CHAPTER 3: REVIEW OF LITERATURE

The hospitality sector is one of the world's fastest-growing industries. However,

huge problems still exist in attracting and retaining a skilled workforce, affirms Mike
Burton, Human Resources Director of Compass Group UK & Ireland. Furthermore, Nick
Varney, chief executive of leisure operator Merlin Entertainment, agreed, saying that:
Two enduring things in this industry are: high staff turnover, which affects the ability to
deliver a consistent brand experience, harming business and the fact that not enough people
see our growing industry as somewhere to build their careers (Druce, 2007).
By contrast, Walker points out that, staff turnover is not always a bad thing. He
argues that some mild turnover can be beneficial because it allows staff to move up the
ladder to more senior positions, giving them new opportunities. Moreover, it allows the
business to bring in new blood, in other words, new people, new ideas, enthusiasm and
motivation which is beneficial for a company to increase productivity (2006).
Nevertheless, high and rampant turnover is endemic in the industry. According to
Walker, some businesses can experience 50-100% turnover every year, way above the Best
Practice Forum's Benchmark Index of 26.5% (almost exactly the same as the 26.7%
international hotel labour turnover benchmark published by Horwath Consulting). At a
turnover of 26.5%, more than a quarter of staff change their jobs every year; at 50%, a
business is replacing half its staff every year (Walker, 2006). An alarming figure that
reinforce the idea that the hospitality industry possesses one of the highest rates of turnover,
among all the service industries.
In the article The Cost of Employee Turnover, Mathew OConnell & Mei-Chuan
Kung (2007) makes the point that organizations tend to underestimate the cost of turnover.
Perhaps it is because there is not a line item in most profit and loss statements, nor is it
typically adequately defined in the budget, and no one submits an invoice at the end of the
month for turnover. Yet, collectively, turnover costs organizations billions of dollars a year.
According to a conservative estimate by the Bureau of Labour Statistics, in
America, the average cost to replace an employee is $13,996 USD (O'Connell, 2007).
In this chapter, will be analyzed what turnover is, the cause and consequences of
employee turnover, as well as, strategies that exist in order to decrease employee turnover
rate. The chapter concludes with a brief discussion and analysis of these topics.
Hemdi and Nasurdin (2006) tell us that hotels all over the world experience high
turnover rates. According to their research, globally, the turnover rate in the hotel industry
is estimated to range from 60 percent to 300 percent annually, far higher than the 34.7
percent reported in the manufacturing industry. Most importantly, they affirm that
excessive employee turnover rate is detrimental to organizations. It is evident that it is
related to direct and indirect costs; furthermore, it affects moral, productivity, reputation
and survival of organizations. That is to say, turnover, when it is high, often means that
employees are unhappy with the work or compensation, it can also indicate unsafe or
unhealthy conditions, or that too few employees give satisfactory performance (due to
unrealistic expectations or poor candidate screening). By contrast, turnover, when it is low,
indicates that none of the above is true: employees are satisfied, healthy and safe, and their
performance is satisfactory to the employer.
Employee turnover
Turnover can be defined as the cessation of membership in an organization by an
individual who received monetary compensation from the organization (Mobley, 1982 in
Hemdi, 2006). In other words, from a business view, Employee turnover is a characteristic
that refers to the relative rate at which an employer gains and losses staff.
Many factors play an important role in the employee turnover rate of any company,
and these can come from both the employer and the employees. Wages, company benefits,
employee attendance, job performance, role ambiguity, workload, stress, leadership
behaviours, or opportunity for advancement are all factors that play a significant role in
employee turnover. However, Turnover is a process, not an event that is related to factors.
OConnell & Kung remarks that hiring high-potential employees into a bad environment
may actually increase turnover (O'Connell, 2007).
The process
OConnell & Kung affirmation can be reinforced in Mobley Model of how job
dissatisfaction leads to employee turnover, one of the first proposed structural models for
representing employee turnover explains: job dissatisfaction leads an employee to thinking
of quitting then, there is an intention to search (for a new job), afterwards, employees
intend to quit, which cause (voluntary) turnover. Based on this brief model of voluntary
turnover, Hong & Chao in its article entitled A Comparative Test of Two Employee
Turnover Prediction Models suggest that job satisfaction is an indirect link in initiating
actual voluntary turnover; what is more, organizational commitment is an intervening
variable to explain the outcomes, stay intentions or turnover. In addition, based on their
investigation they suggest that greater organizational commitments imply greater intent to
stay, i.e., lower voluntary turnover (2007).
Many studies converge that there are two forms of employee turnover, involuntary
turnover and voluntary turnover (Hong, 2007; Iverson, 1999). Involuntary turnover is
frequently declined as movements across organizational boundaries, over which the
employee is only slightly affected (Price, 1977 in Hong, 2007), the representation forms of
withdrawal from an organization often categorized with strategy (e.g. downsizing),
dismissal (e.g. firing), or policy (e.g. compulsory retirement) (Campion, 1991 in Hong,
2007). In contrast, voluntary turnover is defined as movements across organizational
boundaries, over which the employee is heavily affected (Price, 1977 in Iverson, 1999), the
representation forms of withdrawal from an organization are often categorized with
absenteeism and lateness (Campion, 1991 in Iverson, 1999).
Involuntary turnover is most often initiated by organizational changes and
institutional constraints, and it is easy to understand the scope and the affects for the
organization.
Alternatively, turnover can, also, be classed as internal or external. Internal turnover
involves employees leaving their current position in order to take a new position within the
same organisation. There are positive and negative aspects of internal turnover, such as,
increased morale from the change of task and supervisor, as well as, project/relational
disruption, and thus this form of turnover is important to monitor as its external
counterpart. However, internal turnover might be moderated and controlled by typical HR
mechanisms, such as an internal recruitment policy or formal succession planning;
discussion about this issue will be discussed in the following paragraphs (Ruby, 2002).
On the other hand, it is important to mention that, according to the Australia Bureau
of Statistics (1998), of those employees who ceased a job during the year ending February
1998, 64 percent had left their jobs voluntarily (resigned) compared to 21 percent who had
been retrenched (Iverson, 1999), that means the percentage of people quitting their jobs
voluntairly has surpassed expectations. Thus the question arise: what are australian
entrepeneurs doing to retain their workers?
Elements that raise employee turnover situations
Most companies find that employee turnover is reduced when they address issues
that affect overall company morale. By offering employees benefits such as reasonable
flexibility with work and family balance, performance reviews, and performance based
incentives, along with traditional benefits such as paid holidays or sick days, companies are
better able to manage their employee turnover rates. The extent a company will go to in
order to retain employees depends not only on employee replacement costs, but also on
overall company performance. If a company is not getting the performance it is paying for,
replacement cost is a small price to pay in the long run.
Again, in order to understand the phenomenon of labour turnover, it is important to
study turnover intentions. Therefore, a distinction must be made between turnover
intentions and turnover itself. According to Hemdi & Nasurdin (2006), turnover intention
refers to an individuals perceived probability of staying or leaving an employing
organization, while actual turnover is the movement of organizational members across the
boundary of an organization.
Although, it is recognized that people leave their jobs for a variety of reasons, there
is consistent research evidence indicating that voluntary turnover can be explained by
employees intention to leave the organization (Hemdi, 2006). For instance, if an employee
does not understand how to perform his or her tasks effectively, frustration level will
increase and that employee will often leave at the earliest opportunity. In contrast, Career
advancement reflects the use of organizational mechanisms in assisting employees to
achieve their career goals, if an employee feels he has been rewarded for his work; he will
tend to stay within the company.
Moreover, Hemdi & Nasurdin (2006) suggest that intentions; defined previously;
are the only antecedent that have been consistently found to be a direct antecedent to actual
turnover. They state that studies on turnover have shown that turnover intention is the best
immediate predictor of voluntary turnover.
In contrast, some studies affirm, it is axiomatic that voluntary quitting is heavy in
the first few months of employment, we must not assume that all fluctuation in a time series
representing voluntary quit-rates is necessarily due to increase of the accession rate. The
cause-effect relationship is, probably, in part reversible; quit-rates being increased by
external labour market conditions, and by their increase necessitating added hiring for
replacement (J ournal of the American Statistical Association, 1926).
Causes
As Walker (2006) points out, high rates of staff turnover may be endemic in the
hospitality industry; however, it is not inevitable. The most critical period of turnover
incidents is the first few days and weeks of the incorporation of a new employee in an
organization. According to Walker, more people leave then than at any other time. This is
often called the induction crisis and it occurs when the new employee, for whatever reason,
has not been integrated into the team (2006). Furthermore, he argues that this may be the
result of poor recruitment, or a poor induction programme, with insufficient care and time
spent on enabling the new recruit to build strong relationships with his supervisor and co-
workers. The newcomer may just have been left to sink or swim without sufficient support.
Thus, it can be deduced that the recruitment process plays an important part of the success
or failure of retaining employees.
In this industry, the opportunities - both at home and internationally - are huge. So people
with ambition will always be looking to improve their career prospects and will want to
move about to gain more experience and responsibility - and to earn more money. And
where pay levels do not compare well with the competition, the urge to leave and earn
more may be overpowering remarks Walker (2006).
Nevertheless, he argues, people remain in jobs that they like even though higher pay
may be available elsewhere. A number of factors will influence this decision: if there are
good employment conditions, if staff like working in the business, and if there are realistic
opportunities for advancement, people are likely to want to stay (Walker, 2006).
On the contrary, Hong and Chao (2007) in their article entitled A Comparative
Test of Two Employee Turnover Prediction Models, they lead to the conclusion that,
although turnover is usually influenced by work and non-work factors, turnover research,
until now, has concentrated primarily on work-related variables (Mobley, 1982; Mowday et
al., 1982). However, based on the results of their studies, they comment that it is interesting
to see that some non-work antecedents of turnover were consistent with a time-based
variable which had some relationship to work and family. For example, age is a time-based
variable that affects one's job mobility and one's stage in the personal and family life-
cycles. Similarly, number of dependent children is a non-work influence of turnover that is
linked to life-stage and job mobility. Finally, it can be inferred that turnover might not
always be the result of a rational decision-making process characteristic of economic
models of human behaviour, but rather it might be driven by work attitudes such as
organizational commitment (Hong, 2007).
In addition, an individual's general satisfaction also enters into the problem. A man
may be entirely capable of performing certain work and still he may not be contented. The
place, the environment, the activity or lack of activity may not suit him. A multitude of
whims affect one's likes and dislikes (Eberle, 1919).
Alternatively, it has been suggested that to enhance employees trust in organization
and, subsequently, reduce turnover intentions, hotels need to continue providing training
and development programs for their employees, conduct fair and formal appraisals, and
provide ample and clear career advancement to their employees (Hemdi, 2006). In view of
this, positive perceptions of HRM (Human Resources Management) practices will lead to
increased trust in the organization.
Competency, openness, concern for others interest, and reliability are aspects that
reflect trustees trustworthiness. These dimensions additively and collectively contribute to
the development of ones trust in an organization. The structure of trust can be
differentiated according to whether it is rooted in rationality (cognitive trust) or emotion
(affective trust). According to McAllister (1995), cognitive trust is reflected in a belief or
expectation that the trustee is reliable, has integrity, is predictable, will tell the truth, and
will act in a fair or just manner. Thus, Hemdi & Nasurdin remarks that, the extent to which
employees believe that their employers are concerned about their well-being has a
significant impact on their work-related attitudes and behaviours (2006).
In other words, HRM practices send powerful signals to employees about the extent
to which the organization trusts them, and if organizations fail to deliver on contractual or
other promises, employees sense of indebtedness or mutual obligations will be reduced.
Results of this study found that trust in organization fully mediated the relationship
between career advancement and turnover intentions. This implies that career advancement
has an indirect and direct effect on turnover intentions (Hemdi, 2006).
Conversely, the Two-Factor or Motivation-Hygiene Theory argues that the nature
of a job a person performs has the capacity to gratify needs like achievement, competency,
status, personal worth, and self-realization, which lead to a happy and satisfied person.
However, the absence of such gratifying job characteristics does not appear to lead to
unhappiness and dissatisfaction. According to Herzberg, author of the Two-Factor Theory,
men are not content with the satisfaction of lower-order needs at work rather, they look for
the gratification of higher-level psychological needs having to do with achievement,
recognition, responsibility, advancement, and the nature of the work itself (Herzberg,
1968).
Finally, according to Agrusa & Lema, when investigating the issue of employee
retention, many surveys and studies reveal that more people leave their job because they do
not get along with their boss or supervisor than for any other reason. Direct service
employees, particularly, are the people who come in the closest contact with the customer
on a daily basis. Customer will often make a decision to return to an establishment based on
their interaction with a single employee. Thus, when valuable employees continually leave
an organization, it has a direct effect on the customer experience. For instance, if customers
cannot relate to the employees, business is affected in a negative way (2007).
Furthermore, Training investment is very important in a company, especially if they
belong to the service sector because inexperienced, poorly trained staff can turn customers
away, subsequently, these customers then talk about their unhappy experience to their
friends. Bad news travels fast. In other words, customers can discredit a hotel if they
experience bad service.
Therefore, it can be assumed that customer turnover (guests that leave and do not
return) is directly related to employee turnover which can become a challenge for many
hospitality businesses. Customer and employee turnover both have a direct link to the
bottom-line and profit (Agrusa, 2007).
In the following table, it will be explained in short, the possible causes that affect employee
turnover.

Table 1 - Summary of Turnover Possible Causes
Factors Explanation
OrganizationalCulture The extent to which employees believe that their employers are
concern about their well-being has a significant impact on their work-
related attitudes and behaviours.
CharacteristicsoftheJob Some jobs are intrinsically more attractive than others. A job's
attractiveness will be affected by many characteristics, including its
repetitiveness, challenge, danger, perceived importance, and capacity
to elicit a sense of accomplishment.

UnrealisticExpectations Poor recruitment, or a poor induction programme, with insufficient
care and time spent on enabling the new recruit to build strong
relationships with his supervisor and co-workers, this can cause
dissatisfaction that can lead to quitting a job.

HRM practices send powerful signals to employees about the extent to
which the organization trusts them, and if organizations fail to deliver
on contractual or other promises, employees sense of indebtedness or
mutual obligations will be reduced

Demographics Turnover might not always be the result of a rational decision-making
process characteristic of economic models of human behaviour, but
rather might he driven by work attitudes such as organizational
commitment.

Age is a time-based variable that affects one's job mobility and one's
stage in the personal and family life-cycles. Similarly, number of
dependent children is a non-work influence of turnover that is linked
to life-stage and job mobility.

ThePerson An individual's general satisfaction also enters into the problem. A
man may be entirely capable of performing certain work and still he
may not be contented. The place, the environment, the activity or lack
of activity may not suit him

MarketSize When demand is big, employees tend to go to the highest bidder, the
company that can offers them better conditions and/or pay.

Employers More people leave their job because they do not get along with their
boss or supervisor than for any other reason


Source: elaborated by Humberto Rodrguez Torres 2008. Based on (Walker, 2006; Hong & Chao,
2007; Hemdi & Nasurdin, 2006; Eberle, 1919; Agrusa & Lema, 2007)

Consequences
As mentioned before, turnover has direct and indirect costs that have to be taken
into account in order to measure the impact that it has over the companies. According to
OConnell & Kung (2007) there are three main components associated with the cost of
turnover:
Staffing, which can be defined as the cost of recruiting and hiring the person
initially, the organization must spend a similar amount to hire the replacement.

Vacancy, the period of time where a person isnt working in the company that
results in lost productivity and potentially lost business.

Training, time and resources invested on training, orientation, and development of
candidates.

However, pure replacement cost estimates fail to cover the total impact of turnover
on an organization. For instance, factors such as advertising for replacement staff,
commission fees to agencies, management time in interviewing, inducting and training new
staff, lost sales or business opportunities caused by inexperienced staff, interruptions to the
flow of work in a department, low morale and low productivity, damage to reputation (of
the business and the employer among prospective employees) are hard to quantify and need
to be added into the total cost of turnover (Walker, 2006).
According to OConnell & Kung (2007), costs can be higher when employees leave
within a short period of being hired; organizations do not have enough time to recoup their
investment. Employees did not provide enough output to make up for the investment the
organization put into them in terms of staffing, compensation, and training. A high new hire
turnover rate is usually related to issues with the selection process, such as choosing
candidates that arent qualified or are a poor cultural or motivational fit. Therefore, he
remarks that when this happens, the new hire turnover rate is almost three times as high as
the standard turnover rate. While the sample size is very small, it may indicate problems in
the selection, orientation, or training processes.
During the 1990s, a popular practice in many organizations was top grading, a
process by which companies routinely tried to eliminate the lowest 10 percent of
performers to improve the quality of the organization as a whole. Focusing on the quality of
those that are leaving vs. simply the frequency with which they leave is referred to as
turnover functionality. Nevertheless, according to OConnell studies have shown that,
negative ratios indicate potentially more serious problems that might be related to systemic,
cultural problems in the organization (O'Connell, 2007).
On the other hand, academics that follow the Motivation-Hygiene Theory, as well
as, the Mobley Model tend to assure that employees who perceived that their organizations
HRM practices are meant to take care of their well-being will experience greater trust in
their top management and higher affective commitment, and are less likely to leave the
organization. Thus, the higher employees trust in the organization, the less likely he or she
will leave the organization (Hemdi, 2006).
Trust in organization has also been empirically reported as an important intervening
variable impacting from ones beliefs to behavioural intentions or outcomes. Given the fact
that employees are more willing to trust their organization when they perceive that the
HRM practices of the organization are able to take care of their job or career development
needs, fostering supportive HRM practices designed for employee development would be
beneficial (Hemdi, 2006).
Training and development programs convey the message to employees that they are
being valued, supported, and cared for by the organization. As a result, it is possible that the
level of trust in organization experienced by employees may also influence their judgments
about HRM practices.
In the following table it will be exposed an evaluation of the consequences
generated by the causes mention in the previous table, as well as, the impact this
consequences have on a company.







Table 2. Consequences raised by employees turnover and its impact on a company
PossibleCauses Consequences ImpactintheCompany
Organizational
Culture

Trust in organization is an important intervening
variable impacting from ones beliefs to behavioural
intentions or outcomes.

If employees perceive that their organizations HRM
practices are meant to take care of their well-being.
They will experience greater trust in their top
management and higher affective commitment, and
are less likely to leave the organization.
Characteristics
oftheJob

The nature of a job a person performs has the capacity
to gratify needs like achievement, competency, status,
personal worth, and self-realization, which leads to a

Dissatisfaction can lead employees to think of
quitting a job.
happy and satisfied person. However, the absence of
such gratifying job characteristics does not appear to
lead to unhappiness and dissatisfaction.
Unrealistic
Expectations

The result of poor recruitment, or a poor induction
programme, with insufficient care and time spent on
enabling the new recruit to build strong relationships
with his supervisor and co-workers causes the induction
crisis.
The recruitment process plays an important part of the
success or fairly of retaining employees.

Lost of employees, waste of money invested on
training and more expenses for hiring new staff.
Demographics

Age is a time-based variable that affects one's job
mobility and one's stage in the personal and family life-
cycles. The number of dependent children is a non-
work influence of turnover that is linked to life-stage
and job mobility.

Turnover might not always be the result of a rational
decision-making process characteristic of economic
models of human behaviour, but rather might he
driven by work attitudes such as organizational
commitment.
Person

A man may be entirely capable of performing certain
work and still he may not be contented. The place, the
environment, the activity or lack of activity may not suit
him. A multitude of whims affect one's likes and
dislikes-

Low productivity and waste of money invested on
training and other expenses.
MarketSize

People with ambition will always be looking to improve
their career prospects and will want to move about to
gain more experience and responsibility - and to earn
more money.

People remain in jobs that they like even though
higher pay may be available elsewhere. If there are
good employment conditions, if staff like working in
the business, and if there are realistic opportunities
for advancement, people are likely to want to stay.
Employer

People leave their job because they do not get along
with their boss or supervisor than for any other reason.

When valuable employees continually leave an
organization, it has a direct effect on the customer
experience. For instance, if customers cannot relate to
the employees, business is affected in a negative way
Source: elaborated by Humberto Rodrguez Torres 2008. Based on (Walker, 2006; Hong & Chao,
2007; Hemdi & Nasurdin, 2006; Eberle, 1919; Agrusa & Lema, 2007; O'Connell & Kung, 2007)
Strategies

For many years, numerous strategies have been created in order to decrease turnover
rates in companies. However, most of them are based on 5 of the most important theories
that focused on understanding employees and how companies can motivate them, creating
the conditions where they can excel in their productivity. Furthermore, real world strategies
posses a combination of theoretical concepts applied in practices.
1. Two-Factor or Motivational-Hygiene Theory:
Firstly, the Two-Factor or Motivation-Hygiene Theory mentions that there is one set
of job characteristics or incentives that lead to worker satisfaction, while another and
separate set of job characteristics lead to dissatisfaction at work. Thus, satisfaction and
dissatisfaction are not on a continuum with one increasing as the other diminishes, but are
independent phenomena (Herzberg, 1968).
The theory distinguishes between two factors, Motivators such as, challenging
work, recognition, responsibility, which give positive satisfaction, arising from intrinsic
conditions of the job itself, such as recognition, achievement, or personal growth and,
Hygiene factors like status, job security, salary and fringe benefits, which do not give
positive satisfaction, although dissatisfaction results from their absence. These are extrinsic
to the work itself, and include aspects such as company policies, supervisory practices, or
wages or salary (Herzberg, 1968).
According to Herzberg (1968), hygiene factors are needed to ensure that employee
will not be dissatisfied. Motivation factors are needed in order to motivate employees to
higher performance.
HRM practices pertaining to employee well-being such as an orientation program, a
compensation system, job security, health & safety, and employee relations may play a role
in shaping employees attitudes. According to Hemdi & Nasurdi (2006), when employees
perceive that their organizations show greater concern for their personal growth and welfare
via the provision of an adequate and continuous training and development, a fair and formal
performance appraisal and feedback system, and adequate career advancement
opportunities, they will experience a positive emotional state (trust in organization)
The individual visions of the employees and supervisors create the shared vision of
the learning organization. The organizational vision must be created through the interaction
of the employees rather than simply created by their supervisor. The supervisor's role is to
facilitate participation and encourage employees to share their visions rather than forcing
his or her own vision on them (Hemdi & Nasurdin, 2006).
Examining history is an important activity that allows organizations to review past
successes and failures, assess them, and document the lessons learned. Organizations can
anticipate results by utilizing stored information to bring new and innovative perspectives
of processes. Feedback mechanisms for employees to learn from each other (supervisors
and non-supervisors) or from other organizations in a different field provide another
opportunity to examine and gather benchmarking data. Transferring knowledge is the key
for all learning initiatives. Learning activities that are disseminated through the
organization and applied on the job connect the learning with action to benefit both the
employee and organization (Hemdi & Nasurdin, 2006).
As competition in the hospitality industry continues to challenge organizations to
compete effectively, problem solving processes that involve both supervisors and non-
supervisors will need to be developed strategically to improve organizational effectiveness.
Through shared participation in decision making, personal responsibility may increase.
Supervisors working closely in conjunction with their employees may help to minimize
areas of misperceptions among either group of employees and develop a sense of shared
vision (Hemdi & Nasurdin, 2006).
2. J ob Characteristics Model:
Secondly, the J ob Characteristics Model, which attempts to address how a core set
of job characteristics impact a number of psychological states, leading to specific related
outcomes in the work environment.
According to the model, there are five core job characteristics: skill variety, task
significance, task identity, autonomy and feedback. The psychological states included in the
model are meaningfulness of work, responsibility for outcomes and knowledge of results.
Outcomes consist of high intrinsic motivation, high job performance, high job satisfaction
and low absenteeism or turnover.
Skill variety, task significance and task identity are used in the work environment to
stimulate meaningfulness and produce outcomes of both or either high intrinsic motivation
or high job performance. Therefore, if employees feel they are fully utilizing a variety of
their skills, their job affects many people to a great extent and they are allowed to complete
the task from beginning to end, it is likely they will perceive the job as meaningful, leading
to high job performance and/or high intrinsic motivation (Hackman, 1976).
This model can be reinforced with Adkins (2006) suggestions for a successful
business. Employees have to be involved in the decision-making. By contrast, employers
should create an environment where employees can freely give their opinion, letting them
take part in elaborating the training plan, encouraging them to come up with their own
ideas, developing an atmosphere where they can excel and be creative.
During an interview with Babylons restaurant owner, Adkins (2006) highlight:
Branson stated: For us, our employees matter most. It just seems common sense to me
that, if you start off with a happy, well-motivated workforce, you're much more likely to
have happy customers.
Adkins (2006) also remarks that it is important to set personal and collective goals,
by consensus, and monitor them during a certain period of time, therefore, a scheme
including a performance bonus is to be elaborated, subsequently, review it. Recognize
outstanding achievements and reward the best employees.
However, when an employee decides to renounce, employers should conduct an exit
interview. The employee should be asked why he or she is leaving and (in confidence) what
he or she thinks is good or bad about the business. If a regular pattern of complaints
emerges, action can be taken to improve the situation (Adkins, 2006).

3. The Peter Principle:
Thirdly, the Peter Principle, this applies to the level of competence of the human
resources in a hierarchical organization. The principle explains the upward, downward, and
lateral movement of personnel within a hierarchically organized system of ranks.
In an organizational structure, the Peter Principle's practical application allows
assessment of the potential of an employee for a promotion based on performance in the
current job. For example, members of a hierarchical organization eventually are promoted
to their highest level of competence, after which further promotion raises them to
incompetence (Peter & Hull, 1969).
Promotions are used as the primary incentive device in most organizations,
including corporations, partnerships and universities. Organizations use promotions, rather
than just monetary bonuses, to motivate employees even though this may conflict with
efficient assignment of employees to jobs. When performance is unverifiable, use of
promotion reduces the incentive for managers to be affected by influence activities that
would blunt the effectiveness of monetary bonuses. When employee are risk neutral, use of
promotion for incentives need not distort assignments, rather than when they are risk
averse. The distortion may be either to promote more employees that are efficient (the Peter
Principle effect) or fewer employees (Fairburn & Malcomson, 2001)
Moreover, Promotions serve two roles in an organization. First they help assign
people to the roles where they can best contribute to the organizations performance.
Second, promotion serves as incentives and rewards (Fairburn & Malcomson, 2001)
For instance, if a firm provides incentives by promoting those who have performed
well in a job, it may simply transfer them to a job to which they are not well suited, a mild
version of the Peter Principle which in its original version took the form people are
promoted to their levels of incompetence. Why not then use promotions to assign
employees to jobs and monetary bonuses to provide incentives (Fairburn & Malcomson,
2001).
Organizations, particularly large ones, must typically delegate assessments of
individual performance to managers, the incentives of those managers may not be perfectly
aligned with the goals of the organization, so they may misuse monetary bonuses, and
bonuses are a reward to employees for a work already done. To the employees, giving
bonuses to those who perform best is important only to maintain the long term reputation of
the organization for rewarding good performance (Fairburn & Malcomson, 2001).
However, Fairburn & Malcomson (2001) points out that if employees can simply
bribe the manager to give them a bonus, the incentives the bonuses scheme is intended to
provide is completely destroyed.
Thus, the use of promotions to provide incentives can mitigate this effect, as long
as, managerial rewards are tied in some way to the short term performance of the section
for which the manager is responsible, the manager has an interest in ensuring that the
appropriate employees are promoted (Fairburn & Malcomson, 2001).
When a worker gets stuck in a position it is suggested that a way of addressing the
problem is by means of class, or caste (social stratification).
The use of apprentices is a good strategy that company can apply to increase
productivity, quality of work, competitiveness and greater staff retention as Apprentices
now learn through a combination of on- and off-the-job education and training which
makes them more competitive. Furthermore, it embraces the motivational arguments of the
Peter Principles.
In a sector with traditionally high employee turnover rates, it has seen recruitment
and training costs fall significantly because its apprentices are more likely to stay. They are
also more likely to progress into management roles, leading to additional savings.
Employers such as BAE Systems, Bentley Motors, British Gas, Carillion and NG Bailey
also report extremely high staff retention rates of between 85% and 95%, all of which are
higher than their sector averages. They claim this is because apprentices who start their
careers with them have a higher commitment to the overall culture and aims of the
business. This in return brings an additional benefit of reduced recruitment costs. Both
BAE Systems and British Gas report that their productivity has increased (Apprenticeship
Ambassadors Network, 2007).
In order to enjoy of all the advantages that the use of apprenticeship generates, it is
important to get things right from the start that means that everyone involved in the
apprenticeship - individual, employer, training provider, and government skills bodies -
know what is expected of them (Apprenticeship Ambassadors Network, 2007).
The ingredients for a successful programme are providing a supportive
working environment with good support, where training is seen to be valued; induction
programmes should include high-quality information about the obligations and expectations
of apprenticeships, for young people, parents and employers; a scheme of appraisal should
be elaborated in order to monitor progression of the programme and ensure if it has been
completed; there must be effective communication and partnership between the key
stakeholders managing the apprenticeship: training providers, the Learning and Skills
Council, and the employer; identify 'at risk' apprentices early and put mechanisms in place
to follow up recently departed trainees to monitor their career paths; ideally, there should
be the opportunity for a permanent position on completion, subject to performance, which
is clear to the apprentice from an early stage (Apprenticeship Ambassadors Network,
2007).
4. McClellands Theory of Needs:
Fourthly, McClellands Theory of Needs, which proposes that an individual's
specific needs are acquired over time and are shaped by one's early life experiences. Most
of these needs can be classed as achievement, affiliation or power. A person's motivation
and effectiveness in certain job functions are influenced by these three needs.
McClelland explains that the majority of people have one motive to
significantly higher degree, though a few have all three high (McClelland, 1973).

High need for achievement - Highly achievement-motivated people should
be given challenging projects with reachable but challenging goals. They
should be provided frequent feedback. While money is not an important
motivator, it is an effective form of feedback if it is linked to clear measures
of success
High need for affiliation - Employees with a high affiliation need perform
best in a cooperative environment, where they can belong to something
larger than themselves
High need for power - Management should provide people with strong need
to influence the opportunity to manage others.

According to OConnell & Kung (2007), there are tools that can be used in the
hiring process that can significantly improve overall turnover, new hire turnover, and
retention rates. They argue that there are two primary approaches that have been shown to
be beneficial: evaluating risk factors and motivational fit, which are:
Risk factors that comprehend propensity for turnover, characteristics can often be
identified prior to hire. Research has shown that the way candidates respond to some
questions on an application form correspond to a reduced or increased likelihood for
turnover. However, there are some other factor that can reduce turnover such as candidates
that possess relatives working in the organization, as well, as, people who have had more
contact with the organization and are more apt to understand better the nature of the job and
the organization.
Motivational fit, which comprises target the compatibility or motivational fit
between the individual and the work environment. Finding qualified individuals may not be
enough.
In fact, according to OConnell & Kungs (2007) results, candidates who passed the
fit index were two times more likely to stay with the job than candidates who didnt.
Moreover, the combination of motivational fit and turnover risk indices as pre-screening
tools led to a 63 percent reduction in the overall turnover.
Through a better selection and organization management system, there is hope for
organizations to substantially cut turnover costs and sustain a competitive advantage.
It is also essential for hotels to provide clear career paths for their employees. A
written job progression showing the opportunities for career advancement within the hotel
for each employee would be useful. Therefore, it is suggested that it should be indicated
that promotions within the hotel are objectively spelt out and as an assurance that all
employees have equal chances of moving up the career ladder as far as their abilities
permitted. Furthermore, hotels need to train their managers in order to be able to accurately
evaluate the job performance of their subordinates. This is because effective performance
management activities reinforce employees sense of fair play and consistency, leading to
increased trust in organization (O'Connell & Kung, 2007).
5. Mobleys Model:
Last but not least, Mobleys Model, which explains how job dissatisfaction leads to
employee turnover. In order to understand turnover phenomenon Mobley proposed
turnover cognitions constructs: job dissatisfaction, thinking of quitting, intention to search,
intention to quit and turnover. These cognitions represent fundamental elements of
prevailing psychological models of employee turnover (Hemdi & Nasurdin, 2006).
Paton (2006) back up this model in his interview about the success of business in the
hospitality sector with Gavin Wetton, HR director at restaurant chain La Tasca, who argues
that: "It is all about ensuring people understand what's in it for them. It is crucial to be able
to apply this to your best practice. If you are committed to doing things in the right way,
you have to be flexible in how you implement things so that it is right for the business."
The simplest way for HR to be heard and respected is to ensure that the people at
the operational, sharp end of the business understand why adopting a particular procedure
or process is beneficial to them. With the comprehension of goals and procedures,
employees tend to increase their commitment to the company (Paton, 2006).
Wetton also said: There are some businesses in hospitality that can be quite
reactive on things such as appraisal, so, again, you need to explain to people what the
benefits are from having a good appraisal system," he explains. "There is a perception in
the UK, unlike on the continent, that this industry is long hours and low pay, so it is partly
up to HR to generate a more positive message. The key is to be accessible and
approachable, Wetton argues. "You need to listen to your employees and get feedback
from people who work in the business, (Paton, 2006).
Finally, for hospitality organizations that may be implementing new forms of
technology which may greatly shift employee responsibilities; problem solving capabilities
will need to be emphasized on an individual basis (Hemdi & Nasurdin, 2006).
The following table shows a summary of the results of the review using literature,
analyzing all the strategies proposed by all the authors and the possible results this can have
for a company if they are incorporated in HR programs.

Table 3. Summary of models and strategies stated
Model Characteristics Strategies or Actions Possible Results
Two Factor
Theory

Motivators
(increase
satisfaction)

Hygiene Factors
(decrease
dissatisfaction)


HRM practices pertaining to
employee well-being such as
orientation program, compensation
system, job security, safety and
health, and employee relations may
play a role in shaping employees
attitudes

Organizational vision must be created
through the interaction of the
employees rather than simply created
by their supervisor. The supervisor's
role is to facilitate participation and
encourage employees to share their
visions rather than forcing his or her
own vision on them

As competition in the hospitality
industry continues to challenge
organizations to compete effectively,
problem solving processes that
involve both supervisors and non-
supervisors will need to be developed

When employees perceive
that their organizations show
greater concern for their
personal growth and welfare
via the provision of adequate
and continuous training and
development, fair and formal
performance appraisal and
feedback system, and
adequate career
advancement opportunities,
they will experience a
positive emotional state

Supervisors working closely
in conjunction with their
employees may help to
minimize areas of
strategically to improve
organizational effectiveness. Through
shared participation in decision
making, personal responsibility may
increase

misperceptions among either
group of employees and
develop a sense of shared
vision
Job
Characteristics
Model

Five core job
characteristics
include: skill
variety, task
significance, task
identity, autonomy
and feed-back.


Employees have to be involved in the
decision-making. By contrast,
employers should create an
environment where employees can
freely give their opinion, letting them
take part in elaborating the training
plan, encouraging them to come up
with their own ideas, developing an
atmosphere where they can excel and
be creative.

It is important to set personal and
collective goals, by consensus, and
monitor them during a certain period
of time, therefore, a scheme including
and a performance bonus are to be
elaborated, subsequently, review it.
Recognize outstanding achievements
and reward the best employees.


When an employee decides to
renounce, employers should conduct
an exit interview. The employee
should be asked why he or she is
leaving and (in confidence) what he
or she think is good or bad about the
business. If a regular pattern of
complaints emerges, action can be
taken to improve the situation.


Increase of job satisfaction
which results, for the
company, in major
commitment a higher
productivity, in other words,
retention of employees.
Peter Principle
Employees can be
promoted based on
performance in the
current job
(hierarchical
position)


The use of apprentices is a good
strategy that a company can apply to
increase productivity, quality of work,
competitiveness and greater staff
retention as Apprentices now learn
through a combination of on- and off-
the-job education and training which
makes them more competitive

There should be the opportunity for a
permanent position on completion,
subject to performance, which is clear
to the apprentice from an early stage


Recruitment and training
costs fall significantly
because its apprentices are
more likely to stay.

Apprentices who start their
careers with them have a
higher commitment to the
overall culture and aims of
the business. This in return
brings an additional benefit
of reduced recruitment costs.
McClellands
Theory

Motivators:
Achievement,
Affiliation and
Power


There are tools that can be used in the
hiring process that can significantly
improve overall turnover, new hire
turnover, and retention rates. Two
approaches that have been shown to
be beneficial: evaluating risk factors
and motivational fit

Through a better selection and
organization management system,
there is hope for organizations to
substantially cut turnover costs and
sustain a competitive advantage


Candidates who passed the
fit index were two times
more likely to stay with the
job than candidates who
didnt.

Moreover, the combination
of motivational fit and
turnover risk indices as pre-
screening tools led to a 63
percent reduction in the
overall turnover
Mobleys Model
Dissatisfaction
(causes:
organizational
culture,
characteristic of the
job, unrealistic
expectations &
employers style)
led to turnover


Ensure that people at the operational,
sharp end of the business understand
why adopting a particular procedure
or process is beneficial to them. With
the comprehension of goals and
procedures, employees tend to
increase their commitment to the
company

If you are committed to doing things
in the right way, you have to be
flexible in how you implement things
so that it is right for the business

It is partly up to HR to generate a
more positive message. The key is to
be accessible and approachable. You
need to listen to your employees and
get feedback from people who work
in the business


Employees trust organization
and feel satisfies with its
working environment and
organizational participation,
therefore they remain in it.
Source: elaborated by Humberto Rodrguez Torres 2008. Based on (Walker, 2006; Hong & Chao,
2007; Hemdi & Nasurdin, 2006; Eberle, 1919; Agrusa & Lema, 2007; O'Connell & Kung, 2007; Adkins,
2006; Druce, 2007; Apprenticeship Ambassadors Network, 2007; Paton, 2006; Herzberg, 1968; McClelland,
1973; Hackman & Oldham, 1976; Laurence J. & Hull, 1969)

To sum up, turnover is an important process that all organizations suffer and that
have enormous cost, direct and indirectly. Moreover, it has an important impact on
employee morale, productivity and even on the companys revenue. There are four types of
turnovers: involuntary turnover, voluntary turnover, as well as, internal and external
turnover. However, it can be highlighted that involuntary turnover is most often initiated by
organizational changes and institutional constrains, in other words, when people do not feel
comfortable with their working environment or some certain working issues.
According to the research, there are 5 main factors that cause labour turnover which
are: organizational culture, characteristics of the job, unrealistic expectations,
demographics, the person himself, market size and employers and their management style.
Furthermore, it was reviewed that there are five main theories that conduct the
current strategies to reduce turnover rates and motive staff so that they can increase their
productivity.
Finally, achievement, power, affiliation, recognition, autonomy and hygiene are
some of the most important factors that employers have to take into account in other to be
successful in their management strategies.