The Imperial Hotel in London is a four-star hotel that is owned by the 4-star market-Star hotels. The Imperial Hotel is part of a chain of 25 hotels that the 4 Star market-Star Hotels operate in the United Kingdom. The main clientele that the hotel serves are tourists and international business individuals. The guests at the hospital have a high expectation for improved service standards. However, the hotel has been experiencing some problems that have the potential to destroy the image of the hotel as a top 4-star hotel in London. This paper will discuss the second problem that the hotel is currently facing (high staff turnover with 80% of the staff leaving within the year). The high rate of turnover at the hotel is because of the current nature of employment. The hotel employs foreign nationals who desire to work for short periods in London and students studying in London. In addition, the rate of turnover is high because of low pay.
The high rate of turnover has increased the hotel’s operational costs because it uses 35% of the total revenue for the hotel. High training costs associated with employment of new staff has reduced the quality of service provided to the guests. The hotel will lose some of its recurrent customers because of poor services. Furthermore, employees decide to leave the hotel to work for the competitors because of poor job satisfaction. There is a general decreased morale and commitment among the employees resulting in a high turnover. Failure to address the issue of high turnover will cause the hotel to incur additional costs associated with recruitment and training of new employees. The new general manager of the hotel, Peter Farnsworth, believes that some suggestions to combat the problem include offering higher pay packages and bonuses, training and performance appraisals, encouraging employees to compete for key supervisory positions and improve staff management through quality human resource practices.
Analysis of the high turnover rate
A high turnover rate at the Imperial Hotel in London is the second problem that the new general manager seeks to tackle. As mentioned above, the rate of turnover at the hotel is 80%. This means that more than 805 of all the employees that the hotel hires leave their employment annually. An interview with the staff members that leave the hotel argues that their reasons for quitting their jobs are because of a poor perception of work culture in the hotel. Currently, there is a culture of turnover at the hotel. Secondly, employees cite unsociable working hours as a reason for turnover. Thirdly, employees mention the lack of proper training, poor pay levels and little opportunity for promotion to supervisory positions as the reason why they quit their jobs. The poor pay that the hotel offers to the employees means that the employees will be unable to cater for the high traveling costs present in Central London. Also, the hotel has a low competitive advantage because similar hotels in London are offering higher payments and better working condition than the hotel.
Effects of high turnover rates
According to D’annunzio-green, Maxwell and Watson (2004), high turnover rates in organizations is a cause of concern because of the negative effects associated with the turnover. High turnover rates in organizations are the main cause of increased costs. It is expensive for organizations to manage high turnover rates because of the costs associated with hiring new employees and training the new employees. D’annunzio-green, Maxwell, and Watson (2004) asserts that organizations should tackle the issue of turnover because it will have an adverse effect on the profitability of the organization. The recruitment, selection and hiring process is expensive for most organizations; also, the organization will incur training costs that will increase the general operational costs for the organization. Furthermore, new employees may request higher pay levels compared to the previous employees. An organization that experiences fewer turnover rates will not incur high costs of operation compared to organizations that have huge turnover rates (Mckeown, 2002). In addition, an organization may be required to hire consultants to fix the problem of high turnover. A company will invest time and resources to tackle the issue instead of using the time and resource to diversify the business, investing in new marketing platforms and improving performance.
High turnover rates in organizations cause a decrease in the level of morale among the employees. It is important for employees to have high levels of morale because it will affect performance (Secord, 2003). However, an organization with high levels of the turnover rate will experience decreased morale among the employees. Employees will experience a decreased morale if they see other employees moving to other employment opportunities. Turnover rate can also be a cause of low morale, for example, if the employees do not have sufficient pay levels. When employees experience low morale because poor pay rates, their exit from the organization will further escalate the level of morale among other employees.
High levels of turnover rates will cause an organization to suffer from poor performance and productivity among the employees. An organization with high levels of turnover rate has employees with low levels of experience and knowledge to perform efficiently in the organization (Balentine, Mathis & Jackson, 2013). High productivity and efficiency among employees are important for all organizations because it determines the level of success and competitive advantage. In the case of the Imperial Hotel in London, there is a low level of employee morale, which subsequently affects performance. The effects of low morale and poor performance are the reason why customers are experiencing poor service delivery. Poor customer service is the reason why customers prefer to choose other 4 star hotels in London.
According to Banfield (2011), high levels of turnover rate in an organization causes management frustrations. Mangers working in organizations that have high levels of turnover spend a lot of time recruiting, selecting and hiring new customers. While the managers should spend time improving service delivery and performance of the organization, they instead spend most of their time handling the affairs of new employees. For example, a manager will spend a lot of time ensuring that new employees in the department are adequately trained to meet the objective of their new duties.
Management theories to fix the problem of high turnover
The preferred management approach that the Imperial Hotel should use is the human relations approach to management. The human relations approach argues that managers should analyze organizational behavior (how individuals interact at the workplace). The main assumption of the theory of human relations is that an organization will only achieve its goals and objective through the people and with the people. The human relations approach was developed by Elton Mayo in the early 1990s to improve organizational performance (Slattery, 2013). The management theory asserts that people are not economic-rational beings, but emotional. Also, all organizations are based on cooperation and not mechanical systems. The main features of the human relations approach are (Slattery, 2013):
- A manager should understand human behavior
- A manager should understand the inter-personal relations among employees
- Good human relations among employees at the workplace will lead to improved production and higher motivation
The employee equity theory is an example of a management theory that Peter Farnsworth should apply to reduce the rate of turnover at the Imperial Hotel in London. The employee equity theory works based on human relations to improve productivity and morale. The employee equity theory works on the basis that it is important to find a fair balance between an employee’s production level and the level of employee output (Davies & Hertig, 2008). The production level refers to skills level, hard work, and efficiency. Employee output refers to the salaries and benefits that the employee gets from production input. When an employee feels that the level of input is greater than the level of output, the employee will feel de-motivated in the workplace (Mckeown, 2002). It is important for organizations to ensure that employees’ input at the workplace is sufficiently rewarded through proper pay level and benefit. To improve performance and motivation, employers should offer a proper reward system that will motivate employees not to seek employment in rival organizations. The employee equity theory lists inputs as effort, hard work, skill, flexibility, commitment as employee inputs. Also, the employment equity theory lists praise, job security growth and financial incentives as employee outputs (Davies & Hertig, 2008).
The hierarchy of needs theory developed by Abraham Maslow is an example of a human relations approach to reducing employee turnover. The theory asserts that employees have needs that the employment should strive to satisfy (Koontz & Weihrich, 2010). Failure to satisfy all the employee needs will prompt the employee to seek other employment opportunities. For example, one personal need for employees is career development and growth. However, if an employer fails to meet an employee’s need for growth and career progression, the employee will seek employment opportunities in other rival companies. For example, at the Imperial Hotel in London, there are very few opportunities for employees to get promotions to supervisory positions. Many employees leave employment at the hotel to seek employment in rival hotels because they believe that they will advance their careers at the rival hotels.
The Imperial Hotel in London should use the human relations management approach to solving the problem of high turnover. A high turnover rate means that the hotel has a human resource problem. The human relation approach contends that an organization will achieve its goals and objectives if it has proper human relations among the employees. Peter Farnsworth should strive to ensure that the hotel management team has an improved relationship with the employees. The human relations approach asserts that managers should address issues that press employees because employees will seek employment opportunities elsewhere if the manager does not address their issues. Currently, the Imperial Hotel faces the problem of high turnover rates because employees are unsatisfied with their salaries and benefits. In addition, employees report poor job satisfaction because of lack of opportunities to progress their careers. The new general manager, Peter Farnsworth, should use the concepts of the human relations approach to management to address the issues that employees report.
The new general manager at the Imperial Hotel, Peter Farnsworth, should also use the concepts of the employee equity theory to address the issue of high employee turnover. The employee equity theory argues that the level of employee input should be equal to the level of output. It is clear from the case of the Imperial hotel that employees are not satisfied with their pay packages and benefits. Poor remuneration at the hotel is the reason why the hotel is facing high turnover rates. The employee equity theory asserts that striking a balance between the level of input and output among employees will increase job performance and motivation. Therefore, Peter Farnsworth should strike to improve employees’ remuneration and benefits to reduce the rate of turnover. Also, the new general manager should apply the concepts of the hierarchy of needs theory to reduce turnover. Ensuring that the hotel addresses the needs of the employees will cause the company to reduce turnover rates.
High turnover rate of 80% is a major problem that the Imperial Hotel in London faces. The reasons for a high turnover on an annual basis are poor satisfaction, low levels of employee morale, lack of opportunities for growth and training. The new general manager should apply the three management theories (human relations approach, the hierarchy of needs and employee equity theory). Applying the management theories will reduce turnover rates because employees will get higher incomes, benefits, training and possibility for growth. Furthermore, by reducing the high turnover rate, the hotel will reduce operational costs and subsequently increase the level of income.
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