HRM and Staff Turnover in the Hospitality Industry
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Findings show extensive existing research in the field of Human Resource Management (HRM) practices and how they might benefit an organisation's business performance. Academics suggest that there is a series or 'bundle' of human resource (HR) practices which are of great benefit to an organisation, for example, selection and recruitment, training and development, without giving any consideration to other contingency factors, such as the size, structure or varying labour markets of an organisation (Pfeffer, 1994a; 1998b; Huselid, 1995 cited in Gonzalez and Tacorante, 2004). This is known as the 'best practice' approach to HRM. There is also a different contingent approach, known as the 'best-fit' approach, which is dependent upon the organisation's strategic focus, suggesting that it is more beneficial for an organisation to use HR practices which are more aligned with its strategies and external environment (Legge in Storey, 2001). These two approaches will be discussed in more detail in Chapter 2.
Although the literature in the field of HRM shows a positive correlation between employee perceptions of HRM fairness and employee acceptance and satisfaction with HRM decisions (Bowen et al., 1999), there is a gap in the research when it comes to a direct link between HRM and staff turnover and more research is needed to support an assertion that good HRM within an organisation leads to a greater retention of front office staff.
Although the hospitality industry has experienced almost continuous growth since the 1900s, poor staff retention has always been a problem in the industry. The Chartered Institute of Personnel and Development (CIPD) (2009) state that the highest levels of labour turnover are found in the service sector and in the hotel and catering industry in particular (www.cipd.co.uk, 2009). Research points to various reasons for this such as lack of training, development and career opportunities.
The term 'front office' refers to organisations' departments which come into contact with their customers such as the reception area of a hotel, which might consist of a receptionist, reception supervisor and perhaps a revenue or finance manager in some smaller establishments. It is the author's own experience, from working in the hotel industry, that many front office employees possess certain characteristics which render them more susceptible to a high level of turnover and examples of these will be discussed below. In addition, the author has found that front office employees generally do not receive the same HR configuration as some of their counterparts.
For these reasons, the author has seen fit to investigate further the extent to which poor HRM practices affect turnover for front office staff in the hospitality industry.
The purpose of this dissertation is to investigate two of the main problems in the hospitality industry: poor HRM practices and high staff turnover and the existence of a direct link between these working on the hypothesis that sound HRM practices should significantly reduce staff turnover.
- To critically review current HRM practices in the hospitality industry, looking specifically at selection and recruitment and training and development, which are seen to have the greatest impact on staff turnover, highlighting the reasons why poor HRM practices might affect staff retention.
- To provide a definition of staff turnover and discuss the main causes of high staff turnover within the hospitality industry.
- To investigate the characteristics of front office staff, looking closely at the work of Lepack and Snell (1999a; 2002b) regarding 'Human Resource Architecture', with the aim of showing that front office staff receive a different HR configuration to other employees who might be seen as more important to an organisation.
Research is briefly defined as 'a form of systematic enquiry that contributes to knowledge' (Altinay and Paraskevas, 2008:1) and in the case of this dissertation was used to identify new and better ways of managing within the hospitality industry. After reflecting on experience the author decided to investigate further the area of HRM practices and staff turnover, once the research area was decided the author then had to choose the research method which best suited the research question.
Saunders suggests that 'most research questions are answered using some combination of secondary and primary research' (Saunders et al., 2003:189). However, the author of this dissertation takes the view that that there is sufficient secondary data available to achieve the aims and objectives stated above and it is therefore based solely on secondary research drawing on existing sources alone.
Work by academics in the area of HRM, for example, Lashley (1998); Boxall (2008); Hoque (2000); Purcell (2001a; 2008b); Torrington, Hall and Taylor (1991); Mullins (1998); Lucas (2004); Armstrong (1987a; 1992b; 2000c); Storey (1992a; 1995b; 2001c); and Guest (1987a; 1989b) will be analysed to provide a base to the theory of HRM. Data from government sources, for example, People1st, will be used as further evidence to back up the author's findings.
The main advantage of secondary research is that it saves time and money (Ghauri and Gronhaugh, 2002). Secondary data can be obtained much more quickly than primary data and time is the only cost incurred. Secondary data facilitates the analysis of larger data sets, such as those collected by government surveys (Saunders et al, 2003). It is readily available and generally of proven reliability. Stewart and Kimes (1993) suggest that the quality of data in secondary research is likely to be far superior to that obtained through primary research as secondary data is permanent and more open to public scrutiny. 'Secondary information offers relatively quick and inexpensive answers to many questions and is almost always the point of departure for primary research' (Stewart et al., 1993:1).
However, it is important to recognise that secondary data does have a number of disadvantages. It may well have been collected for a specific purpose differing, either substantively or in emphasis, from the research question and this dissertation's objectives. It might also reflect the attitudes of those collecting it rather than 'offer an objective picture of reality' (Saunders et al., 2003:203). In addition, the secondary data may be outdated. Wrenn et al (2007) suggest that old information may not necessarily be bad information, but that up-to-date information is an 'absolute necessity' (Wrenn et al., 2007:73).
The author has attempted to overcome weaknesses of the secondary research method by using secondary data that is both current and closely related in emphasis to this dissertation's title, aim and objectives. As the author aimed to analyse a large data set instead of concentrating on a smaller sample, for example, one organisation in particular, it was decided that secondary research would be more appropriate for this type of study.
Chapter 2 reviews the literature on HRM history, approaches, theories, strategies and practices. Views of prominent academics in the field of HRM are summarised, critically analysed and evaluated.
Chapter 3 defines the different types of staff turnover which occur within an organisation, identifying drivers and costs associated with high staff turnover. Characteristics of the hospitality industry, which may make it particularly vulnerable to poor staff retention, are identified.
Chapter 4 reviews some of the key HRM practices being used in the hotel industry, focusing on selection and recruitment methods and training and development techniques, explaining how they affect staff turnover. Red Carnation Hotels are used as an example to show the impact the implementation of an effective training programme has on levels of employee turnover.
Chapter 5 investigates Lepack and Snell's (1999a; 2002b) work on 'Human Resource Architecture', showing that staff turnover levels in different departments might be attributable to different HR configurations.
Chapter 6 concludes that good HRM practices can greatly reduce staff turnover and recommendations for improved staff turnover are made.
THE THEORY BEHIND HUMAN RESOURCE MANAGEMENT AND SOME KEY PRACTICES
This chapter reviews the literature on HRM theory, providing a brief overview of HRM's history and its similarities with personnel management. The 'hard' and 'soft' approaches to HRM are compared and contrasted, as are the 'best fit' and 'best practice' strategies.
2.2 Human Resource Management
HRM is a management strategy which aims positively to influence individual ability and motivation and afford employees the opportunity to perform to the best of their abilities. (Blumberg and Pringle, 1982; Campbell, McCloy, Oppler and Sager, 1993 cited in Boxall and Purcell, 2008). Whilst Boella and Goss-Turner (2005) attempt to define HRM simply as a strategic management function aimed at determining and achieving managerial goals, Storey (2001) provides the clearest definition of HRM:
'A distinctive approach to employment management which seeks to achieve competitive advantage through the strategic deployment of a highly committed and capable workforce, using an integrated array of cultural, structural and personnel techniques.'
HRM emerged as a new concept in the 1980s in the USA, promoted by such academics as Beer, Spector, Lawrence, Quinn Mills and Walton (1984) from the Harvard School and other influential writers who argued in favour of a more comprehensive and strategic approach to an organisation's workforce (Armstrong, 1992). It quickly spread to the UK.
Bratton and Gold (2003) state that 'HRM assumed new prominence due to concerns about global competition, the internationalization of technology and the productivity of labour' (Bratton and Gold, 2003:4), all of which required managers to change the way in which organisations used their human resources and managed the employment relationship. The increased influence of trade unions and the continued growth of organisations in general, led to greater importance being placed on the personnel function of management.
Prompted by economic trends and views of influential writers at the time, such as Pascale and Athos (1981), Peters and Waterman (1982), Kanter (1984) and Porter (1985), along with those from the Harvard School, chief executives began to realise that to gain, and retain, competitive advantage, human resources must be properly managed. Cuming (1993) suggests that employees are in fact the most important resource available to an organisation if organisational success is to be achieved.
HRM enables an organisation to achieve goals through its workforce, whilst integrating human resource policies and business plans. Effective HRM should create a working environment in which all employees can be utilised to their full capacity and potential. It plays an important role in building the capabilities of a workforce and improving the general climate of employee attitudes (Boxall and Purcell, 2008) and aims to ensure commitment from individuals in order to achieve success for the organisation (Guest 1987).
Academics have conflicting views on the meaning of HRM, some doubting its existence altogether. Fowler (1987), for example, believes that HRM is nothing more than "a construct largely invented by academics and popularised by consultants" (Fowler 1987 cited in Armstrong, 1999:586), while Woods (1999) claims that HRM is a paradox which has never really been mastered.
Many academics are unable to make a clear distinction between HRM and personnel management (Armstrong, 1987; Sisson and Bach, 1989a; 1994b, 2000c; Legge, 1995; Torrington and Hall, 1998), while others are able to easily identify differences between them. The best way to conceptualise them, however, 'is as a continuum with personnel management at one end and HRM at the other' (Wilson, 2001:47). Their differences and similarities can be found summarised in Table 1.
2.3 Hard and Soft HRM
There are two approaches to HRM, each of which aims to provide an organisation with a competitive advantage. Storey (1992) and Guest (1987) were the first writers to make the distinction suggesting that the emphasis could either be on 'human' or 'resources'. In the UK, the two approaches are known as 'hard' and 'soft' HRM.
The 'hard' approach to HRM stresses the need for 'business orientated style, with an emphasis on productivity, efficiency in the utilisation of human resources and the achievement of business goals' (Boella and Goss-Turner, 2005:23). Nickson (2007) describes the hard approach as 'instrumental and economically rational' (Nickson 2007:9), aiming to gain a competitive advantage whilst keeping labour costs to a minimum.
Armstrong (1992) suggests that the hard approach to HRM treats employees like any other resource, for instance land or capital, to be used as managers see fit. However, this approach does not necessarily mean that employees will be treated badly. Marchington and Wilkinson (2002) suggest that if labour is in short supply or is central to the achievement of organisational goals, employees may be treated well. For the hard approach to be most effective, the staffing structure of an organisation must mirror its needs. It is essential that an organisation has the right number of staff in the right place at the right time (Wilson, 2005). The HRM practice of human resource planning is therefore crucial (Mullins, 1998).
The alternative approach, 'soft' HRM, stresses the 'human' aspects of HRM (Price, 2007) focussing particularly on communication and motivation. Training and development programmes as well as commitment strategies are used with the aim of producing highly skilled employees in order to gain a competitive advantage (Bratton and Gold, 2003).
A 'soft' HRM approach puts staff at the centre of determining and realising strategic objectives and staff are led rather than managed to achieve organisational success. Storey (1992) states that 'Soft HRM sees employees as a valuable resource whose competencies, skills and attitudes are to be appropriately nurtured' (Storey, 1992:28). The organisation and its workforce work together towards a competitive advantage, the organisation aiming to improve the quality of its staff in the hope that it will reap the rewards of their development.
The 'soft' approach is based on the premise that if employees feel they have been treated well, they will do all they can to achieve organisational goals. Although some authors, for example Sisson (1994), argue that organisations claiming to use a soft HRM approach may just be using the language to disguise what is actually a hard approach, similarities have been drawn between a 'soft' HRM approach and personnel management, as organisations use employees to achieve a competitive advantage through developing their skills and loyalty.
2.4 The 'best practice' or 'best fit' approach to HRM
There are two fundamental HR strategies which are used to ensure that the effects of HR practices are maximised. The 'best practice' approach is generally agreed to comprise a list of tangible practices, with 'best practice' HRM or 'bundles' of practices having the greatest impact on performance (Pfeffer,1994a; 1998b; Huselid,1995; Wood, 1995; Patterson et al, 1998; Guest, 2001).
'Best practice approach is based on the assumption that there is a set of best HRM practices and that adopting them will inevitably lead to superior organisational performance.'
The 'best fit' model on the other hand is based on the principle that HR strategy will be more effective when appropriately integrated within the specific firm and environmental context (Boxall and Purcell, 2001)
Writers suggest that there is a bundle of practices essential to the HR effective strategy of any organisation. These include practices discussed in more detail below, such as selection and recruitment, and training and development. Others may be more marginal as they do not necessarily have general application, for instance, family friendly policies, profit related pay and share ownership (Guest, 2001; Torrington et al, 1999a; 2002b; 2005c). The importance of deploying these practices in the correct manner must, however, be stressed. Simply employing them without the correct management may have a negative effect on an organisation and its retention of human resources.
Critics of the best practice strategy argue that, as organisations vary in size, compete in different labour markets and have varying market strategies, what works for one organisation might not necessarily work as well for another. Organisations' 'work systems are highly idiosyncratic' (Becker et al, 1997 cited in Ingham, 2007:78) with optimum results only being achieved if practices are tailored carefully to each individual situation. Larger organisations, for instance, are more likely than smaller entities to adopt more sophisticated staffing and training procedures and to have a more structured workforce with more specialised jobs and defined career hierarchies. They inevitably require therefore more formalised HR practices to facilitate the management of larger numbers (Schuler and Jackson 1995).
The concept of 'fit' between business and HR policy is based on the assumption that if HRM is more contingent with the external environment and an organisation's business strategy, it will lead to higher performance and competitive advantage (Legge cited in Storey, 2001). The 'best fit' approach ensures that HR strategies are aligned with the culture and operational process of an organisation as well as the external environment. Armstrong suggests that this is 'one of the most important aims in a development programme' (Armstrong 2000:132).
2.5 HRM practices
Recruitment and selection procedures (Bonn and Forbringer 1992; Woods and Mcaulay 1989; Wagner 1991; Wheelhouse 1989) and training and development opportunities (Hogan 1992; Himestra 1990; Conrade et al., 1994) have been identified as having the biggest impact on staff turnover and are explored in detail in Chapter 4. Mullins (1995) recognises that the aim of any organisation must be to 'select the best available staff in the first place, train and develop them and to retain them for a reasonable period of time' (Mullins 1995:183).
Through the use of various intervention processes, for example, recruitment and selection and training and development, an organisation can influence turnover (Mullins, 1995 cited Cheng and Brown, 1998:138). This is consistent with literature which suggests that the use of high performance work practices, including recruitment and selection procedures and training, are associated with lower labour turnover, greater productivity and corporate financial performance (Huselid, 1995:635)
However, before exploring recruitment and selection and training and development further it is important to mention some of the other key HRM practices used in the hospitality industry. HRM practices should cover five main areas:
- Staffing and recruitment; making sure that available jobs within an organisation are filled appropriately by staff with the required knowledge, experience, abilities and skills, whilst also deploying an effective retention programme.
- Rewards; carrying out regular appraisals and making sure that reward systems are in place as well as that staff benefit for achieving organisational goals.
- Employee development; ensuring that employees have the correct amount of training to enable them to do their job to the best of their abilities whilst enabling them to reach their full potential.
- Employee maintenance and job security; making sure that employees are working in a safe environment as well as offering support where redundancies are necessary.
(Bratton and Gold, 1999; Mullins, 1998; Redman and Mathews, 1998 cited in Lucas 2004)
It is also suggested that HRM practices should include team working, employee involvement, liaisons with outside bodies (ACAS, HCTC and HCIMA), maintaining statistics and records and dealing with trade unions (Redman and Mathews, 1998 cited in Lucas, 2004, Mullins, 1998).
2.6 Recruitment and Selection
Recruitment and selection is an important element of HRM in all organisations regardless of size, structure or sector (Marchington et al., 2005) and is critical to the long-term success of every hospitality business (Hayes et al., 2009). In terms of the hotel industry, Kelliher and Johnson (1987, 1997) have suggested that recruitment is, in fact, HRM's central function.
Recruitment is the process of identifying candidates for current or future position vacancies. It is 'Those practices and activities carried out by the organisation with the primary purpose of identifying and attracting potential employees' (Barber, 1998:5 cited in Purcell et al., 2007:273; Hayes et al 2009:44). Selection is the process of choosing an individual for a current or future position vacancy (Hayes et al., 2009:44). Selection pares down the number of applicants while recruitment makes the paring down possible by producing the pool of candidates from whom new employees will be selected. However Recruitment and selection is generally viewed as an integrated function (Mullins, 1995; Croney, 1988; Nankervis, 1993b) and is considered as such in this dissertation.
The recruitment and selection process is the first point of contact for potential employees, who will tend to judge the organisation as a whole by the manner in which it is conducted, as well as the first stage in the HRM value chain. This leads some specialists to the view that: 'effective recruitment is likely to be the most critical human resource function for organisational success and survival' (Taylor and Collins, 2000:304 cited in Boxall et al., 2007:273).
Managers must address a number of questions before they begin the recruitment and selection process for it to have the desired effect, particularly whom to target, where, how (web, newspapers, job fairs) and when and what message to communicate (Breaugh, 1992; Breaugh and Stake, 2000 cited in Boxall et al, 2007:274).
Literature suggests that recruitment and selection techniques have progressed from purely traditional techniques (advertising, walk-ins, selection interviews, reference checking) towards more strategic approaches (networking, internal labour market, behavioural interviewing, targeted selection) (Nankarvis and Debrah, 1995; Nankarvis, 1993b). There has also been an increase in recruiting through informal methods (word-of-mouth networks, 'recruit a relative or friend' incentives, 'keep warm' contacts with past employees and speculative applicants). Evidence suggests that such incentives strengthen job satisfaction for both recruiter and recruited (Purcell and Rowley, 2001:183), which in turn reduces staff turnover.
There are a number of potential implications of poor selection decisions: Managers may have to waste time on disciplinary procedures or retraining poor performers as well as recruiting replacements for those leaving the job soon after commencing employment. These processes are both expensive and time-consuming, possibly diverting managers from other tasks. Poor recruitment and selection techniques do not only lead to under-qualified staff being employed. Some may be over-qualified and decide to leave soon after starting the job (Marchington et al., 2005).
2.7 Training and Development
Training and Development is another key HRM practice which, if performed effectively, can reduce staff turnover within an organisation. Pepper (1984) defines training as the 'organized process concerned with the acquisition of capability or the maintenance of capability' (Pepper, 1984:9-11 cited in Wilson, 1999:118). It is also viewed as a service provided by an organisation for its 'internal customers- its employees' (Lovelock, 1989 cited in Chiang et al, 2005:101).
Wexley and Latham (1991) introduce development into their definition suggesting that 'training and development is a planned effort by an organisation to facilitate the learning of job related behaviour on the part of its employees' (Wexley and Latham, 1991:3). Development can relate to future requirements, such as preparation for promotion, whilst training generally relates to the here and now. For the purposes of this dissertation, however, the two terms are considered synonymous.
Training strategies can include the employment of skilled trainers and use of training manuals or videos as support tools. Training can be hands-on or may take the form of classroom training. In some cases, the two strategies may be used together with feedback being provided through evaluation and appraisals (Chiang, 2005:101). Training may be either formal and take place outside the organisation or informal, on the job, where observation and instruction occurs on site (Jones, 2004:127).
An effective training plan requires a good training site, a qualified trainer with clear objectives and methods as well as the necessary training tools and an evaluation strategy (Tanke, 1990). Paynes (2004) suggests that the aim of any training plan must be to ensure that staff have the required knowledge, skills, abilities and characteristics to confront new challenges
HRM has been defined and the conflicting views have been discussed as have the different approaches and strategies used in order to provide an overview of the topic of HRM. An overview of the key HRM practices has also been provided and those most relevant to the hospitality industry have been split into key areas. Although selection and recruitment and training and development are suggested to have the greatest impact on employee turnover, the literature suggests that other key HRM practices, such as reward schemes, employee maintenance, liaisons with outside bodies, maintaining statistics and records and dealing with trade unions, may also have a significant effect (Bratton and Gold 1999, Mullins 1998, Redman and Mathews 1998 and Lashley 1998).
This Chapter explores the concept of staff turnover. Staff turnover is defined and a measure used to calculate turnover levels is discussed, along with its limitations. The characteristics of the Hospitality Industry are identified to show the extent to which they might make the industry more vulnerable to high staff turnover and turnover figures will be provided to support any assumptions that have been made. Some of the main reasons for high staff turnover in the industry will be considered looking in particular at some of the relevant 'push' and 'pull' factors. The cost and benefits of staff turnover will be weighed up to demonstrate the real need for the proper deployment of some of the HRM practices discussed in Chapter 2.
3.2 Definition of Staff Turnover
The Hospitality Training Foundation (HtF) defines staff turnover as, 'the number of people leaving their job in a year as a percentage of the people employed in the industry' (Hospitality Training Foundation, 1998 cited in Boella, 2005:178). Generally, turnover is measured over the financial year and is a measure of separations from an employing organisation. Organisations can use the following formula to calculate turnover rate in each department.
Number of employees who left during the period
Average number employed during the period
Analysis of the turnover rate allows organisations not only to see whether they generally have a problem of high turnover but also to compare the rates of turnover between departments and to target workforce planning strategies accordingly.
The calculation above is simple and is a broad indicator but it does have limitations. It does not reflect length of service of employees or whether or not the employer employs a few people at a high rate of pay or many people at a low rate of pay (Boella et al., 2000a; 2005b). The calculation also includes unavoidable turnover, for example, staff leaving due to illness, death or relocation and it may be beneficial to an organisation to create a measure which only measures 'avoidable' turnover (Phillips, 2005).
There are four types of turnover which occur within an organisation: voluntary; involuntary; functional and dysfunctional. The differences between them are summarised in Table 2.
3.3 Labour turnover in the Hospitality Industry
Over the last 30 years the hospitality leisure and tourism sector has enjoyed a sustained period of growth and now accounts for nearly 5% of the UK's total economic output, employing 2 million people, 1/14 jobs in the UK. Labour turnover across the sector is the highest of all sectors of the economy, rising from 30% in 2005 to 31% in 2008 with recruitment and development of new staff costing an estimated £414 million in 2008/2009 (Wisdom, 2009).
A minority of employees in the hospitality industry are drawn from the primary labour market and as such are generally committed to the industry and sometimes to a particular sector within it. Riley (1996) estimates that 6% of jobs in the hospitality industry are managerial positions, 8% supervisory and 22% craft (Riley, 1996 cited in Kusluvan, 2003).
The industry relies heavily, however, on the secondary labour market, which is made up of workers with skills which can be used across a number of industries, for example, secretaries, administrators and maintenance workers. 'Secondary labour markets do however approximate pretty closely in their characteristics to much of what happens in the industry in terms of the behaviour of employees and their treatment by employers' (Goldsmith et al, 1997:16). Boella et al., (2005) suggests that these employees generally attach more importance to a geographical area rather than a career and choose to work in the industry purely to earn a living.
The hospitality industry is particularly susceptible to high labour turnover because it is labour intensive and its pattern of staffing is characterised by high mobility, seasonal and part time work, with a high proportion of unskilled, young, part-time and casual staff. The proper use of HRM practices is therefore of great importance to the industry.
3.4 Reasons for staff turnover
The greatest numbers of employees leave in the early days of employment, the period in which relationships have not yet developed. Mullins (1998) refers to such turnover as the 'induction crisis' and suggests that it is particularly disruptive and costly. This early turnover is generally the result of 'improper selection systems, ineffective orientation and inadequate socialization process to adopt employees to the organisation' (Phillips, 2005:185).
As Torrington et al., (2005) point out, some departures from an organisation are unavoidable, for instance because of relocation, illness or the need to juggle work and family life. According to Lashley and Lincoln (2003), however, high labour turnover is usually due to avoidable causes, such as dissatisfaction with wages, the relationship with other staff or poor working hours, the majority of which can be addressed by effective management.
Two broad categories influence staff turnover: work-related attitudes (push factors) and external environmental factors (pull factors) (McBey et al., 2001). Push factors are issues arising within an organisation, including uneven work patterns, poor pay, performance reward contingencies, unsuitable hours of work; discontent with leaders and poor terms and conditions (Lashley and Lincoln, 2003:99). Pull factors include better benefits, conditions, career prospects and/or training and development opportunities on offer at an alternative organisation. In addition, as McBey and Karakowsky (2001) point out, a number of external factors may affect the likelihood of any individual employee to leave an organisation, including, age, education, expectation and marital status.
As explained above, the hospitality industry is particularly vulnerable to high staff turnover because it is heavily reliant on a workforce which is young, mobile, seasonal, part-time and/or unskilled. Some characteristics of the industry render it more vulnerable to high staff turnover than others. 9% of the workforce in the industry, that is approximately 179,000 people, still does not possess the skills required by their employers. The industry is heavily reliant on young people - 16% of the workforce is aged between 16 and 19 - who are generally both mobile and seasonal employees who have little intention of staying in the industry (Wisdom, 2009).
Many employers perceive high turnover as inevitable with so many 'transient' workers and find it difficult to retain staff. However the industry is also characterised as having poor management practices, including weak HR strategy, which many (Iverson and Deery, 1997; Goldsmith et al 1997; Phillips, 1999; Rowley and Purcell, 2001; Kusluvan, 2003; Lucas, 2004) believe to be a cause of high turnover levels. It is the aim of this dissertation to investigate this belief.
In a study of 160 employees in the hotel industry, Harbourne (1995) found that 30% of full time staff and 37% of part timers found that job satisfaction was the most important reason for staying in their current job. He also found that satisfaction levels are in the main determined by opportunities to meet people, teamwork, atmosphere, the amount of control employees have over the way they perform, physical conditions and hours worked. Harbourne lists a number of factors which lead to dissatisfaction amongst employees in the hotel industry; for example, poor promotion opportunities, low pay and share of tips and lack of recognition for good work.
Cline's (1997) study of 500 international hospitality executive respondents found that training could greatly improve satisfaction. Harbourne's finding that job satisfaction is the main determinant of whether or not employees remain with an organisation in conjunction with Cline's (1997) study which shows that satisfaction can be controlled by training, an HRM practice, as well as the push and pull factors discussed above. All goes some way in proving that staff turnover is an issue well within the control of management and although the characteristics of the industry may encourage turnover to some extent, they should not be used as an excuse to accept high turnover within an organisation.
3.5 Cost of Staff turnover
Staff turnover gives rise to direct and indirect costs. The former include advertisement and agency fees, training costs and the cost of selection testing and background checking. Indirect costs include management time spent on recruitment and employment, training time, low morale and customer service disruption (Branham, 2001; Brewster, 2000; Rowley and Purcell, 2001). Brewster (2000) suggests further, however, that some costs can be either direct or indirect depending on the circumstances in which they have been incurred. In any event, staff replacement is both an expensive and time consuming exercise, with new employees needing time to learn their jobs. It is suggested that the cost of turnover is 'two to three times the monthly salary of the departing employee' (Bohlander and Snell, 2009:94).
As indicated above, high staff turnover is not only costly in terms of money and time, it can also have a negative effect on an organisation's environment and culture. In particular, it is likely to adversely affect morale, motivation and job satisfaction. It may lead to burn-out amongst other members of staff and disrupt the level of organisational performance and customer satisfaction. It also places additional demands on managerial time (Mullins, 1998). For example, managers might have to spend time on recruiting, selecting and training new staff which they might not have had to do had they retained members of staff who already possessed the required skills to do the job.
The loss of skilled or hard working value-adding employees through voluntary dysfunctional turnover must be addressed in the form of improved HRM practices within an organisation as these employees usually have valuable firm-specific knowledge and attributes which new employees are unlikely to possess.
3.6 Benefits of Staff Turnover
Although staff turnover is largely viewed negatively, some writers suggest that, if controlled, it can actually be beneficial, assuming that replacement staff add greater value than those they have replaced (Cascio and Boudreau, 2008; Lashley and Lincoln 2003; Torrington et al, 2002a; 2005b; Rowley and Purcell, 2001). Labour turnover can benefit the business where a regular influx of workers brings new skills, enthusiasm and experience (Rowley and Purcell, 2001). This is a view supported by Lashley and Lincoln (2003) and Torrington et al., (2002a; 2005b) who suggest that, if new employees bring new skills and ideas, then a certain level of staff turnover may in fact be beneficial to an organisation as it may become more dynamic.
Lashley and Lincoln (2003) further suggest that if poor performers are the ones to leave the organisation, for example, through functional turnover, this could also have a positive impact on the organisation. Cascio and Bourdreau (2008) recognise that some employees just simply burn out. They reach a 'plateau of sub standard performance' (Cascio and Bourdreau, 2008:70) and possess such negative attitudes towards the organisation that the turnover of these staff can only be a good thing.
Torrington et al (2005) discuss a number of further benefits flowing from a certain amount of staff turnover arguing that it avoids the possibility of a workforce becoming stale as 'fresh blood' comes into an organisation leading to its rejuvenation. They go on to point out that a certain level of staff turnover can give an organisation a greater level of control over labour costs. This is particularly beneficial to those organisations with regular and unpredictable changes in their business as they would be able to hold back from replacing leavers in times of low income.
This chapter has defined staff turnover and explained ways in which it can be measured. Figures have been provided to show that staff turnover is a real problem within the industry and although some authorities point to a number of possible benefits of a certain level of staff turnover these are largely outweighed by the costs.
The reasons behind staff turnover, for example, the push and pull factors, have been discussed and Harbourne's (1995) and Clines' (1997) findings have shown that the main reasons for staff turnover are well within the control of management even if some of the industry's characteristics make it more susceptible to labour turnover. Although some managers within the industry see staff turnover as just another characteristic of the industry. Others recognise the fact that high staff turnover is largely self-inflicted.
HUMAN RESOURCE PRACTICES AND STAFF TURNOVER
This chapter discusses the HRM practices which can be adopted to reduce turnover within an organisation. The 'primary functions' of HRM, in particular selection and recruitment and training and development, are looked at in detail. The ways in which they are used in the hospitality industry to reduce staff turnover is discussed, along with the view that these functions may also negatively impact on an organisation's turnover level. The example of Red Carnations Hotels is used to prove that if HRM practices are managed correctly, staff turnover is greatly reduced.
4.2 HRM practices and turnover in the Hospitality Industry
Whilst Rowley and Purcell (2001) suggest that false expectations and poor management practices in the hospitality industry are potential push factors leading to staff turnover, they found that 'Staff morale and labour turnover rates were directly related to their HR management policies and practices. These included training and staff development.' (Purcell and Rowley 2001:183) Managers too readily tend to accept high turnover and have a 'What's the point?' attitude, tending not to pursue courses of action that will lead to a greater level of staff retention. For example, they recruit cheap labour to minimise costs (Goldsmith et al., 1997).
However, Cheng's (1996) study recognises that the hotel industry would be perceived to have recognised the adverse effects of labour turnover through the adoption of strategic HRM practices. Cheng and Brown (1998) suggest that it is essential that the hotel industry develops efficient HRM practices and policies that enable them to retain competent employees who contribute to the achievement of organisations' objectives, for example, those related to dysfunctional turnover. Practices included recruitment and selection and training and development with recruitment and selection at the centre of these practices (Mullins 1995:185 cited in Cheng and Brown 1998:138; Kelliher and Johnson 1987a, 1997b).
Huselid (1995) found considerable support for the assumption that HRM practices are associated with lower employee turnover. Huselid suggests that as HRM practices have a direct impact on individual employee performance, through their influence on employee's skills and motivation, the use of HRM practices directly effect turnover and productivity over which employees have direct control.
4.3 Affects of Recruitment and Selection on Staff Turnover
Due to the characteristics of the industry explained in Chapter 3 (poor HR practices and the negative image of the industry) employers find it very difficult to recruit and select staff with the necessary skills. A study conducted by Hoque in (1999) found that recruitment and selection techniques are not conducted professionally in the industry while a further study conducted by Roberts (1995) of 150 hospitality managers suggested that 85% of organisations had no recruitment plans whatsoever (Kusluvan, 2003).
Huselid (1995) argues that recruiting procedures which provide a large pool of qualified applicants, paired with reliable and valid selection regimes, will significantly influence the quality and type of skills new employees possess and will in turn largely reduce staff turnover. As few organisations in the industry have any form of recruitment plan and potential employees' views of the industry are very negative, this is bound to lead to high turnover in the industry.
Based on research conducted in the USA, Bonn and Forbringer (1992) argue that improved selection and recruitment procedures assist in reducing turnover. Mullins (1995) points out that Hotels and Catering EDC was highly critical of the recruitment and selection methods used within the industry, calling them unsophisticated and lacking in objectivity and stating that managers should adopt more systematic and problem solving methods: 'Ad hoc and informal instead of sophisticated and effective' (Croney cited in Mullins 1995:188). Cheng and Brown (1998) suggest that the ability to retain the right kind of employees starts with the selection process and go on to assert that 'mitigating labour turnover begins with the hiring function, specifically the selection process' (Cheng and Brown, 1998:141).
As stated in Chapter 3, the biggest risk of turnover comes within the first months of employment and for this reason Roberts (1997) suggests that: 'Good recruitment and selection practices must be concerned with stabilising the risk and managing the integration of the new person into the role' (Roberts, 1997:232). Information provided to the candidate throughout the selection process should be aimed at encouraging enthusiasm and managing expectations.
4.4 Training and Turnover
Literature suggests that effective training and development programmes and a willingness to invest in employees leads to an increase in commitment and satisfaction which, as discussed in Chapter 3, is one of the main reasons why an employee stays with an organisation, thereby reducing turnover (Woods and Macauley 1989; Conrade et al 1994 cited in Cheng and Brown, 1998:146). Chiang (2005) found that training dedicated to improving knowledge, skills and attitudes heightens employees' job satisfaction, increasing the likelihood of them remaining with an organisation. However, he also found that employees were not satisfied with training quality, due to inadequate training methods and a lack of support from management.
Lashley and Lincoln (2003) suggest that a well-structured training programme creates a number of reasons for an employee to stay with an organisation. It enables new employees to realise quickly what is expected of them, increases employee confidence and self-worth and opens up career opportunities. Overall, these factors play a large part in increasing employee satisfaction.
Training is considered to increase consistency in job performance (Wesley and Skip, 1999 cited in Chiang et al, 2005) whilst 'creating a culture that underlines the value of long term employment' (Rowley and Purcell, 2001:174). Limitations of training and development programmes within an organisation may lead to a number of employees seeking to gain skills elsewhere (Maxwell and Watson, 2002). Hoque's (2000) study found that, 'The training offered to staff is seen as a key factor in encouraging retention' (Hoque 2000:120).
Nankarvis (1995a; 1993b) highlights the existence of development opportunities within the industry and suggests that these constitute evidence of the hotel industry's attempts to minimise voluntary staff turnover through long term career opportunities (Nankarvis and Debrah, 1995; Nankarvis, 1993b). This counters the perception that labour turnover is an inherent and acceptable facet of the hotel industry (Mullins 1995; Riley 1991a; Woods 1994) and supports the assertion that it is manageable through effective HRM practices.
However, Conrade (1994) argues that, despite the importance and significance attached to training within the industry; in practice the availability of planned quality training programmes is limited. Some managers may feel that effective training may enhance the value of their staff increasing the likelihood of them being poached by rival employers seeking to exploit the skills they have acquired. As off-the-job training is associated with more general skills it is suggested that this leads to higher turnover as skills learnt whilst employed by one organisation may be able to be used at another offering a higher level of pay. Becker (1964) suggests that better training standards allow employees to extract higher wages and, as employers are unlikely to recoup this investment, they are unlikely to sponsor training (Forrier and Sels, 2003).
Although certain training and development programmes can sometimes lead to an increase in turnover, evidence suggests that employees will generally remain with an organisation if training and development techniques are used. Conrade, Woods and Ninemeier (1994) found that 93% of employees in the lodging industry stated that training would 'encourage them to stay at a property'.
4.5 Red Carnation Hotels- A Case Study
The benefits of a clear and effective training programme can be seen by looking at Red Carnation Hotels. Red Carnation is a 5* hotel chain with a number of hotels situated in London and Dorset as well as other locations around Europe. Red Carnation cut employee turnover from just over 80% to below 30% following the introduction of highly targeted management training. The reduction in turnover improved staff morale, boosted room occupancy by 10% and increased profitability (Pollitt, 2006). Staff previously had no supervisory training. However, Red Carnation introduced a two tier training programme. Aim 1 involved experienced ambassadors in management training new supervisors in the skills to achieve the Chartered Management Institute Certificate in team leading. Aim 2 meanwhile enabled supervisors with at least 6 months experience to build on their skills to enhance departmental and business goals. Off-the-job training enabled the organisation to teach new skills and behaviour through role-play and skill practice exercises.
The fact that Red Carnation used management ambassadors who had been with the organisation for some time to train supervisors meant that these managers were able to provide supervisors with company specific knowledge not readily transferable to another organisation. This reduced the likelihood that they would leave the organisation and use their acquired skills elsewhere. Equally, the implementation of the two tier training programme provided employees with a career development opportunity increasing the incentive to remain in the organisation. The training programme might have also given the employees a sense of importance and made them feel more effective and confident in their role. It is also likely that the training programme would have greatly improved employee satisfaction, which again, as has been suggested in previous chapters, will have been further reason why staff turnover was greatly reduced within the organisation.
However, Red Carnation used off-the-job training as part of its programme which is associated with the acquisition of more general skills. It has been argued, as stated previously, that such training can lead to higher turnover as employees can use their newly acquired skills in other organisations. It may be, therefore, that Red Carnation Hotels might have reduced staff turnover still further had off-the-job training not been as part of their training programme.
This chapter has provided an overview of some of the HRM practices used within an organisation, looking specifically at the 'primary functions': recruitment and selection and training and development. Although these practices can have negative impact on turnover, the likelihood is that if properly implemented, they can be used as a key HRM tool to reduce turnover, as has been shown by looking at the example of Red Carnation Hotels.
Although this chapter goes some way towards proving that HRM practices, if managed correctly, can reduce staff turnover, literature suggests that, in practice, HRM may be used in different ways at various levels of employment. Chapter 5 describes how the HRM practices discussed above are applied to front office staff and what effects they have on their level of turnover.
FRONT OFFICE STAFF AND HUMAN RESOURCE CONFIGURATION
Front office employees possess characteristics which render them susceptible to a high level of turnover as stated in the introduction of this dissertation. Furthermore, front office employees do not generally receive the same level of HRM as some of their colleagues. This Chapter further explores these matters and the characteristics of front office staff are compared with those which lead to high staff turnover, as discussed in Chapter 3.
Lepack and Snell's (1999a; 2002) findings are investigated in order to show that front office staff receive a different HR configuration to other employees. The HR configuration which is used for front office staff is analysed to show the extent to which it leads to high staff turnover.
5.2 Characteristics of Front Office staff
As mentioned in Chapter 1, the term 'front office' refers to organisations' departments which come into contact with their customers, such as the reception area of a hotel, which might consist of a receptionist, reception supervisor and perhaps a revenue or finance manager in some smaller establishments.
There is a general perception that the majority of jobs in the hospitality industry are low status due to low pay, poor working conditions, unsocial hours and associations with servility and work which is seen as dirty, worthless and 'women's work' (Guerrier, 1999 cited in Kusluvan, 2003). It is also suggested that the low status of jobs in the industry is transferred to its workforce which is perceived to be 'uneducated, unmotivated, unskilled and unproductive' (Pizam, 1982:5). However, this is now a very dated view and front office employees generally have quite different characteristics from those suggested by Pizam (1982).
The industry relies heavily on young employees aged between 15 and 24 as discussed in previous chapters and hence a large number of young employees work in front office positions. These employees are generally part-time, seasonal or casual staff who may just be trying to get some extra money between jobs or during school or university holidays with little intention of remaining in such employment for any length of time. Migrant groups or transient staff in front office tend to use employment in a similar way. They may have left their home countries to travel or seek higher wages using their job to save money to return home to their families or continue their travels.
The skills front office staff possess are seen as highly transferable and can be put to use not only in various other sectors within the hospitality and tourism industry but in other industries such as retail (Riley, 1996). It is suggested that this transferability of skills accounts both for the high labour mobility and inter-industry turnover and the large pool of available employees waiting to be recruited.
Although Pizam (1985) suggests that employees in the industry may be unproductive, this may not in fact be the case for front office staff. More recent research from Baum et al., (2006) highlight the importance of front office to a hotel, arguing that it is the centre for liaison and communication and describing it as 'the brain' (Baum et al., 2006:509) of an organisation. Vallen and Vallen (2004) endorse this view and define front office as 'the main contact point of the hotel' (Vallen and Vallen, 2004 cited in Baum et al., 2006: 509). Baum et al., (2006) point out that front office staff are important in building up the reputation and image of an organisation and that their skills are among the most important factors in underpinning its competitive success. These include good communication and interpersonal skills, quick wittedness, marketing proficiency, emotional control, an understanding of guests and the industry and good IT skills (Liv 2002; Guo 2004).
Given the importance of front office and the skills of its staff to an organisation, it is reasonable to suggest that front office employees have a relatively high strategic value. On the other hand their skills as shown above are seen as easily transferable and there is a large pool of potential recruits. So what does this mean for the HR configuration which front office employees receive and what effect will this have on their turnover?
5.3 Human Resource Architecture
It has been suggested that 'as different groups of employees possess different skills that vary in importance to an organisation's competitiveness the HRM practices used to manage them is likely to vary' (Jackson, Schuler and Rivero, 1989 cited in Lepack and Snell, 2002:518). Employers may have a core group of employees which they carefully recruit, select, train and develop and take certain other measures in order to reduce their turnover. However, they may have a different group of employees from which they wish to remain relatively detached, notwithstanding high turnover (Magnum, Mayall and Nelson, 1985).
Lepack and Snell (1999a; 2002b) identify four types of employment: knowledge work, job based employment, contract work and alliance/partnerships. They go on to distinguish between these 'employment modes' by identifying the strategic value, for example, the extent to which the employee can improve an organisation, explore market opportunities and neutralise potential threats (Barney 1991; Ulrich and Lake, 1991) and the uniqueness of human capital, for example how specialised and how hard to replace employees are (Barney 1991; Williamson, 1975) embodied within each mode and the HR configuration used to manage them. Lepack and Snell (1999a; 2002b) have created a model of the relationship between human capital and employment modes shown by Figure 2.
As the characteristics of employees in each employment mode vary, it is reasonable to suggest that employees will use a different HR configuration for each quadrant depending on the relative importance of an employee to the organisation.
Quadrant 1 comprises those employees viewed as core to an organisation as they are able to contribute to its strategic objectives. Quadrant 1 is referred to as knowledge-based employment as the human capital in this quadrant is both valuable and unique and 'represents the knowledge base around which firms are most likely to build their strategies' (Snow and Sell, 1993; Stewart 1997 cited in Lepack and Snell 2002b; 520). As knowledge-based workers have high strategic value and are unique, organisations generally choose to invest heavily in their training and development to reduce turnover and 'encourage commitment to the firm's long term success' (Lepack and Snell 2002b; 522).
Quadrant 2, job-based employment, is made up of human capital that has strategic value to an organisation but limited uniqueness. As strategic value is high, this provides an incentive to employ those who fall into this quadrant. However, their skills are mostly transferable, so those who fall into this category can be replaced more easily. Organisations are therefore less likely to make the same kind of investment in these employees as they do in those in Quadrant 1. HRMs are likely to rely on a productivity-based HR configuration which includes hiring employees, paying them a relatively low wage, focusing on their job performance and preparing for the possibility that they may leave (Becker, 1964; Flamholtz and Lacy, 1981). With regard to training and development opportunities for employees who fall into this quadrant, academics suggest that organisations are more likely to acquire individuals who already possess the required skills rather than developing skills which may be seen as generic (Kock and McGrath, 1996; Snell and Dean, 1992; Tsui et al., 1995).
Quadrant 3, contract work, consists of human capital which has neither a high strategic value nor a high level of uniqueness. Stewart (1997:90) suggests that 'one job-holder is pretty much as good as another'. Employees in this quadrant will receive a compliance based HR configuration with training and development programmes which are limited to ensuring compliance with company policies, systems and procedures. Employers are likely to ensure that employees conform to standards and regulations set by the organisation offering little else in the way of HRM practices.
Quadrant 4, alliances and partnerships, reflects the reliance organisations place on alliances and partnership for human capital which is unique, but it is argued, with 'insufficient strategic value to employ internally' (Lepack and Snell, 2002b:521). Alliances provide external knowledge for an organisation. For example, some hospitality organisations use external accounting and information system companies as well as human resource consultants. Sharma (1997) suggests that these companies provide 'long term customized services' (Sharma, 1997:760) for organisations. 'Partnerships allow organisations to maintain an ongoing relationship with an organisation that is necessary for application of unique and specialized skills' (Lepack and Snell, 2002b; 521). A collaborative HR configuration is used for employees that fall into this quadrant. Managers see it as important to recruit and select alliance partners who they feel are best able to integrate their knowledge and experience within the organisation and will work well in a team environment. HRMs are likely to invest in the relationship between the organisation and the alliance partners rather than directly invest in the alliance partners' employees.
The findings discussed above are of great importance to this dissertation as they show that different employee modes receive a different HR configuration. By looking at some of the characteristics of front office staff discussed above we can identify the employment mode applicable to them and consider the HR configuration that they receive.
5.4 HR Configuration for Front Office Staff
As we have seen above, front office employees have a high strategic value due to the importance of the front office to an organisation, but limited uniqueness and easily transferable skills. For this reason, they should be placed in Quadrant 2 of Lepack and Snell's (1999a; 2002b) model under the job-based employment mode. Employees who fit into this quadrant generally receive a productivity-based HR configuration, which means that they receive relatively low wages with managers preparing for their departure rather than focusing on their development. Employees who receive this HR configuration may also receive a relatively low level of training as HRMs generally decide to employ those with the requisite skills instead of providing new employees with training programmes. This may be because employers feel that investing in such training programmes is not cost-effective as employees may not remain in an organisation for any length of time but may take their newly acquired skills elsewhere.
Although Riley (1996) points out, as stated in Chapter 3, that some employees in the industry, for example managers and supervisors, are employed from the primary labour market, the employment mode applicable to these employees would also be likely to be job-based, since even though they might have a higher strategic value than other front office employees such as a receptionist, their skills are still limited in terms of being unique.
Literature throughout this dissertation has suggested that selection and recruitment training and development can have a large impact on staff satisfaction and in turn labour turnover. As front office employees generally receive a productivity-based HR configuration whereby training is very limited, it is reasonable to suggest that such configuration has a negative effect on turnover. Lepack and Snell's (1999a; 2002b) work supports the case for a 'best fit' HRM approach as discussed in Chapter 2, as it advocates that different forms of human capital should receive a different level of HRM.
This chapter has shown that some of the characteristics of front office staff relate to those which lead to high staff turnover, as discussed in Chapter 2. Lepack and Snell's (1999a; 2002b) study on 'Human Resource Architecture' provides evidence that there are four 'employment modes', each with a different HR configuration. Due to the limited uniqueness but high strategic value of front office employees, they are most likely to fall within the job-based employment mode which operates under a productivity-based HR configuration. Whilst some of the characteristics of front office employees mirror those of the industry itself, making it more vulnerable to high staff turnover, the productivity-based HR configuration which front office staff receive also has a negative impact on labour turnover.
CONCLUSION, RECOMMENDATIONS AND LIMITATIONS
This dissertation has provided an overview of the theory behind HRM and has critically reviewed some of the 'primary functions' of HRM, selection, recruitment, training and development and the effect that these HRM practices have on staff turnover.
Staff turnover has been defined and a formula for measuring turnover le
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