This educational post was provided by Pat Shroll from Trifecta Management Group.
One would have to have lived in Antarctica not to see the effect and changes that COVID-19
has brought into our world. So many have suffered the loss of loved ones, and few, if any, of
us have escaped its impact. The pandemic has changed how we relate to one another,
communicate with one another and shop and go about our daily lives. It has changed the
landscape of commerce, broadened the scope of working from home, introduced virtual
interactions between businesses and clients, created supply chain issues, demanded
enhanced health and safety practices, and, at its worst, forced the closure of businesses
The restaurant and location-based entertainment industries comprise two business sectors
that were hit the hardest by the pandemic, primarily due to the business models for both
being based on facilitating socialization through shared activities. It’s been a long time
since a basic human need has put people at such severe risk of contracting a potentially
Regarding business practices in general, the pandemic has changed almost everything and
has put “business as usual” on the trail of the dinosaurs. While a book could be written on
the totality of changes, I would like to address a controllable cost that was difficult to
manage before the pandemic, and now, at times, feels impossible to manage—labor cost,
often the most considerable controllable expense on the P&L.
The New Reality
Consumer expectations in this industry have changed in some ways while remaining
constant in others. As a result, operators have had to absorb additional costs to meet
customer expectations for hygiene and cleanliness, while providing the same levels of
service that people experienced pre-pandemic. This has resulted in management learning
to do more with less amid staffing shortages and falling profits.
Over the past several decades, “quality of service” has become a competitive point of
difference, with good to excellent service being the standard expectation from a Guest
perspective. When employees are stretched thin and overworked, it is virtually impossible
to deliver the quality of experience that a fully staffed operation would. Customers have
been quick to notice and slow to understand the drop in service standards. They are paying
the same, if not more, than before the pandemic and receiving less perceived value – their
frustration is understandable, though some show little tolerance by berating staff and
leaving smaller tips, which only compounds the problem. In many instances managers have
had to assume hourly duties to keep a facility open, pulling them away from other
responsibilities and causing their focus on executing the fundamentals to diminish.
Most operators are not only experiencing a rise in the cost of labor, but also seeing
increased cost of goods sold due to raw product, transportation and logistical issues rooted
in the pandemic. Without time to manage the fundamentals, improvements in unit labor
cost gained in staffing shortages are lost elsewhere.
Since all operators are facing the same labor shortages, the market has responded
accordingly – low supply, high demand increases the cost of products or services, in this
case, wages and compensation. Acting in their own self-interest, workers naturally follow
the money, and so a “bidding war” breaks out among employers that results in not only
higher labor costs and staffing shortages, but also dictates lower performance and behavior
standards. What’s a manager/owner to do?
When the most profound COVID restrictions were largely lifted and operations resumed,
calling back employees became problematic. It has been my experience (and others in the
industry have confirmed the same), that our best employees were the first to return.
Initially, one of the factors has been competing with the enhanced unemployment benefits
provided in response to the pandemic giving employees the option to remain home. The
remaining factors include the legitimate and, in some cases, lingering employee health
concerns regarding returning to the workplace, childcare issues and a general revisiting of
career goals and priorities. The upshot was that any hope of quickly reaching pre-pandemic
staffing levels were promptly dashed. This created several new challenges for operators.
With less staff and increasing volume we have all had to address the following:
- The people who were working had to assume a much bigger workload and longer hours.
- To lose any additional staff would only make matters worse for those left behind, and so, management was put in the position of having to accept lower performance and behavioral standards, e.g., slower service or tardiness.
- Systems and Organizational Tools were sacrificed in the name of time and efficiency.
- Staffing shortages required partial closure of some revenue generators within an entertainment facility.
It has been my experience that good people stay because they feel involved, take pride and
ownership in the product and experience delivered, and appreciate the work environment
that good employers provide. That said, their desire to make more money is
understandable and some will be lured away purely by higher wages.
To retain the people we have, initiated hiring bonuses, retention bonuses and elevated
payrates to match the market-driven wages offered by competitors. Fresh out of the
shutdowns, we had to put in place a weekly bonus for showing up for all scheduled shifts
(something in my wildest dreams I could not have imagined pre-pandemic).
In addition, we have discovered that to achieve our goals we have had to embrace more
fully technologies that enable us to do more with less, e.g., tableside tablets for taking
orders and paying the check. We are also doing a better job of utilizing information
generated by technology to project sales more precisely, schedule accordingly, avoid
overtime and utilize comparative analysis. These technology solutions were available
previously, but the pandemic has accelerated their implementation and the consumer’s
acceptance of them.
While we have been able to hit our labor budgets, from a strict financial sense, it is not
because we are necessarily doing a good job, it is often because we are short staffed. One of
my greatest concerns for when (and if) the hiring and staffing environment returns to pre-
pandemic parameters, is whether these incentives must continue or if we can wean
employees from these hopefully temporary benefits. For that to occur, the labor market
must change to one where there are more job seekers than job openings.
If I have learned anything in my thirty years in business, it is that the only thing that doesn’t
change is the fact that things are constantly changing. And so they have, in both guest and
employee expectations. The dynamics of the manager / labor relationship has, for now at
least, swung significantly in favor of labor, putting management in a challenging position.
This change requires that we provide a rewarding and supportive work environment,
establish and maintain a positive and strong company culture, work smarter, utilize
technology, and embrace fundamentals like never before.
By Pat Shroll, Senior Vice President of Operations
As Senior Vice President of Operations, Pat Shroll contributes to the development and operations of current
venues and supervision of team members in our portfolio of concepts that include retail and family
entertainment centers, as well as a variety of individual restaurant concepts.