Employee Retention Challenges in the Hospitality Industry

Introduction: Growth and the Retention Imperative

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 a global economy. Additionally, growing economic globalization will likely continue to influence leisure exposure to different cultures and places, further 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 therefore the primary factor in need of address, 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 regard 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), and the near-absence of benefits such as health insurance, profit sharing, and retirement benefits — along with environmental constraints particular to the industry.

Though a new emphasis on service industry growth in 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 incentives to do so — there are still many issues yet to be addressed. Chief among them is how to arrive at equitable terms for an employee working a job traditionally thought of as temporary, especially in a field where there is limited opportunity for education and few positions for advancement (Hall & Jayawardena, 2002, p. 12).

American values of individualism and meritocracy suggest that workers should improve their lot by moving out of low-wage jobs rather than by improving compensation and working conditions in those jobs (Leidner, 2002, p. 27). In fact, some hospitality industry jobs — and the employees who fill them — are treated as social pariahs if those positions are sought and retained by intention.

The hospitality industry, along with 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.

One example of a mutually beneficial program is the Pathways to Independence initiative, sponsored by Marriott International. 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 who serve as counselors and help individuals struggling to break free from welfare dependency stay with the program. The program has been very successful across different sites. For example, the Los Angeles Airport Marriott hotel Pathways program, begun in 1995, graduated 110 participants and placed 80 people in jobs, of whom 83% were retained (Mor Barak, 2000, p. 339).

Creativity is the key to change. Making nontraditional partnerships with employees and outside agencies can benefit the industry greatly. The above example works precisely because it connects people who have a strong desire to find and keep employment with the education and placement they need, while allowing the employer to tap a previously underserved portion of the population for recruitment and retention.

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 at every level, including economic incentive, benefit incentive, social incentive, and potential for personal growth. Industry models must become inclusive workplaces according to a model that best meets the needs of all parties (Mor Barak, 2000, p. 339). The industry must also address the availability of personal growth opportunities, including continuing education and a sufficient number of positions within the industry to accommodate those who choose to pursue it. Sadly, when seeking information on continuing education offered within the hospitality industry, one is more likely to find hospitality listed as a top expense to be managed when other business types offer continuing education for their employees — rather than finding an industry leader that offers such services to its own workforce (Glover & Law, 1996, p. 49).

Equitable pay scales that provide clearly increased income based on years of service are a particular weakness in the hospitality industry, where many positions offer little to no growth in earnings, with low ceilings and low entry-level wages. As Waldinger and Lichter (2003) observe:

"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." (p. 9)

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

Compensation, Advancement, and Workforce Motivation

Conventional pay structures prevent supervisors and managers from directly and immediately rewarding a subordinate for a job well done. Tight pay bands also reduce the ability to reward performance adequately through annual pay increases. The consequence is that many supervisors and managers must promote top performers simply to reward them. This creates competition among employees and forces the best performers out of their current roles and into management (Abernathy, 1998). In an industry where there is such an extreme imbalance between entry-level and management positions, the standard business model of performance-based promotion clearly becomes counterproductive. When an employee sees little prospect of real advancement, pursuing quality becomes personally unproductive.

As Abernathy (1998) further notes, when employees are paid by the hour, it is not in their financial interest to work more efficiently, since doing so results in more tasks being assigned or, worse, a reduction in hours. This problem is compounded when employees depend on overtime pay to supplement their base income. Management expecting employees to develop more efficient processes — when those efficiencies simply mean learning additional jobs for the same pay, or even losing current hours — is fundamentally at odds with employee motivation.

In this environment, the outcome is a workplace where good performance is not rewarded and poor performance is punished — a dynamic that leaves people feeling insecure in their employment and drives the most capable workers out of the field:

"While Redman and Matthews (1998) contend that effective retention programmes will achieve higher levels of service quality, 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 thus become counterproductive and do not offer employees a real incentive to strive for achievement. A downward spiral ensues in which time limits and quotas, rather than quality and careful attention to detail — both crucial in the hospitality industry — drive workplace motivation and push good employees out of the field entirely.

Conclusion

This paper has examined one of the most pressing issues facing the hospitality industry: employee retention. The current state of retention in the industry could rightly be called a crisis, and it must be addressed aggressively with whatever means are available. If that means prioritizing the most cost-effective options, then all alternatives should be carefully weighed before being discounted. More aggressive measures — such as providing health benefits or tuition reimbursement — are unlikely to be adopted universally, but failure to address them even at a research level does a disservice to both the industry and the broader community. Low-cost strategies should be explored and utilized as broadly and assertively as possible, above all because they serve the best interests of all parties involved.

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