Employee Retention the Hospitality Industry

Employee Retention

The hospitality industry has seemingly exponential growth potential as the economies of many nations begin to merge, creating an environment of heavy travel and increased dependence on an increasingly global economy. Additionally, the increasingly global economy will likely continue to influence leisure exposure to different cultures and places, therefore stressing the importance of industry answers to growth. Through this emphasis on the global nature of business, as well as many other factors the hospitality industry stands to gain members as both customers and employees in just as exponential a fashion as the growth of the industry itself. (Daniels, 1985) Sustainable growth is then the primary factor in need of address in the industry and growth brings with it a whole set of special concerns and problems, one of the greatest being employee retention. (Lucas, 2003, p. 88) the hospitality industry is experiencing a relative crisis with regards to recruitment and retention as a result of exponential growth as well as factors such as increased diversity (Aronson, 2002, p. 46) (Waldinger & Lichter, 2003, p. 215), a difficult imbalance between skilled and unskilled labor needed to sustain quality (Waldinger & Lichter, 2003, p. 36), nonexistent benefits, such as health insurance, profit sharing, retirement benefits as well as environmental constraints that are particular to the industry.

Though a new emphasis on service industry growth in the national and global economies has begun to address issues of equity in employment in the hospitality and other service industries, where employees are seeking to remain longer in such positions, and therefore need to have incentives to do so. There are still many issues yet to be addressed with regard to how to come to equitable terms for an employee working a job that was traditionally thought of as temporary, in the scheme of ones life, especially in the case of a field where there is limited opportunity for education and few positions for advancement. (Hall & Jayawardena, 2002, p. 12)

The American values of individualism and meritocracy suggest that workers should improve their lot by moving out of fast-food jobs rather than by improving the compensation and working conditions in these jobs. (Leidner, 2002, p. 27)

In fact some hospitality industry jobs and the employees that fill them, are thought of as social pariahs if they are sought and retained by intention.

The hospitality industry, as well as all service based industries must rise to the occasion, by creating employment situations and packages that answer the need for long-term, quality employees, through both social and economic means. (Mor Barak, 2000, p. 339) There are at least a few examples of best practices in the hospitality industry that provide creative means to support a growing industry.

An example of a mutually beneficial program to employ welfare recipients is the Pathways to Independence program, sponsored by the Marriott International hotel and hospitality chain (Laab, 1998). Pathways is a reality-based, 180-hour training program (60 hours of classroom training and 120 hours of occupational training) that helps welfare recipients develop the skills they need for full-time employment with Marriott or other hospitality industry employers. Participants who complete the program successfully are guaranteed an offer of full-time employment with benefits. Marriott employs staff mentors in its program who serve as counselors and help individuals struggling to break free from welfare pasts to stay with the program. The program has been very successful in different sites. For example, the Los Angeles Airport Marriott hotel Pathways program, begun in 1995, has graduated 110 participants and placed 80 people in jobs of whom 83% have been retained. (Mor Barak, 2000, p. 339)

Creativity is the key to change and making nontraditional partnerships with employees and outside agencies can benefit the industry greatly, the above example is a retention program that works as it offers a system were people seeking employment, with a great desire to keep it are getting the benefit of education and placement and the employer is tapping a previously underserved portion of the population to recruit and retain staff.

Major Obstacles to Employee Retention:

To rise to the occasion the industry, as well as individual entities within it must first recognize the factors that engender employee retention, on every level, including economic incentive, benefit incentive, social incentive and potential for personal growth incentive. Industry models must become inclusive work places, according to a model that best meets the needs of all parties. (Mor Barak, 2000, p. 339) the industry must address the availability of personal growth opportunities, including continuing education and the availability of enough positions within the industry to accept those who choose to explore this option. Sadly, when seeking information on continuing education offered within the hospitality industry one is more likely to find hospitality listed as a top three expense to be accounted for when other business types are offering continuing education for employees, than you are to find an industry leader that offers such services to its own employees. (Glover & Law, 1996, p. 49)

Questions of equitable pay in a scale that can be perceived to provide increased income based on years of service, a particular weakness in the hospitality industry where many positions offer little to none in the way of increased earnings, with low ceilings and low entry level wages.

Not only do workers get ranked. Jobs also stand in a hierarchy, with the characteristics that workers value (pay, stability, benefits, and autonomy) typically going together. So there are "good jobs" and "bad jobs," and the size of the potential pool of candidates varies with the quality of a given position. At the top of the labor market, there is often an ample labor supply; even if employers experience spot shortages, the job-seeker correctly perceives that the number of good jobs is almost never sufficient. (Waldinger & Lichter, 2003, p. 9)

Within the hospitality industry this is an even more serious situation, as there is much larger pool of entry level jobs, than there is a pool of available high-skill level jobs. "Hospitality employment across the globe can be characterized as 'vulnerable' employment, and is subject to regulation in areas such as minimum wages." (Lucas, 2003, p. 1) Some industry leaders have responded by creating pseudo-high ranked jobs, such as say, shift supervisors and/or team leaders but across the board these positions are likely to be an assumption of responsibility with very little real additional compensation.

Performance-based promotions. Conventional pay prevents supervisors and managers from directly and immediately paying a subordinate for a job well done. And tight pay bands reduce the ability to reward performance adequately through annual pay increases. The consequence is that many supervisors and managers must promote top performers to reward them. This creates competition among employees and forces the best performers out of their jobs and into management. (Abernathy, 1998)

In an industry where there is such an extreme imbalance between entry level positions and management positions it is clear that the standard business model associated with performance-based promotions should be thrown out the window, as when and employee sees little in the way of real job advancement seeking quality becomes personally unproductive.

As frequently noted, work expands to fill the time available. When you are paid by the hour, it is not in your financial interest to work more efficiently, since doing so will simply result in more tasks being assigned or, worse, a cutback in your hours. This problem is compounded when employees depend on overtime pay to supplement their base income. I find it amazing that management really expects employees to form teams to develop more efficient processes that will simply result in their having to learn additional jobs for the same pay or that might even cause them to lose their current jobs. (Abernathy, 1998)

In this environment the sad but rather logical answer then becomes a situation where the good is not rewarded and the bad is punished, which is contrary to the overall environment of the workplace and simply leaves people feeling even less secure in their employment.

While Redman and Matthews (1998) contend that effective retention programmes will achieve higher levels of SQ, there is a view that the most talented people leave the sector, while the less competent stay for fear of becoming unemployed (ILO, 2001). In spite of the increase in hospitality management programmes and more hospitality graduates (Ineson and Kempa, 1997), there are poor graduate transfer rates (Barron, 1997) and demand outstrips supply (Purcell and Quinn, 1996). (Lucas, 2003, p. 88)

Management strategies become counterproductive and do not offer the employee real incentive to strive for achievement, and a downward spiral ensues, where time limits and quotas, rather than quality and careful attention to detail, crucial in the hospitality industry, drive workplace motivation and drive good employees out of the job/field/industry.

Diversity is also an issue that needs serious address within the hospitality industry as so many entry level positions in the industry are filled by the available pool of entry level employees, many of whom are immigrants from a wide range of nationalities and cultures, though more regionally specific, the pool can actually be dominated by one nationality. The answers offered by the high profit seekers as stakeholders is to take advantage of the immigrant, by demanding high work hours, and even in some cases taking advantage of the individual's low level of knowledge about the rights and responsibilities of the employee and the employer, denying overtime pay, when earned, unauthorized deductions from pay, even things as simple as demanding less "ethnic" hairstyles from employees to the point of termination for violation and other issues that frequently go unchallenged by people who already feel their job is in jeopardy by the very nature of their cultural heritage. (Piatt, 1993, p. ix) (Levin-Waldman, 2000, p. 43)

Changes in the ethnic mix of the labour force are occurring. In the U.S. most growth in the non-white workforce will come from Asians and Hispanics who together will comprise 20 per cent in 2020, while the black population will only account for 11 per cent (Woods, 1999). These groups are generally clustered in lower-level occupations in the HI. Sixty per cent of line-level personnel in U.S. restaurants are from an ethnic minority, where diversity needs to be acknowledged through cross-cultural training (Lee and Chon, 2000). Conversely there were only 35 black general managers in 45,000 U.S. hotels (Charles and McCleary, 1997). (Lucas, 2003, p. 101)

As these changes continue to occur, and as corporate social responsibility in the hospitality industry consistently fails to appropriately respond to such changes the situation will likely get worse, with regard to employee retention as well as many other employment issues.

Given that most workplaces do not measure the effects of equal opportunities policies either, there is a clear indication that the management of equality and diversity is not taken very seriously. By contrast the management of sales, costs, profits and labour costs where there is extensive monitoring is afforded very high priority (see Appendix 1). (Lucas, 2003, p. 103)

The emphasis on diversity should clearly be greater than it is in the industry at this time, the bottom line can not be the only driving force behind labor choices, yet it frequently is.

The almost complete lack of employment benefits, beyond a simple paycheck for the majority of employees within the hospitality industry, will likely become an even greater problem in the future as trends continue toward service industry work and increased cost of health care continue to jolt the wage earner and the employer like. Benefits often mean a great deal more to the individual earner than even the wage, and this is especially true of those who are retained in employment in the hospitality industry. As workers stay within the field they age and their medical expenses rise. The industry has not adequately addressed this issue and seems to still be under the false impression that the majority of its workers are under the age of 25 and not likely to need to seek medical care beyond the most basic. If employee retention is truly the goal then employee benefits like health insurance and retirement benefits are absolutely crucial.

A those industries increasing their share of total employment, most notably services (such as personal and hospitality services) and retail trade, have among the lowest health care coverage rates." (Wiatrowski, 1995, p.36)

Those rare exceptions express best case scenarios but for the most part any coverage offered is usually cost prohibitive for both the employer and employee match (as they are usually offered as match programs where only part of the premium is paid by the employer and the other part the employee and so frequently employees opt out of coverage where it is available), given the level of pay. This situation is sometimes countered when the employee makes little enough money to qualify for government services, but as pay increases and government reform continues this will not likely remain the case and even more people will become employed and uninsured. Resolving this problem is a much greater taks than one industry can seriously address, and yet for the sake of employee retention it is absolutely imperative that employers address it and do the best research they can to find the most cost effective ways to help employees seek and obtain this historical and crucial benefit.

One additional point in need of mention that is particular to the hospitality industry is the very nature of the service being provided, in juxtaposition to the employee work conditions and lifestyle. Hospitality industry employees are sadly, members of a new servant class. When the culture of our nation has rejected domestic work in the home, instead emphasizing technology and personal sacrifice to take care of household work, the hospitality industry, in its growth has had to increasingly create jobs that are in stark contrast to the relative affluence of the individuals the employees serve. This is a particularly difficult issue to address in employee retention, especially with regard to perceived rewards being so deficient. If the individual seeks little more than a smile on the face of a well served customer they might remain very happy in their role as a member of the modern servant class, but most people need more than this. In addition to this there are also always those customers who no matter how well they are served are not conscientious, appreciative or even kind to hospitality workers. Lastly the juxtaposition between the opulence of areas of the industry the customer sees and the behind the scenes conditions the employee works within is also difficult to navigate. One example, though at least psychologically appropriate, seems shallow when all the preceding information regarding this work is taken into consideration.

McDonald's encourages its managers to use low-cost strategies to keep workers happy, distributing a book called 300 Ways to Have Fun at Work that offers suggestions such as holding ice cream parties, handing out candy, and offering on-the-spot recognition to workers who do things right (Leidner, 2002, p. 25)

This is a perfect example of the kinds of bottom dollar decisions that are being made in the hospitality industry to keep people coming to work day after day, without offering them truly equitable wages, recognition of diversity, few to no chances for progressive employment, and poor working conditions.

Employee Retention Solutions:

The situation afforded the hospitality industry, will no doubt require skill and creativity to begin to achieve greater employee retention. There are some model organizations, who serve as examples of how a company can embrace certain tactics that serve the employee but do not seriously increase labor costs. Some examples of these types of answers will follow, though the expression of more idealized answers will also be discussed in this section. Some of the ways in which mangers and employers can effectively address the issues of employee retention in the hospitality industry are high cost, and therefore unlikely to be adopted, though still worth discussion. While other alternatives to improve employee retention are low cost and therefore more likely to be adopted but have some measure of effectiveness.

In an ideal society the poor balance between skilled and entry level opportunities within the hospitality industry could be bridged by continuing education, offered universally for the purpose of retaining quality employees in current and higher positions. The very people who are hosts and hostesses of countless hours of corporate continuing education are the least likely to benefit from a direct offer of such an opportunity. There are minimal ways in which this issue can be addressed in the hospitality industry due to simple demographics of the situation, though incentives such as tuition reimbursement can be offered, to individuals who commit to working within the company for a period of time after completion or attainment of certification or degree, a best case scenario. (Aronson, 2002, p.46) Though creating an internal continuing education system can be cost effective and offer the employee a greater sense of community and connectedness as well as a greater sense of accomplishment in industry. (Lucas, 2003, p. 88) more realistic offering, than a global implementation of tuition reimbursement, utilized to attempt to make at least some headway in the fight to keep the best workers with regard to this imbalance, would be to come up with creative solutions that are low cost but offer the individual a greater potential outcome. One example would be to offer the best shifts to employees that have tenure. This is especially effective in tip earning positions, but can also be effective in non-tip earning positions where the individual seeks the ability to work a certain shift to meet educational or family needs. It costs the company little but can make a big difference for an employee. Keeping communications open is the key to effectively implementing such a strategy and frequent informal work reviews, that are reward-based rather than punishment oriented can also help with this endeavor. The potential pitfalls of turning reviews into a situation of reprisal is dangerous though and should be avoided,

To the extent that employees are not treated equally, the difference in rewards tends to be based on subjective factors such as the manager's perceptions, likes, and dislikes. Politics replaces performance. Employees rightly focus on satisfying managers rather than customers. (Abernathy, 1998, p.35)

This is one strategy often employed to help resolve the equitable pay issue as well. Keeping good employees, rather than punishing them for good works, by implementing speed and/or quota work seems to be, a popular though questionably marginally appreciated tool. (Abernathy, 1998, p.35)

Creating a system of rewards that are low cost, but improve moral, such as that suggested by McDonalds can improve employee moral and seek to allow employees a greater opportunity to communicate, when they are not working and could potentially increase retention, but cannot be relied upon extensively to resolve this problem, as a 8 dollar ham at Christmas is a poor replacement for a raise to help feed a family for an entire year, but every little bit helps and all the cost effective strategies that can be implemented in the business climate should be.

Equitable pay issues are difficult to address in an industry where payment is determined by entry level skill. Like with the other forms of cost effective strategies creativity is the key. Once again in an ideal world the individual would be offered a pay package that was a greater reflection of skill, with years of service but usually this is only marginally possible, given the frequent restraints of upper management and the profit driven stakeholder. Though, in a more realistic situation, shift priorities and overall moral boosting behaviors are required.

The pariah of the United States as an industrialized nation unable to offer its top shelf medical services to more than half of the working population is an issue that will likely receive even greater attention in the near future, than it already does, though the hospitality industry as a cornerstone of service industry growth must in the mean time address this problem vehemently. The situation is rather unconscionable but unavoidable in many cases. In the mean time some of the ways in which employers can address this problem include; hosting information sessions with the local agencies providing government sponsored income contingent health care services, providing literature to individuals about these programs and aggressively seeking health provision coverage for workers through ardent research. There is no really effective stopgap to this problem but employers can also offer match deduction programs, where money can be earmarked from wages and employers then match that nominal amount, in a savings system so that an individual can at least access the most basic medical services if they are needed.

Low pay serves the immediate mutual interests of employer and employee as an avoidance strategy for employment taxes, but this may have other longer-term and more damaging consequences. Avoidance maximizes employees' net pay and minimizes employers' labour costs, but employees are not eligible for a range of benefits, including pensions. (Lucas, 2003, p. 129)

With regards to long-term benefits, such as retirement pensions and the like, they are also almost unheard of in the hospitality industry and this is again something that needs to be addressed as individuals will be working out of dire necessity far past the point of being healthy enough to do so if this problem is not addressed on a global scale. Creating a very large group of future dependants on the system is not something that the hospitality industry is likely to acknowledge as a goal but the service industry in general seems to be doing just that, for cost cutting and necessary reasons. Again addressing this issue is monumental and beyond the scope of the industry alone. There are no cost effective measures to reduce the likelihood of this occurrence in the future.