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The Real Cost of Employee Turnover

When a worker quits, there's much more than just financial burden. Find out what it's really costing you.
A recent article in Modern Restaurant Management on attrition in the hospitality industry states that a single front-line churn, i.e. one lost employee, can drive as much as $5800 in lost profit over the course of one year. Now, that's a lot of hamburgers you'll have to sell to make up the loss. And, we're just talking about one single churn, that's one single employee. In fact, in most restaurants in America, employee churn generally averages around 75% and in fast food, it can peak as high as 130%.

Think about that for a moment. Let's say your overall attrition is 100% at $3000 per new hire. If you have a staff of 25 people, you'll need to let 25 go and hire 25 more each year. That's roughly two new hires each month. At $3000 a pop, you're losing $6,000 a month, just on attrition. In a year, that's a loss of roughly $72,000. Now THAT'S a lot of burgers.

Let's put some numbers in your head about your specific business. To figure out your turnover rate, you'll first need to determine how many people left your company last year. Take that number and divide it by the amount of staff you would normally have in your location at peak performance. Then, multiply that number by 100. The answer is your turnover rate.

Now, what would you say turnover costs you each year? The answer may surprise you. In fact, the real cost of turnover is MUCH worse.

So now that you know your rate, you need to understand how it influences your business. When people pause to consider the effects of employee turnover, they generally think of it in terms of the direct costs of employee separation. Things such as benefit payouts, worker's compensation, and the expense and hassle of finding and hiring new crew members.

There's an old saying about pulling cogs out of your engine, that nothing good can happen. Well it certainly applies here. Like cogs, each member of your team has an important role without which the greater process will begin to warble and degrade. Eventually, productivity and profit will go out the window.

Remember that as each churn occurs, the existing team needs to pick up the slack, while management sources a new candidate. And as the new trainee enters the operation, at least one senior employee is tasked as mentor, further increasing the workload of the rest of the team.

The big problem with this sort of situation is that no-one has time to consider anything but their own duties, and in no time at all, things start to lapse. Bathrooms don't get cleaned, tables don't get cleared, drink orders don't get filled. There's no time for customer experience and certainly no time to step back and think about improving the business.
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The combination of frustrated clientele and reduced team morale drive a nasty cycle of both staff and customer walk-outs.
Weighted down with the responsibility of maintaining operational KPIs, managers will be forced to pull double-duty, working extra hours and multitasking to fill the gaps. Like anyone placed in such a negative position, they'll eventually wither. I no time, they too will find themselves on the 'grass is greener' bandwagon, and no-one wants that. A team without leadership is destined to fail.

In summary, on top of the obvious financial impacts, unbridled attrition also destroys productivity, limits sales potential, slashes the customer experience, drives down employee morale, and ultimately initiates a vicious circle that leads to even more attrition.

Clockedin has the solution.

Our network gets you connected to job seekers who already know your brand inside out. Having worked in your brand at some point in the past, they already have the training and experience they need to slide right into your operation on day one. Heck, some of them still even have their uniforms!

Sound too good to be true? Click here to head to our website and learn more about the network and how we're helping brands across the country eliminate churn. You can book a demo or register for a free trial by selecting either option from the top right of our website.
Book a meeting with us now and we'll show you how to take back your margins by eliminating the costs of employee churn.
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