One of the most important indicators in the hospitality industry? What is Labor productivity? How productive are your employees and how much revenue do they generate per hour worked? Do you have any insight at all into the labor productivity within your company? We’ll take a closer look at this topic and provide five tips for increasing labor productivity.
1. Never steer solely on labor productivity
On average, the costs of labor should be approximately 33% of the revenue. You calculate labor productivity by dividing the revenue achieved by the number of employees. Contrary to what you might expect, higher productivity is not always better. Let’s take a look.
Option 1: On Tuesday, you put three highly experienced employees on the floor for € 20 per hour, together they generate a revenue of € 1000. This yields labor productivity of € 41.67 (€ 1000/24 hours).
Option 2: On Wednesday you put down three beginners of € 10 per hour, together they achieve revenue of € 800. This yields labor productivity to € 33.33 (€ 800/24 hours).
Though Option 1 seems better, that is not the case when you look at the wage cost percentage. In option 1, the wage cost percentage is: € 20 × 24 / € 1000 = 48%. And with option 2: € 10 × 24 / € 800 = 30%. With option 1 you keep € 520 of your revenue and with option 2 that is € 560. Ultimately, option 2 yields more. Want to know more about what the average employee in the hospitality industry costs?
2. Play hard, work hard
If you expect your employees to work harder, it helps to occasionally interrupt workdays with activities that have nothing to do with work. Consider a team lunch or organize a company drink. This way, employees can spend time together outside working hours and bond within the team, but also with each other.
3. Give employees room to develop
Employees are able to do their work better and more efficiently as they gain more experience. You can also offer employees training. This does not always have to be external. For example, do not send people home on a rainy or calm day, but train them yourself. Online training courses are also available. Look at the options that are feasible for you. L1NDA also has free resources where you or your staff can learn for free.
4. The right supplies
Employees need the right tools to be able to perform their work properly. It may sound like an exaggeration, but a cook cannot cut his meat comfortably without a good carving knife. It is a shame to cut back on this. A good quality knife probably costs a lot of money, but it also pays off when your cook can work faster and more efficiently.
5. Labor costs vs revenue
It is essential to look at your labor costs versus your revenue. Entrepreneurs make a personnel schedule, but unfortunately still do not look enough at the expected revenue, the realized revenue, the wage costs that this entails, and whether this deviates from expectations. It is precisely this information that is essential. By actively monitoring this, you as a hospitality entrepreneur not only get to know your business better but also how to make more optimize your personnel scheduling.