The Basics and Benefits of Employee Retention

What is Employee Retention?

Many companies worry about labor shortages, high turnover, and absenteeism. The onboarding process is time-consuming and expensive for just one new hire. But when too many team members seek employment elsewhere, it can decimate a struggling restaurant. Furthermore, changing employees' perception of the work environment is more challenging when there is high turnover and absenteeism. Morale and productivity decrease and retention may become a serious problem.

This is why so many restaurants are seeking new methods to improve employee retention and improve morale. Employee retention is the most critical factor in creating a stable workforce. It is defined as a restaurant or small business's capacity to retain top talent.

Restaurants need to maintain a company culture that encourages staff to stay employed, or else retention suffers. Retaining employees requires Human Resources or managers to enforce best practices that ensure accountability and job satisfaction. Read ahead for more insight into employee retention and why it is so critical to a restaurant's success.

The Importance of Employee Retention

Training too many new hires at once cuts into efficiency and productivity. Long-term employees are highly valuable to a restaurant. They have an in-depth understanding of the company's vision and understand how to meet key objectives. Also, they have the expertise and knowledge to finish required tasks each day.

Retention rates are also critical because they impact a restaurant's expenses. Maintaining qualified and accountable workers is a huge benefit for any organization. Recruiting and onboarding take up valuable resources and time. Average costs are approximately $14,936, which vastly cuts into already razor-thin profit margins. Lower turnover enables restaurants to invest in more essential activities that increase profit.

Furthermore, long-term team members know what they are doing. Employees feel capable to fulfill all of their daily requirements. They know how to collaborate effectively with management and coworkers to finish tasks on time.

Supervisors must use existing talent to train new hires. Restaurants also must ensure that new hires get acclimated to a new work environment. This hurts productivity, efficiency, and the employee experience, which impacts customer satisfaction.

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5 Steps to Create an Employee Retention Program

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An employee retention program enables restaurants to protect their human capital. High turnover is not only expensive and time-consuming; it damages a restaurant's reputation. When workers frequently quit, internal expertise and efficiency suffer.

Despite the importance of low turnover, owners might not think they have the time to implement a retention program. While a retention program is certainly a challenge, the effects of high turnover are much worse. Repeatedly training new hires takes up too many resources. So, how should a restaurant get started? Read ahead to learn specific retention strategies.

1. Employee Retention Program Assess Turnover

The first step is to know where the restaurant stands compared to others in the hospitality industry. There are a set of formulas and tools that can help estimate the turnover rate. Here is one of the more popular formulas

Annual Turnover Rate % = Number of Employees Who Quit / (Start + End Number of Employees) / 2

Then, take the results of this equation and multiply it by 100. For example

Annual Turnover Rate % = 8 / (40 + 32) /2 = .222 x 100 = 22% turnover

Restaurants can use these findings to optimize the turnover rate or maintain existing rates, if low. The end goal is to create a company culture that optimizes employee engagement and improves productivity. Even if the number doesn't seem particularly high, there is always room for improvement.

2. Employee Retention Program Compensation Strategies

Compensation should depend on how valuable a team member is to the restaurant. Rather than reward employees collectively according to roles, restaurants should consider salary increases on a case-by-case basis. Salary ranges should be around the same amount, or higher than the competition. However, a small business cannot always afford to enforce this policy.

It's important to remember that compensation is only one part of the equation. If the work conditions are poor, a salary raise won't keep a wavering worker employed forever. Restaurants should remember that a compensation strategy should include health insurance packages, other benefits, and perhaps even wellness initiatives.

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3. Employee Retention Program Positive Work Environment

Work-life balance is critical, particularly since COVID-19. Mental health issues and depression are at an all-time high. While employers are not fully responsible for their workers' well-being, there are certainly ways to improve morale.

Occasional free lunches, gym memberships, or other wellness initiatives are relatively inexpensive options. Flexible work schedules and optimal vacation policies are other ways to lower turnover and improve the company culture. Furthermore, asking how workers are doing and treating them with respect can go a long way.

4. Employee Retention Program Leadership and Recognition

Leaders have a critical role in boosting employee retention and improving employee engagement. They can offer support strategies and invest in tools that streamline tasks and minimize workloads. Supervisors should listen to feedback and act on problem areas to maintain accountability. Communication tools such as scheduling or inventory software can boost connectivity and minimize errors.

Leaders should also create an internal communications strategy and prioritize transparency. This will help workers feel a part of the company's vision, which will lower turnover. It will also help to resolve problems and respond to crises more effectively. Recognizing hard work and appreciating top talent is also critical in improving engagement. Workers are much less likely to look for employment elsewhere when they feel respected and recognized for their efforts.

5. Employee Retention Program Professional Development

Most employees want to advance in their careers, or at least be allowed to do so. In the restaurant industry, this may include higher salaries, full-time status, or promotions. Professional development strategies include asking workers what they expect out of their jobs and what motives them. Supervisors should allow motivated employees to move to different positions and learn more processes. Offering additional training such as bartender certification courses can be a way to boost engagement and morale.

4 Common Employee Retention Challenges

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If employee retention was easy, then restaurants wouldn't struggle with such high turnover. While managers can use certain initiatives to control turnover to an extent, they can't completely stop it. Read ahead for some of the top challenges facing restaurants.

1. Employee Retention Challenges Inability to Increase Pay

Small restaurants can't always improve employee retention because they don't have the funds to offer competitive salaries. Retention is an issue when a worker wants too high of a raise and a small diner just can't provide it. While restaurants need to provide good salary packages, there's only so much they can do.

What restaurants can do is ensure individuals in similar roles are paid similarly and fairly. This will prevent disputes and improve morale. However, some top talent deserves higher pay because of their efforts. Finding this balance remains a challenge, particularly when there are low profit margins.

2. Employee Retention Challenges Too Many Opportunities

Labor shortages are a big problem, as COVID-19 based relief has kept many individuals on unemployment. All industries are scrambling to find new workers, and customers are getting the short end of the stick. To retain employees and find new ones, many restaurants are offering attractive compensation packages. This makes it much harder to retain current workers because there are so many other attractive options. There is little an employer can do in this circumstance, unless they can offer more incentives.

3. Employee Retention Challenges Candidates Lie

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Let's face it. Most people have fudged a bit here and there on a resume or during an interview. Everyone wants to build themselves up to make them more attractive to a potential employer. It is common to lie about unexplained time-off, exaggerate roles in past positions, or claim expertise that does not exist. Even in this day and age with extensive background checks, it is easy for someone to fall through the cracks.

While initially hired, the employee may prove to be incapable. If restaurants hire too many unqualified people, the workforce is not going to be very good. This leads to firings, no-calls-no-shows, and other problems that impact profit and efficiency.

4. Employee Retention Challenges Boredom with Role

Some workers look for an easy interim role until a better opportunity comes along. They may lie during the interview process and claim to be interested in long-term growth at the restaurant. However, these workers become bored and are easily swayed by better employment elsewhere. This is a problem that is virtually impossible for employers to detect or ignore. Frequent feedback sessions and performance reviews can help identify who these individuals are, but it's not always possible.

The Top Benefits of Employee Retention

Part of running a restaurant is understanding the risks of low employee retention. The cost of high turnover is detrimental to morale and profit margins. Not only does it affect operational expenses, but also the workplace culture and customer satisfaction.

Regardless of the impact of high turnover, many restaurants don't recognize how important it is to prioritize retention. Diners who do see a return on investment across all sectors of the supply chain. Here are some of the top benefits of employee retention.

1. Benefits of Employee Retention Save Money

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It costs the United States approximately $1 trillion to locate and recruit new team members each year. These expenses include marketing costs, interviewing costs, and onboarding fees. Further training and supervision from management or coworkers also take up valuable resources and time. Furthermore, there's no way to gauge the price of low productivity and disengagement. Each of these factors increases expenses in one way or another, compounding the price of turnover.

2. Benefits of Employee Retention Improve Morale

When employees continue to leave, it hurts the morale of the remaining teams. They may think there is something wrong with the restaurant, which inspires them to look for work elsewhere. It also decreases their motivation and job satisfaction. Restaurants that implement effective ERPs can optimize morale, maintain engagement, and decrease the desire to leave.

3. Benefits of Employee Retention Increase Expertise

The longer someone stays employed at a job, the more capable they are. Furthermore, employees have the chance to explore other roles within the restaurant. They can cross-train, learn how to use new digital tools, and help out with managerial tasks. This builds a more cohesive and collaborative workforce with a great knowledge base.

4. Benefits of Employee Retention Maximize Training and Recruitment

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When a restaurant locates qualified team members and hires them, they still need to be trained. When a new hire finds employment elsewhere, all of those investments were for nothing. With an effective ERP, restaurants can save thousands in onboarding expenses. Another option is to recruit from within. This can help save thousands of dollars per individual, and increase expertise throughout the restaurant.

5. Benefits of Employee Retention Increase Productivity

Productivity loss impacts everything from customer satisfaction to employee morale to profits. It takes new hires roughly one or two years to be as productive as another coworker. It also takes time for new hires to generate relationships with colleagues and patrons. Labor shortages create a host of new concerns, such as excessive overtime, burnout, and low quality of service.

An ERP can save a restaurant all of these expenses and emotional losses. Workers are more engaged and tend to accomplish more tasks. They also generate better friendships with customers, which increases customer loyalty and profit.

Best Employee Retention Strategies

Once a restaurant calculates the turnover rate, it can decide whether to implement strategies to improve employee retention. Creating a plan can be a beneficial tool to minimize high turnover in the future and maximize employee engagement. HR professionals must generate feedback channels, ensure recognition for hard work, and more. This will improve employee retention and create a better, collaborative company culture. Read ahead for the top employee retention strategies.

1. Employee Retention Strategy Build Employee Engagement

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Disengagement impacts the entire company culture from top to bottom. A disgruntled team can't perform high-quality work, discourage colleagues, and are poor examples. Studies show that workers are highly disengaged, with more than 80% unhappy in the workplace. Giving team members a voice, recognizing them for hard work, and offering solutions can help increase engagement. Employee surveys are one option to help managers understand the entire employee journey and any bottlenecks.

2. Employee Retention Strategy Recognize and Reward Hard Work

Studies show that employees stay at a job longer when they are recognized for hard work. Unfortunately, the vast majority of employees in the United States feel unappreciated for their efforts. This hurts morale and engagement, as well as retention. Restaurants should prioritize compensation, rewards, and social recognition to improve retention rates.

3. Employee Retention Strategy Recruit Qualified Employees

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There are many ways to attract highly qualified team members that will help achieve key goals. Asking the right type of questions, providing feedback, and offering incentive packages can help. Optimizing the recruiting and onboarding process can help weed out unqualified candidates.

4. Employee Retention Strategy Optimize the Company Culture

Most workers consider a restaurant's culture before they decide to take a job. A strong organizational culture will improve coworker interactions and enhance customer service. This will also organically attract new talent. Owners should communicate core values in a manner that all employees can comprehend. Digital tools, regular check-ins, and face-to-face meetings can help to optimize the company culture as well.

Conclusion for Employee Retention

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In conclusion, here is everything to know about employee retention -

  • An ERP will help to assess turnover, provide compensation strategies, foster a positive work environment, strengthen leadership, and offer professional development opportunities.
  • Challenges with employee retention include an inability to offer more pay, too many other opportunities, candidates tell lies during interviews, and employees get bored with their roles.
  • The benefits of high employee retention are that it saves money, improves morale, increases expertise, strengthens recruitment and onboarding, and increases productivity.
  • Restaurants should implement an employee retention strategy by building employee engagement, recognizing hard work, recruiting qualified employees, and optimizing the company culture.

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