Does staff induction impact upon labour turnover?

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DOES STAFF INDUCTION IMPACT UPON LABOUR TURNOVER IN THE UK HOSPITALITY INDUSTRY?

CHAPTER 1 INTRODUCTION

1.1 Overview

This dissertation studies human resource management (HRM) and specifically employee induction and labour turnover. It aims to explore, evaluate and analyse the impact of employee induction on labour turnover in the hospitality industry. There is a plethora of literature that supports induction training and promotion of organisational culture, suggesting it can lead to higher levels of commitment, productivity, quality of service and profitability and reduced level of labour turnover (Boella, 2000: Fowler, 1999: Hofstede, 1994: Mullins, 1992: Nickson, 2007: Taylor, 2008: Torrington, 1994: Storey, 2007: Watson, 1995).

1.2 Rationale

It is widely recognised by academics (Boella 2000:, Boella and Goss-Turner 2005:, Cook, 1993: Fowler, 1999: Goldsmith, Nickson, Sloan and Wood, 2003: Meighan, 2000: Mullins 1992: Sommerville, 2007: Storey, 2007) that high levels of staff turnover can lead to lower levels of customer service, reducing customer satisfaction decreasing profitability.

The original reason for undertaking this study stems largely from the authors personal experience of working in the hospitality industry. Experiencing first hand the effect of a high labour turnover through team members either; resigning, being sacked, changing department or coming to the end of their contract. The effects of the high turnover added pressure to existing staff as they had to cover shifts, train new staff whilst also losing shared knowledge and expertise; leading to reduced staff morale, productivity, levels of service and customer satisfaction.

Employee turnover has a research stream that can be traced back to the work of March and

Simon (1958) and was primarily based upon the level of job satisfaction and organisational commitment. Labour turnover has always been high in hospitality, leisure and tourism compared to other sectors (Boella, 1992). This is reinforced with a survey by Roberts in 1995 (cited in Goldsmith et al 2003) found that of the 150 hospitality companies surveyed, where 95 percent identified high labour turnover as a problem. Ten years later and the industry still has a reputation for very high levels of labour turnover (Boella and Goss-Turner, 2005).

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The UK hospitality, tourism and leisure industry sector accounts for nearly 5% of the UK’s total economic output, employing around two million people, representing one in 14 jobs, approximately 7% of the total UK workforce (People 1st, 2009). According to research by the Charted Institute of Personnel Development (CIPD), the hospitality industry has the highest staff turnover in the UK. A survey by People 1st (2009) reinforced this point by highlighting the 31 percent turnover figure in 2008/2009, costing an estimated £414 million. The average cost of filling the vacancy created by turnover at £219 without marketing, with marketing it would cost £673 and £764 for a managerial position.

With the world recession, organisations are looking to save money where ever possible, reducing staff turnover is one area that could be seen as a target.

1.3 Aims and Objectives

1.3.1. Aim

To evaluate the effect staff induction has on labour turnover in the UK hotel sector; looking specifically at operational staff.

1.3.2 Objectives

The objectives for this dissertation are as follows:

To evaluate literature on labour turnover, staff induction, organisational culture and commitment and HRM approaches in the hospitality industry.
To analyse different approaches to induction and its effect on labour turnover.
To evaluate models of best practice in induction and evaluate their use in the hospitality industry.
To make recommendations on a best fit model of induction in the hospitality industry. Concluding the research and identifying limitations to the dissertation.

1.4 Research Methodology

Research can be defined as “an orderly investigation of a defined problem using scientific methods to gather representative evidence and draw logical, unbiased conclusions” (Poynter, 1993-p1). Sekran (2000) defined research as “the process of finding a solution to a problem after thorough study and analysis”. This dissertation is “a review of existing knowledge in a particular area together with the creation of a new slant of this knowledge” (Clark, Riley, Wilkie and Wood, 1998: p.7). The dissertation uses secondary research only. According to Clark et al (1998) and Sekran, (2000) secondary research does not introduce any new data and is based solely on data that already exists. The generic topic of HRM, linked to organisation culture, commitment, loyalty and staff induction has been widely researched and producing many academic journals, articles and theory which can be drawn upon.

There are numerous advantages to using secondary research. As the data has already been published it can save resources such as time and money (Sekran, 2000), larger sets of data can be collected, analysed and evaluated with the effort focused on the analysis and evaluation (Saunders, Lewis and Thornhill, 2007). Furthermore, it can present higher quality data than primary research, it provides both qualitative and quantitative research (Sekran, 2000) and it can be checked by anyone at any time. Saunders et al (2007:p.256) stated that additionally it allows “more time to think about the theoretical aim and substantive issues” and can lead to “unforeseen or unexpected discoveries.” However there are some disadvantages to using secondary data. The data could have been collected with a purpose different to the research question it is being used for (Saunders et al, 2007). The data may be out of date, old or unreliable, so first the validity of the source must be verified (Sekran 2000). Clark et al (1998) identified that up to date information may be difficult to obtain.

Types of secondary data that are to be used in this research project uses various sources, including; government publications, industry statistics and reports, book and journals. These will be providing the main source of information, as the majority of this research is reliable and easily available. In order to locate information and sources, Emerald, Brookes Electronic Library, Google Scholar, and Brookes Library will be used. Online resources are quick, simple and easy to access.

1.5 Limitations to Research

The research for this project does not include primary data, and is purely based on secondary research, as explained above this has its drawbacks. The project focuses on the UK as will hte literature however non UK sources will be used.

1.6 Chapter Structure

This section will briefly outline the chapter structure and give an overview of what each chapter entails.

Chapter 1

This chapter outlines the aims and objectives of the research paper, including a rationale justifying the reasons for this enquiry of research along with possible limitations and problems that may occur. It will also give a brief overview of the research methods used.

Chapter 2

This chapter defines and identifies labour turnover in the UK hospitality industry. Exploring the patterns, causes and effects including the induction crisis.

Chapter 3

This chapter aims to define and describe the current staff induction process, highlighting key approaches and models. Exploring the importance of socialization and building loyalty and the benefits.

Chapter 4

This chapter draws on the research and applies it in indentifying a best fit staff induction model to reduce labour turnover in the hospitality industry.

Chapter 5

This chapter aims to evaluate and review the effect staff induction has on labour turnover. This chapter also provides a conclusion with the recommendations and limitations to the research.

CHAPTER 2 EVALUATING LABOUR TURNOVER IN THE HOSPITALITY INDUSTRY AND IT’S IMPACT UPON PERFOMANCE

2.1 Introduction

Labour turnover is an important issue to all employers worldwide; from governments and multinational companies to small privately owned business (Goldsmith, A., Nickson, D., Sloan, D. and Wood, R. 1997). Labour is an essential resource to any business, determining future success (Lucas, 2004). This chapter defines labour markets, explores the concept of labour turnover, defining it and highlighting key methods used to measure labour turnover, along with the effects.

2.2 Labour Markets

The starting point for all strategic activity in HRM is to understand in which an organisation operates (Goldsmith et al, 1997). It is only possible to formulate accurate policies and practices once its keys features have been identified and their importance understood (Torrington, Hall and Taylor, 2005). The labour market is the source that provides the fuel for labour turnover.

Riley (2000) refers to the labour market as a pool of available talent in which employers compete to recruit and subsequently retain staff. Labour markets are not organised, centrally planned, structure co-ordinated machines, rather a free flow or movement of employees in and out of jobs (Goldsmith et al 1997). Riley (1996) summed up the free flowing, erratic nature by stating that the market consists of thousands of individual decisions by employees and employers independently. Over time these small, singular choices provide a pattern or trend of the labour market, meaning the supply and demand in a labour market can be determined by the independent unconnected decisions (Torrington et al, 2005).

One model created to help understand the labour market within the hospitality industry is the ‘dual labour market theory’ (Goldsmith et al, 1997 p16). They state the labour market is ‘made up of two distinct but related groups or markets’, a primary labour market and a secondary labour market. Below in Table 1 is an outline of each theory.

PRIMARY LABOUR MARKETS	SECONDARY LABOUR MARKETS
1. Jobs are supplied by large, highly profitable firms.	1. Jobs are supplied by mainly small firms where profitability is not easily assured.
2. There is a high capital to labour ratio in these firms and high productivity.	2. There is a low capital to labour ratio and productivity tends to be low.
3. Production is usually large scale in nature and based on substantial proactive investment in technology.	3. Production is usually small scale and intensive in nature, and in commercial personal service industry at least, technological requirements are based on clearly defined needs.
4. There is a stable demand for products arising from national and international markets.	4. Demand for products and services is subject to irregular and/or seasonal fluctuations rooted in local and regional markets.
5. Wages and skill levels are relatively high.	5. Wages and skill levels are relatively low.
6. Opportunities exist for training and advancement.	6. Training opportunities are limited as are opportunities for advancement.
7. Employment is stable.	7. Employment is unstable.
8. Unionisation is often high.	8. Unionisation is low or nonexistent.

Table cited in Goldsmith et al (1997) p17.

Woods (1997) agreed with the dual labour market theory, summarising the primary market as consisting of highly profitable large firms, relatively highly skills jobs with the opportunity for training and development. It is widely perceived that the majority of the hospitality industry is similar to the secondary labour market; with profitability not guaranteed, relatively low paid, low level skilled jobs that are intensive (Goldsmith et al, 1997).

2.3 The UK Hospitality Labour Market

The UK hospitality, tourism and leisure industry sector accounts for nearly 5% of the UK’s total economic output, employing around two million people, representing one in 14 jobs, approximately 7% of the total UK workforce (People 1st, 2009). However as highlighted by Lucas and Wood (2000) the hospitality industry id highly reliant on young part time and casual labour. The State of the Nation Report 2009 by People 1st reinforces their point with 16 percent of the hospitality workforce aged between 16 and 19 years old, whilst only 5 percent are over 60 years old. Of the total workforce 59 percent are female of which 55 percent are part time employees, compared with 31 percent male.

Boella (2000) identified that the common hospitality employee is typical of the secondary labour market; seeking short term employment, with relatively low or no skills. They have no desire to create a career and consequently leave after a short term of employment. This constant turnover is part of a vicious cycle, whereby employers are reluctant to invest in employees and as they leave soon after training (representing a loss of investment) and the employees leave due to little or no training (Goldsmith et al, 1997; Mullins, 2001).

2.4 Labour Turnover

As already established the hospitality industry has a high level of turnover. Boella and Goss-Turner (2005, p178) define labour turnover as ‘the total number of leavers expressed as a percentage of the total number of employees in a department, unit or organisation’. Lashley and Lincoln (2003) agreed by highlighting labour turnover simply as the movement of labour out of and into a working organisation.

To understand how ones organisations faring it is possible to compare to industry averages. It is clear that hospitality had a higher than average figure in 2007. This high level of turnover is widely accepted as normal (Mullins, 2001).

Industry	Average Turnover 2007
Hotels and Catering	32.6%
Retail and Wholesale	27.5%
Media and Publishing	27.1%
Construction	27.1%
Call Centres	24.6%
Communication	23.5%
Manufacturing	20.95

Table: Turnover Rate. Cited in Taylor (2008 pp434).

2.4.2 Benefits of Labour Turnover

It is highly debated in the literature as to whether turnover is a positive or negative within a business. Carrel et al (1995) in Taylor (2005) present the notion of functional versus dysfunctional turnover, suggesting that functional promotes innovative ideas and methods. Boella (2000) agreed and stated that with new employees ‘comes a breath of fresh air’, a necessary change to prevent stagnation. Torrington et al (2005) also draw attention to research by Hom and Griffeth (1995) that has shown function turnover exists greater than dysfunctional. The net results is an improvement in productivity as the poorer employees quit, leaving a higher proportion of good employee enhancing organisational effectiveness.

2.5 Reasons for High Labour Turnover

People leave employment for a variety of reasons, many of which are outside the power of an organisation to influence; such as leaving is retirement. Highlighted below are some of the key reasons of labour turnover.

2.6.1 Induction Crisis

Mullins (1998) cited staff turnover to be at the highest level during the first few months of employment as the induction crisis. A report in 1984 by the HBTIB states that in the specific sector of guesthouses and hotels almost 45 percent of all new workers left their employment within the first three months, and 15 percent within the first month. This has reduce slightly over the last 20 years, with the People 1st (2009) survey highlighting that over 10 percent of turnover came within the first six months of employment, with bar staff at an average of 30 percent. This trend is disruptive and expensive, especially as the investment of training and time have been lost (Mullins, 1998). Torrington et al (2005) go further and identify more costs lost, such as marketing and interviewing, although these can be saved if the next employee is hired internally as opposed to externally.

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2.6.2 Outside Factors

Outside factors relate to situations where someone leaves for reasons that are largely unrelated to their work (Torrington et al, 2005). One of the most common reasons is relocation, whereby an employee moves cities or countries. Others might include the lifelong passion to travel, illness, and family issues (Meighan, 2000). To an extent this type of turnover is unavoidable, however is may be possible to provide childcare or flexible working hours (Torrington et al, 2005).

2.6.3 Push and Pull Factors

With push factors the problem is dissatisfaction with work or the organisation, leading to unwanted turnover (Torrington et al, 2005: Lashley and Lincoln, 2003). Causes could include a range of issues from; insufficient development opportunities, boredom, ineffective supervision, poor levels of employee involvement or personality clashes (Goldsmith et al, 1997, Fowler, 1999: Mullins, 1995 and Torrington et al, 2005). If there are no opportunity to voice these concerns an employee’s tend to look elsewhere for work.

Pull factors are the opposite, the attraction of a rival employer. Salary levels are often cited as the main cause, when a rival offers a better employment deal (Fowler, 1999). However it could also be; better opportunities, a chance to work with a particular person, or location issues such a commuting distance (Torrington et al, 2005). The two main aims for employers are to take are to ensure they know what the competition is offering, so they can be realistic and competitive (Meighan, 2000). It’s also important that an employee understand what he has and appreciates it.

2.7 Understanding Labour Turnover

Torrington et al (2005) stress that there is very little an organisation can do to manage turnover unless they understand the reasons for it.

2.7 Costs of Labour Turnover

In monetary term labour turnover cost the industry £414 million in 2008/2009 (People 1st, 2009). However this has a decreased since 2000 according to Boella (2000) who stated that labour turnover was £430 million. The formula used to calculate labour turnover is the number of employees who left during a period divided by the average number of employed during a period, times by 100 and represented as a percentage. Boella (2000) identified that although the results of this formula givers a labour turnover percentage, it does not give any indication of productivity of the staff, so it is best to monitor both.

Lashley and Lincoln (2003) state that there are a number of ways to determine the cost of labour turnover, yet the prevalent statistic used compares the number of leavers to the number to the normal component of staff. Whilst this is easier and quicker to calculated, it is less accurate and doesn’t take into consideration the seasonality of an organisation, and giving no indication of the amount of time spent by an employee at the organisation Meighan (2000).

Torrington et al (2005) suggests that labour turnover represents both direct and indirect costs. Direct costs include advertising, travel expense, marketing, additional staff overtime pay, interview time (Boella, 2000: Lashley and Lincoln, 2003 and Mullins, 1998). These cost are easily calculated and visible.

Indirect costs associated with labour turnover include loss of leadership, low levels of staff expertise, reduced productivity, increased wastage and reduce customer satisfaction (Boella, 2000: Mullins, 1998: Taylor, 2005 and Torrington et al 2005). These intangible costs affect the remaining staff more, and are difficult to put a price on.

2.9 Conclusion

The three common reasons stated by Torrington et al (2005) for leaving include:

Dissatisfaction with the conditions of work, especially house.
A perception that they were not being given sufficient career development opportunities
A bad relationship with their immediate supervisor.

The nature of the industry itself (seasonal, limited career structures). The nature of individual units (location, size, staff/work ratios). The nature of individual managers (lacking formal management training, acceptance of high labour turnover). High proportion of worker from the secondary labour market. Torrington et al.

CHAPTER 3 AN ANALYSIS OF DIFFERENT APPORACHES TO INDUCTION

3.1 Introduction

The following chapter provides a definition staff induction and socialisation and its importance, highlighting the key areas and effectiveness. The aim is to investigate the theories behind the induction process and its requirements.

An employee is an ambassador to their organisation, representing them through their attitudes and behaviour, how they act is partly down to the organisational culture (Sommerville, 2007, p 47). How employee’s understand and learn these attributes begins with staff induction and socialisation. In HRM literature, organisational socialisation is widely recognised as a key process ensuring new employees can be efficient and effectively integrated within the organisation (Taylor, 2006). Both induction and socialisation are entwined together. Staff induction practices govern unconsciously or deliberately organisational socialisation (Torrington et al, 2005). With the continuous process whereby new recruits are brought into the firm is an important element of HRM practice. If executed well it can help to retain the new employee and reduce staff turnover (Lashley and Best, 2002).

3.2 Performance Management Systems

There have been a significant number of studies over the last 15 years investigating the link between HRM and organisational performance. These have focused on the extent to which (if at all) high commitment or best practice HRM may lead to improvements in worker or organisational performance (Taylor). The idea is that particular bundles of HR practices have the potential to contribute improved employee attitude and behaviours, lower levels of absenteeism and labour turnover, higher levels of productivity, quality and customer service in all types of organisations (Sommerville). Performance management aims to directly link together individual goals, departmental purposes and organisational objectives (Torringon et al). Examples of performance management systems include; recruitment and selection, training and development. Armstrong and Baron (2007, p7-8) defined a performance management system:

Communicates the organisation vision and objectives to all employees
Set departmental and individual performance targets linked to organisational objectives.
Uses formal review procedures to communicate performance requirements.
Conducts formal reviews of progress
Uses the review process to identify training, development and reward outcomes.
Evaluates the whole process.

3.3 Induction Training

Starting a new job can be a stressful process, wondering if you will fit in with your new co-workers, if everything is as good as advertised. Whilst some nerves are inevitable, helping to reduce them and making the new employee feel welcome are vital in retaining new comers (Lashley and Best, 2002). The term ‘induction’ can be interpreted in several ways, however in the generally used in the context of the workplace to describe the entire process of an adjusting to their new working environment and jobs (CIPD, 2010).

Whenever new employees join an organisation there is always a period of learning and adaptation before they become fully effective (Meighan, 2000). Partly, this involves finding out about the practicalities of the job and facts about pay, other employee benefits and the organisation’s rule and regulations (Fowler, 1999). But there is also the need to understand the less tangible but very powerful influence of ‘the way we do things around here’ or culture (Meighan, 2000). Every organisation has its own culture and new employees are unlikely to be fully effective or feel comfortable in their work until they have absorbed this cultural influence and adjusted to it (Taylor, 2006).

Induction has a number of distinct purposes (Armstrong, 2007), all of which are concerned with preparing the new employees to work as effectively as possible and as soon as is possible in their new jobs. The induction is the initial process of learning and adjustment (Fowler, 1999). Meighan (2000, p5) went further and defined induction as ‘a planned, systematic process to help new employees settle into their jobs, quickly, happily and effectively’. Marchington and Wilkinson (2008) suggest that induction covers a variety of informal and formal programmes. From simple greeting and showing a new employee to their work station to personalised programme away from the immediate place of work.

However some academics (Lashley and Rowson, 2000: Marchington and Wilkinson, 2008: Skeates, 1991: Storey, 2007: Tayeb, 2005) believe that the induction process begins with recruitment and selection. Here the employee and employer can discuss expectations and understand what’s realistic, assisting in reducing a mismatch the job role, benefits and expectations. In accordance with these views induction (Skeates, 1991, p16) has been describe as being any arrangement made to familiarise the new employee with the organisation, safety rules, general conditions of employment and the department in which they are involved in. Boella (2000) reinforces this point by suggesting that the induction processes also involve welcoming the new recruit and introducing them to their new colleagues, and that the process starts from the initial contact with the employer.

Irrespective of whether or not a structure process is in place, all employees go through an induction phase. In many organisations especially those that do not have a specific human resource department or manager, this may be little more than greeting before being shown to their workplace. New employees may be told to ask questions if needed and are left to get on with the job as it is assumed they already posses the skills to complete the task. Sometimes a rite of passage may consist of a joke, (go and get me a long weight), with little attempt to explain anything about the company from its mission statement to direction. Even information regarding health and safety or disciplinary procedures. However this can leave the employee feeling isolated and confused, unaware of the rules, causing them to leave. Each problem represents a cost to the employer; poor quality of work, unproductive new starter, time spent on disciplinary issues, re advertising the job. In these circumstances it is unlikely the employer will develop commitment and loyalty (Taylor, 2006).

Organisation socialisation is one of the fundamental processes that define how cultures emerge (Tuttle, 2002). It underpins the social structures (Cable and Parsons, 2001) that shape not only how social actors interact but also the boundaries of action and the rules of engagement. In the context of organisations, socialisation is a process that significantly shapes their way of core practices shape how things are done and why they are done in a particular way (Torrington et al, 2005). Staff induction and socialisation (Ardts et al, 2001) are central to the replication of an organisation because they enable new individuals to become functional members of a group.

Ardts et al (2001, p159) defines organisation socialisation as “the learning process by which newcomers develop attitudes and behaviour that are necessary to function as a fully fledged member of the organisation”. This extends the process of inducting a new employee to the organisation by imprinting the norms, expectations and behavioural patterns. It focuses on the interaction between a stable social system and the new members entering it. Successful socialisation is the transformation from an outsider to participating effective insider (Copper-Thomas and Anderson, 2006, p492).

3.3.1 Psychological Contract

One of the major influences on behaviour at is the psychological contract (Boella, 2000). The contract refers to the unwritten expectations (Taylor, 2006) of the employer and employees have of their relationship. What each other expects to be delivered, what they expect from the working experience, how they expect to be treated (Marchington and Wilkinson, 2005: Meighan, 2000: Taylor, 2006). These expectations exist only in the head of employees, but this does not mean they should be underestimated (Torrington et al, 2005). Like written contracts they can be breached, broken or changed without consent, resulting in dissatisfaction, de-motivation, and higher levels of staff turnover (Armstrong, 2007). The loyalty and commitment from the employee are lost because of a perceived injustice or a disloyal breach of their contract (Boella, 2000).

Riley (2000) stated that the old contract characterises the yester year workforce; focusing on building long term relations, job security and career progression in exchange for loyalty. The ‘new contract’ has modified to typify the current flexible, transactional workforce (Taylor, 2007). The employer offers employment for a limited period, with some development opportunities in exchange for the employee completing a set of defined duties to an agreed standard until a better offer arises. As a result there is greater flexibility with less commitment (Tanke, 2001) and loyalty, as employees see their employment as short term and an opportunity to make money, develop skills and experience (Torrington et al, 2005), increasing the likelihood of staff turnover. In recent years much debate has been raised on the subject of the old versus the new contract (See TABLE *****)

The Old Psychological Contract