Survey Shows that Restaurants Can Reduce Costs Through Better Employment Practices
Jan 22, 2014
By Lauren French
The restaurant industry is an important part of our economy, employing over 10 million people and generating sales revenues of $660.5 billion in 2013 alone. But despite its success, the industry offers its employees notoriously low wages and limited access to benefits and advancement opportunities. A new study shows that these practices may be harmful not just to workers, but to businesses as well.
The study, which was written by Rosemary Batt and Jae Eun Lee of Cornell Universtiy and Tashlin Lakhani of Ohio State University, and released by Restaurant Opportunities Center United, includes the first national survey of work and human resource management in the U.S. restaurant industry. High Road 2.0: A National Study of Human Resources Practices, Turnover, and Customer Service in the Restaurant Industry examines the impact of negative employment practices on turnover and employment stability and shows how they can hurt restaurants’ bottom lines.
High levels of employee turnover and low rates of worker tenure are prevalent through all segments of the restaurant industry, especially moderately priced and fast food or “quick serve” establishments. The study finds that almost one in two fast food workers quits or is fired from his or her job each year. Turnover is expensive for a number of reasons: labor costs related to recruitment and training; loss of proficiency and productivity; lack of employee loyalty and commitment; and overall disruption of operations. Turnover costs range anywhere from $18,200 for an establishment with 30 employees to $1.82 million for a chain of 100 restaurants.
Fortunately, the industry’s turnover problem is not insurmountable. The study finds that implementing better workplace practices, such as increasing wages, can reduce turnover by almost 50 percent. Indeed, while restaurants with the worst human resources practices experience annual turnover rates of 45 percent and a typical worker tenure of 3.6 years, establishments with the best practices experience just a 26 percent turnover rate and enjoy an average worker tenure of 6.3 years
According to the survey, the most important human resource practices that restaurants can implement to decrease turnover and increase worker tenure are higher hourly wages and greater job security, as well as predicable full-time schedules, more discretion on the job, and the opportunity for internal promotion. Other helpful practices include providing job training and organizing work to allow employees to effectively use their skills. Restaurants are not the only employers who can benefit from these policies; business experts are discovering that these high-road practices make economic sense across a range of industries.
The numbers don't lie. This survey shows that when employers make smart investments in their employees, they benefit from the returns. It's time to create workplace conditions that allow both the restaurant industry and its workers to flourish.