View from the Bar: Lowering Turnover & Increasing Profits

Two very happy team members at Pub 819, a Craft & Crew venue. Image: Pub 819 Facebook / Craft & Crew Hospitality

Employee turnover is one of the costliest challenges owners and operators will battle.

Just one employee quitting or being terminated can cost several thousand dollars. The more employees an operator must replace, the further profitability takes a hit; as turnover increases, so do costs, impacting profits.

That’s precisely the situation David Benowitz, president and COO of Craft & Crew Hospitality Group operating in the Twin Cities, faced just five years ago.

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We asked industry leaders to weigh in on what metrics they were tracking to ensure proper cash flow, increased profit margins, and operations setup for future growth.

We spoke with Benowitz about the overwhelming turnover rate in which Craft & Crew was mired, the group’s accompanying dismal profitability, how turnover rate and profitability relate to one another, and how the challenge was overcome.

As we approach 2020, owners, operators and managers need to have a plan to start a new year with fresh eyes and fresh tactics.

When did you first realize your turnover rate was problematic? What indicators were red flags?

I first realized our turnover was problematic about five years ago when I started researching the hard and soft costs associated with turnover for both hourly and salaried employees. I learned that our turnover was well beyond the national average (100 percent) and I started digging further into the problem.

It soon became evident to me that our hiring, onboarding and training process needed a complete overhaul, and that we needed to start making substantial changes to our organizational culture. Five years ago, our approach to hiring was based almost completely on skillset and prior experience, and we were a numbers- and specials-driven organization. Today, we hire based on personality and cultural fit, and we are a people-driven organization that prides itself on our company core values.

What was your plan to cut your turnover rate, and was there a specific percentage you sought to reach?

My plan to cut turnover was to gain a much deeper understanding of who we were bringing in to the organization and gain insight into why people were choosing to leave or requiring termination. In 2014, we had a 110 percent turnover rate and I set the goal of reducing to 70 percent within two years. This year, our projected turnover is 53 percent.

To get us here I worked to learn everything I could about the value of company culture and how to build one that sustains and drives an organization. I read books, attended conferences and seminars, and interviewed top CEOs in my community to learn what worked and didn’t work for them. By the third interview it was overwhelmingly clear that the key to success lies in the people within an organization. I became a “culture junky” and made it my mission to turn our failing culture around.

The most impactful change was learning how to interview for cultural fit. Establishing clear and applicable core values made it easy for all hiring managers to understand how to identify those who would be well-aligned and those who would never work, and we developed a structured hiring process to bring in the right people.

Check this out: Why Your Business Needs Vision, Value, Mission and Culture Statements

But the work really begins with making the right hire, you then need to train your staff thoroughly and appropriately and treat them as if they are part of your extended family. The way employees feel as part of your organization is a critical aspect of success. There are so many choices within this market. Attracting the best talent means positioning yourself as a thought leader in organizational health who is committed to building and nurturing professionals in the industry—without that you’ll just be another bar or restaurant and employees will see their position as just another job. Standing out in this industry is challenging and I genuinely believe having the best people is the most sustainable way to do it. Everything else is a short-term play; investing in your people builds long-term affinity and success.

What should owners, operators and managers look for when interviewing for personality rather than skill set?

Before we go into any technical questions, we ask questions that are going to give us indicators of who they are as a person. One of my go-to questions when hiring managers is, “What is most important to you in this next opportunity regarding the employee/employer relationship?” From this single question I can tell what compels this individual and why they are looking for a change. You start to get a feel for whether they are just looking for greater compensation or for a more satisfying professional experience.

We also use the Kolbe assessment when hiring all managers. The Kolbe allows us to understand who our candidates are at the core and what their conative abilities are. Because Kolbe analyses natural strengths and affinities rather than learned behaviors and information, it is an excellent indicator of how people respond under stress and in what environments they’ll really thrive. It gives us information about the employee’s fact-finding and quick-start abilities, their follow-through, and their implementation skills. It also helps employees better understand their coworkers, fostering teamwork and streamlining conflict resolution. The Kolbe is an amazing hiring tool and is now a key part of our process.

Check this out: View from the Bar: Erick Castro Addresses Hiring Practices

Finally, I go through our company core values with every candidate. These values—including guest satisfaction, teamwork, crew development, creative and fun and growth—are at the heart of how we run our restaurants and what we expect from our team members. Going through them in detail with candidates is an eye-opening process and it’s generally quite evident whether it resonates with a candidate or not. Those who have a favorable reaction are the people you want for your organization.

How does a lowered turnover rate correlate to increased profitability?

It costs $2,000 in hard cost and $2,000 in soft cost to turnover a single employee. When turnover is 100 percent and you have several hundred or several thousand employees, that amounts to a lot of money. With 280 employees, decreasing our turnover rate from 110 percent to 53 percent created substantial cost savings for the company.

Check this out: View from the Bar: Uplifting the Community and Revenue

It’s no surprise that companies with low turnover typically have a winning culture. If your employees are happy and provide amazing customer service by truly connecting with guests, you start to build regular guests. These regulars are the cornerstone of your operation and give you the ability to propel your company to the next level.

What's your plan to further increase profitability in 2020?

Were focused on doing exactly what we have been doing in terms of our organizational health. Hire the right people, put in the time and effort to train them right, empower them, and treat them the way we’d want to be treated. This is our winning formula. My goal is to get us to a 25 percent turnover rate by 2021. Due to the nature of the business and seasonable employees, I know we’ll never get to zero percent, but if we can cut it to 25 percent we will be in very good shape both financially and culturally.

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