Human capital crisis in hospitality

30th Jan 2006

By John R. Hendrie

Every year the pundits and hospitality leaders project challenges for the coming year, and, like clockwork, one issue is always TURNOVER OF EMPLOYEES.Ê How do you attract and retain employees, your Human Capital, your Ambassadors to the Visitor and Guest?ÊÊ We know we run a tight margin business, where payroll costs are our largest expense.Ê In the US, we know that we do not really want the minimum wage to increase, although many States now exceed the Federal level.Ê We know that we do not want the Tip Credit to disappear.Ê We also may have a good perspective on the demographics of our employees:Ê primarily female, heavily immigrant, not highly educated, many holding more than one job.Ê And, of course, Organized Labor has an effective, clear and loud message for that perceived disenfranchised audience.Ê

Yet, we basically accept an annual 50% turnover rate, matter-of-factly—the cost of doing business, we say—that turnstile just keeps spinning.Ê You have invested in these resources, and you expect some reasonable results in an economic context.Ê It goes beyond a “fair day’s work for a fair day’s pay” concept, although both sides of that ledger need some basic realignment.

Perhaps, some progressive companies have done some research to actually attach a cost to Turnover.Ê They may have looked at advertising, interview time, hire processing and paperwork, and training costs—no small investment there!Ê Others may have completed an Employee Survey to establish Employee Satisfaction benchmarks, which should alert and motivate Management to address the issues.Ê But, the Turnover continues, and the operations suffer as do our patrons.

Jeff Coy, ISHC, president of JLC Hospitality Consulting, in a recent article, “Shrinking Labor Force is Top Challenge for Global Hospitality, Tourism & Service Industries”, presented an alarming picture and statistics.Ê He also gave some examples of Recruiting extremes to meet this shortage of employees.Ê


“In Nashville (TN), a new general manager of major chain hotel sent a truck to a competitor’s property.Ê On the side of the truck was a sign offering cash bonuses to employees willing to come to work for him.Ê On the inside of the truck was a man handing out applications. . .ÊÊ

When Disney Hotels was recruiting workers for its hotels and restaurants in Orlando, company representatives traveled to Pittsburgh, Rochester NY and San Juan, Puerto Rico, offering $1500 relocation bonuses and a $100 airline ticket to anyone who would work for Disney for at least one year.ÊÊ

Paramount’s Kings Island amusement park in Cincinnati (OH)... hired up to 300 European college students to staff its peak summer months.Ê Another 200 workers were imported from other US cities.

When labor shortages impact the transportation, lodging, food service and attraction companies, there are fewer employees left to deliver the high-quality service or experience. . .Ê Poor service results in negative experiences and visitors decide not to return.”Ê
There is no magic bullet here, but gnashing of teeth and tacit acceptance is no solution either.Ê Attracting talent can take many forms, even the extreme mentioned earlier, but the promises and the facade all end at your Front Door, where too many readily become processors of “warm bodies” rather than anÊ Employer of Choice.Ê It starts with the Climate/Environment you represent and strive for.ÊÊ

Almost every Employee Attitude Survey states that Respect is the key to the relationship, so employers must be prepared to honor cultures, languages, traditions,Ê and even age, as represented by that changing labor pool dynamic from which you select your talent.Ê Your Policies and Procedures must also be seen as consistent and fair.Ê Secondly, recognition for their contribution is a significant factor for success. This effort must go beyond the empty “pat on the back” mentality; your employee population can frequently design and recommend suitable programs which achieve a high level of recognition for their peers. Also, Compensation is a viable component of this strategic mix for Retention.Ê As we preach performance, we should pay for that excellence, not necessarily “folded” into the base, but awarded as a bonus, frequently and in a timely fashion.Ê Additionally, a thoughtful, cost-effective Benefits Program will round out your commitment to retain your talent. Lastly, as you have hired for attitude, everything else is trainable, so ongoing Training and Development programs and initiatives are mandatory.Ê These must be your commitments! Think about it.Ê Is the above really any different than what you would expect for yourself and your career?

Events, legislation and trends on their own will overcome the Marketplace, particularly the Service sector.Ê Yes, we have limited resources, but our ambitions and realities dictate what we must do.Ê Just as we have moved to the Guest-Centric for our business philosophy, we must reorient our thinking about our Human Capital, stop that revolving door, and develop and reward our employees, retain that talent and showcase them to our ever more demanding clientele.


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