Your Capital Costs Are Walking Around on Two Legs

Working chefs and managers complain all the time about old, broken down equipment—reefers on the fritz, dull slicers, clogged burners, walkin doors that won’t shut, duct-taped computers, leaking faucets—you know the drill. Sometimes it seems that wrestling a couple of grand out of the GM’s capital expenses budget is an impossibility. Yet these same GMs will fire an employee seemingly at the drop of an egg, and not think twice about it. We’re exaggerating about the attitude, of course, but the point here is that hiring, firing, and training employees will cost you far more in an average year than you can imagine, and the total sum will make your capital purchases look like pocket change.

Let’s say it takes four hours of your time to interview candidates for a position. Once you’ve got one selected, you have to check references, call and offer the job, set up the orientation, etc. Then there’s the payroll file, uniform, employee file, schedule, and the orientation itself. All together the amount of time invested just to get him or her standing in the restaurant in a uniform can be 8-12 hours. Then there’s the training. Some operations will give 8 hours training, while others may give 24, depending on policies and available personnel. Well, you may say, managers are on salary, so their time is ‘free’, and employees training other employees are still able to put in a productive shift, right?

Well, not really. The hard costs are the processing costs. There is the advertising cost. Your manager or bookkeeper has to complete the necessary paperwork for payroll. There may be insurance paperwork. When you terminate the employee, there are more costs: there’s the termination interview, the termination paperwork, the payroll amendments, and so on. If the termination requires an unemployment filing then there is more time and money spent. If the termination requires legal counsel, then the costs can get gruesome.

But the real costs, the hidden costs, are in the loss of productivity. No one who is new at a job can be as good, fast, accurate, smart, predictable, or trainable, as a seasoned veteran. Just getting a sauté cook up to something like acceptable speed and accuracy usually takes three to four weeks. Put a pencil to that!

We’ve found that a good ‘rule of thumb’ cost per each new employee is $1,300 to $2,000, depending on the complexity of the operation. If you turn over ten employees a year—well, you can do the math.

The solution is to reduce turnover. One way to do this is to ensure you spend the time necessary to hire and train the right individual. It will always come back and bite you financially when you simply hire a warm body. The second way to reduce turnover is to take proper care of the people you already have, realizing that they are worth far more than most of your other ‘equipment’. We’ll cover this subject in a future article.

It is easy for an owner/manager to fire people…to be a great owner/manager it takes a clear understanding that you must hire the right person, train them correctly and ensure you take care of them. When you do this, you’ll be able to afford all that fancy new equipment!

Would you like to know more about hiring, training and maintaining expert staffing? Contact us today for a free consultation.

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