Impact of Employee Turnover and Retention in Hospitality Industry

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Volume 1, Issue 6 (August, 2013)
INTERCONTINENTAL JOURNAL OF HUMAN RESOURCE RESEARCH REVIEW
PeerReviewedJournalofInter-ContinentalManagementResearchConsortium
http://www.icmrr.org
IMPACT OF EMPLOYEE TURNOVER AND RETENTION IN HOSPITALITY
INDUSTRY
1Fayis Muhammed K.V 2 Juliet Gladies. J
1 Student, RVS Institute of Management Studies & Research, Coimbatore,
2 Assistant Professor, RVS Institute of Management Studies & Research, Coimbatore,
ABSTRACT
Employees are a valuable asset for any organization and there are a lot of investments in terms of time
and money, which are made in order to ensure that any organization acquires and retains an appropriate
working force. The acquisition of the proper working force through hiring may be quite simple, but the
retention of such employees is quite challenging because the job and marketplace is dynamic and ever
transforming. A study on the employees of hospital industry in Calicut district was done with 110
samples. The overall reliability was found to be 0.820. It was found that that retention influences
turnover.
Keywords: Employee turnover, Employee Retention, Turnover-Intrinsic & Extrinsic
1. INTRODUCTION
With increasing globalization and international competition, the importance of recruiting, retaining and
managing resources that can help to increase competitiveness of organizations has become a crucial
factor in the success of hospitality industry. Among these resources, human resources demand special
attention. Human resources play a central role in the services sector. A primary reason for this is
that the services are seen as inseparable from their provider.
1.2 LITERATURE REVIEW TURNOVER
Turnover is one of the most prevalent, longstanding concerns in the hotel industry, which has been
characterized as having a “turnover culture” (Deery & Shaw, 1997); (Wasmuth & Davis, 1983a);
(1983b);(1983c). Turnover continues to be a topic of interest among management researchers.
(Shaw, Delery, Jenkins, & Gupta, 1998) report over 1500 studies on the subject. There have been meta
A Peer Reviewed International Journal
IJHRRR
INTERCONTINENTAL JOURNAL OF
HUMAN RESOURCE RESEARCH REVIEW
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analyzes on the determinants of turnover (Hom & Griffeth, 1995). Several studies have also examined
both the magnitude and costs of turnover in the hotel industry (Hom & Griffeth, 1995); (Hinkin &
Tracey, 2000); (Pizam & Thornburg, 2000). High turnover is generally acknowledged as one of the
distinguishing features of the hotel and hospitality industry (Carbery, Garavan, O', & McDonnell, 2003).
(Denvir & McMahon, 1992) define employee turnover as the movement of people into and out of
employment within an organisation which can be voluntary or involuntary. The involuntary
turnover occurs when the reasons for leaving the workplace are independent of the affected employees
such as when an organisation is involved in downsizing or restructuring. The voluntary turnover
which is the focus of this research is when the employee leaves the services of the employer for his
or her own reasons.
(Wood, 1997), (Wood R. H., 1997) and (Mandley, 1996) underline the positive and negative effects of
the high turnover rate in the hospitality sector. Some researchers do not see employee turnover to be
dysfunctional, however, at the organizational level there is strong evidence that higher turnover has
replacement and recruitment costs (Derry & Iverson, 1996); (Mandley, 1996). One reason that a high
rate of voluntary turnover is alarming for many managers is the fear that the employees with better
skills and abilities will be those who are able to leave whereas those who remain will be those who
cannot find other jobs (Tanova & Holtom, 2008). Additionally, in the hospitality industry one of the
most critical intangible costs is the loss of employee morale for the employees who prefer to stay
with the organization. As a result, this can affect the level of service provided to the customer.
(Mobley, 1977) has formulated a withdrawal decision process to explain how people decide to leave
their institutions. According to his model, individuals first evaluate their existing jobs and experience
satisfaction or dissatisfaction based on their jobs. If dissatisfaction is felt, the thought of quitting
arises. Before searching for alternatives, individuals first try to evaluate the cost that will incur from
quitting the existing job and the utility that is expected to be received from the search. If the expected
utilities are considered to be worthy of quitting, a search for the alternatives begin, followed by an
evaluation and comparison of the alternatives with the present situation. Intention to quit is formed if the
alternatives are more desired which is followed by actual withdrawal.
Turnover is triggered by dissatisfaction with such factors as relationships with supervisors, job content,
working conditions, and pay (Griffeth, Hom, & Gaertner, 2000). While other factors may influence an
individual’s decision to leave, such as the competitive conditions of the local market, it is clear that
management has direct control over many of the most important drivers of employee turnover. The
cost of employee turnover has received considerable attention. Efforts to develop cost-benefit
and related models have been particularly helpful in identifying the economic impact of employee
turnover (Cascio, 2000); (Sturman, Trevor, Boudreau, & Gerhart, 2003).
In the hospitality industry, there are two primary financial implications of this ongoing problem. First,
employee turnover may compromise the consistency and quality of customer service, directly
damaging revenue and profitability. Employees who are planning on departing may not be
motivated to perform at adequate levels, and it takes time for new staff to acquire the knowledge and
skills necessary to be proficient in their essential duties and responsibilities. Variance in service quality
is often a function of time on the job; it is virtually impossible for newly hired employees to provide the
same levels of service as veterans who have mastered their tasks. Moreover, the stress created by short
timers and employees who have left may limit the remaining employees’ ability to meet guest
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expectations and can create burnout, which further exacerbates and perpetuates the problem. The second
implication is that expenses typically increase as a result of employee turnover.
The many direct and indirect costs associated with replacing staff can be sorted into hard costs, soft
costs, and opportunity costs. Hard costs, such as newspaper advertisements, have a direct financial
impact on the organization and are accounted for as expenses. Soft costs, such as the time it takes to
interview applicants, will not show up on an income statement; but those costs rise, for example, when
managers are distracted from other value-added activities. Opportunity costs, such as missed sales,
usually go unmeasured altogether but can be substantial. Given that such costs may considerably
diminish profitability (Simons & Hinkin,2001), it is imperative to effectively manage employee
turnover.
Cho, Johanson, & Guchait, 2009) argues that in hospitality sector in the US positive employee
attitudes such as organizational commitment and perceived organizational support help to reduce the
intention to leave. Thus employee turnover refers to the number or percentage of workers who
leave an organization and are replaced by new employees. Measuring employee turnover can be
helpful to employers that want to examine reasons for turnover or estimate the cost-to-hire for budget
purposes.
EMPLOYEE RETENTION
Employee retention refers to the various policies and practices which let the employees stick to an
organization for a longer period of time. Every organization invests time and money to groom a new
joinee, make him a corporate ready material and bring him at par with the existing employees.
Some human resource managers are of the view that increased compensation and benefits should be the
primary method to retain workers. However, such a strategy implies that the organization is in a position
to increase its compensation. Managers must therefore consider retention strategies that do not rely on
the org anization’s ability to increase compensation expenses (Employee Retention, 2012).
(Brown, 2004) argues that for retention strategies to be effective, they must focus on providing
employees with opportunity to grow their careers in an organization with a solid business foundation.
(Walsh & Taylor, 2007) in their study reveal that providing employees with career development
opportunities is one of the important retention strategy because employees are more likely to invest in
their jobs if they feel the company has invested in them.
It is also important to communicate well with employees. This is because an informed employee is a
connected employee at the work place therefore will remain in their jobs (Brown, 2004); (Walsh &
Taylor, 2007). It is important to implement the “Three R‟ s Rule”: Recognize, Reward, and Repeat.
Employers must pat their employees on the back for every job well done to continually reinforce
appreciation of their performance (Brown, 2004).
(Walsh & Taylor, 2007) in their study focus that offering fair compensation is one of the important
retention strategy to be practiced in the industry.It is also argued that positioning the organisation to
evoke emotions of compassion and community pride will generate greater company allegiance among
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present and future employees, (Michelman, 2003). Retention strategies must be designed to suit
individual employees. This therefore requires individual employees participation in
designing retention strategies (Jackson & Defranco,2004) (Jackson et al, 2004).
1.3 OBJECTIVES OF THE STUDY
To study about employee retention and turnover in hospitality industry with special reference to Calicut
district, Kerala.
METHODOLOGY
The study focuses on determining the employee turnover and retention in hospitality industry in Calicut.
The identity of the hotels are not revealed to protect the business interests and in line with the ethical
conventions of research.
The total population of the employees working in the chain of hotels in Calicut district was found to be
560. The sample size was extracted randomly to 20% of the population. The sampling method was
used for the study is Non-probability random sampling. Data was collected through questionnaire. The
questionnaires were distributed to 130 employees working in hotels in Calicut out of which 110 useable
responses were considered.
The Instrument for Employee Turnover focused on factors like Turnover intrinsic and extrinsic,
benefits and Retention focused on factors like Leadership, Working Condition, Personal Satisfaction and
Organization Culture. The statistical tools used for the study are Reliability test and regression analysis.
The five point Likert scale such as Strongly Disagree, Disagree, Neutral, Agree, Strongly Agree and
Highly Dissatisfied, Dissatisfied, Neutral, Satisfied, Highly Satisfied was used. Reliability was tested
on the data collected using Cronbach Alpha Test and the overall reliability for Turnover and Retention
was found to be 0.820.
1.4 RESULTS & DISCUSSION
The instrument’s reliability was measured using Cronbach's alpha test which is a measure of internal
consistency, that is, how closely related a set of items are as a group. A "high" value of alpha is often
used (along with substantive arguments and possibly other statistical measures) as evidence that
the items measure an underlying (or latent) construct. Alpha above .70 is considered reliable. Alpha
above .60 is probably reliable, but you should consider evaluating each question to determine if
you could raise the alpha level by eliminating it from the analysis. Alpha below .59 is considered not
reliable.
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Table: 1 Reliability analysis
Dimensions No: of Questions(Items) Cronbach's Alpha
Working Conditions 7 .873
Leadership 12 .886
Personal satisfaction 9 .746
Organization culture 8 .712
Turnover-extrinsic 8 .865
Turnover-intrinsic 7 .813
Benefits 8 .851
From the table we can interpret that the alpha value for all the dimensions are above 0.8 for all the
dimensions except for personal satisfaction and organizational culture which accounts for 0.7 hence the
data obtained by the researcher is highly reliable.
TURNOVER- EXTRINSIC
Table: 2 Turnover Extrinsic
SL NO VARIABLE MEAN
1 I feel satisfied with my job 3.67
2 I feel content with my remuneration package 3.70
3 There are possibilities for career
advancement in my current job
3.76
4 I am content with the management of my
organization
3.74
5 Everyone is treated fairly in my current job 3.61
6 I receive adequate training and information
to do my job well
3.74
7 My job is challenging and offers growth and
opportunities
3.70
8 I am valued and appreciated by management 3.73
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From the above table we can interpret that in a scale of 1 to 5 where 1 denotes strongly disagree, 2
denotes disagree, 3 denotes neutral, 4 denotes agree and 5 denotes for strongly agree to the statements.
The employees are agreed that they are satisfied with their job and they were also content with their
remuneration package. They are also agreeing that there are possibilities for career advancement in their
job. If we generally conclude the table we get to know that the company is providing good facilities to
avoid turnover there in organization.
TURNOVER- INTRINSIC
Table: 3 Turnover Intrinsic
SL
NO:
VARIABLES MEAN
1 There is a good fit between my current job
and my personality
3.57
2 My personal values are aligned with the
values of the institution
3.51
3 I am involved in the social networks of the
institution
3.55
4 I am involved in peer group relations 3.79
5 I am content with my job 3.90
6 I enjoy coming to work everyday 3.81
7 I feel committed to my job 3.74
From the above table we can interpret that in a scale of 1 to 5 where 1 denotes strongly disagree, 2
denotes disagree, 3 denotes neutral, 4 denotes agree and 5 denotes for strongly agree to the statements.
Employees are thinking that they have a good fit between their job and their personality. They were
content with their job and also committed with job that’s why they wish to come daily for work there in
organization.
IMPACT OF RETENTION TO TURNOVER
H0 = Retention does not influence turnover
H1 = Retention influences turnover
Table: 4 Regression result of relationship between turnover and turnover
Independent
Variable
Dependant
variable
R
square
Sig. Constant
(A)
Beta Sig B
Retention Turnover .683 000 0.671 .826 000 .834
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The regression equation is Y=A+BX Turnover= 0.671+0.834(Retention)
The regression analysis to verify the relationship between retention and turnover as given in table reveals
that the calculated value of regression is significant (B.826). It can be inferred that retention has
significant positive influence on turnover of the employee. Hence we reject the null hypothesis. 8.3% of
the turnover is predicted by retention.
1.7 CONCLUSION
From this paper we can identify that a range of factors that have been shown to be consistently
linked to turnover. It was found that Turnover is influenced by both extrinsic and intrinsic factors. Also
it was found that retention influences turnover. Further investigation of turnover and retention in the
hospitality processing industry could include an examination of turnover data to establish whether
turnover is uniformly high across the industry or whether there are differences between establishments in
the same local labour market. The collation of qualitative data through employee surveys either at
industry level or within particular establishments may be useful for identifying source of
dissatisfaction, intentions to leave, and any underlying causes of turnover.
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