IMPACT OF EMPLOYEES TURNOVER

Abstract

Employees turnover has become a major issue in most hospitality industries. However, Human Resources Managers are trying so hard to look for means to reduce employee turnover. The main objective of the research is to investigate the impact of employee turnover on the profitability of Radisson Blu Sky Hotel.

Hospitality industries spend a lot of finance to train, develop, maintain their employees so it is important for them to reduce the cost involved by minimizing employee turnover since they depend on their employees to be more successful in the job market.

The study made used of a descriptive research design to gather both qualitative and quantitative data that explains how employee turnover affects hotel’s profitability. The sample was a total of 50 employees where 44 responses were retrieved.

Stratified sampling was employed in the study where the target population was divided into 2 Strata namely the low-level staff and middle-level staff. The quantitative research method was used with closed-ended questionnaires, the collected data was analyzed using MS-Excel and presented in the form of tables and graphs.

Data gathered using open-end questions will be analyzed using the qualitative research method. The study findings revealed that the hotel suffered from high cases of employee turnover. Most respondents indicated that employee turnover has an impact on profitability to a great extent.

Also, most respondents felt that the set strategies will minimize employee turnover in the hotel. The high turnover rate of workers had a negative effect on hotel efficiency as most skilled and highly productive workers were lost and it took some time to hire new employees, leading to a rise in training and recruiting costs resulting in a decline in profitability.

Lack of motivation has been shown as a major factor in employee turnover and this encouraged most of the employees to leave the hotel and seek jobs in the hotel that offered better wages and salaries.

The study concluded that the factors of employee turnover that impacted the hotel’s profitability included, poor working conditions, employees’ lack of the training necessary to become more productive, poor salary wages with no motivation packages, dissatisfaction with the management, and supervisor unfair treatment.

The study recommended that the hotel management should employ strategic strategies such as increase the pay scale of employees, providing a stimulating working environment, and continue using 360-degree feedback.

CHAPTER ON

INTRODUCTION

We live in a continuously changing environment that does not only affect the hospitality industry but also the employees working in it. In controlling the capital of the enterprise, Human Resources Management has a crucial role to play.

Employees are an essential asset for the hospitality industry and, in reality, the success of this sector depends entirely on the effectiveness of its workforce.

Today it became a huge challenge for Human Resource Managers to retain employees for a longer period and decrease the rate of employee turnover.  Thus, the hospitality industry is more negatively affected by employee turnover because the employees are the main tools to create and render services from the hospitality organization to the customers and this literally, affects the profitability. The hospitality industry, profitability deteriorates when the organization incurs cost to train and induct new employees.

Hospitality is considered to be one of the fastest-growing sectors in the world, contributing

to more than one-third of the service sector (ILO, 2010 cited in Bharwani, 2012). Although the Covid 19 has changed the situation in the tourism sector, after the tourism recovery the study is actual again.

This embraced the service industry model: intangibility of resources, the inseparability of output and use, and heterogeneity between consumers and service providers (Kusluvan et al., 2010). The hospitality industry relies heavily on the human factor and direct customer touch, in particular. The major function of the product is human resources, which play a crucial role in improving the organizational image (Bharwani & Butt, 2012).

Teng (2013) described the hospitality industry as an organization with a purpose to satisfy a full range of needs such as food, beverages, and accommodations.  The hospitality industry involves frequent guest–host interactions and hospitality organizations that cater to the needs of a diverse group of people. Commercially, the hospitality industry has existed for almost 4,000 years. The hospitality industry continues to be a billion-dollar industry that relies on its customers ‘ disposable income and availability (Knani, 2014).

With the growth in international travel and therefore, increasing demand on hospitality businesses, performance measurement in the hospitality industry has gained particular importance as a tool for effective decision-making (Haktanir, 2006). It offers hotel management the possibility to make decisions that could ensure the best possible results, taking into account the special characteristics of the hotel business (Ivankovic et al., 2010).

According to the World Economic Forum, Travel and Tourism Competitiveness Report (2015), Europe remains the region with the most foreign arrivals per year, thanks in part to its rich cultural resources, world-class tourism service infrastructure, good health, and hygiene conditions.

In 2001, in Estonia, there were 400 establishments providing accommodation, with 18000 beds. In addition to more former hotels in Tallinn, Tartu, and Parnu, more remote motels and tourism farms have also found a market. 3.23 million foreigners visited Estonia in 2001, more than twice the population of Estonia, according to statistical evidence. (www.estonica.org 18:03).

More so, about 4 million tourists visit Estonia every year, the majority of them come from Finland and stay for a short period – morning (night) trip from Helsinki to Tallinn, evening (night) trip from Tallinn to Helsinki.  Here they visit shops and service outlets. Joining the European Union considerably increased the number of foreign visits in Summer 2004, reputedly by 20-25% or even more. (www.estonica.org 18:03)

With globalization increasing competition, companies need to continue to develop tangible products and provide services based on employee-created strategies. Such workers are extremely important to the company because their organizational importance is basically intangible and not easily replicated (Meaghan et al., 2002). Managers should therefore recognize employees as major contributors to the efficient realization of the success of the organization. (Abbasi et al., 2000).

Horton (2007) added that employees turnover has become a major concern for many small size enterprises and this is as a result of several factors. Izzack (2010) explained further, that turnover could be caused by both organizations or by the employees. Thomas (2003) clarified that employers are more concerned with turnover because it adversely affects the success of their company and has a high-cost effect. In this light, Armstrong (2006) said employee turnover refers to how long workers continue to leave and join the company at which level an employer gains and loses employees.

Thus, Maertz, Griffeth, Campbell, and Allen (2007) explained that the staffs frequently move to other organizations with a determination of attaining high turnover, and it is also exposed that the organization that works in providing higher incomes are higher profitable in the competitive marketplace than those to pay less income to their employee.

Employee turnover can be costly from the outlook of an organization (Suliman & Obaidli, 2011). The higher level of turnover results in greater expenditures associated with hiring and training new staff. It costs companies cash to employ human resource employees to interview and employ applicants and training new laborers can be an expensive procedure that distracts experienced employees from profitability performance as suggested by (Rettab et al., 2009).

In every organization, Human Resources are considered as the main organizational source (Schroeder, 2012). Lashley (2001) cited in Singh et. al. (2017) notes that the quality of the service delivered is used as a strategic weapon in many companies in the service sector. Satisfied, motivated, and stable workers are also a serious success factor for any hotel and can only be accomplished by maintaining the staff and raising the turnover ratio.

When an employee quits, it imposes costs on the organization. The employee must be replaced and the new employee must be qualified. George & Jones’s (2002) study explains that the level of job satisfaction in the workplace is the factor that influences absenteeism which in turn it may cost employee turnover and the impact of it is at times employees might resign or leave their jobs.  Bigley et al. (1996) supported the opinion that employees who are dissatisfied with their jobs are more likely to be absent.

Several scholars suggest that if not properly managed, high turnover rates could have negative effects on the organization’s productivity (Hogan, 1992; Wasmuth & Davis, 1983; Barrows, 1990). Hogan 1992, almost twenty years ago between $ 1400 and $4000 was the direct and indirect expense of leaving a single line worker.

Philips (1990) and, these unseen costs arise from new employees, closely associated co-workers with incoming employees, closely associated co-workers with leaving employees and positions being filled when vacant, all of which impacts the organization’s profitability. On the other hand, customer service and satisfaction were influenced by turnover (Kemal et al., 2002).

Impact Of Employee Turnover On Profitability.

Here, the author gives an overview of the concept of employee turnover, assesses the impact of employee turnover in the hotel industry and brings out strategies to reduce employee turnover in the hospitality industry.

The essence of employee turnover

Employee turnover according to Suliman et Al Obaidli (2011) is mainly affected by various factors, nevertheless, it is frequently associated with the influence of organizational concerns. Employee turnover is the ratio of the number of workers that had to be replaced in a given time period to the average number of workers (Agnes, 1999).

In simpler terms, employee turnover is the series of actions that it takes from the employee leaving to his or her being replaced. It is often utilized as an indicator of company performance and can easily be observed negatively towards the organization’s efficiency and effectiveness (Glebbeek & Bax, 2004). Frequently, managers refer to turnover as the entire process associated with filling a vacancy: each time a position is vacated, either voluntarily or involuntarily, a new employee must be hired and trained. This replacement cycle is known as turnover. (Woods, 1995)

Thus, employee turnover is not a relatively new concept in management but a typical issue in human resources management that is presently attracting the attention of public administration and industrial relations management practitioners across the globe.

Aside from the cost of investment in employees, with globalization, which is heightening competition, organizations must continue to develop tangible products and provide services, which are based on strategies created by employees. (Ongori, 2007).

This concept is also often used, irrespective of reason, in efforts to measure employees’ relationships in an organization as they leave. “Voluntary turnover unfolding model” represents a divergence from traditional thinking (Hom and Griffeth, 1995) by focusing more on the decisive aspect of employee turnover, in other words, by showing instances of voluntary turnover as decisions to quit. Employee turnover according to Ongori (2007) is clustered into diverse types.

Voluntary and involuntary turnover

Worker commences the voluntary. When worker selects or planned to move from the organization, they work in they choose to leave or switch the job by themselves. Involuntary on the other hand is when a worker is left with zero options to select from and has to go through the termination from the organization with or without their consent.

Such situations can come across in various different ways including; firing, retirement, physical /psychological debility, switching/transfer, etc. although these both situations are apprehensive toward the departure of the worker; and thus, it necessitates diverse decision-making management practices. (Ongori, 2007)

Functional and dysfunctional turnover

The departure of the immensely skilled and proficient worker from the organization raising the difficulty of replacement of skills and knowledge that in return corrode the organization’s labour force and points towards the high turnover cost is known as dysfunctional (Ongori, 2007).

On the other hand, functional turnover is the departure of ineffective and less competent employees whose skills are easier to be replaced (Ongori, 2007).

Avoidable and unavoidable turnover

Avoidable turnover is the reason that the business may be clever to sway or tackle it (Ongori, 2007). For staff that exit the workforce due to low job gratification, difficulties of misconduct, compensation, etc. it can be recollected through refining the stated management. Unavoidable worker turnover stanches from reason over which the business has slight or no control. (Ongori, 2007)

Mohanty & Mohanty, 2014; Shani, Uriely, Reichel, et Ginsburg, 2014 agrees that the hospitality industry is characterized by high mobility and abnormal working hours as well as frequent interactions with clients, which require top-notch customer relations and emotional labour by the employees. These industry characteristics have been cited as part of the reason the industry posts a relatively high rate of turnover compared to other industries. (Victoria J.,2015)

2.2 Research Problem, Objectives, and Questions

2.2.1 Research problem

Employee turnover is detrimental to organizational efficiency and profitability, resulting in a depletion of diverse financial and intellectual capital and assets (Hofhuis, Van der Zee & Otten, 2014).

According to Maxwell (2010) cited in, Nyaga (2015) the greatest concern with employee turnover is that the organization loses the most knowledgeable and skilled employees that the company has recently invested in preparing for different operational tasks.

Employees are important resources in every organization and they are required to put extreme efforts to prevent their valuable employees from leaving the organization. The hospitality industry in Tallinn is labour intensive and mainly relies on its employees for the success of its operations.

However, it is realized that this tremendous increase in employee’s turnover leads to loss of their skillful and valuable employees and in turn affecting job performance. This has great effects on the hotel such as customer dissatisfaction, decreased employee morale, decreased productivity, low service quality, negative business acumen, decreased job performance, high turnover costs, and finally poor hotel performance. These effects would generally lead to loss of market, lower sales due to customer dissatisfaction, and the organizations start to make losses rather than gaining.

This has created a significant awareness gap about the management of employee turnover. By assessing the effects of employee turnover on organizational profitability, this study aims to fill the missing void. The results obtained are impacted by successful guidelines on how companies can reduce the turnover rates of workers and generate more benefits.

It is in this regard that the researcher intended to investigate the impact of employees’ turnover on profitability, a case study of Radisson Blu Sky Hotel in Tallinn.

2.2.2 Research Objectives and Research Questions

The main objective of the study is to investigate the impact of employees’ turnover on hotel’s profitability and to give recommendations on how to decrease the impact, a study of Radisson Blu Sky Hotel in Tallinn.

More specifically, the main research objective shall be guided by sub-research questions of this study;

What factors contribute to employee turnover?

What are the impacts of employee turnover on hotel profitability?

What strategies can be recommended to minimize employee turnover in hotels?