There has been widening recognition that human resource management strategies (HRM) impact organisational performance and overall effectiveness particularly in the service industry where strategic HR practices can contribute to competitive edge (Cheng & Brown, 1998). The hospitality and tourism industry essentially comprises a service and production sector and with the immense emphasis on service quality, people essentially represent the entire industry. The success of the industry is dependant on the calibre of its employees and how they are managed in order to help the organisation achieve its objectives. HRM practices in smaller organisations are given comparatively a lower priority with larger hospitality organisations. (Kelliher & Johnson, 1987)have recorded studies to suggest that even larger hotels have not yet developed a model for HRM but is moving away from personnel management in the past two decades. The major challenges faced by the hospitality industry and organisations within this industry are that the industry is known for poor pay and employment conditions and a low take-up of HR practices. It is also generally believed that the industry has relied extensively on low-cost, numerically flexible and disposable workforce. Within the Australian context, there has been controversy regarding the extent to which organisations are moving away from a low wage, low-road approach to HRM exemplified by high levels of contingent labour towards a more systematic high commitment approach consistent with functionally flexible, enabling work practices (Angela Knox & Walsh, 2005). The key issues that have central implications for strategic HRM are the casualisation of the workforce and high employee turnover within the industry and human resource managers need to utilise practices that enable them to have flexibility with respect to employment contracts and casual labour and also have strategic objectives to reduce the high employee turnover. This report attempts to identify the key issues within the Hospitality and tourism industry like casualisation of the workforce, employee turnover and its implications for strategic human resource management. The report also discusses the case of Marriott International Inc., a large hotel chain operating within Australia and world over and attempts to identify if there are trends of best practices within its HR department which can be applicable to the entire industry.
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2. HRM practices in Hotel industry in Australia
(Lockyer & Scholaris, 2004)conducted a survey that revealed that there was a lack of systematic selection procedures in the hotel industry particularly the small hotels and the larger hotel chains were having difficulties meeting the demands imposed by the labour market and other recruitment constraints. HR practitioners must have a tacit knowledge of a hotel’s local labour market and customer base to be able to make strategic selection procedures. Recruiting and selecting staff members is essential to an organisation and since the hospitality industry is largely a service industry, the employees should also be considered as assets. Hiring practices in Australia have moved from traditional methods (advertising, walk-ins, selection interviews, reference checking, etc.) to more strategic approaches like networking, internal labour market, behavioural interviewing, targeted selection, etc. Australian hospitality industry trends suggest that there is more internal recruitment within organisations and internal recruitment is inclusive of transfers and promotions of casual and part time staff. Recruiting methods in Australia are seen to be predominantly strategic but less innovative. Australian hotels place high emphasis on the recruitment and selection process to attempt to reduce employee turnover and there is a large number of casual labour hired especially amongst the young because of the ease of entry.
Consequently it can also be recognised that effective training and development practices within the service industries is imperative to providing a unique and differentiating standard of service, enabling increased profitability and bottom line results. According to the World Tourism Organisation (WTO), the hospitality and tourism industry is the largest sector and effective HR practices like training and remuneration and will benefit the organisation succinctly through their implementation (Taylor & Davies, 2004). Australian hotels use a number of methods to identify the training needs of the employees by usually analysing guest comment cards, consultation sessions amongst employees etc. The industry being highly labour intensive poses a major task for the management of this labour as the product delivery is conversely based on the effectiveness and manner in which service is delivered within the industry.
The hotel industry is associated with long, unsociable hours and poor working conditions highlights the poor pay, low skills and lack of career opportunities as characteristics that influence the attraction, development and retention of managers.(O’Leary & Deegan, 2005), (G. Martin & Woldring, 2001). Therefore a high emphasis must also be laid on the development of managers. (Brophy & Keily, 2002) developed a competency framework for middle level hotel managers by mapping these to the key results areas of customer care, quality and standards, managing staff, achieving profitability and growing the business. They highlight the importance of operational activities for middle managers, concurring with the finding of (Watson & McCracken, 2002)and (Watson, McCracken, & Hughes, 2004)
Another area of importance is performance management and most hotels practice procedures like the performance development plan (PDP) which involves employee feedback and input and are integrated into the performance appraisal plan (Cheng & Brown, 1998). The practices adopted in Austrlian hospitality firms are a combination of self appraisal in conjunction with supervisor – subordinate evaluation. This practice has been widely adopted by a number of Australian firms because it is perceived to be a more balanced assessment of the employees but a strategic and functional practice which can be adopted is the 360 degree feedback because this is a service oriented industry and the feedback from customers and peers would certainly benefit the evaluation of an employee’s performance.
There is also an underlying practice amongst Australian hotel industry employers regarding employment relations and they engage directly in firm-level bargaining with trade unions. The Australian hotel industry was characterised by poor union participation but in recent years, evidence from (Angie Knox & Nickson, 2007) suggests that this is not the case especially in larger firms. The union representation of this industry approximates about 37 percent density according to Australian Workplace Industrial Relations Survey. Wages and employment conditions are regulated by legally enforceable awards and Australian hotels are regulated by a combination of federal awards and collective agreements (Angie Knox & Nickson, 2007). This in turn has a cascading effect on the type of employment relationship in existence and also introduces the issues pertaining to the hiring of causal labour, part time employment of majority of the entry level service jobs and also the prominent problem of employee retention.
The most significant challenge faced by HR practioners is to work effectively with other function managers within the hotel to create integrative plans that help the firms achieve their business objectives and to link the strategic goals of the Human Resource function to that of the other departments and the organisation as a whole (Tracey & Charpentier, 2004). This involves intensive practices of Corporate Social Responsibility implemented by the HR function but aligned with the organisational objectives. The interest in business ethics in Australia has also increased with significant research being conducted not only on the role of the HR function but also its ethical implementation. There is a low consensus among HR managers in translating ethical principles into organisational practice and strategic HRM helps to implement these principles and minimise the deficit in transfer of knowledge. Business ethics and the role of HRM is significant here as it includes the concept of productivity, profitability, efficiency and effectiveness in achieving the organization’s basic purposes, comply with legal requirements, or, alternatively, that they succeed in avoiding legal threats and to improve quality of work life, to ensure fairness in policies, and to foster harmonious relationships between management and workers. Therefore strategic HRM is important to achieve organisational goals and therefore achieve better firm performance (A. Martin, Mactaggart, & Bowden, 2006). This sort of Strategic HRM practices can be seen in the case analysed below of Marriott International Inc. which is a large international hotel chain also operating within Australia.
3. Marriott International Inc.
The case of Marriott International Inc. illustrates some best practice principles which have resulted in the organisation being awarded the employer of choice awards a number of times and placed 50th in a leading newspaper as the ‘Best Company to Work For’. Marriott uses its employees as a brand differentiation strategy as revealed by their surveys with employees which was the outstanding service qualities delivered by the employees. Marriott International Inc. has an organisational culture of “spirit to serve” whereby they use a three stage approach to implementing these strategies. Training programs lasting five days are conducted on a periodic basis for their leaders and managers and have a map of customer expectations created and a plan to exceed those predicted expectations. Managers are given techniques to improve self motivation and that of their team through positive attitude including visualisation, writing goals down, and positive vocabulary. They are also equipped with culture change to drive their business. They also deliver 15 minute training sessions that cover major aspects of job quality and also have a ‘daily basics’ training that covers on one of the basics to deliver good products. Marriott has recognised that the only way to deliver the brand is through their people (Anonymous, 2003).
Marriott is committed to fair treatment of associates and to providing training and advancement opportunities to all employees. Diversity is also an important policy in Marriott. The company believes that this is the way they attract, develop and retain talent people. Such diversity is not only within group, but also applies to suppliers, customers, owners and so on. Marriott states that one of major efforts are devoted to recognize associate hard work, provide health care, and create opportunity for growth and career development. The company is trying to build an associate-centered environment. Therefore, it provides a total compensation package which include:
• “Medical, Dental, Life, and Disability Insurance
• Annual Salary Increases
• 401(k) Retirement Savings Plan
• Continuing Education/Tuition Reimbursement
• Hotel Room and Food & Beverage Discounts
• Ongoing Training and Career Development “
Marriott International Inc has a formal corporate culture; there are also holistically planned HR policies, although there are different emphases between those formal corporate culture and HR policies (Fu & Liu, 2005). Marriott award their employees with the highest award, which is the J. Willard Marriott Award of Excellence and the selection is made from over 300,000 employees (Anonymous, 1996). The company also awards employees on their excellence towards corporate social responsibility with the Alice S. Marriott Award for Community Service which goes to show their efforts towards building an ethical and socially responsible organisation through their ‘spirit to serve our community’ efforts (Anonymous, 2003). Marriott International Inc., also has programs with its low-skilled, low-wage workers to offer them opportunities with day care, English classes, and other social services for loyalty, enthusiasm, and a low turnover rate. Employee stock options are also part of the package. This is one instance where the self-interest of low-skilled, low-wage employees coincides with the self-interest of their employer (Bethesda, 2009). It can clearly be noted here that considering the levels of the casual workforce in Australia, Marriott has made arrangements to attract and retain even these types of employees. Since, Marriott, have recognised that the hospitality industry is a labour-intensive service industry, depending for its success ‘on the social and technical skills of its personnel, their ingenuity and hard work, their commitment and attitude, they have created a conducive environment to treat their internal customers with priority and it permeates to all the HR functions.
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4. Casualisation of the workforce in Australia
The Australian context of the tourism and hospitality industry has been characterised by casual employment which has been permitted under labour regulation with concerns of it being precarious (Campbell & Brosnan). (Wooden & Warren, 2004) also emphasises that this is one of the distinctive features of the Austrlian labour market and the Australian Bureau of Statistics (ABS) data suggest that just over 27 percent of all employees were employed on a casual basis. Australian Employment law Guide reports that this percentage has been progressively increasing in the past 5 years as shown in Appendix 1 in terms of the number of labour hours worked. Milman suggests that 51.3 percent of teens are employed on a casual basis within the hospitality tourism and retail industries which is a significantly large number of casual workers. On the other hand (Angela Knox & Walsh, 2005) suggests that research shows that a number of managers are employing temporary and casual workers and, to a lesser extent, part-time employees, as well as female, ethnic minority and immigrant labour.
The increased number of casual employees is largely filled by young workers especially in the Food and Beverage outlets, Banquets and Housekeeping. There is almost no qualification required for these entry level positions and employees are usually trained on the job. The employment of temporary and casual workers is shaped by fluctuations in customer demand and the size and number of extra events and functions that are scheduled during the day and tight labour cost-control practices are considered to be a key characteristic of HRM in the Australian hotel industry. These characteristics have been the primary reason for the employment of causal and temporary workers based on demand. This form of employment can be seen as employment that falls under Total Quality Management, where employment is on the basis of production, or in this case service demands.
As labour regulation has developed, casual employment has come to be firmly embedded in labour regulation. Casual employment has a number of characteristics irrespective of the industry being examined and this can be further reiterated by the laws that provide for casual and temporary employment. The Australian Employment Guide says that it is important to distinguish casual contracts from continuing contracts because by definition casual contracts impose no obligation on either party to continue the relationship. Each period of hiring is distinct and severable and any continuing relationship does not mean in law a continuing contract. In casual contracts, therefore, there is a work/pay bargain that:
• provides no continuity of employment, and consequently no obligation on the employer to provide, or continue to provide, work; and
• directly ties work, output or time spent to the rate of pay. This is so whether the nature of the payment is on a piece-work or time-rate basis.
The issues here that develop as a direct consequence of this kind of employment include but are not limited to greater job insecurity, low pay, limited opportunities for career progression, unsatisfactory working hours, low levels of access to work-related training and low levels of union representation. Even though the union membership has increased significantly over the past few years within the hospitality industry, the union membership for casual employees is virtually non existent. Wooden conducted research which provides conclusive evidence that although there are negative attributes of casual employment, it is extremely misleading to characterise non-standard jobs as sub-standard jobs. It thus follows that initiatives intended to inhibit the diversity of employment options that are available to employers will often not result in changes in working arrangements that will be unambiguously preferred by employees.
If Australia wishes to develop a committed, highly skilled workforce, it must offer jobs which are secure and where the employees receive benefits commensurate with their skills and experience; in other words the many holes in the legislative and administrative framework need to be tightened up so that casual work is not abused. The practices used by Marriott International Inc. as described earlier have been very useful in preserving the ethical integrity of casual employment within the hospitality industry in Australia and even hotels like Hilton offer its employees a work at home option to improve both company as well as employee growth and performance. The research findings of (Angela Knox & Walsh, 2005) also suggest that a number of recent studies have challenged the notion that the hotel industry takes an unequivocally ‘low-road’ approach to employment and HRM matters and this reflects insights from research studies on the hotel industry that suggest that differences in employer policy and practice may well reflect variations in organisational size and market position. As in the case of Marriott which is a large company with 300, 000 employees and with percentage of net profit to be 14.4 percent (appendix 2), the company size and market position have allowed it to take the ‘high road’ and utilise the HRM function as a source of competitive advantage and align it consistently with the business strategy, goals and objectives.
5. Staff retention and high turnover
The Australian hospitality and tourism industry not unlike the rest of the world is notably a highly labour intensive industry with employees often taking on varying degrees of work load and pressure within the service construct. Employees, especially entry level, casual, part time and temporary employees are often faced with high pressure work systems where performance is given considerable importance which has direct impacts on firm performance on the whole. Most leading hotel chains even have regulations on grooming standards and codes of conduct of employees and employees can be dismissed based on those grounds. This puts added pressure on the workers which can lead to an increased percentage of staff turnovers.
The prominent issue that arises from high staff turnover is naturally increased personnel costs incurred because of recruiting and training new replacements, but the turnover analysis is often ignored within the Australian hospitality industry as it is seen as a hidden cost and is considered a normality within the industry itself (Cheng & Brown, 1998)
(Dibble, 1999) suggests that turnover may be caused by personal or personality factors, family issues, work, team relations, as well as organisational structure and strategic human resource practices. (Cheng & Brown, 1998)Cheng and brown here suggest that HR practices should pervade every HR function and the organisation itself to reduce the turnover within the industry. Organisations that employ more flexible HR practices have a greater probability to induce low employee turnover. (Davies, Taylor, & Savery, 2001) conducted research in hotels in western Australia that enlightened the fact that although researchers have long spoken about the numerous HR functions like training, performance appraisal, remuneration, employee development and their effect in reducing turnover, the most prominent function that indicates an improvement in quality, productivity and reduced employee turnover is the training function. Employees feel empowered and committed to the organisation for the training received by them. The kind of training within the hotel industry can be skills acquisition, performance management training, leadership and development etc. Although the current economic crisis has increased the availability of talented labour for the hospitality it is still imperative to integrate HRM functions to retain employees within the organisation.
6. Recommendations
The HRM department of Australian hospitality and tourism industry although strategic in their approach towards their function, needs to adapt to the increasing demands of the industry and the high increase in casual work force. HR managers need to conduct substanstiative training and development activities to empower even their casual staff to reduce turnover and utilise employees as a source of competitive advantage for firms. They need to align their strategy with the goals and objectives of the organisation itself so as to be able to recruit and select appropriate employees whether it is causal, part time or full time employees. Increasing the benefits and compensation given to employees also reduces the turnover in the industry as clearly indicated by the Marriott case. Providing low cost benefits for casual employees and training reduces the annual turnover and increases firm performance.
7. Conclusion
The Australian hotel industry is highly dynamic and has various attributes to it; most significant of those are the casualisation of the workforce and high turnover. The recommendations put to practice certainly aides organisations perform better and reduces the negative implications for the HR department within these organisations. Taking a ‘High road’ approach and focussing on delivery of quality helps the HR managers to focus on training and development of the employees and to increase higher commitment from them. The areas of significant change likely within the hospitality industry are technology, power paradigms, training and development, compensation programs, employee relations and family, social and work life balance. These areas need to be facilitated by the Human resource managers by integrating their practices to ensure high firm performance and low turnover by empowering employees.
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