The Cost of Turnover
Putting a Price on the Learning Curve by Timothy R. Hinkin and J.BruceTracey
Employee turnover does more than reduce service quality and damage employee moraleit hits a hotels pocketbook.
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mployee turnover has long been a concern of the hospitality industry, and therefore of researchers who examine industry human-resources concerns. One stream of research that arose in the past 20 years was an effort to quantify the cost of employee turnover. Although most managers agreed that turnover was bothersome, calculating a dollar figure for employee departures would provide those Timothy R. Hinkin, Ph.D., is a professorof managementorganization, human resources, and law (MOHRL) and director for undergraduate
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The lodging industry sees fierce competition, with new products and branding strategies vying for the dollars of increasingly demanding consumers. Technologically, the industry has made tremendous progress in revenue-management systems, computerized reservations, and POS systems, and we can only hazard a guess what the internet will eventually mean to the lodging industry. Virtually all jobs have been altered by technology and downsizing, and hotel employees have more to learn and do than they did two decades ago. The demographic characteristics of the workforce have changed, and in many markets most of the people considered employable are already employed. With predictions of labor shortages to come, competition for qualified employees will only increase, making employee retention an important managerial objective. A recent stream of research has empirically demonstrated a significant relationship between sound human-resources practices and financial performance.3 For example, a recent study by Delerey and Doty found that three HR practices namely, results-oriented perform mance appraisals, employment security, and profit sharingwere strongly related to return on equity and other financial measures of a firms
3 For example, see: Jeffrey Pfeffer and John Viega, Putting People First for Organizational Success, Academy of Management Executive, Vol. 13, No. 2 (1999), pp. 3748; and James L. Heskett, Thomas O. Jones, Gary
High employee turnover has monetary costs. Though estimates vary, most experts agree that turnover costs, when all things are considered, equals at least 25% of a leaving employee’s annual wages (Silva & Toledo, 2009). For example, for an employee making $25,000 per year, the total turnover costs associated with replacing that employee would be at least $6,250. This includes cost of prescreening measures such as drug tests, background checks, application reviews, interviews, pre-employment training and other recruitment costs (Dolfin, 2006). It also includes implicit cost associated with on the job training and the productivity loss experienced by other employees that must help acclimate new employees to their environment
Retaining employees is one way the turnover rate can decrease, Branham (2000), focuses on retaining valuable employees by incorporating four key elements. The first key elements is, “be a company that people want to work for”. There are many companies that have been labeled as, “employers of choice”. These employers all have something in common, which is how they value their employers (Branham, 2000). They treat their employees with respect and like family. With being an “employer of choice,” people are the most valuable asset; not just customers but employees too. Many companies go above and beyond for their customers, but not for their employees, yet they wonder why they are losing valuable talent.
2. The second reason for high rates of hospitality staff turnover include deficiency of plentiful doles such as company provided health insurance, retirement benefits, vacation pay, sick leave, additional schooling or exercise programs and other peripheral benefits which are so often perks of other industries. Since the labor pool for a large portion of hospitality jobs is so poor and turnover is so high, a majority of hospitality companies are unwilling to capitalize in programs which would
There are two types of turnover, voluntary turnover happens when the employee makes the decision to leave and involuntary turnover is when employees has no choice in their termination (Schmitz, 2012). Every month or sooner managers experience some of their exceedingly qualified employees leave the company. After realizing that their company is becoming less profitable is when they begin to wonder why and brainstorm on ways to retain them. In Information Technology, “the cost of recruiting new staff is high and the loss of continuity when staff leave can also be very expensive” (Bott, 2005, p. 111). In IT, human resources strive to maintain their highly skilled employees while employees’
The Bubba Gump Shrimp Company, a national chain of franchised seafood restaurants, prides itself on great customer service and affordable high-quality food, and knows that to meet their goals, they need a culture that attracts and retains the best employees (Bubba Gump Shrimp Company, 2011). In an industry notorious for high employee turnover and low job satisfaction (Prewitt, 2000), the Bubba Gump Shrimp Company reduced “management turnover from 36% to 16% in 2 years” (Aamodt, 2010, p. 397). What intervention opportunities exist for restaurant operators to reduce turnover of both managers and restaurant staff and more importantly, what resulting performance improvements can operators expect? While openly competitive pay and benefits
A high turnover in a few companies is a tremendous issue. An individual that is a manager should be able to understand the requirements of operating a business so that he or she keeps their employee ecstatic. A few reasons that unhappy employees leave their jobs are micromanaging, too many responsibilities, the manager doesn’t engage with his or her workers, promotions are limited within the company, communication, or even constant change within the company.
“Employee turnover is a critical cost driver for American business. The cost of recruiting and filling vacancies, lost productivity from vacant jobs, and the costs of
Having a Guest Service Staff might also be a beneficial position in the long run for the SunCoast Hotel. Currently there is is a 35 percent average turnover rate for hotel employees; 10 percent is through natural attrition. If employees are being used more efficiently and given a wide range of task to complete, WB consulting believes that this turnover rate will decrease due to a positive increase in affective commitment. Engaging the employees more and setting up a healthy relationship with management, we believe, will have a very strong positive impact for job satisfaction. Employees will see the big picture and see how their work directly effects that,
Research shows the cost of turnover is substantial and varies from region to region. The measurement of what costs are included are just as diverse, but according to Jones and Gates (2007), the cost of turnover can be 1.3 times a departing nurse’s salary. With this in mind, the costs of recruitment and retention cannot be underestimated nor seen as an expense, rather a return on investment.
PaThe reality is that sometimes employees quit. While not all employee turnover is bad, many applied behavior analysis (ABA) service providers seem to experience a higher employee turnover rate than is seen in other industries. Since employee turnover is costly (at approximately $5,000 each person), if your ABA agency is experiencing a high employee turnover rate, you must address this problem. Once you discover the reasons that your employees are resigning, you can begin to address these issues and reduce your employee turnover rate.
Employee retention has always been an important focus for human resource managers. Once a company has invested time and money to recruit and train a good employee, it is in their own best interest to retain that employee, to further develop and motivate him so that he continues to provide value to the organization. But, employers must also recognize and tend to what is in the best interest of their employees, if they intend to keep them. When a company overlooks the needs of its employees and focuses only on the needs of the organization, turnover often results. Excessive turnover in an organization is a prime indicator that something is not right in the employee environment. We will look at
Unknown too many employers in the restaurant industry was the cost of losing an employee is 1.5 times their salary. (Aamondt, M. 2012). In a recent study by Sigma Assessment Systems, stated the third most common reason for employee turnover is company culture. Company culture can be defined as the reward system, the strength of leadership, the ability of the organizations to elicit a sense of commitment on the part of workers, and its development of a sense of shared goals. (Sigmaassessmentsystems.com 2013)
According to Salih Kusluvan, Zeynep Kusluvan, Ibrahim Ilhan and Lutfi Buyruk the most important asset of tourism and hospitality organizations are human resources. Authors have examined numerous studies where employees’ performance can be managed to strengthen the organizational bottom line. Authors have structured review of the literature on the subject of key human resources management practices and offered an assessment of emerging trends in human resource management.
Boardman and Barbato (2008) posit that the hotel, catering and tourism (HCT) sector of the industry suffers from high levels of labour turnover. This provides a constant challenge for employers, limits the ability to maintain a skilled workforce and results in enhanced costs. The Marriott Corporation, for example, reported in 2000 that a 1 per cent increase in employee turnover would cost their company between $US5 and US$15 million.
Employee turnover is one of the biggest challenges that Unilever faces. A turnover event takes place when an employee voluntarily or involuntarily exits an organization or unit. There are various factors that contribute to high turnover events in Unilever. For instance, the organization often struggles to contain challenges arising from regular complaints by employees over issues such as being overworked. As soon as they are recruited, new workers do not go through real organizational induction or orientation. Therefore they do not understand who to contact or what they are expected to be doing. As a result, highly skilled and talented workers decide to leave the organization. The degree of long-term sick leaves is high in the company. Some workers complaint that the company subjects them to long working hours and low wages. This results in an imbalance in their work-life issues. Employee turnover also affects managers and senior employees.