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The secret to business success: training your workforce

If you missed us at the Golden Gate Restaurant Association’s Industry Conference, here’s an abbreviated recap of our panel on “Training and Keeping Your Workforce” with our very own Justin Kulla, founder and CEO of BusinessBlocks; Sumir Meghani, co-founder and CEO of Instawork; Alison Arth, founder and principal of Salt & Roe; Justine Flynn, service director at Souvla; Gabriel Barba, director of training and development at Alta Group; Emma Rosenbush, general manager at Cala. Panel members shared best practices of how restaurants can implement training programs to maintain staff as well as discussed how the industry can chart a path for a more stable and professional workforce.

Justin: Today, we’re going to be talking about training and keeping your workforce. There are about 4,000 restaurants in San Francisco supporting about 64,000 jobs, and this topic is an important one to discuss because it’s related to the success of all small businesses, especially restaurants. The two biggest contributors to cost for restaurants are food and labor. When we think about labor, people generally refer to how much we’re paying somebody per hour, but the cost to recruit and train and employee turnover is also a meaningful part of labor costs. The Center for Hospitality Research at Cornell estimates that the cost of employee turnover averages around $5,864 per person for a typical front-line employee. If you can get the hiring and training part of the equation right, that helps increase the likelihood of profitable restaurants. For everyone on the panel, do you have a sense of what your average turnover ratio and average tenure at your restaurants are? How do you think about that?

Justine: We don’t think about it terms of numbers. It’s not something we think we can quantify because holding onto one employee for 4 years, who started as a dishwasher, and watching this person grow to become a Souvla manager in the next few years is invaluable. So even if employees around that one person is turning, because we’ve supported him and his growth, he’s going to show up every time we call and support us and everything we need to do to succeed. If you can make a difference in the lives of a few employees, they’re going to take care of you because you’re taking great care of them.

Gabriel: I think the reason why this conversation is so important because when i first came on with Alta Group, the attrition rate was quite typical of the industry. You had people who were coming on board as a stepping stone for their career, “I’m just serving tables to make quick cash.” With the work we’ve done and the time we’ve put into individual development plans and structures to hiring and sourcing, it really has helped us get the talent we want and provide them with not only an equitable wage but maybe an idea that this can be a career. A year in a half ago when we first started implementing these systems, we found we had the typical turnover rate. But the retention we’ve had in the past 6-7 months has gone up - people are sticking with us at least a year whereas before, they were here for the summer time or holidays.

Emma: We opened 2.5 years ago and we have 45 percent of our staff who has been with us for 2 or more years. What the three of us have in common is to be opening up these pathways that are more career-oriented and has more mobility within our businesses. If you really build that culture, you find that you can help dampen that turnover. That said, you still get people who show up for 3 shifts and never hear from them again.

Justin: Emma, you said Cala is a second-chance employer and obviously that brings some particular challenges. How do you think about the expectation of turnover knowing that you’re going to have to do some heavy lifting in terms of training?

Emma: The challenges seem to come in this longer period of training. If you’re taking somebody who is completely green, we know that a big part of the training is actually just getting comfortable being in the restaurant - how you move through the restaurant, how you speak in the restaurant? But the challenge is that if they in one month, we put in this extra time and money and we see often, especially people who are transitioning back into the workforce, they get their feet on the ground and make a paycheck - they go back into the trade before they were incarcerated. When it is the right fit and we’re opening the door, the added investment is helping us move that person through longer.

Justin: Alison, you have experience in other markets outside of San Francisco. What’s happening in other markets and is there something to learn from them? What are you seeing in places like Minneapolis?

Alison: The statistic that really stuck with me is - for every 8 new jobs that are created in San Francisco, only 1 housing unit is built. It’s really easy to extrapolate from there that that creates astronomically expensive housing, and most people who are working at hospitality are just working just above minimum wage. It makes it very difficult, if not totally impossible, to stay. In markets like Minneapolis that just isn’t the case. In addition to the housing crisis is our public transportation system. Anyone who’s tried to get home using public transportation after a closing shift at a restaurant and is catching the bus at 3am can attest to that. In New York, sure, housing is expensive, but you can get to Queens and Brooklyn or any other neighborhood with great ease, any time of day.

Justin: Sumir, Instawork is a platform that helps connect employers and qualified candidates. How do you help qualified candidates in restaurants across the city?

Sumir: We’ve had to be creative. There are 2 observations that I have about what I call this new hospitality workforce. In 7 years, three-quarters of the world’s workforce is going to be millennials. They’re young, they use their cellphone for everything, and when you ask them what they want and this is true of instawork users, they want training and flexibility. Money is actually not the top on their list. Then you have the new immigrant workforce. In California, about a third of hospitality workers are immigrants. So when you ask them what you want, it’s pay and flexibility. They want to be able to make it to Oakland, where they live, so they want flexibility around their schedules so they can catch the last Bart train. We also try to reach the immigrant communities at soccer fields, churches and community organizations, to find these untapped communities, where there are career-oriented or professional workers who just need access.

Justin: what’s interesting is you’re trying to create professionalization for an industry that has not been treated that way in the past. It’s overdue and needed. Alison, to that point, when is it right for someone to implement a training program? Should they think about it as a certain number of locations, revenue or employees?  What’s the right time to invest in training and learning and development?

Alison: In an industry where we’re fighting for 3-4 percent profitability, it’s beyond fair to say that every single dollar really counts, and every single dollar can be the difference between success and failure. If we know that the average cost of losing and replacing just one single employee is $5,800, it’s hard to argue against the fact that actively taking a stance against turnover is a worthy investment. I think training is inarguably the number one thing that leads to retention. Developing structured, formal and regularly implemented training program is the absolute number one way to retain people and the reason is - people do really want to do a great job at work. They want to feel confident in their position, they want to feel empowered to make decisions pertaining to their role and beyond anything, they want to achieve. That certainly includes big moments of achievement, like promotions, raises, publicly recognized awards, but even bigger than that, and daily moments of achievement. And there is no way as an employee in a restaurant that you’ve achieved something unless you know what success looks like and that’s what training does. It gives you guidelines and boundaries that clearly define what it means to do a good job. So all of that is to say - the right time to start thinking about implementing formal training programs is when you’re writing your business plan. It should be written in there as part of your strategy for financial success because it’s going to help you keep people. It should be in there as part of your strategy to consistently deliver excellent guest experiences, which is what’s going to drive your top line. More than anything, it needs to be budgeted for. It needs to be built into your budget. For business, just like life, there are tradeoffs for absolutely everything. You have to invest in. There’s just no other way.

Justin: Money is an important part and it’s certainly the place where you start, but it’s not the only form of compensation. Feeling like you have opportunity to learn and grow are often also important parts of compensation. They tend to be parts that make people stay. Gabriel, how does your company think about investments for the front of the house and back of the house from the learning and development perspective?

Gabriel: I remember when I first came on board with the company, I had a conversation with our CEO and I said, “You know this is going to be expensive, but the return of investment is going to be worth it.” We spend about $1,000 from the time a person is hired and until they’re ready to go on the floor. That’s give or take - depending on the location. Some stores have a different service style, so you don’t have a lengthy time. We do consider the cost, and we build it into our budget. We consider - ‘Okay at this point, it’s going to set us a little back, but what are we going to get out of it? We’re going to get an employee who is engaged, who finds meaning in the work they do, who believes in equity, who believes in community, love and respect,’ which is what Alta Group teaches during all trainings.

Justin: Emma, when you think about training at Cala, it’s a different type of training. You have to rewind and think about some basics that we all take as assumptions people know when they arrive. How did you design that?

Emma: It starts at the periphery of the restaurant, and we slowly build people closer to the middle - into the actual dining room. So if we employ somebody who just spent a couple decades in prison and has not worked outside of that institution, what we have learned (and this comes from our 2 in a half years of trial and error) is the beginning stage is actually getting very comfortable in the space. So what we have been able to do for the greenest of the green is on the job training, funding that is available through Goodwill’s nonprofit. These different programs will cover certain percentage of wages for a period of training time, and that has allowed us to build in extra positions. We understand our labor is going to be high, and this is the way we want to hire and we think it’s paying off. Ultimately, the strength is having these individuals and professionals who have worked in restaurants before and coming together to create something every night that I think is what makes us special. The challenge is that beginning period and allowing more period for somebody to get more confident working on the floor. That being said, there’s a cap. If after 2 weeks, we see it’s really not the right fit, then what I’ve also learned is to not drag that out and to keep to make it worth because it becomes toxic for the whole team and we’re losing money.

Justin: Tipless restaurants - how has that impacted your culture?

Emma: That’s huge. We don’t do tips. We’re a revenue share model, so we charge a service charge on the bill. That allows us to legally distribute between the front and back of house, so all of that goes back to staff in the form of hourly wages. That’s huge with our culture because it means that if somebody isn’t pulling their weight, there’s a bit more of team policing. If we have an employee who is not performing to the degree that’s supporting everybody else, we hear about it and I find it really beneficial because that means for training, it’s on all of us to get this person where we need them to be. It’s enforced our culture and it’s helped our servers understand when we bring on a new server, it’s in everybody’s best interest to support that new employee.

Sumir: We surveyed 3,000 restaurants and asked, “How much time do you spend on hiring and training?” The average was 21 hours. About 20 percent of restaurants spend 40 hours or more and another 20 percent spend 5 hours or less. When we ask Instawork professionals: “What would you like, why are you leaving jobs?” Pay comes up, but the single biggest thing that comes up is cross-training. You’d hear from dishwashers that they want to prep and runners and bussers want to do each other’s jobs. Hosts and hostesses want to do serving. It struck me that this is something that’s mutually beneficial because as restaurant owners, it gives you far greater leverage to reuse people in different positions in an emergency.

Justin: Alison, you work a lot with entrepreneurs who are just getting setting up with their own restaurants. What are the things you would encourage them to codify in their business plan to make sure they’re investing at the beginning?

Alison: I think culture is a word that we’ve said a lot in this panel. Business leaders in restaurants or any business are generating their culture every day. It’s either conscious or not. It’s getting built every day, so codifying what you want that culture to be by outlining values and intentions is incredibly important because it gives your leadership a blueprint to work by and that gets translated down to every member of the team. If it’s not actively defined at the inception of a business, culture absolutely gets built, but it gets built in a million different directions and generally not in one that you actually want to grow into.

Justin: We’d do a disservice by not talking about wages in SF. What are you seeing from a wage perspective in terms of hiring back of the house and front of the house?

Sumir: In terms of wages, everybody knows SF is expensive. We found that most back of the house professionals on Instawork are working more than 2 jobs - they have an AM job, a PM job and/or working extra shifts on the side. Again think about a win-win scenario, it’s not just pay more. Restaurants that have been really successful in hiring have flexibility, where they understand that people may need a second job, not because they’re not loyal but because they need to survive. I know it doesn’t work for every concept or every type of restaurant, but what workers care about is dollars in their pockets so they can survive, live in a sustainable way and take care of themselves and their families.