When Will The Restaurant Industry Finally Get Labor Right?

It was taken as a good sign recently when the Nation’s Restaurant News reported that employee turnover in the restaurant industry was on the rise for the first quarter of 2011.  This means more jobs are being created and more vacancies need to be filled in the restaurant business than any time since 2008.

All the hiring is good news.  So is the sales forecasts by industry researchers Technomic and the National Restaurant Association (NRA), which have both been revised upward recently.

But why does that automatically mean employee turnover should go up? And why is this an accepted part of being an employer in the food business?

Restaurants need to finally get their labor practices right if they ever hope to keep competing in the new, post-recession economy.  This has always been a high turnover industry, full of people holding down a job while they wait for something better to come along.  In the last couple years, with unemployment at 25 year highs, restaurants had their pick of talent.  Now that the economy is improving, that talent is looking for, and finding, a better job.

Complacent restaurateurs shrug their shoulders: we’ll just hire someone else, they say.

Meanwhile, Gallup just released an in-depth study that analyzed the average spending per customer per visit based upon their level of “engagement” – how valued they felt as a customer and how positively they viewed a restaurant’s service, taste of the food, and value for the money.

Gallup found that no matter the segment, many restaurants were leaving money on the table by not effectively engaging customers.  Even worse, their polling shows that a significant number of consumers have permanently lowered their dining spending, despite the improving economy.  The lone exception to this rule are engaged customers.

What does all this mean?  To borrow a phrase from Bill Clinton’s 1992 presidential campaign: It’s the experience, stupid.

A good experience happens for a customer when the food, the service, and the atmosphere are perfect.

All three of these factors are dependent upon the performance of the staff.  Your people.  Day after day.  That’s why it’s interesting to see the California Restaurant Association reject a proposal in that state to give workers up to nine days of paid sick leave per year, despite the release of a recent study that found a similar law in San Francisco was largely embraced by the restaurant community there.

It’s also interesting to watch the NRA oppose bills like Card Check or Missouri restaurants fight a minimum-wage increase.  These organizations seem to be choosing profit over people every time.

The new reality is that people are a restaurant’s new source of profits.  And to get good people, you have to pay for them.  Sure, you can keep paying the minimum hourly rate plus tips, never give a paid day off, even for sickness, despite the food safety risks, and casually shrug your shoulders when the economy improves and all your best help finds a real job, leaving you to train a greenhorn teenager to keep your customers engaged.

You’ll also be history before too long.

The restaurants that survive the new reality in food service are the ones who know how to recruit, train, and keep top-notch staff.  Whether they accomplish this through creative compensation strategies, a people-first corporate culture, or by actually giving a few paid sick days a year doesn’t matter.

What matters is that restaurants need to wake up.  Accepting that turnover will go up just because better jobs are available in an improved economy simply isn’t good enough.

When are restaurants going to wake up and finally get labor right?