Employee retention in Entry-Level Jobs

The cost and economic impact of frequent staff turnover in industry sectors providing entry-level employment opportunities are significant. Although, some employers are accepting the fact of high turnover and have operational systems in place to deal with and manage it. But many sectors of the service industry, especially small and mid-size enterprises, the restaurant and hospitality industry, health and wellness providers, the retail sector, and the construction sector, are experiencing considerable pressures and financial losses caused by high staff turnover. “In figures, studies show that the cost of losing an employee depends upon their position. An entry-level employee turnover cost is between 30% and 50% of their annual salary to replace. For example, an entry-level employee earns $20,000 annually. Hiring a replacement would cost $6,000 — $10,000 (Simply Benefits Marketing 2020).” These are just the hard costs of employee turnover, then there are the hidden soft costs that are harder to observe and measure. “In industries like retail, customer service, and hospitality, entry-level turnover alone costs billions of dollars each year, based on voluntary turnover rates and annual replacement costs. Meanwhile, employee disengagement results in higher absenteeism, more accidents, lower business profitability, worse customer service, and a lower share price (Gilsdorf, Hanleybrown, and Dashell 2017).”

Hospitality Industry Turnover

Let’s explore the various aspects of turnover within the hospitality industry, the costs, and possible causes. According to Cornell’s Center for Hospitality Research, a typical front-line employee costs on average about $5,800 in turnover costs (Lexy 2022). This cost is of great concern, especially when factoring in the staggering turnover rate of over 130%. “Employee turnover is a challenge that has grown drastically amid the COVID-19 pandemic. In January, the Bureau of Labor Statistics announced that the turnover rate for the hospitality industry reached a whopping 130.7 percent in 2020 (Carouthers 2021).”

Why are hospitality employees leaving their jobs? According to Alexandra, 8 Causes of Employee Turnover in Hospitality (Alexandra 2022), some of the top reasons are, unclear job expectations, disconnect with managers, bad fit, lack of flexibility, toxic or unhealthy work environment, inefficient communication, lack of recognition, minimal growth opportunities. Understanding the main issues and causes is important when tackling a retention strategy with the aim to improve or mitigate these immense losses of employees.

Understanding Employee Retention?
First, we need to understand what employee retention means. Consider this, not all turnover or loss of staff is necessarily bad. In some instances, if employees leave that are either, disruptive or perpetually unhappy with their work environment, mostly due to their own making, it can be of benefit to the operation. It is considered to be acceptable to have a 10% turnover rate. But if employees leave due to circumstances that are beyond their control or influence, leadership must seek an understanding of the causes. Great consideration ought to be given to possible causes, systemic operational issues, and organizational culture. Trying to solve these complex issues will demand input from all stakeholders, an open-minded and creative environment, and a design thinking approach to reframing the problem in a human-centric way.

Using Design Thinking

“Design thinking is a methodology that provides a solution-based approach to solving problems. It’s extremely useful when used to tackle complex problems that are ill-defined or unknown — because it serves to understand the human needs involved (Barkley Consulting Group n.d.).” Design thinking is a system based on several process steps or stages (Barkley Consulting Group n.d.).”

• Empathizing: understanding the needs of the user, in this case, the hospitality industry.
  • Defining the problem: stating the user’s needs or problems in simple terms.
  • Ideation: questioning the status quo or current common assumptions, brainstorming and creating ideas, embracing the problem, not in its current form, but as an opportunity to create something new.
  • Prototyping: starting the process of creating new solutions and ideas to the problems.
  • Testing: testing of the new ideas, solutions, and processes.
  The process of design thinking can be an arduous and long process if done well but it will result in lasting effects that are well thought out and inclusive of all stakeholders.

In this report, I will be focusing on the first three stages of the design thinking process to demonstrate what design thinking could look like.

Empathizing, Understanding the Needs

Here we explore some of the initiatives that can have an impact on reducing high turnover, through a human-centric lens. These are things an employer can implement right now to reduce the turnover rate.
10 Ways to Reduce Hospitality Industry Employee Turnover (JWU 2021).

Defining the Problem

In this particular scenario, here is what the employer has learned from employee feedback surveys which are perceptively some of the major contributors to employee turnover or employees leaving their jobs.
Understanding the problem from the stakeholder’s perspective is crucial when defining the problem at hand.

Ideation and Brainstorming

What is ideation and what do we want to achieve with it? Ideation is defined as “the capacity for or the act of forming or entertaining ideas”. Ideation is often closely related to the practice of brainstorming, a specific technique that is utilized to generate new ideas. A principal difference between ideation and brainstorming is that ideation is commonly more thought of as being an individual pursuit, while brainstorming is almost always a group activity. Brainstorming is usually conducted by getting a group of people together to come up with either general new ideas or ideas for solving a specific problem or dealing with a specific situation (CFI 2021). Considering the magnitude of employee turnover and the absolute need to improve talent retention, ideation will be most effective if done by collaborative brainstorming involving all stakeholders.

As mentioned before these are just the first few stages of the design thinking process. The ideation process has been mostly done by myself and as such is not as rich and developed as it could be if done in a group setting with all the stakeholders included. It serves as an introduction point to the stakeholders and as a catalyst to get the conversation started, as well as setting the stage for open and creative idea generation.

References

Alexandra. 2022. “8 Causes of Employee Turnover in Hospitality.” Harver. January 18. Accessed 06 18, 2022. https://harver.com/blog/causes-of-employee-turnover-in-hospitality/.

Barkley Consulting Group. n.d. Design Thinking. Accessed May 27, 2022. https://barkleyconsultinggroup.com/services/design-thinking/?gclid=CjwKCAjw7cGUBhA9EiwArBAvov8NsExFCh8ZjHsM1Q9ufXcuOJuxbOVhjTZ5dd8rg6ZpPv2zayt1SRoCtKQQAvD_BwE.

Carouthers, Peggy. 2021. QSR. April 8. https://www.qsrmagazine.com/sponsored/restaurants-can-boost-90-day-employee-retention-43-percent.

CFI. 2021. “Ideation: The whole creative process of coming up with and communicating new ideas.” CFI. 01 27. Accessed 06 20, 2022. https://corporatefinanceinstitute.com/resources/careers/soft-skills/ideation/.

JWU. 2021. “10 Ways to Reduce Hospitality Industry Employee Turnover.” Johnson & Wales University. November 15. https://online.jwu.edu/blog/10-ways-reduce-hospitality-industry-employee-turnover.

Lexy. 2022. How Much Does The Average Hotel Spend On Employee Turnover? January 30. Accessed 06 18, 2022. https://www.lexingtondowntownhotel.com/how-much-does-the-average-hotel-spend-on-employee-turnover/#1.

Simply Benefits Marketing. 2020. Employee Retention — What is the True Cost of Losing an Employee? July 25. Accessed June 18, 2022. https://www.simplybenefits.ca/blog/employee-retention-what-is-the-true-cost-of-losing-an-employee#:~:text=An%20entry%2Dlevel%20employee%20turnover,their%20annual%20salary%20to%20replace.