Part 1 of 2: Wealthy and Wise
Calculating the return on investment of employee training
By Allison Perlik, Senior Editor -- Restaurants & Institutions, 4/15/2004
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Even a business built on the power of its people needs a strong foundation in financial accountability. Every outlay of cash must make an impact on the bottom line—directly or indirectly—to earn a spot in the budget. For foodservice trainers, this means greater pressure to demonstrate how the costs of education translate into measurable results.
While standard foodservice expenses such as food, equipment and labor easily prove their worth through simple cost-benefit analyses, the calculations become more complex when people are factored into the equation. If companies invest in employees' knowledge, how can they calculate the cost/value equation?
The answer for some trainers lies in detailed models that employ a series of factors to establish return on investment (ROI). These formulas link initiatives to results ranging from increased worker retention to reduced food costs.
Other companies rely on less-formal systems to call out the value of their training programs, pointing to benefits such as employee morale and loyalty. Regardless of their chosen methods, however, trainers agree on one thing: Pressure is mounting to prove their worth.
"The training field is becoming much more accountable. We are a cost center, and executives and operators are making sure they are able to justify all cost centers in the organization," says Curt Archambault, a regional training and development manager for San-Diego based Jack in the Box. "When we're able to quantify the benefits, we will see higher levels of support for our programs and initiatives."
While calculating the ROI of training first made the radar in other industries about 15 years ago, it has become a hot foodservice topic only over the past five years, says Joleen Flory Lundgren, vice president of human resources and training for casual-dining barbecue chain Famous Dave's in Eden Prairie, Minn. Flory Lundgren, Archambault and Toni Kottom, senior director of training and development for Edina, Minn.-based Perkins Restaurant & Bakery, all have conducted seminars on ROI for the Westfield, N.J.-based Council of Hotel and Restaurant Trainers. They say a first step in implementing ROI models is deciding where to apply them.
"For most companies, somewhere between 5% and 10% of programs in a year would be looked at in a complete ROI analysis," Kottom says, noting that typically projects chosen involve larger-scale initiatives such as starting a training university or shifting current programs from individual units to a centralized approach. Core topics such as sanitation and food safety, must-haves in any curriculum, generally would not merit ROI analysis.
Archambault recommends that when selecting programs to track, trainers follow guidelines set forth by The Jack Phillips Center for Research, based in Birmingham, Ala. According to Phillips, a widely recognized leader in the ROI-training field, criteria to consider include the project's life cycle, objectives, costs, audience size, visibility and management interest.
Laying the Groundwork
To ensure that the results of a selected program can be quantified,
trainers must understand the goals the organization wishes to
accomplish. Does the company want to reduce on-the-job accidents
with safety instruction? Decrease liquor costs with a beverage-and-bar-service
class? Increase mystery-shopper scores through guest-experience
initiatives?
Once the objectives are clear, equally important is gathering the necessary data to allow for comparisons when training is complete. If a company wants to find out whether safety training reduces on-site accidents, for example, it must first ascertain the number of accidents for a previous period to compare to results from the post-training period as well as to a control group that did not receive training.
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It also is key to recognize how other company initiatives such as marketing campaigns or the implementation of new technology will affect the targeted results. That's part of the reason Andrew Denning, director of training and development for Minneapolis-based Buffalo Wild Wings, advises colleagues to aim low when attaching ROI to their programs.
"When I do [ROI analyses] I just want to provide data to show that the program will pay for itself. I'm not looking for a 200% return," Denning says, noting that although initiatives typically pay back exponentially over several years, most ROI models are designed to cover one fiscal year.
Just because some companies choose not to apply formal ROI models doesn't mean they don't put a price tag on the value of training.
At MBNA corporate headquarters in Wilmington, Del., Director of Dining & Hospitality Services Gary Gunderson places a high premium on developing his staff, sitting down once a year with every team member to create a personalized education plan that is directly linked to the individual's career path.
"From my perspective the payback is minimal turnover, high employee morale and the ability to develop intellectual capital in my people over the long run," he says.
Independent restaurants, whose marketing funds often are limited, rely on training to ensure that guests receive a first-rate, personalized experience to remember.
"I think it definitely helps in repeat business and word-of-mouth advertising," says Marc Cohen, corporate chef and co-owner of 230 Forest Avenue and the two-unit Opah in Orange County, Calif.
Tackling Turnover
For independents, noncommercial operations and chains alike, the
positive effect training has on employee retention—one of
the most-talked about elements of the ROI equation—is top
of mind across the board.
"The amount of dollars we save by having one of the lowest turnover rates in the industry is invaluable," says Brad Rosenstein, president and CEO of the century-old Jack's Oyster House Inc. in Albany, N.Y.
Brenna Flinn, human resources administrator at Whitsons Food Service Corp. in Huntington Station, N.Y., attributes the relationship between training and retention to increased employee satisfaction. The opportunity to continue their education in the field is an important benefit for the noncommercial contractor's 1,200 employees, she says. If team members are happy with the opportunities they are provided, they tend to stay on board.
Greenwich, Colo.-based Red Robin Gourmet Burgers finds that its Smiling Burger Championship, a training tool-turned-competition, boosts retention and serves as a recruiting tool. When the casual-dining chain is staffing stores in new markets, the annual competition—where finalists receive free travel to the company's leadership conference—ranks high in appeal to potential employees, says Robyn Vaughn, director of new restaurant openings.
Van Eure, president and owner of Raleigh, N.C.'s 44-year-old The Angus Barn, says the company's investment in training provides her staff a sense of ownership and responsibility that translates into longstanding loyalty to the operation. This loyalty leads to consistency in both hourly employees and management, an attribute widely noted as a key factor in restaurant performance.
Connecting the Dots
Foodservice trainers can link companies' investments to specific results by establishing clear-cut goals for their programs. Following is a partial list of areas to address in measuring the value of training initiatives.
- Employee/customer complaints
- Employee lateness/absenteeism
- Employee morale
- Employee turnover
- Food costs/food waste
- Labor management
- Liquor costs
- Mystery-shopper scores
- Operating expenses
- Top-line sales
Playing for Keeps
El
Pollo Loco knows how to play the training game. Last year, the
Irvine, Calif.-based quick-service chicken chain pledged to invest
in customer-service training, bringing in a new director of training,
adding more area leaders while reducing the number of stores for
which each was responsible and increasing its general and administrative
expenses by more than $1 million. What makes these added training
costs worthwhile?
"Through our own research and third-party studies, we know that when you move a guest's experience on a scale of 1 to 5 from a 3 or 4 to a 5, that translates into almost two incremental visits for that customer a month. Two extra visits a month at our transaction level per week and average check translate into dramatic improvements in cash flow," says Steve Carley, president and CEO.
Special Report Part 2 of 2: Movin' on Up>>
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