HRM and Staff Turnover in the Hospitality Industry

CHAPTER 1

INTRODUCTION

1.1 Rationale

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.

1.2 Aim

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.

1.3 Objectives

1. 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.
2. To provide a definition of staff turnover and discuss the main causes of high staff turnover within the hospitality industry.
3. 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.

1.4 Methodology

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.

1.5 Structure

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.

CHAPTER 2

THE THEORY BEHIND HUMAN RESOURCE MANAGEMENT AND SOME KEY PRACTICES

2.1 Introduction

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.’

(Storey 2001:6)

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.’

(Armstrong 2000:135)

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

2.8 Conclusion

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).

CHAPTER 3

STAFF TURNOVER

3.1 Introduction

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

X 100

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, pe