In our pub business we have recently been recruiting for a Deputy General Manager. During our interviewing, it has been fascinating to learn why so many staff want to leave the largest companies in the sector and come and join little old us. We should not really be able to compete with larger businesses, but we do, and I have been curious in finding out why.  

We lose on many things, particularly staff development and benefits, where bigger companies do a great job. But we win in two more key areas. Firstly, the team ethic of a smaller business, with Directors being visible and involved, which also means we get the small things done much more quickly, particularly regarding repairs. But where we really win in comparison to the Goliaths, is in managing our labour.  

It should not come as a shock that as an industry, we really care about customer service. While there are many factors that contribute to the productivity levels of our teams, I think that staffing levels are perhaps one of the most significant.  

Some of the candidates we spoke to voiced frustration over the fact their employers chose to set cash targets as means of budgeting their labour over the Christmas period. The staff felt they would have done much more than the target, but as a result of it, were not given enough resource to do so.  

It is always a bit of a shock, and quite fascinating to me when I hear about bigger companies managing their labour costs with the bluntest of instruments. Of course, cost management is at the forefront of every operator’s mind, particularly with NLW increases looming. Simply setting a cutthroat budget to slash costs will also slash sales. We will not win over the customer if we deliver bad service, and more importantly, we will not win over our people if we are seen to act in not only an illogical way, but also in a way that impacts their job satisfaction levels. We have all seen what happens next:  they either leave the company, or more worryingly, the industry. 

Managerial behaviour in a devolved, people-intensive industry can be really difficult to get right. It is a bit of a truism to say that we have some great managers, some OK managers, and some poor managers. We need to find the best way to let our best managers manage, and to train our worst managers to be better at their job. In truth, it is likely this means taking different approaches for different people. There is something I refer to as ‘lowest common denominator management’ – which means adopting management practices that cater to your least experienced people, as opposed to just your best or average people.  

Our most trusted and experienced managers can be encouraged to perform even better; others, who perhaps have less experience in the business, may require a more hands-on approach until they get there.  

Labour is the sharp end of our industry. If you demand a 75% food gross profit, the team will accept that your economic model is such that it is the right thing to do. They might baulk a bit more at pricing when they are the ones that get the grief from the customer, but they will also accept that dealing with price increases are part and parcel of the job. However, when it comes to labour, they can see when they are understaffed. 

Even if our teams believe they need more staff than what is required, it is our responsibility to spend time explaining why the way we have planned our teams is right, and how they can be more productive in their role to achieve the same goals.  

This is what companies are potentially failing to do. We work in an industry where people want to understand more, and where, when explained, they are more motivated and accepting of the requirement.  

We need to explain when a two on shift is better than a three on shift; why we do not need a pot wash at quieter times; why certain tasks are to be thought of as slack tasks and not as fixed tasks. Sometimes, in our rush for a result we forget these basic processes. 

I have no doubt that we will need to train and explain to our new team how we work, what we care about, and how we deliver in our own way. 

There is a myth in our industry that being understaffed is the biggest challenge to sales growth, and that is the missed opportunity. But the truth is that, while we all want to have the right number of staff, the bigger enemy to service and sales is overstaffing. 

Let us take the difficult example of when you need 1.5 people on a shift FOH. Clearly you can’t have one, because they would fail, so the right answer is to have two. You might decide that you want one on the bar, one serving and one running food. Then you have three. Comfortable – and many might argue that they have the structure right, service will be great, and they can cope with any increase in sales. Good rostering, right?  

But I have seen countless examples of what actually happens on this kind of shift. One person does the work of 1.5 people, badly, and the other two people chat.  

Of course, the customer is forgiving if you have two people working hard and it is busier than expected, but equally they are unforgiving if they see two people chatting.   

We have all seen it too often. Recently, we were doing some customer training and made this point to managers. There was no argument – they all agreed. 

So, if we can all agree that overstaffing is the biggest enemy, why does it happen? 

Is it because rotas are written without thinking enough about demand? Is it that people think there is a minimum number on shift that is required and can’t see how to run their business on less? Is it fear that someone won’t turn up? Is it that they overstaff in case they are busier? Is it that the manager really wants to do nothing on the shift so rotas extra hands? 

Is it that there are a few standard shift structures that are deployed, and the staff don’t want to create any more? I think it is the combination of all of those reasons that causes overstaffing. 

But what is the cost? The problem with our industry is that the majority of shifts during the week are quiet. If we have 14 shifts a week, then it is likely that at least half of them are quiet shifts, where there is a tendency to overstaff. If say 20% of our labour occurs at these points (for one of my own it is 35%), and we could save 10% of this, then this is still a 3.5% improvement in labour. And we all need that. 

So, let’s come back to the reasons. In truth only the first and the last can be solved through systems, unless you control a manager to death and remove any level of authority – an equally dangerous approach.  

The rest are achieved through education and training. It has been great to have recently seen both managers and kitchen managers get the point in recent training sessions. But the prize is a big one. Reduced cost and increased sales are the dream ticket. So, let’s bust the myth. 

The planned increase to minimum wage has made a substantial change to the differentials between young people. From April next year, over 21s will see a minimum wage of £11.44, whilst under-18s will receive £6.40. 

There is a solid argument against paying under 18s only 55% of the new minimum wage for adults. Many of them are better than that, which poses the question – is this age discrimination at a government level? Here in lies the rub. While a lot of under-18s deserve a higher rate, there is often a high chance that as employees, they will not work out for the following reasons:  

For many under-18s, working in hospitality will be their first real job. We must teach them the basic disciplines of work: turning up, preferably on-time; looking smart every day; smiling, and not just to friends; going to work with a hangover and not hiding in corners; being polite to colleagues; talking to old people; working as a team; accepting proper discipline; listening to instructions and not repeating the same mistake – the list goes on.  

A number of young people fail on any of these measures, and some, sadly fail on all. The churn of under 18s is therefore considerably higher than for those on their second, or probably third job. The training to help them through some of these barriers is also considerably higher.  

The hospitality industry has always been a good training ground for the rest of British industry, teaching the skills that mean those people are better able to hold down and excel at jobs in the future. A job working in a pub means that person has already developed a work ethic, which is a positive sign on a CV. 

The real risk is that if this differential gets eroded, the cost of employing experienced hands may seem more appealing, and so the incentive to employ these first jobbers starts to disappear.  

But what is the right number? The argument we should accept is not a theoretical one, but a practical one. Are these young people getting the chance to start work? The answer is no!  

Less than 5% of the 25-plus age group are unemployed, whereas after a brief dip to under 10%, the unemployment rate for under-24s is now climbing sharply and currently sits at 12.7%. Anything over 15% and I suspect the government will feel grave concern, but it looks like we are heading that way pretty fast. 

Having read the summary of the low pay commission report, it looks to me as though it takes a massive amount of time to pull together, which means it is likely they will not have reacted enough to the stats which changed sharply between April and July this year. 

To layer on further challenges, we also pay our teams tips. Where these tips are through a company, hopefully the low pay commission have taken them into account. But, where they are not, they will not be in the report. This means that young people are certainly earning more than the government are recording. 

My hope in all of this is that wage rates for young people are set at a point. As an industry, we want to employ young people and continue our vital role in helping them start their careers. I am proud of those who have grown through my own pubs – having watched some join as teenagers, gone through a successful university career, and ended up with great jobs. I would really like that to continue. 

Priced out: The struggles facing operators in wake of increasing NLW

This year, there’s been a 11.5% surge in the annual minimum wage, once the increases for lower age workers are added into the mix. It’s left the industry shocked, and understandably raising ever more concerns about the hefty financial load weighing on our sector with the associated risk for the industry. 

For those of us, myself included, still grappling with the aftermath of our coronavirus loans, life just got tougher. As I’ve been sharing with many, we took out loans of £150k per pub during the pandemic. Initially, a base +5% interest rate seemed manageable with such low base rates, but now our rate has doubled to 10% and the burden has significantly intensified. We’re still in the process of paying off the loan and now each pub requires an extra £40k before we even begin to make headway. 

Even with payroll at 30% of sales for a business generating £1.5 million in turnover, the minimum wage hike is tacking on an additional £50k to our expenses, and our profit, if we don’t act. What used to be a substantial but manageable variable cost for labour is increasingly becoming the toughest and most challenging line on the P&L. 

My job as a restaurant owner and software supplier is to figure out the best way to manage my business going forward. Really, there are only two options: put up prices or drive further efficiencies. The reality is we will have to do both. As we see month-on-month food prices dropping, and the price of electricity seemingly stabilising, we might hope that we can slightly raise prices and convert most of that increase to our bottom line. The question is how we much we dare increase prices when already the customer has a degree of cheque shock! 

The remainder of the cost savings will have to come through further efficiencies. For us, the biggest debate will be how we can drive food efficiencies. We aren’t big enough to have a central kitchen, a smart efficiency which other businesses have enacted very well, but we can start to make dishes for both businesses and buy in where we can find a good enough quality product. I think over the next year many businesses will need to look much more seriously at this.  

We really don’t like restricting opening hours. For us, availability is key, and we will lose business overall if we shut early in the week or in the afternoons. We have worked hard to get our team numbers down on those very quiet days, so we just about scrape through to zero profit on the day.   

After these kinds of measures, it does come back to labour efficiency, and I still think there is a lot that, as an industry, we can do. The real challenge is how much effort and energy we can, and should, put into labour efficiency.  

 Giving someone a budget and telling them to deliver is not really management, just as the blunt instrument of a labour percentage is no longer acceptable. We are going to have to embrace several things we have chosen to avoid – proper slack-based budgets, good shift planning, and identification of slack tasks are just a few.   

The hard yards in labour management are upon us again!