Labour costs are likely to make up the largest segment of expenses within most hospitality, entertainment and leisure businesses. This being the case, it is important to have a regular and comprehensive method of measuring staff efficiency, cost and satisfaction. The five following measures give an indication of the sort labour performance measures managers need to consider.
Labour cost as a percentage of total revenue
Labour cost as a percentage of total revenue is the simplest and one of the most commonly used labour ratios. This ratio is calculated by diving total wages (not including personal ongoing costs) by the total revenue generated over the corresponding period. Generally, hospitality venues should be aiming for labour cost as a percentage of total revenue to be below 25% and preferably below 20%.
Revenue per hour of labour input
Revenue per hour of labour input can be a very useful labour ratio. To calculate, simply divide total revenue for a given period by the number of hours of labour input over the same period. This ratio will vary greatly between businesses as subtle differences in venue layout and business practices will effect the result. This ratio is best used as an ongoing measure within the business to observe whether labour productivity is rising, falling or constant. Armed with this information, action can be taken to encourage or rectify various labour practices and processes.
Staff turnover percentage
Staff turnover percentage is often used as a proxy to determine staff satisfaction levels. Hospitality operations in particular suffer from a high staff turnover. Staff turnover is calculated by taking the number of staff who have left the organisation whose positions have subsequently been filled by another individual, divided by the total staff numbers. Ensure that any new positions created and filled are not counted in this measure. The result will be a percentage which gives an indication of how often the organisation is turning over its staff. Percentages below 15% are fantastic, anything above 50% and you have problems.
Sick days per staff member
Sick days per staff member is another measure for determining staff satisfaction. Sick days per staff member, as the name aptly suggests, is calculated by dividing the total number of sick days taken by all staff within an organisations by the total number of staff. If the number of sick days per staff member is below four to five per year, your business is performing well. A number higher than eight may be an indication of low staff satisfaction or unhealthy work place health and safety practices.
Staff satisfaction survey
Regular staff satisfaction surveys are a great tool for improving your workplace and staff morale. Conducting regular surveys (semi annual is a good) can help an organisation identify small problems before they become large ones. High staff satisfaction will do wonders for your business.
For an example staff satisfaction survey click here