given a low unemployment rate as well as recent regulatory mandates on healthcare and wages, and scheduling in some municipalities. In addition to these external headwinds, many industry labor challenges are self-inflicted, such as when employees leave because of errors in their paychecks, which will be tolerated less in a tight labor market.
Nonetheless, restaurant operators can combat the biggest labor challenges, from staffing and scheduling to attracting and retaining talent to rising healthcare and wage costs, with a few proven approaches.
Staffing and Scheduling
For decades, restaurant businesses have used the traditional approach of creating labor budgets: allowed spend based on a percentage of sales. The manager then allocated labor across the week, sense-checked the allocation against allowed spend and added or cut appropriately. Operators typically applied people to set shifts with little staggering or thought to the shape of day and activity by time slot.
The restaurant industry will likely never get away from requiring a targeted allowance of hours, spend or cost to be applied, so there is nothing wrong with the fundamental basis of the approach. However, if operators do not consider activity levels by time of day and schedule accordingly, they will invariably be faced with too many or not enough team members to varying degrees across the week.
The consequences of not getting it right
Wrong number of team members, working at the wrong times and doing the wrong things, leads to disengagement and frustration. Teams know their tip average will drop, they feel stressed and embarrassed, and their productivity levels dip. An unhappy, over-stretched team will quote long waits, stop selling desserts, not sell second drinks, make mistakes or collect too many food orders from multiple tables at the same time, which can ultimately crash kitchens.
What’s the answer?
Applying science is key. Start not with what the desired spend is but with the demand forecast—what is required to deliver in relation to expected activity. Look at how much workload there is, by area and type, and how much of that work each team member can handle in a single time slot. This approach allows the scheduler to get right into the detail of how many people are needed for each timeslot, so peak trading times are covered with the right number of people in each area to drive sales.
Attracting and Retaining Talent
It is important to recruit people that are suited to the culture of the organization. Will they be suited to the business mission and aligned to the company values? What mindset is required and how does an organization ensure that this is tested thoroughly through the recruiting process? New recruits that do not align will become disengaged very quickly (assuming the business doesn’t disengage with them sooner). When the ‘right fit’ is recruited, it is more likely that they will join an organization personally engaged. They applied for the role because they wanted to work for the brand, the job description matched their skillset and their own research suggested that it was a great place to come and work. With all that in mind, the employer should maintain and enhance that engagement from day one onwards.
Using tech to drive engagement
There are tools and services that can support and enable engagement, such as annual surveys, engagement technology, employee benefits, and team building events. Smart technology is now a way of life, and the first thing many people do in the morning is to check social media on their mobile phones. There is a huge opportunity for organizations when it comes to engagement and smart technology. Many organizations rely on their internal intranet sites to share their information and to store documentation they want their employees to find. The reality is that most intranets are out of date and in many cases a ‘ghost town’ when it comes to usage. Within restaurant businesses, many employees will not even have any access to the intranet as they cannot gain access at home – another reason why the use of smart technology to collaborate and share relevant information should be a must have.
Rising Healthcare and Wage Costs
The restaurant industry faces significant and rising labor costs. On January 1, mandatory higher minimum wage rates went into effect in 18 states and almost two dozen municipalities. In addition, restaurants are challenged by a series of regulatory requirements, from the Affordable Care Act to Secure Scheduling and mandatory paid sick and parental leaves.
Manage costs by improving labor productivity
The answer to these mandates lies in initiatives to improve labor productivity. This requires operators to schedule better and plan labor better. In turn, this means they must forecast their sales more accurately. Software tools can help more accurately predict sales and align businesses operations, such as labor scheduling, kitchen prep, inventory and so on. Done properly, this work drives both top-line revenue and margin.
The rising labor cost mandates can also put pressure on restaurant operators to deliver increased sales while at the same time reduce overall worker hours. While this forces restaurants to consider reducing their service offering, in a bid to cut workload and costs, this would not be a good move against a backdrop of increased competition for guests, for whom good service is a key differentiator. The combination of increasing sales while reducing worker hours means that the productivity of the labor force—the sales each employee generates per labor hour—must be under more scrutiny than ever before.
Using technology, data and more attentive management, restaurant operators will need to be sure that they match labor to demand more precisely to minimize any labor downtime, finding the right balance between having enough staff to meet demand, but not overstaffing. In addition, cost per employee and profit per employee are important measures to start tracking and managing more closely. Restaurants should review their staff capabilities, and implement training where appropriate, to ensure the workforce is optimized for performance.
As has always been the case in the restaurant industry, operators are beset by many labor challenges. However, as we enter into 2018, the industry is beset by recent costly regulatory mandates combined with a tight labor market that gives an advantage to the workforce on issues of compensation, scheduling and engagement. Operators can overcome these challenges through creative approaches to staff management and the right technology tools.