Cost Per Hire: How to Calculate It, How to Control It

Cost Per Hire: How to Calculate It, How to Control It

Cost per hire is one metric that is especially easy to lose sight of and underestimate, as these costs tend to overlap with existing business functions — paying HR staff, advertising, administrative work and so on. When you actually sit down and run the numbers, however, your total hiring costs for any given year can be eye-popping.

As of 2012, the standard definition of cost per hire is the sum of all recruiting costs (both internal and external) divided by the total number of hires. According to the Society for Human Resource Management’s most recent Human Capital Benchmarking Report, the average cost per hire for any type of business is $4,129. However, if you’re part of a large chain (“large” in this case being over 10,000 total employees), then you can expect that cost to be roughly halved.

In the leisure and hospitality industry, which includes restaurants and hotels, this individual cost is likely to be lower than average as the majority of positions are nonsupervisory and don’t have large expenses associated with them like relocation costs or lengthy training. However, because the turnover rate is nearly 50% higher than the average of the private sector, the total cost over the course of a year can definitely add up.

Calculating cost per hire

As with your basal metabolic rate, cost per hire is one of those things that’s almost impossible to get an exact number for, but doing a quick-and-dirty calculation that is close enough to be functional is actually pretty easy.

Here’s the simplest formula:

calculating cost per hire

Keep in mind that costs and number of hires refer should both be calculated for the same period (e.g. month or year).

Internal costs

Internal recruiting costs are expenses “related to the internal staff, capital and organizational costs of the recruitment/staffing function.” These include, but are not limited to:

  • Salary for any related HR and hiring personnel
  • Salary costs of time spent hiring by other staff members (conducting interviews, screening applications, and so on — if this is too complicated, leave out)
  • Any referral bonuses you might be offering to existing employees

External costs

External recruiting costs refer to expenses “incurred to external vendors or individuals during the course of recruiting.” These include, but are not limited to:

  • Fees paid to outside employment agencies
  • Fees paid to post job listings in newspapers or on websites
  • Cost of drug screening and background check
  • Fees paid and materials cost to attend any job fairs or similar events
  • Cost of any required aptitude tests
  • Cost of relocation
  • Cost of any training period in which the new employee is not doing any productive work

Any costs after an employee is hired, such as training, is not included in the cost per hire calculation.

Total hires

The total number of hires could be measured differently across companies. However, these usually include all internal and external hires, both full and part-time, who:

  • Went through a hiring process
  • Temporary staff on payroll and promoted to a full-time position

Divide the total of all the recruiting costs by your number of new hires for that particular time period, and you now have a pretty good idea of your cost per hire, for that time period at least. If you do this on a monthly or quarterly basis, average your totals for a more accurate picture.

Controlling your cost per hire

OK, so you have a better bead on your cost per hire. Now, what can you do to bring it down?

Let’s start by addressing the elephant in the room that we touched on earlier: turnover. After all, if employees don’t leave, you’re not faced with the cost of replacing them. Annual employee turnover in the hospitality industry typically hovers between 70-75%, well above the average of about 45% for all other types of private sector jobs.

Combatting turnover starts with optimizing the hiring process. Many job seekers are now looking for jobs online via job boards and social networks. So why not leverage that to your advantage? Consider using niche job boards, like Sirvo, that not only make it easy for job seekers to apply for jobs but also provide business tools so that better hiring decisions can be made.

Another factor that contributes to turnover is that, for many people, a restaurant job is just something to pay the bills while they pursue their dream, and that isn’t going to change. However, employees don’t always leave because this is just a McJob to them; when they feel that management doesn’t listen or care, then there’s almost nothing to keep them from looking for greener pastures elsewhere. Little things that don’t cost much, like better communication and small incentives such as shift meals and performance bonuses, can go a long way. Likewise, the employee may no longer regard the job as disposable if a clear and realistic path to advancement is presented to them.

At the end of the day, knowing where your business stands in terms of hiring costs is crucial, especially in the hospitality and restaurant industry where employees at the heart of the business. So, get your expenses together and your calculator out!

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Culinary School: Worth the Cash or Not So Much

Culinary School: Worth the Cash or Not So Much

Becoming a chef definitely has its perks! The work is fast-paced and it’s not sedentary, so you won’t suffer the devastating health effects of planting yourself in front of a computer all day. It’s prestige work that people admire and respect as they enjoy the fruits of your artisanal labor.

However, getting to that point is hard work. In fact, less than half the people who enter culinary schools actually graduate (although CIA, Culinary Institute of America, a premium non-profit institution, claims a 78% graduation rate). Another eye-opening stat – some estimate that at least 50% of culinary school graduates who go to work in restaurants are no longer cooking after five years. So is it worth it to go to culinary school or are you just as likely to succeed if you opt out?

First thing’s first

Before considering culinary school, you’ll probably need to think long and hard about whether becoming a restaurant chef is right for you. Most people who dream of becoming a chef or owning a restaurant or other eatery don’t realize the demanding physical labor involved. Forget about the gym — hefting around those soup pots filled with gallons of soup or hauling 100 lb. bags of beans not only builds muscles but can damage a few. If you’re a girl…you’re not exempt. You’re on your feet all the time, and that’s no improvement over sitting all the time.

A culinary arts degree will barely boost your salary over what you’d make by just working your way up through the ranks.

Hope that your kitchen is air-conditioned, because the health department doesn’t want any unscreened windows or doors open, and kitchens get pretty hot with the ovens going on a sweltering summer day. Expect cuts and burns. Forget about a social life with the long hours, including the typical 12-hour shift. And time and a half? Not necessarily.

Reasons against culinary school

Still want in? Great, then you should know that any kitchen classy enough for you to learn from a true mentor will probably also relegate you to lower level positions, such as working on the line, for at least some time whether or not you go to culinary school. And a culinary arts degree will barely boost your salary over what you’d make by just working your way up through the ranks from dishwasher or apprenticing yourself as they do in Europe.

These are just some of the reasons many decide against culinary school. You don’t need it to become a chef. It’s expensive: “The average tuition cost at 10 of the country’s popular culinary arts programs is three times the amount of tuition at standard four-year public universities.” Consider how long it will take you to pay back $50,000 or more for a two-year program if you’re just making $10/hour and need a little money left over to live on.

Good teachers are good teachers…and it’s nice to learn from them in a less stressful environment than a commercial kitchen.

Reasons for culinary school

So with the seemingly few perks and the steep bill, why would you opt for that training? Executive chefs responsible for hiring as well as other seasoned food workers point out these reasons to consider a culinary degree program:

  • Good teachers are good teachers…and it’s nice to learn from them in a less stressful environment than a commercial kitchen.
  • School is a good transition to a commercial kitchen, often a brutal environment.
  • As with top flight schools in any walk of life, it’s a good place to make connections.
  • There are more uses for a degree in culinary arts than working as a chef in a commercial kitchen.
  • Some executive chefs look first, although not exclusively, at culinary arts school graduates.
  • With a basic vocabulary and foundational skills, you may get off to a quicker start in the restaurant business than if you try to enter without that.

Many graduates of culinary arts schools value their education for a variety of reasons (see the comments) and make sufficient money to pay off their school debt. Virtually everyone in the business, students and professionals, recommends working in a commercial kitchen for a period of time, for little or even no pay, even doing dishes, before deciding if a passion for cooking merits the substantial investment in culinary school. Many recommend on-the-job training as an alternative to school, moving up from dishwashing to higher level tasks, learning skills as you go from willing mentors along the way, books, videos and lots and lots of practice.

You’ll need that passion and positive attitude to carry you through the tough times.

Finally, it comes down to passion, attitude and willingness to work hard. Very hard. You’ll need that passion and positive attitude to carry you through the tough times when the work seems overwhelming or when the rewards seem not sufficient to balance it. But if it’s what you really want, and you persevere, maximizing your learning and skill-building opportunities in any way you can think to do it, including culinary school, you just might become that chef who loves what s/he does and thrives on it.

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Training Hacks: Developing an Effective Training Process

Training Hacks: Developing an Effective Training Process

The hospitality and restaurant industries can be high-stress jobs. Employees must be able to multi-task and adapt to any situation quickly, all while on the move constantly; sometimes for up to ten hours per shift. They’ll have to do all of that while handling needy or irate customers who don’t understand the effort that it takes to create a phenomenal experience. Luckily, there are tried and true ways of training your employees to handle anything that’s thrown at them. And not to be cliche, but practice does make perfect.

As we mentioned in the previous Training Hacks, the intensity and duration of training will depend on your type of business and it’s size. Don’t forget, the best training programs provide the best results.

“You don’t BUILD a business. You build PEOPLE – and then people build the business.” -Zig Ziglar

The Method

At its core, training consists of four very basic principles.

  • You’ll need to explain the task and process.
  • Then, it’s best to demonstrate what you’ve just explained.
  • Next, have the trainee try doing what you’ve just shown them.
  • Last, review the topic and cover any important last notes.

You may not have ever realized it, but this method is used everywhere, from teaching small children to university classes (it works at home, too).

The method can be summed up in this handy saying: Tell/Show/Do/Review. Yes, we’re aware of how childish and simple it sounds, but the results are hard to argue against. Let’s elaborate on the four principles a bit more.

Step 1: Tell

When you’re dealing with a new employee (especially one who’s new to the industry), it’s best to ease them into the lesson by taking a few minutes to explain the task they’ll be learning.

You’ll want to have available any and all tools or materials they’ll need to execute the specific task. At this time, tell them the names and uses of said materials. After that, go into detail on the exact steps to take when performing the task.

For example, if you’re training a new assistant server in bussing and setting tables, you’ll want to have everything they’ll be using ready to go, or at least know where materials are kept in order to instruct the newbie. Then, break the process down into steps. This is especially helpful if the trainee is writing notes; they’ll be able to easily and effectively keep track of what you’re saying.

Step 2: Show

Now that the trainee has a general idea of what to expect, it’s time to show them how to perform the tasks. Yup, that means it’s your turn to show off your know-how. To this end, it could be a good idea to practice what you’re teaching beforehand, especially if it’s been awhile since the last time you did so.

Make sure you complete the task to its entirety using the steps you’ve explained. Any variations in the steps or final results will only cause confusion.

Step 3: Do

Now, it’s time for the trainee to perform the task for themselves. Within this step, there are many methods you can use to ensure the employee has understood and grasped the training.

  • Now is a good time to answer any questions they have and to ask questions to test them.
  • Depending on the task you’re training them on, you can have the employee shadow you throughout the restaurant while you show them how the task fits into the flow of service.
  • You can role play with them. You’ll act as a patron and have them complete the task in a “mock” real life situation.
  • Last, YOU can shadow them as they perform the task.

Remember, if the new employee makes any mistakes while performing the task, be sure to correct them as soon as is appropriate. If you have to, explain the steps again or show the steps again. Do not progress to the last part of this training method until the employee can perform exactly the way you’ve explained or demonstrated.

Step 4: Review

Start this step by having the employee explain the task back to you. A popular method is to actually let the employee teach the task back to you using the four training stepsThen, when it’s your turn to do the task, make some mistakes to test the trainee. This will keep them engaged in training and on their toes.

Of course, exactly what the new hire is being trained on will vary by position. However, there are a few training items that are required by all positions in the restaurant. Here are a few:

  • Clocking in/out
  • Safety procedures
  • Opening/Closing duties
  • Cleaning duties
  • Checking out at the end of the shift

Before letting the trainee go, be sure to answer any questions they may have. This means asking if they do in fact have any questions because they may not be inclined to bring them up themselves.

“Hire character. Train skill.” -Peter Schutz

Properly training an employee can (and should) be a time-consuming effort. But if you hire the right people for the right positions, you’ll form a culture in your establishment that makes training fun and easy, all while producing the best talent.

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Training Hacks: Materials and Resources Essential for New Hires

Training Hacks: Materials and Resources Essential for New Hires

After hiring, you’ll want new staff to start training as quickly as possible. This ensures they hit the ground running while avoiding rookie mistakes. In order to make this possible, however, training materials and resources must be ready to go, especially these six items that every new employee should have in hand the minute they walk in the door.

New hire paperwork

It’s a good idea to greet new hires with these materials. And whether you’ll be doing the training yourself, or you have a designated trainer, a senior staff member should sit with the employee while they fill out their new hire paperwork. This allows you to go over the materials with them and it’s the perfect time to set your performance expectations.

After the paperwork has been completed, take your new hire on a tour of your establishment. This helps to familiarize them with the business. During the tour, you can introduce them to other employees and tell them any names or terminology they need to know. It’s also a good time to show them where any safety equipment or materials are located.

A training schedule

Don’t leave new staff in the dark about training ins and outs, especially the timeline. Depending on the size and type of your establishment, training may only last a few shifts, or you may require weeks before you feel a new employee is qualified to work alone. Also, remember, you may need several training schedules based on position, so be sure to plan accordingly!

With this in mind, try to have the entire training schedule planned out. Let them know what days they’ll be working, what area of the business they’ll be learning about each day, and who they’ll be working with.

Having at least one designated trainer for each position is a great way to make sure all employees are trained the same way every time.

Designated trainer(s)

Having at least one designated trainer for each position is a great way to make sure all employees are trained the same way every time. Even better: having a few trainers that can share the load. This also takes some of the pressure off of you, allowing you to continue running your business while your trainer supervises new employees.

If possible, introduce new hires to their trainers immediately. This will allow them to get to know each other and will also ensure that new employees will know who to find when they come in for training shifts.

Printed materials or learning aids

If you have printed materials for your new employee, make sure they’re ready to go right away. If you use an app or website, make sure you make the employee is aware of the site or app and how to use it in conjunction with their training. There’s nothing worse than telling your new hires to read an article or complete online training without providing them with the necessary information to access the content.

Tests are a great way to gauge where trainees are in their learning process.

Tests to verify training/learning

Tests are a great way to gauge where trainees are in their learning process. So, before your new employee is ready to deal with customers on their own, you’ll want to test them to see if they’re grasping the training. These tests can be anything from online quizzes to mock restaurant scenarios. Of course, testing formats and parameters should be discussed with new hires and included on training schedules.

Tests are also a great way to see how the trainer is doing. If you start to notice new employees all seem to make the same mistakes or perform the same tasks incorrectly, sit down with your trainer(s) to make sure they’re teaching the correct habits and skills.

A clean, new uniform and name tag (if required)

Finally, if you require a uniform, make sure you have a fresh one ready on their first day. This goes a long way in making your new recruit feel like they fit in and are a part of the team right away.

If you’ve read our first post on Training Hacks, you’re well aware of how hard it is to find good employees. Make sure you’re not just a stepping stone on their career path. Welcome your new employees warmly and have a comprehensive training program in place so they feel secure in their job choice.

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Robotics and Automation in the Restaurant Industry

Robotics and Automation in the Restaurant Industry

Since the dawn of time, innovators replaced bare-handed human activity first with tools, then with machines. Today’s industry influencers are those ready to take next steps, harnessing robotics to operate businesses with greater precision and efficiency, further reducing human input.

The first automat, called appropriately enough, Automat, opened in New York July 2, 1912, in Times Square. The innovative dining idea was successfully marketed with, “gleaming, newfangled gadgets that dispensed fresh food barely touched by human hands.” At the height of this fast food trend centered in New York, there were 40 Automats. The last one, at East 42nd Street and Third Avenue, closed in 1991.

If you’re old enough to remember the glory days of the Automat, you’ll be happy to know they’re back…in a 21st-century incarnation.

If you’re old enough to remember the glory days of the Automat, you’ll be happy to know they’re back…in a 21st-century incarnation. One new automated dining experience comes to us under the brand Eatsa, currently in San Francisco and Los Angeles and preparing to expand to 10 additional locations.

Like the Horn & Hardart Automats of the early 20th century, the concept behind Eatsa is to serve low-cost fast fresh food without human interaction. And like the Horn & Hardart Automat, Eatsa also features “gleaming, newfangled gadgets that dispense fresh food…”

The key to this brave new world is to find the most effective cooperative relationship between us and our machines.

Eatsa isn’t fully automated, though. Human hands put together quinoa bowls behind a cubby wall where customers pick up their orders. But actually, that human-machine partnership is also trending these days. Microsoft CEO Satya Nadella, “proposes that human qualities like creativity and empathy, paired with the raw computational power of A.I. can help solve some of society’s greatest problems.” The key to this brave new world is to find the most effective cooperative relationship between us and our machines. Eatsa seems to have a combo that works for its customers.

Co-founders Tim Young and Scott Drummond, “looking to create a convenient, low-cost health food concept, fused advanced technology with the long-abandoned automat format.” Same purpose…different technology. In the older incarnation, nickles and quarters activated delivery, and ultimately that mode of delivery caused its demise since the patented mechanical dispensers accepted only nickels and quarters in their slots.

“We’re using data science to drive the whole Eatsa experience,” chief strategy officer and co-founder Scott Drummond said to Fast Company. “Cashiers won’t be a limitation.” Apparently, neither will coin-operated dispensers.

Many of us crave speed and low-cost, but many of us still enjoy an evening out for fine dining.

Momentum Machines takes a different approach than Eatsa, going for the back of the house instead of the front. “In 2014, the company released a device that essentially worked like a printing press for hamburgers. The robot pressed patties, chopped toppings, and assembled the ingredients into a sumptuous-looking sandwich.” This fall the world’s first robot-powered burger bar opened in San Francisco.

Many of us crave speed and low-cost, but many of us still enjoy an evening out for fine dining. For familiarity if nothing else, we like our humans in the environment. Our objective isn’t speed but a relaxing, elegant evening. While fine dining restaurants probably want to keep workers in the picture for ambiance, even they benefit from robotics. “Maybe they’ll focus still on making the food by hand and focusing on quality ingredients,” says Sarah Smith, a researcher at IFTF’s Food Futures Lab, “but there could be parts of the experience that could have some level of automation.”

Robotics may even enter into some home dining experiences. “The future is served” with Moley Kitchen Robotics. It’s easy to imagine versions of these automated chefs replacing line cooks even in fine dining environments.

The best estimates find that up to 50% of jobs could be automated by the late 2030s, with restaurant workers among the most vulnerable to displacement.

Not only smaller fast food businesses are exploring robotics. McDonald’s, which started with Ray Kroc’s idea of “uniformity in service and quality among all of the McDonald’s locations,” also took next steps toward the future. During the last two years, the company opened the beta version of a fully automated McDonald’s in Phoenix in the hope of opening 25,000 more of them if the test succeeds. The new robots work in harmony at a speed 50 times faster than the average McDonald’s employee, with no chance of error. There, too, robots cooperate with humans who supervise them to make certain all is well.

Data-driven robotics is an area of technology with a big future. Indeed, a lot of what happens in restaurants these days is automated. The best estimates find that up to 50% of jobs could be automated by the late 2030s, with restaurant workers among the most vulnerable to displacement.

Of course, those lower staffing costs will eventually present Americans with a different set of challenges as machines replace the jobs of many people.

The advantages of robotics in the restaurant industry are obvious; robotics mean lower labor costs, uniformity and easy customization to name a few of the benefits often stated.

Of course, those lower staffing costs will eventually present Americans with a different set of challenges as machines replace the jobs of many people. Hopefully, American creativity and innovation will address these issues as effectively as they have the healthy, cost-effective, fast meal or efficient food production in fine dining environments.

In the meantime, coming soon to a location near you…fast casual healthy fresh dining where you can focus on your dining experience and companions, not the waiter or cashier — and even fine dining where unbeknownst to you, robots work swiftly and skillfully to prepare your elegant meal.

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