Measure Twice. Fix Once - Permanently - By Joseph M. Gravish

If you're a manager in the hospitality industry personnel turnover should be on your radar screen.The Innviting Inn and Suites announced recently that its 2006 gross operating profit jumped an amazing 20%. According to Mr. I. Feelgood, the General Manager, he and his management team embarked on a strategic plan in early 2006 to fix perhaps their most perplexing, persistent, profit-robbing problem - excessive employee turnover. As a result of this and other actions, their annual GOP reached an all-time high. Wouldn't you like to be the GM of the Innviting Inn? The question you should be asking is - why can't we do that? The answer is, of course, you can - by measuring the true cost of your pain and committing to a plan to remedy it.This article provides the tools you need to diagnose your level of pain. It describes how turnover - in dollars and cents - affects your bottom line and the steps you should take to fix the problem - permanently.

Let's first agree to be factually honest. The oft heard rationalizations - 'it's a normal cost of business' - 'it's not my problem'- just won't cut it any longer. If you're a manager of any type in the hospitality industry, and the lodging sector in particular, turnover should be a permanent blip on your radar screen. Obviously some turnover is good, even healthy for business growth. Fresh blood, new ideas, etc. contribute to improved products and service. Excessive turnover however cuts beyond a reasonable tolerance level into the core of the operation. It's simply money - in the form of your investment in building a knowledgeable, skilled, experienced workforce - walking out your door. But you already know that. Or do you? What was your turnover rate, by position and department, in 2006? How much did it actually cost? Can you afford it?

If you can answer those questions, or are doing something about it, put this article down. Read no further. Get your team together and celebrate. Congratulations. You're part of the enlightened few.If not, read on.

A recent Cornell University School of Hotel Administration study lays out the facts. It estimates the industry turnover rate to be 50 to 60 percent nationally. Other studies over the years have shown that turnover has, in some cases, approached 100%. Other than elementary, middle and high schools I can think of no other situation wherein an entire 'class' with few exceptions, normally walks out the door en masse, each year. The problem here is that your productivity suffers - but it's sometimes hard to quantify the impact.It's not difficult however to measure your turnover rate and ultimately put a dollar figure against it. Remember, turnover equals lost productivity.

Determining Your Turnover Rate

I Goggled 'turnover rate calculator' and got 783,000 returns. But let's keep it simple. As a manager it's more important that you regularly monitor your turnover rate - and do something about it - than how you do it. The real problem becomes more apparent when you determine the cost of that turnover; hence the title of the Cornell University report, 'The Cost of Employee Turnover: When the Devil Is in the Details'.Turnover, according to the report, affects 'consistency and quality of customer service, resulting in direct reductions of revenue and profitability'. It later links turnover to increased operating expenses and separates the cost of replacing employees into three categories:
hard costs, such as advertising and recruiting expenses;
soft costs, such as time required to interview job candidates;
and opportunity costs, such as missed sales.

When viewed together and over time, calculating these costs properly can be illuminating.In my experience property managers tend to downplay, even dismiss, some turnover cost factors, particularly the soft costs. Their rationale is that the tasks associated with acquiring, training, maintaining and separating staff are all normal HR and hiring manager's duties. All true. However, wouldn't you prefer to spend your (limited) time and energy strategically improving your current products and services through a veteran, loyal staff rather than constantly replacing people and do-looping through the same process over and over again? You can't fight the battle and train at the same time.

The Cost of Turnover Hold onto your hat!

The average cost of losing an employee was estimated to average $5,864 (the range was $2,604 to $14,019). Geographic location (for example San Francisco vs. Kansas City), local unemployment conditions, job complexity (HVAC technician vs. houseman), etc. are a few of the factors that can also influence the true cost.

The Cornell University report divides turnover into five cost segments:
pre-departure,
recruitment,
selection,
orientation and training,
and lost productivity.

Of those, lost productivity costs comprise 52% of the total average cost. Were you an Executive Housekeeper any drop in production long before 52% would be potentially disastrous.And even at the lower end of the scale potentially losing almost $3,000 from your bottom line for every employee lost unnecessarily should be viewed with horror by ownership.

If you really want to find the devil's details the turnover calculators listed at the end of this article, and others, can help measure your costs more accurately.

The Challenge
So here's my challenge to you.

First, understand and agree that turnover negatively impacts your bottom line.
Commit to taking sustained actions to reduce your turnover rate by 10 to 20 percent annually. How?
• Define the essential job qualities needed for each position in your hotel.
• Eliminate the 'anybody is good enough' hiring philosophy (one bad hire can spoil the entire staff). Hire objectively against essential job qualities.
• Ask tough, behavioral-based interview questions (not every job candidate deserves to be hired). Use a panel, multiple, even peer interview system (the more sets of eyes the better).
• Conduct thorough background checks (don't' put your company at risk - ever)
• Hold every manager personally responsible for their department's personnel turbulence.
• And most importantly, position your company to be the employer-of-choice, not the employer-of-chance.

Like it of not, being the employer-of-choice costs money. Accept it - don't debate it. Don't your Most Important Assets - your employees - deserve and merit the ability to enhance the quality of their life and enjoy the security that a decent compensation and benefits package provides? Studies have shown wage and benefits are the #1 job performance motivators. Properly designed, your up-front investment will be more than offset with the savings achieved through the reduction of back-end turnover costs.

If we as an industry fail to act, local, state and federal governments (dare I mention unions) will do it for us.Finally, when successful, celebrate with all your staff - from the bellman to the maid - from the front to the back of the house. Then build on your success. Do it again next year.

Turnover Cost Calculators - Samples
• University of Wisconsin, Cooperative Extension, Center for Community Economic Development (www.uwex.edu/ces/cced/publicat/turn.html)

• Workforce Management Online, Manager of Choice, November 2003

Mr Gravish invites readers to respond by sending him your turnover data, methods employed to reduce excessive turnover, and your success stories. Joseph M. gravishjmgstlouis@hotmail.com

Mr. Gravish is a human resources professional with over 25 years leadership experience at numerous organizational levels both national and international. He is an advocate of building business success through, and by, people - first.