Introduction
High employee turnover or attrition rate in any organization is a problem area for its management and one of its main aims will be to keep this at the level at least with industry standards. This paper deals with the high employee turnover found in the hospitality industry and the issue has been studied concerning the New Castle Hotels and Resorts based in the United States and Canada. This company has around 25 years in the hospitality industry and owns about 50 properties in the US and Canada.
Attrition rates have gone up to 300% in some years, with the figure coming down to 100% by the end of 1999 according to the American Hotel and Motel Association. The New Castle Hotels had managed to bring this figure down to a healthier 57% by the beginning of 2000. To the further credit of the company, the figure stood at 40 % in 2005, while the industry standard was a high 60%.
This was achieved through the policies introduced and implemented by the Human Resources Department of the Hotel. “New Castle Hotels, headquartered in Shelton, owns and manages 24 hotel properties in the United States and Canada and enjoys an employee turnover rate of less than 40 percent across the board.” (David Toth, Why New Castle Hotel has a low employee turnover? May 2, 2005, Fairfield County Business Journal).
Problem Statement
High employee turnover is costly for any organization both in terms of money and time. The problems faced by the New Castle Hotels due to high attrition were many. In a customer relationship-rich environment like the hospitality industry, employees have to be trained which requires time and money. The regular inflow of new employees to fill the gaps left by those who have left means incurring the same costs again and again. There are direct and indirect costs incurred in handling employee turnover. Closing the exiting employee’s file and paying severance pay and the cost of advertising for and recruitment and training of new employees come under indirect expenses.
Lower productivity caused by, the exiting employee, the time taken to train new employees, and the time spent by other employees in training the recruit come under indirect expenses. This problem also caused other problems like low motivation levels in existing employees. With all the above-mentioned problems existing in the hospitality industry, how can the New Castle Hotels and Resorts bring down the attrition rates?
Literature Review
The subject of organizational behavior was thought to be of no relevance in organizations before the industrial revolution. Organizations in those days were mainly family affairs and the area of operations was limited to a small locality. Automation was unheard of and much relevance was laid on manual labor. The style of management was autocratic and the rights and feelings of the workers depended upon the personality of the owners.
The person who first took steps in the study of labor was Frederick Winslow Taylor followed by Frank and Lillian Gilberth, Elton Mayo, the Hawthorne Studies. Worker motivation was considered only in the context of higher wages and such theories were classified as scientific management theories. All the above theories indeed did study employee motivation in varying degrees of effectiveness.
But all reasoning was based on the important money and physical working environment and not on factors like job satisfaction or internal motivation. “Despite the economic progress brought about in part by Scientific Management, critics were calling attention to the “seamy side of progress,” which included severe labor-management conflict, apathy, boredom, and wasted human resources”. (The Human Relations Movement, Professor Edward G. Wertheim, Historical Background of Organizational Behavior). Then came the human relationships approach which gave importance to factors other than money.
Well known among them include and Theory X and Theory Y of Douglas Mc Gregor, Theory Z by Abraham Maslow, other theories by Frederic Herzberg, Chry Agiris, Rensis Likert, etc. Organizational behavior theories are generally classified into macro, micro, and meso theories. Macro theories study the internal working of the organization which includes individuals, informal and formal groups in the organization. Macro theories study the behavior of the organization as a whole without going into the details of its inner working while meso denotes a combination of the two.
In the context of high employee turnover, the ideal scholarly work would be in areas that deal with employee motivation. One advantage of employee motivation is that, if implemented effectively, results are quick and comparatively cheaper than other methods to improve high turnover. Training an experiment in a job takes time to get results. Four theories related to motivation are discussed below along with their relevance to the present topic:
Theory X and Theory Y by Douglas McGregor: Theory X mentions the characteristics of workers as perceived by the people during the time the scientific theories were propounded. The basic assumption is that all people are lazy whatever the circumstances and that this was ingrained in their minds. A concept of something called job satisfaction which is very relevant in today’s world was not considered by these theorists. Another false assumption was that people did not have any ambition. Alack of ambition will result in employees being unwilling to take steps to further their careers. People will remain in the same post they started with resulting in boredom and frustration.
Universal lack of initiate was another factor stated in Theory X. They very much longed for the concept called security. The only way to motivate employees was through monetary incentives, threats, or perceived or actual punishments. In short theory, x believed in the carrot and stick approach. It can be seen that in today’s world none of these holds, except maybe the security factor. Theory X was in fact points taken by McGregor to show the contrast from those he presented in his Theory Y.
This theory says that people generally have an affinity to do work or in other words, they welcome work to sitting idle. They have ambitions that motivate them to give their best to the organization they work for. They welcome challenges and are motivated by them. They are motivated more by these factors than the monetary rewards they may get from good performance. In short, it would be better to give more freedom to the workers than strict management. Situations in the hospitality industry sometimes show that there is too much supervision especially towards the low-skill workers who like other employees have the same feelings and emotions.
Theory Z by Abraham Maslow
Theory Z goes a step further than what is propounded by the theory Y of McGregor. The basic assumption of Maslow is that there is inherent goodness in all people and even presents his ideas on a philosophical level. This has resulted in what is famously known as ‘Maslow’s Hierarchy of needs theory. Here he presents a series of human needs and rates them according to what is important for a human being. He states that physical needs in a person. So physical needs rank as the lowest in importance in this list. Safety is ranked above physical needs in importance. The next need that Maslow states are the need for a human being for affection or love.
Every human being has a certain amount of self-respect or self-esteem. This need is the second most important need. The most important need that a human being looks for is self-actualization. This is a general perception and the truth as far as motivation in the present age. Man’s performance is dictated by the ratio in which the above needs are satisfied, It could be mentioned here that what is mentioned in Theory Y and Theory Z was not something new, but was relevant at all times. It just happened that modern-day theorists recognize the truth and informed the world about it.
The Hygiene and Motivation theory by Frederic Herzberg: The value of accomplishment plays a major role in his theory. Herzberg says that needs are of two types, animal needs, and human needs. In animal needs supervision, relationship with other people in the organization, the physical working conditions, and monetary reward take precedence and there are a set of people who give more importance to these needs. They are also motivated more when such needs are met. The human needs include recognition from superiors or equals for past performance, the motivation they get from the work itself, an eagerness to accept responsibility, and hopes and aspirations of job advancement. There are another group of people who are motivated more when these types of needs are satisfied.
Theory of Renis Likert
This theory generally describes different styles of management about the human nature of the managers. The first style he mentions is exploitative-authoritative, the least used method in the current age and the most used in the past. The second style is described as benevolent-authoritative, which could be a situation found in a benevolent dictatorship. The style is consultative, indicating that there is communication and consultation between workers and management and is found to a large extent even today. A system that is found more and more effective in today’s world is the participative style.
Here decision-making is taken with the participation of the whole group and hence a feeling of achievement. Such a style of managing has resulted in better performance and achieving of higher targets. “There is an old saying that you can take a horse to water, but you cannot make it drink; it will drink only if it’s thirsty – so with people”. (Motivation is the key to performance improvement, Management Managing Better, the Accel Team, …workers working productively).
Causes
The cause of high attrition faced by the New Castle Hotels and the industry, in general, were much the same. The hospitality industry has employees coming from multicultural and multi-racial backgrounds. So problems that arise due to this mix were one of the causes of employees quitting work within a short time. Lack of job satisfaction was another reason cited. Working in the hospitality industry is quite demanding because of the high level of interaction with customers. In this industry, customer behavior towards hotel and resort employees is generally ruder when compared to other industries and it is easy for an employee to be put off when such behavior becomes excessive.
This will also lead to an unsatisfactory working environment. Even though there is a general feeling that doing service is a virtue, serving people in the capacity of a waiter or bell boy might be thought of as demeaning. This might result in a lack of value perceived in the job. The adage that ‘grass is greener on the other side’ exists strongly in this industry also. So the way employees unfavorably compared their job with other jobs outside the industry is another factor for high turnover. In such an environment it is no surprise that employees feel low motivation in doing their jobs. Another factor is that most managers do not fully understand the monetary and psychological cost of high attritions.
Even if they do understand, most of them are untrained or not prepared to handle it. There is also a general belief that high turnover is natural in the hospitality industry and there is nothing much he can do about it. This industry has a high percentage of low-skilled jobs manned by young people. Attrition rates in such a situation will be high in any circumstances. The high percentage of part-time jobs found in this industry is also another factor. Most part-timers are just holding on to their jobs while searching for a regular job and will leave as soon as they find one. Many students looking to earn some extra money to pay for their studies are employed in this industry.
They will not continue with this once their studies are completed. Most importantly, many employees felt that there was a lack of commitment towards them from the management and this resulted in a low commitment to their jobs reason for this high attrition rate. Strangely, the problem was compounded by the September 11 attacks in the US which forced the industry to cut down on jobs over more than 100,000 because of a fall in tourist arrivals. In this instance, the problem was not caused by organizational behavior. The problem arose when the business began picking up and the industry found it hard to find suitable employees.
Again many laid-off employees refused to go back to work in the industry. “Employee retention, job enrichment, motivation, customer satisfaction and other on-the-job issues like safety and discipline are additional concerns for employers in many lodging facilities” (Ady Milman and Ricci Peter, April 1, 2004, Journal of Tourism and Hospitality Management, Predicting job retention of hourly employees in the lodging industry).
Solutions
The following are the steps that can be taken up by the New Castle Hotels and Resorts that to reduce employee turnover:
Having an open-door policy: an open-door policy refers to a situation where the management is open to the grievances or difficulties faced by the employees. It creates a situation where resentment and frustration will not build up. In the absence of such a policy, as soon as such resentment or frustration builds up to high levels, employees just resign or look for other avenues of work. As mentioned earlier, jobs in the hospitality industry are very demanding and due to this, employees need an avenue where they can openly discuss their problems with superiors
A peer review program: there will be instances when a discussion of relevant issues with top management may not work out. In this case, the problems remain unsolved, leading to a situation similar to the case if a peer review program had not existed. A board consisting of colleagues and superiors should be set up and the situation presented, reviewed and a decision made. Such a decision will be considered to be binding on the aggrieved employee. There is a greater chance that the employee will get one more chance to get his problem solved before quitting, resulting in savings for the company.
Opinion Surveys
Opinion surveys about the employee’s feelings about the company and other factors will be useful. A favorable survey might result in an undecided employee remaining with the company.
A just promotion policy
Promotions based on seniority and other eligibility factors will be a great step in reducing high turnover. Out-of-turn promotions are a great reason for employees to leave the company due to resentment. Also, filling up a senior post that has become vacant should be filled from within the ranks of the employees and an outsider should be appointed if such a person is not available.
This assignment has given this writer a sense of fulfillment because high turnover is costly not only to the employer but to the employee also. The difficulty caused to the hotel has already been mentioned. In case the employee is leaving due to better prospects he will be happy, but if it is due to the resentment he will be under pressure as to how and when he will get a job. A better understanding of the human mind has been achieved and this will be of enormous benefit in a managerial situation. Understanding the viewpoint of the other person is very important in uncomfortable situations such as these, and a sincere effort to do so will earn the gratification of the other person.