Pay Now or Pay Later!

Training staff and managers is an investment, not an expense. Yet, time and again when the ‘going gets rough’ as it has in 2020, the first thing to be cut from the budget is often training.

But does it really save any money in the long run? Maybe the better question is, what is the cost of not training an employee?

Untrained employees inevitably lack knowledge and motivation to work according to standards, never mind embracing personalized member service. Their behavior can lead to unproductive hours worked, product waste, and will certainly affect member satisfaction and the team overall. There is a direct correlation to untrained employees and lack of engagement, ultimately ending in turnover. Pay now or pay later, either way, you are paying for training. Undoubtedly, not investing in human capital will cause the employees, the club and the members to suffer in the long term, which usually results in a large training investment to undo the damage done. So let’s consider the true cost of NOT training an employee.

A quick case study: I have trained service staff on the topic of suggestive selling using the pitch of “you can give yourself a $3,000 raise.” Then I showed them how to do it through training while also working with the chef to have a menu that provided selling opportunities. If the server was able to achieve $3,000 more in tips and we assume that is 20% of their increased sales, they were actually each taught how to contribute $15,000 more in revenue for the company. Imagine if seven of your trained staff could each add $15,000 in revenue, that’s $105,000. Until the servers were trained to increase sales, the training cost was $105,000 in annual revenue potential unrealized for years.

Here are a few illustrations how not investing in training could be costing you money now without realizing it, and how to resolve it.

• Train everyone to enhance the member experience and remain aware of sales overall: Memberships, merchandise, personal training, yoga classes, golf instruction, junior clinics, special events, meetings, etc. Imagine if everyone knew how to better create sales opportunities and then close sales in all areas; not only would it increase member satisfaction and engagement; it would also increase revenues. A 10% gain in sales is achievable with focused training and vision. For a $5,000,000 club, that’s an additional $500,000.
• Focus on food and beverage average check amounts: Increasing the food and beverage average check is a training investment well worth the time and money. Imagine 25,000 covers (annually) in food and beverage at an average of $15.00 per cover. If that is increased to $17.00 per cover through better training, the club would enjoy a $50,000 bump without any additional expense. That’s a conservative example for most clubs and all a server has to do is make thoughtful recommendations for every course served and listen for cues. They must be taught – through training.
• Improve employee retention: It is well documented that turnover replacement costs are about 20 percent of the employee’s annual salary. Let’s be conservative. Someone making between $20,000 and $40,000 will cost about $5,000 to replace. For a club with 50 employees and a modest turnover rate of 20%, the turnover cost is about $50,000 annually. The connection between training and retention is well well-known. Well-trained employees are happier, more engaged and productive, making them less likely to leave. Reducing turnover by 5% in this case would result in a savings of $12,500, or about $1,000 per month, which could be invested in training.
• The last and probably most important area for training in a club is focus on member retention. Let’s say dues are $20,000 per year for 325 members. If untrained employees negatively impacted member satisfaction causing member attrition to increase by 2%, that’s $130,000 lost in dues, not to mention their spending at the club, potential referrals or their lifetime value to the club.

Adding all of these up, I have outlined $550,000 in potential revenue increases, $12,500 saved in turnover cost and potential dues revenue loss of $130,000, which can be directly tied to lack of training. So, now I’ll pose my question again – is training an investment in the club’s future or an expense to be put on the chopping block?

Whether we budget for it or not, we are paying for training every day.

This article originally appeared in the April/May 2021 edition on BoardRoom Magazine.