The restaurant industry plays a key role in the Spanish economy, supporting the tourism and leisure sectors while employing a significant number of workers. But the generally small, family-owned-business approach to food services will have to evolve in order for the industry to meet its growth potential. According to experts, the industry will need to adopt more effective management practices, particularly with regard to staffing, where worker dissatisfaction and turnover rates can damage business.

Long hours, poor salaries and the low social prestige for many of the jobs in this industry, such as waiting tables, creates much higher than average worker dissatisfaction rates. The result: High, voluntary turnover rates damage the quality of service.

How can these trends be reversed? A recent study by IESE says that better training to change attitudes is needed, in addition to improved skills training.

The food service industry is very important to Spain’s economy and therefore needs to be managed efficiently, analysts say. According to the Spanish Hotel Industry Federation (FEHR), there were 354,152 businesses in this sector in 2007, including 81,989 restaurants, 243,627 bars and 15,624 coffee shops. These figures offer some idea of the number of workers who manage these establishments.

Spain also is home to many famous restaurants and chefs, including Ferrán Adrià, who ranks among the world’s leaders in haute cuisine. He runs El Bulli, which is located in Rosas, Girona, and is considered one of the best restaurants in the world, according to the well-regarded industry magazine Restaurant. Spain’s high level of international prestige in the restaurant industry has led many young people there to stake their futures on cooking and fill the hotel schools, with the goal of achieving a reputation as a Spanish chef. 

But the restaurant business’ less glamorous side remains a challenge, and as a result, there is little loyalty among restaurant waiters. According a recent survey by INE, the National Institute of Statistics, restaurant sector employees are among the least satisfied in the Spanish labor market. This data appears in a recent study, “Turnover in the restaurant sector: causes and recommendations,” published in June by the IESE business school and the InsedNetwork, a Spanish service-sector business association. The reports’ authors analyzed interviews with managers in the sector’s largest companies, reviewed other available survey data, and studied the literature on the subject.

The report found that 42% of restaurant employees change jobs within two years. Several factors have led to the high turnover rate, including the low social prestige of the profession; relatively long working hours and low salaries; and a shortage of professional tools that would enable owners, managers and midlevel managers to deploy the best resources.

Indiscriminate Hiring

High demand for waiters and other restaurant workers during the economic boom, in addition, led to indiscriminate hiring, with little regard for a candidate’s background or skills. This made such jobs look like something temporary — “bridge jobs” — for workers until they found something “better.”  Since 2008, when the recession hit, the turnover rate has moderated. But once the downturn ends, the high turnover rates are expected to resume.

José Ramón Pin, academic director of IRCO (International Research Center on Organizations) at IESE, notes that the restaurant sector has always been subject to continual transformation. “The fact that the sector is intimately tied to everyday social standards and customs causes this need for continuous change. In recent years, the process of transformation has accelerated, giving way to a change in the business model,” Pin says.

What kind of changes? Traditionally, restaurant companies were mostly tiny family-owned companies. Food production was done by hand and management took place in the household. But this long-standing approach is giving way to a new model in which the big companies gain market share using professionalized management methods, strong purchasing power, standardized processes and economies of scale, says Pin, who co-authored the study with Pilar García Lombardía, another IESE researcher.

For example, restaurant owners recognized the need to “do away with ‘atomization’ [as opposed to concentration] in the sector as well as weaknesses in business management, disorientation, lack of specialization, and insufficient innovation in small and midsize companies.” The authors also criticized “the low sensitivity [of companies] regarding the importance of human resources and of value-added products, as well as excessive inflation in prices.”

“[High] turnover rates,” meanwhile, “have been around in the sector forever,” notes Dimas Ramírez, head of human resources at The Eat Out Group, a subsidiary of Agrolimen, the largest restaurant company in Spain. In the report, Ramírez notes, high turnover rates are accepted — “something so taken for granted that this has contributed to normalization [of such conditions] and strengthening them. Things shouldn’t be that way because when you normalize something, you don’t fix limitations. This isn’t the way things happen elsewhere, where after you identify a problem, you evaluate it, analyze it, and you take measures to mitigate it,” he points out.

Nevertheless, the industry is moving toward professionalization, and away from the traditional family-owned companies whose business models and production processes have been handed down for generations, but which may not always work best in today’s more competitive markets. Instead, the industry is moving towards large chains controlled by international firms and the proliferation of high-end restaurants.

Notes Pin: “Changes in management methods, in the size of companies and in their production processes, are inevitably going to affect the configuration of the labor market in the sector. Among other issues, the new trends point toward the need for greater professionalization of the people hired in the sector.”

Given the broad scope of the Spanish restaurant market, there are differences within the sector. Generally, high turnover rates affect small companies (20 to 49 employees) and micro-businesses (fewer than 19 employees). At the big restaurant chains, such as VIPS restaurants and American multinationals such as McDonalds, Burger King and Pizza Hut –- which have about 500 workers each — there is usually less of a turnover problem.

Turnover is also higher in lower job categories. This includes basic positions, which require fewer qualifications. In contrast, turnover rates for managerial jobs are similar to those in other sorts of business sectors.

This lack of commitment to the profession generates a vicious cycle that it is hard to overcome. The high turnover rate creates operating and quality problems, and adds expenses for the business owner who, in turn, often decides not to invest in training, which is fundamental for strengthening ties between the company and the worker. “In the first place, we must talk about the educational gaps in the intermediate positions, and in the entrepreneurs themselves, who own these restaurant businesses. This shortage not only means insufficient development of professionalized managerial systems for human resources but also, clearly, places much higher value on job experience over [formal] training,” notes the author of the study.

What’s more, the little training offered does not meet minimal requirements that would make it successful. “According to experts, the training that is provided does not meet the expectations that potential employees have regarding professional skills. The ‘disconnect’ between training plans and business reality is, without doubt, an important reason why the businesses lack value,” stresses Pin.

No Training, or Wrong Kind

For example, training programs provided by Formación Professional (FP), an alternative to university courses, are not devised to enable future success on the job. “The basic problem is that FP’s hotel industry programs involve some 2,000 hours of training, which is excessive, according to specialists in the sector. This over-training becomes a problem when students leave these schools, and they are not rewarded by the labor market [for the training] with [higher] wages, job titles and [better] possibilities for promotion.”

On the contrary, in most job interviews, work experience is the most highly valued quality. This puts at a disadvantage those job candidates who have been training but have not yet received on-the-job experience. In addition, many business people choose new employees who will deal with the public on the basis of subjective criteria such as their physical appearance.

According to InsedNetwork and IESE, formal hotel industry training is ranked only fourth among the criteria used by employers in the hiring process. In most cases, the formula for hiring new employees is based on personal contacts, newspaper advertisements and direct requests.

Many companies have also failed to develop sophisticated techniques for retaining personnel. “Voluntary retention can represent a problem for these companies,” says Pin, because retaining workers would require business owners to spend a significant amount of money on retraining. But failing to retrain also carries significant costs in the form of high turnover rates.

Fewer than 30% of the companies in the Spanish restaurant industry have enacted measures for building greater job satisfaction and improving the working environment. Instead, “when a worker’s level of satisfaction does not reach a specific level, the employee will try to find a solution by looking for another job either inside or outside the sector,” notes Pin.

When there is strong demand for jobs, job dissatisfaction plays a determining role in the worker’s decision about whether or not to quit the company. “Clearly, we can explain the high rates of turnover in the restaurant industry [or parts of the industry] by looking at the high level of job dissatisfaction,” Pin says.

How can the industry break this cycle involving high job dissatisfaction and the low prestige of jobs in the sector? According to the authors, experts agree that training is the key — training that focuses not just on aptitudes but also on attitudes. Says Pin: “Regaining professionalism in the sector… involves having an attitude that is appropriate for service, taking care of customers, and caring about the details.”

“Training is also necessary — and a great deal of it — for upper and midlevel managers in the companies in this sector,” concludes the report. “Using tools that enable companies to increase the professionalization of human resource management is indispensable for consolidating definitive change in the sector; change that will permit [companies] to have a greater chance of succeeding in the newly competitive environment.”