Tip of the Day

Labor Cost Benchmarking

Payroll cost, as we have said over and over, is the single largest expense in hospitality operations.  When asked why he robbed banks, the notorious bank robber Willie Sutton responded, “because that’s where the money is!”  Hospitality managers, when looking for ways to control costs, should always look first to payroll costs – because that’s where the money is.

To paraphrase eminent 19th century British scientist, Lord Kelvin, “If you don’t measure it, you can’t control it.”  If you don’t understand the details of your payroll cost in a formal way – that is with ongoing payroll benchmarking – you have no real understanding of what is going on with your labor cost and, therefore, no real way to curb abuses, schedule more efficiently, or control overtime.

Because of its importance and impact on the bottom line, a General Manager should insist that his or her department heads monitor their payroll on a daily basis.  This will foster a keener understanding of their labor cost, help spot mis-punches or employees milking the clock, eliminate unnecessary overtime, and coincidentally make it far easier to budget for future periods.

See Labor Cost Benchmarking for more information.