New Workforce Study

Best Practices for Reducing Employee Turnover, an Oregon Perspective

The Bottom Line. Those are perhaps the three most powerful words in any industry, but especially in hospitality where profitability margins can be paper-thin. While competitive wage, insurance, and health costs seem uncontrollable, the cost of recruiting and training new employees due to turnover can be minimized. Turnover cost savings drop to the bottom line the same as increasing sales or prices. The strategy of focusing on employee retention rates can also have a longer-term effect on overall labor costs, and the increased capabilities that veteran employees provide can positively affect guest loyalty and therefore increased profitability.

Pay Now or Pay Later. “Those managers who understand the value of employee retention and structure their organizations’ compensation systems and management practices to reinforce retention will outperform the competition… Any company that is experiencing a high degree of turnover is incurring unnecessary financial costs as well as decreases in service quality and the quality of work life.” (The Cost of Turnover: Putting a Price on the Learning Curve, The Cornell Hotel and Restaurant Administration Quarterly, 2000) 

Ideas That Work. ORLA’s Education Foundation commissioned Oregon State University’s Hospitality Management department to conduct research to identify and highlight organizations in Oregon who have created innovative practices that have resulted in improved employee retention. The study’s format is user-friendly and is presented as a series of short video interviews with eight companies who recognized the need to transform their view of the company’s relationship with their employees. Take a look at the videos posted on ORLA’s website at OregonRLA.org/workforce.
 
Todd Montgomery M.B.A, the research project’s lead, explained that they discovered a key commonality among each employer, “Leaders implementing best practices realize the current labor market and trends are unsustainable. Adapt or die, literally.” While best practices highlighted in this study range from first year engagement tactics to experiential training, and data-driven employee culture that leverages technology to mentorship programs, there were several common threads recognized among the companies interviewed. Commonalities include;

1. There was a recognized need to change human resource and management practices in order to increase retention.
2. The organizations regarded employees as partners.
3. Leaders realized that an employee who felt that they were treated well gave consistently better service to the organization’s customers.
4. An effort was made to integrate perspective from outside the hospitality industry and was deemed valuable and essential in challenging and changing the organization’s status quo.  
5. Managers expressed authentic concern and the desire to care for people, both their employees and their customers.
6. In addition to profit goals, the organization was motivated to serve a higher purpose in its business and to operate their companies “the right way.” 

The Application. While all of this sounds intriguing, we recognize that the “Bottom Line” is how much money these types of practices can save. While interviewees in our study weren’t asked to share their own financial results for proprietary reasons, here’s a sample of what Cornell found in the study referenced above when turnover costs were calculated using Separation, Recruiting, Selection, Hiring, and Lost Productivity factors for the following positions:

Position
Hotel Front-Office Associate
Line Cook
Administrative Assistant
Gift Shop Clerk

Property 1
$5,688.03
$2,076.91

Property 2
$5,965.06

$7,568.01
​$3,386.25

These numbers represent the average cost of turnover by position for two different hotels. The costs associated with turnover were higher than previous estimates, taking into consideration training and lost productivity due to a learning curve.

We hope that you find our new work helpful as you consider your own operations and workforce challenges you may be facing. We welcome your comments as well as suggestions for other best practice research your organization would find valuable. Feel free to reach out via email at [email protected] | Wendy Popkin 

Wendy Popkin is the Executive Director for ORLA’s Education Foundation (ORLAEF), a nonprofit foundation dedicated to supporting the educational and training needs of the hospitality industry. Wendy is a 32-year career veteran who describes herself as “fanatically enthusiastic about helping others enjoy the same type of fabulous career opportunities I have enjoyed in the hospitality industry.”