Competencies Describe the hospitality industry’s turnover problem, demonstrate how to calculate turnover rates, and identify the costs of turnover. (slides 1–5) List causes of turnover, summarize several methods for reducing turnover, and discuss the impact of diversity on turnover. (slides 6–13) Explain the proper use of discipline in a hospitality organization and describe approaches to employee discipline. (slides 14–18)

Competencies (con’t) Describe possible appeals processes in an employee discipline program. (slides 19–20) Describe the appropriate use of discharge in an employee discipline program and identify several important concerns associated with using discharge. (slides 21–24) Outline an effective exit interview system. (slides 25–26)

Determining Turnover Rates Turnover is the term for the replacement cycle that occurs each time a position is vacated. The rate of turnover can be calculated for any time period or any group of workers. Slide 1

Methods for Determining Turnover Rates The following method, which includes both desirable and undesirable turnover, is used to determine total annual or monthly turnover rates: # of terminations Annual turnover rate = x 100 Average # of employees A second method can be used to adjust for loss of undesirable employees (desired turnover): Annual turnover rate # of terminations − Desired terminations = x 100 Average # of employees Slide 2

Major Findings of the AH&LEF Study The 1998 American Hotel & Lodging Educational Foundation (AH&LEF) survey on turnover found that employee turnover in the lodging industry was about 50.4 percent annually overall. Other significant findings include: Turnover is not as high in the lodging industry as it was previously believed to be. Both managerial and supervisory turnover is much lower than anticipated. Very few lodging properties kept information on turnover that occurs within the first 30 days of hire . Slide 3

Major Findings of the AH&LEF Study (con’t) Very few properties (5.1 percent) calculate separate turnover rates for part-time and full-time employees. More than two-thirds (68.3 percent) of the participating properties maintain separate turnover records on a departmental basis. Different companies and properties calculate turnover differently. The results of the landmark AH&LEF study on turnover have more recently been confirmed by other researchers as still accurate. Slide 4

Costs of Turnover Turnover costs range from $3,000–$10,000 per hourly employee. According to the National Restaurant Association, turnover costs for restaurants average about $5,000 per employee, while turnover costs for managers can average $50,000 or more. Tangible costs are incurred directly when replacing employees; intangible do not relate directly to out-of-pocket expenses. Separation costs are incurred directly with the loss of an employee. Replacement costs are associated with recruiting new employees. Training costs are those associated with orienting new employees, preparing and printing new employee information, creating or purchasing training materials, and conducting training. Slide 5

Causes of Turnover Most researchers agree that turnover is more related to internal causes than to external causes. Researchers have found three main causes of turnover: (1) low compensation, (2) faulty or inadequate hiring practices, and (3) poor management that weakens morale. Within the hospitality industry specifically, a recent study has pointed to the impact of three factors—culture, hiring practices, and promotion practices—as being responsible for most hospitality turnover. Both managers and employees cite the quality of supervision as the number one cause of turnover in the hospitality industry. Recent research also points to “shocks” as causes of turnover. Slide 6

Top 15 Major Causes of Hospitality Turnover 1. Quality of supervision 2. Ineffective communication 3. Working conditions 4. Quality of co-workers 5. Inappropriate “fit” with company culture 6. Low pay and few benefits 7. Lack of clear definition Slide 7

Top 15 Major Causes of Hospitality Turnover (con’t) 8. No direction on what to do 9. Commercialized expectations 10. No career ladder 11. Changes in leadership 12. Limited career opportunities 13. Changes in philosophy or practices 14. Lack of clear direction on a company-wide basis 15. Job transferability Slide 8

Short-Term Turnover Remedies Employee retention programs are designed to reduce turnover. Short-term remedies focus on collecting and using information to address immediate concerns , and include: Surfacing the organization’s culture. Finding out why employees leave. Finding out why employees stay. Asking employees what they want. Giving employees a voice. Slide 9

Short-Term Turnover Remedies (con’t) Making managers aware of their biases. Developing recruiting programs that meet the company’s needs. Developing orientation programs that reflect the organization’s culture. Taking interviewing seriously. Take managing turnover seriously. Slide 10

Long-Term Turnover Remedies Long-term remedies focus on making organizational changes to create a company in which employees want to work, and include: Developing socialization programs. Developing training programs in additional languages. Establishing career paths. Implementing partner/profit-sharing programs. Implementing incentive programs. Providing child care and family counseling. Identifying alternative sources for employee recruitment. Reconsidering pay scales. Slide 11

Keys to Successful Retention Programs 1. Executive-level support 2. Managerial follow-through on program implementation, maintenance, and support 3. Expenditures of time and money Slide 12

The Impact of Diversity on Turnover As hospitality and other industries become more diverse, it may be necessary for managers to review company policies and attitudes in order to retain certain groups of workers. The payoff for managers who pay attention to cultural differences can be great: higher productivity, better service, fewer guest complaints, lower labor costs, and greater profitability. Managers must establish open communication with everyone in their diverse work force; failure to do so can certainly result in unwanted turnover. Slide 13

Laying Groundwork for Disciplinary Systems Managers must establish rules of conduct for the workplace and then communicate how those rules should be followed. It is imperative that managers: Establish reasonable rules Make sure employees know the rules Enforce the rules fairly, without discrimination Document each employee action or behavior that results in discipline Slide 14

Approaches to Administering Discipline There are at least three basic approaches to discipline: 1. The hot stove approach 2. Progressive discipline 3. Preventive discipline The first two are traditional approaches in that they are reactive, i.e., emphasize the administration of discipline after an employee fails to follow organizational norms and standards. The third approach is proactive, in that it attempts to establish a means of directing employee behavior. Slide 15

The Hot Stove Approach This approach holds that employees who break a rule are subject to disciplinary action; it has several foundations: Immediacy: Corrective action must be taken immediately after an infraction occurs. Warning: Managers must provide clear ground rules for behaviors and adequately warn employees that “hot stoves will burn.” Consistency: A hot stove will burn everyone to the same degree. Impersonality: Discipline must be linked with the behavior, not the person. Appropriateness: The degree of discipline must equal the extent of the infraction. Slide 16

Progressive Discipline Progressive discipline relies on a clear and complete definition of behaviors that will be penalized and the type of disciplinary action that will be meted out for each infraction; it comprises four steps: Oral warning: An informal warning with no documentation Written warning: A formal warning in which a copy of the documentation is placed in the employee’s file Suspension: Time off, usually without pay Discharge: Termination of employment Slide 17

Preventive Discipline Preventive (positive) discipline places disciplinary emphasis on recognizing and reinforcing good performance rather than punishing bad performance. Stages include: Oral reminders Written reminders Paid decision-making leave Discharge Slide 18

Appeals Mechanisms Appeals mechanisms serve two major functions: 1. It allows each party to present its side of an issue 2. It provides evidence of managerial efforts to ensure due process for employees Slide 19

Appeals Processes 1. The hierarchical appeals process is based on an organization’s chain of command. 2. The open-door appeals process allows employees to appeal to any manager in the organization. 3. The peer review appeals process requires that committees of employees and managers hear appeals and issue final rulings. 4. The ombudsman appeals process involves the use of an ombudsman who investigates complaints or a mediator who listens to both sides of a case and attempts to mediate an acceptable solution. Slide 20

Wrongful Discharge Wrongful termination lawsuits account for 13% of all lawsuits in the United States, second only to shareholder suits. Employees can sue employers for back pay, front pay, and punitive damages in wrongful discharge cases. A transfer can be viewed as wrongful discharge if it is used as a method of avoiding a termination or layoff; a demotion can be viewed as wrongful discharge if it involves no record of employee wrongdoing. Managers must enforce the same rules and penalties fairly at all times if companies wish to avoid or win wrongful discharge cases. Slide 21

Employment at Will Under employment at will, management can terminate an employee at any time for any reason, and employees can terminate a relationship with an employer at any time for any reason. Recently, the U.S. has moved decidedly away from this doctrine toward the philosophy that there is an implied contract between an employer and an employee. Jury members tend to hold that an employee cannot be fired without “sufficient cause,” and are likely to find for the plaintiff if they do not see sufficient cause. A detailed employment history can avert a lawsuit and it is always important to document the precise reasons for termination. Slide 22

Public Policy Employees cannot be fired for filing workers’ compensation claims, serving on juries, refusing to commit perjury, or, in many states, for whistleblowing, i.e., informing on other employees or managers or turning them in to authorities for illegal acts. These rights have been reaffirmed in more than 40 states as exceptions to either employment at will or employer-employee contract arrangements. Slide 23

Discharge Interviews Discharge is the maximum penalty an employer can levy on an employee, thus it should be taken only as a last resort. The purpose of a discharge interview is to: (1) relate the history that has led to the interview, (2) explain why the manager must take such severe disciplinary action, and (3) complete the discharge. Slide 24

Exit Interviews Exit interviews are interviews conducted with employees who leave an organization for any reason. The purpose of exit interviews is to collect information on why employees leave and learn what can be changed to ensure that more employees are not lost. Many hospitality managers use exit interviews only to find out if a departing employee is likely to sue the company, but it is far more important to use them to find out why good employees leave. Exit interviews are most effective when conducted by a third party. Slide 25

Guidelines for Conducting Exit Interviews Conduct interviews in the final week of employment, but not on the last day if at all possible. Make every effort to ensure either anonymity or confidentiality. Probe for the real reasons employees are leaving. Schedule a follow-up interview one to three months after the employee leaves. Close the interview with guarantees of confidentiality and warm thanks. Slide 26