The document discusses high turnover rates in the hospitality industry and how this negatively impacts productivity and profits. It argues that traditional resumes are ineffective for evaluating service industry candidates because they do not assess interpersonal skills or "hospitality quotient," which are most important. The document cites Danny Meyer's emphasis on hiring employees with strong emotional intelligence over technical skills alone. It concludes that new recruiting technologies should assess personality and qualifications beyond resumes to improve hiring and reduce turnover in the hospitality sector.

1. Resumes & Hospitality
Don’t Mix.
What matters in an industry plagued by high
turnover and low labor productivity

2. NUMBERS TELL THE STORY
According to statistics collected by the Society for Human Resource Management
in 2011, the food service and hospitality industry experiences a yearly turnover rate
of 35% – a rate more than double the cross-industry average yearly turnover rate
of 15% (Figure 1).1 True, there are certain particulars of the industry that account
for part of this increased turnover, like seasonal hiring. Additionally, the cost to
the employer of finding and training a new employee is significantly less in the
hospitality industry than it is in many other industries.
From a cost-to-employer standpoint, it’s easy to see how restaurant and hotel
management could be tempted to see their employees as dispensable. This
couldn’t be farther from the truth. Hiring front-line hospitality industry professionals
like restaurant servers, bartenders, and hotel staff may be of negligible cost, but
their interactions with the consumer have a direct effect on customer satisfaction.
FIGURE 1 Yearly Turnover Rate (%) by Industry
Food Services 35%
Entertainment 29% Trade 22%
High Tech 12% Government 10% Association 9% Utilities 8%
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3. The quality of a customer/employee interaction may determine whether or not
a first-time customer will become a loyal one. (More on this later.) High turnover
negatively impacts productivity amongst existing staff members. Veteran employees
are not only forced to absorb a recently departed colleague’s responsibilities, they
must also devote their resources to training the new hire once he or she is found.3
(Figure 2) The US Bureau of Labor Statistics found that in 2010-2011 labor productivity
in the “food services and drinking places industry,” remained unchanged.
Compare this to the wholesale and retail trades, which saw respective 1.9% and
2.2% increases in labor productivity during the same one year period.4 Retail and
wholesale trade had 22% turnover in 2011 – nine percentage points lower than
services. It’s a likely hypothesis that hospitality’s outsize turnover may be to blame
for stagnating labor productivity. Without making any great mental leaps, it’s
clear that companies in the service industry can increase profits by retaining their
employees more effectively.
FIGURE 2 Labor productivity increased in retail and wholesale industries; yet
remained unchanged in the food service industry in 2010-2011.
2.2% Retail
1.9%
Wholesale 0%
Food Service
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4. QUANTITATIVE VS. QUALITATIVE
We have just looked at some meaningful statistics - hard numbers that demonstrate
marked inefficiencies in the hospitality sector. The numbers indicate that something
is amiss, but the missing piece is qualitative in nature. The most important barometer
for the success of a front-line worker in the service industry is his or her interpersonal
skill-set (They don’t call it “service,” for nothing!) and last time we checked, there’s
no “People Skills” section on a resume.
Although collecting data on this claim is nearly impossible, it’s generally accepted
wisdom that a customer who is treated poorly by a front-line employee is far less
likely to return with their business than one who is treated well. The emergence of
customer review websites like Yelp only compound the effects of unsatisfactory
service – giving thousands of potential customers access to the experiences of a
few opinionated patrons. Now more than ever, bad service is bad for your bottom
line.
LEARNING FROM THE MASTER
One hospitality industry entrepreneur who has demonstrated that excellence in
service correlates positively with financial success in the service industry is Danny
Meyer, founder and CEO of Union Square Hospitality Group (USHG). USHG is the
parent company of 11 Manhattan restaurants including: Eleven Madison Square
Park, Gramercy Tavern, and The Modern. Meyer’s story doesn’t end at critical
acclaim (5 Michelin stars and 25 James Beard Awards) and financial success in fine
dining, however. USHG is also leaving their mark on the fast-food industry with Shake
Shack, a chain of retro styled burger joints.
Meyer applied the nuanced art of hospitality he perfected in Manhattan’s intensely
competitive fine dining world to a limited-service burger joint – Shake Shack – and
has hit it big. (Figure 3)Shake Shack’s New York City locations are estimated to gross
an average of $4 million yearly.5 Compare that to McDonalds, whose Manhattan
locations gross a little over $2 million per year.6
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5. Meyer’s philosophy focuses on providing patrons with service of the highest caliber.
He has developed a term for the qualitative indicators that denote an employee who
provides excellent service to their customers – the “Hospitality Quotient.” When hiring
for all of his restaurants, Meyer seeks out individuals with high Hospitality Quotients.
A job applicant may look good on paper, but he or she may lack crucial communication
skills or a pleasant demeanor. Take it from Danny Meyer: in the service industry work
experience is less than half the battle. He prefers to hire people he calls (Figure 4)“51
percenters.” meaning that 51% of their job skills are derived from their emotional
intelligence and only 49% from their technical skills.7
The reasoning? Technical skills can be taught, but the interpersonal intelligence
necessary for exceptional hospitality can’t be. This logic also holds true for the resume
– technical skills can be accounted for, but a person’s “Hospitality Quotient” simply
can’t be. The most valuable, not to mention unteachable, assets a service industry
professional can bring to a business are not addressed in his or her resume.
FIGURE 3 Shake Shack’s New York locations gross on average twice as
much as McDonald’s Manhattan locations.
SHAKE
SHACK
GROSS A LITTLE OVER
AV E R A G E S
$2 MILLION PER YEAR
$4 MILLION YEARLY
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6. FIGURE 4 Emotional Intelligence VS Technical Skills
49% 51%
TECHNICAL EMOTIONAL
SKILLS INTELLIGENCE
THE BOTTOM LINE
An ineffective hiring tactic has a detrimental effect on the economy of an industry.
Hiring the wrong candidates is a likely contributor to both the increased turnover
and decreased labor productivity within the service industry. Conversely, hiring
the right candidate increases customer satisfaction and the chances of regular
patronage.
New technologies in web and mobile recruiting offer innovative alternatives to
sorting through ineffective paper or PDF resumes. The most effective solutions
will provide the recruiter with qualitative, personality-based, information on the
applicant that he or she needs to make a truly informed hiring decision. The future
of recruitment for the service industry would do well to leave the resume in the
past.
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7. ENDNOTES
1 Society for Human Resource Management. (2011) SHRM 2011-2012 Human Capital Benchmarking
Report. Alexandria, VA: SHRM.
2 ibid.
3 Jacobs, Eliza. (2011) Executive Brief: Differences in Employee Turnover Across Key Industries.
Alexandria, VA: SHRM Foundation.
4 U.S. Bureau of Labor Statistics. (2012) Productivity and Costs by Industry: Wholesale Trade, Retail
Trade, and Food Services and Drinking Places Industries, 2011.
http://www.bls.gov/news.release/prin1.htm
The U.S. Bureau of Labor Statistics defines Labor Productivity as: “The industry labor productivity
measures describe the relationship between industry output and the
labor time involved in its production…they reflect the joint effects of many influences, including
changes in technology; capital investment; utilization of capacity, energy, and materials; the use of
purchased services inputs, including contract employment services; the organization of production;
managerial skill; and the characteristics and effort of the workforce.”
5 Kramer, Katie. (2010) “Shake Shack Founder Expands His Empire,” CNBC On the Money.
http://www.cnbc.com/id/39679233/Shake_Shack_Founder_Expands_His_Empire (Figure from 2009)
6 ibid.
7 Cardwell, Diane. (2010) “Spreading his Gospel of Warm and Fuzzy,” The New York Times.
http://www.nytimes.com/2010/04/25/nyregion/25meyer-ready.html?pagewanted=all&_r=1&
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