Human Resources | November 2011 | By Jordan Melnick

More than Minimum Wage

There’s something that matters more than money when retaining employees.

With 12.8 million workers, the restaurant industry is one of the largest employers in the country. Industry champions often boast of the distinction, and particularly now, with national unemployment at 9.1 percent, it appears as if the restaurant industry is playing a hefty role in the U.S. labor market.

Of course, people who have had their eye on the industry for a while remember a time, before the Great Recession, when it wasn’t easy to recruit quality employees or even a full staff.

“Anyone who’s been around the business for any length of time knows that there have been times when it was all but impossible to get people to work in a fast food and quick-service environment,” says Christopher Muller, the dean of Boston University’s School of Hospitality Administration and a fourth-generation restaurateur.

“I’m here in Boston,” Muller says. “Back in the ’80s, Burger King and McDonald’s were busing people in from 50 miles away and offering them [well above minimum wage] because they just couldn’t find enough employees.”

At a time when there are more people unemployed in the U.S. (13.9 million, according to the Bureau of Labor Statistics) than there are employees in the restaurant industry, brands need not worry about the supply of willing workers running low any time soon, let alone about renting any buses.

But even in a labor market flush with supply, restaurants need to look ahead and determine if they are poised to attract the top talent they need to thrive once the economy improves and the labor pool shrinks.

And Muller isn’t sure that they are.

“We have a very tenuous relationship with our workforce because we treat our workforce in many cases as expendable, and that’s not to our competitive advantage,” he says.

“We need to professionalize the industry so that people can stay in the job.”

Muller is referring to the notoriously high rate of employee turnover in the restaurant industry. During the better part of last decade, the median turnover for a quick-serve crew member was more than 100 percent on an annualized basis—meaning the average nonsupervisory employee at a quick-service restaurant left his or her job within a year.

Hourly Crew Turnover by Quarter
There's been a significant decrease in turnover from the beginning of 2009 into 2011. According to experts, as long as unskilled unemployment remains elevated, hourly turnover will remain low because of the limited options these workers have.
Source: People Report, Human Capital Intelligence, Q1 2011
Management Turnover by quarter
The turnover rate for the management population is a much different picture from that of hourly crew. Since these workers are more experienced and educated, they have more employment options and are "voting with their feet," according to HR research firm People Report.
Source: People Report, Human Capital Intelligence, Q1 2011

That number dropped to 85 percent in 2010, and it is at 80 percent so far in 2011. The drop is an indication of the obvious—people with jobs are clinging to them at a time of high unemployment—rather than of a fundamental change in restaurant competitiveness in the labor market.

Still, in the last two decades, many restaurant chains have reckoned with the public perception that working at a fast food restaurant was a bum job. For example, the industry’s top dog, McDonald’s, has pushed hard and effectively against the stigma of the “McJob,” a term that came to denote any low-pay, dead-end job, not just ones at the chain itself.