On the surface, the restaurant industry couldn't look stronger. Growth in the national economy is going strong, employment and personal income are increasing at a solid pace, and consumer confidence is hovering at its highest level in three decades. Those economic factors have propelled the restaurant industry into its seventh consecutive year of real growth. Sales in the industry are up and are expected to keep climbing.

But lurking beneath the shiny surface there is a problem. The strong economy has had one adverse effect on the labor-intensive restaurant industry: It has drained even more potential new employees from an already shallow labor pool. The national unemployment rate has remained below 5 percent in each of the last 14 months — a trend rarely seen in peacetime economies. Most people who want a job right now have one, which leaves fewer potential employees swimming in the restaurant-industry labor pool. Restaurateurs must do more than ever before to catch high-quality employees and keep them on the line.

Casting about for solutions

According to recent National Restaurant Association surveys, operators of all types of restaurants share many labor concerns, especially recruiting and retaining high-quality workers. When asked to identify the most significant challenge their restaurants would face in 1998, operators of both tableservice and limited-service establishments most often cited the struggle to find qualified and motivated employees.

Among tableservice operations, this difficulty is most evident at establishments with lower average check sizes. According to the Association's 1997 Tableservice Operator Survey, one-third of tableservice operators with an average check size of less than $8 identified the lack of qualified and motivated labor as the most significant challenge they expected to face in 1998. Nearly one out of five tableservice operators with an average check of $25 or more said that finding qualified labor would be their most significant challenge during the year.

Analysis of two consecutive annual Association Tableservice Operator surveys reveals that the labor shortage is becoming more significant in the tableservice segment. In 1997, tableservice operators in all check-size categories indicated that finding qualified labor was likely to be the top challenge they would face in 1998. In contrast, in a 1996 survey, operators in only one of the four average-check-size categories responded that finding qualified labor would be their top challenge in 1997.

In 1997, respondents were also asked to rate the degree to which various labor issues presented challenges to their operations. Once again, finding new employees was identified as the most challenging labor issue for tableservice-restaurant operators, especially operators with lower average check sizes. More than two-thirds of tableservice operators with an average check of less than $8 reported that finding new employees was a "significant challenge" for their restaurants, compared with one-half of operators with an average check size of $25 or more who responded similarly. Only 6 percent of operators with an average check size of less than $8 indicated that finding new employees presented no challenge to their restaurant, whereas 12 percent of operators with an average check size of $25 or more responded that way.

Reeling in new recruits

As the restaurant-industry labor pool continues to shrink, the employee-recruitment process has become more important than ever. To assess the effectiveness of employee recruitment and retention in the restaurant industry, the National Restaurant Association conducted a survey in July to investigate recruitment-and-retention methods used by its member restaurants.

In that survey, an overwhelming majority of restaurant operators indicated that getting referrals from their current employees was the most effective method of recruiting new employees. According to the respondents, a referral from an employee — especially a good employee — makes it more likely that the new worker will fit in well with the rest of the team. New staff members brought in by other workers also tend to be more reliable, because they don't want to reflect poorly on the people who referred them.

Employee referrals are such an effective recruiting method that many restaurateurs offer financial rewards to current employees who refer new workers who stay for a certain time period. Both tableservice and limited-service operators use such incentives, although the practice was more common among tableservice operators who responded to the survey.

The rewards for referring new employees vary from establishment to establishment. One tableservice operator indicated that his restaurant offers a $30 bonus to a staff member who brings in another employee who stays for at least 30 days. Another company reported offering a $100 bonus to the referring employee after a new employee works for three months. Some operators said that they offer smaller bonuses for the initial new hire, with a larger bonus to come if the new employee stays for a given length of time.

The findings of the industrywide survey were mirrored in the Association's recent survey of tableservice-restaurant operators. In that survey, tableservice-restaurant operators in all average-check-size categories rated employee referrals the most effective method for recruiting new workers. Operators in all check-size categories also listed walk-ins and newspaper ads as effective methods of recruitment.

Tableservice operators with higher average check sizes were more likely to report that recruiting from colleges and schools was effective for their operations, whereas operators with lower average check sizes were more likely to report that government employment offices were effective for them in the recruiting process. The Internet, and targeted minority recruiting and recruitment firms, are also used in the hiring process, but the tableservice operators surveyed considered those methods to be less effective.

Netting the prime catch

After a restaurant operator has gotten a prospective employee in the door, the most important step of the recruitment process begins: interviewing. Respondents to the Association's recruitment-and-retention survey indicated that good interviewing was a key component of hiring quality workers.

Almost all tableservice operators use a written application and a structured interview in the hiring process, according to the Association's survey. A large proportion of tableservice operators also reported using reference checks, but that practice was more common among operators of higher-check establishments.

Skills tests are also more common among higher-check establishments. In the Association's 1997 survey of tableservice operators, 43 percent of respondents with an average check size of $25 or more reported using a skills test in the hiring process, compared with only 18 percent of operators with an average check size of less than $8.

Although restaurant operators are doing the best they can with the resources they have available, many feel that the process of screening potential employees is not thorough enough. When asked what single action they wished their organization could take to become more effective at recruiting and retaining employees, many operators expressed the desire to employ a full-time human resources person who could screen potential employees more thoroughly by means of reference checks, skills tests and job simulations. Unfortunately, with increasing labor costs squeezing their already-tight bottom lines, most operators also indicated that they could not afford to hire a human resources staffer.

Training with the goal of retaining

Restaurant operators recognize that employee training is vital to their success — not only to improve the efficiency of their operations but as a means to retain employees as well. As the number of applicants for positions in the restaurant industry has declined in recent years, so has the relative quality of the labor pool. Meanwhile, competitive pressures and customers' expectations mandate that workers excel at their jobs. Both trends are forcing operators to provide more thorough training for their staff members.

Virtually all restaurant operators provide some type of on-the-job or shadowing training for their employees. However, the demand for more intensive training and the availability of technology have led operators to use other training methods. According to a recent Association survey of tableservice operators, roughly four out of 10 tableservice operators provide video-supported training and approximately three out of 10 operators provide classroom or facilitated training. Smaller numbers of operators reported providing computer-interactive training or CD-ROM-supported training.

But the trick is to keep them

If a restaurant operator is lucky enough to succeed in recruiting a top-notch employee, the next challenge is to keep that worker around for an extended period of time. To that end, operators have become extremely creative in meeting the desires and needs of their extremely diverse work force.

In today's competitive environment, restaurant operators in many markets are often forced to pay higher wages and expand benefits packages to retain employees. Some operators encourage their staff to think of their jobs as long-term employment opportunities by offering a 401(k) program to their full-time workers.

Many restaurateurs have found success through employee-recognition-and-reward programs. By offering incentive packages to both individuals and groups of employees, operators not only raise the performance level of their workers but also create a sense of teamwork within the organization.

Although restaurant operators cite competitive wages and benefits as an important component of employee retention, they know there is an intangible side to retaining staff as well. When asked what they considered to be their most effective employee-retention techniques, many restaurateurs reported that creating an atmosphere of teamwork and fair treatment was just as important as offering high wages. Many operators indicated that they had retained employees by giving them a sense of respect and empowerment and by turning the workplace into a caring environment with a family atmosphere. All of these components create an environment in which employees feel as though they're an integral part of a team, which instills a sense of loyalty.

In the Association's recruitment-and-retention survey, restaurant operators were asked what single action they wished their organization could take to become more effective at recruiting and retaining employees. The most common response was expanding their benefits packages to include health insurance. Unfortunately, this benefit remains elusive for many operators, because health insurance is still prohibitively expensive.

Fishing with finesse

As is the case with most of the challenges they face, restaurateurs are responding to recruitment-and-retention difficulties with creative solutions. Just as necessity is often the mother of invention, the current tight labor market is a catalyst for the development of innovative employee-recruitment-and-retention techniques that will only help to improve the strength and profitability of the restaurant industry in the future.

Back to top