Labor Turnover in a Hospitality Business - Report Example

Executive Summary This document consider staff turnover at a franchised outlet of a famous chain of branded convenience foods. It is based on a sample survey of employees who work at this outlet, located in a prime commercial downtown site. The outlet has been in operation for about 7 years, but none of the original employees remain at the first level of organization, whereas most at the supervisory level have about 5 years experience each. The company’s service levels are affected by this high turnover at the customer interaction level, and the franchisee management is not adequately seized of the matter, as new recruits are available in plenty, and since training costs are met by the brand owner. Changes in recruitment, training, and team building can reduce employee turnover, and take the outlet towards better performance levels. Introduction The People element of the Marketing Mix is one of the distinguishing features of services versus products (Payne, 2002). This element found no mention when the first 4 elements were conceived. Hospitality is a service which essentially relies on people, and no business in this sector can expect to do well unless it excels in interaction with customers. Every business which uses people and service as a means of competitive advantage focuses on training in order to develop proprietary ways of turning ordinary individuals in to standard reproductions of templates of how customers should be treated and served. Some service enterprises invest more on training establishments than on conventional physical assets. Employee turnover can become a limiting factor for productivity, as enterprises depend increasingly on training recruits to implement their exclusive service processes. Turnover of trained personnel can also dilute the competitive edge. Some organizations may not be fully aware of all costs and non-financial implications of staff turnover. This document reports on a franchisee of an international brand of convenience food outlets. Research has combined individual data collection with focused group interviews (Walters, 1996). The findings are used to suggest ways in which the brand owner can make the franchisee accountable for the costs and non-financial effects of employee turnover. General conclusions have also been drawn from the specifics of the case studied. Description of the Operation The franchisee is located in a prime downtown area, with dense customer traffic throughout opening hours, which are from 1100 to 2300 local time. The brand leverages international appeal, cleanliness, nutrition information, respect for local ethnicity, and speed of service. Burgers, fries, and shakes are the most popular lines of products, and young people looking for casual entertainment are targeted customers. There is a separate dessert kiosk, a take-away service, and a delivery service, apart from a standard restaurant area with tables and chairs. The business is highly competitive. Other branded convenience food outlets, as well as small domestic enterprises abound within meters of this franchised outlet. Much of the custom is spontaneous, and people have any number of choices should any one outlet fail to meet their expectations. Young people are impetuous in any case, and may walk away if kept waiting, or treated with anything less than top professionalism. International branding is the primary strength of this franchised outlet under study. The brand represents a modern culture with global appeal, and strongly motivational appeal. The Product, Promotion, and Price elements of the Marketing Mix are strongly coordinated, apart from the Place advantage through the prime location, but service elements are no less important in enhancing the offer against tangible offers from other outlets on the very street. The local economy is in the midst of unprecedented growth. Incomes rise quickly, and the ranks of potential customers swell in cascading waves. The demographic mix is eclectic in character, with customers from international backgrounds mixed with upwardly mobile representatives from domestic sections of society. The brand owner manages almost the entire business cycle save for the formal employment of front-line staff. Food and beverages on the menu are delivered at least once a day in semi-finished form. All food preparation and service areas are internationally standardized, as are all planned phases of customer interaction. Core Functions, Ownership and Success Speed of service is an essential component of the service, and the one which is most easily measured. Every person taking an order commits a time in seconds, within which the tray or parcel will be ready, and such promises are also made for home deliveries. Customers need not pay if service time is exceeded, so pressure from them to enforce this condition is high and unvarying. The franchisee must not only have enough people to operate all order-taking stations, and have sufficient numbers of stations so as to minimize queues, and to door-deliver orders, but have additional people ready to take orders from people in line, so that their orders are ready by the time they reach cash counters. Uniformity of service and of product is a second and equally important dimension of the brand to be delivered by the franchisee. Every customer has to be treated with courtesy and friendliness which is quite unique anywhere in the city. The products are precisely the same in taste and appearance as in any other outlet, not just in the city and country, but anywhere in the world. Objection handling meets exacting standards, and it is very rare if at all possible to encounter a dissatisfied and angry customer, or one left disgruntled after expression a complaint. It is difficult for an observer to realize that this is a franchised operation. The branding is so strong that only the records of regulators can independently establish the nature of employment of the staff encountered directly by customers. This implies a sophisticated and intense set of Human Resources Management processes, by which the brand owner is able to influence the behavior and actions of people not directly employed by them. Success must be defined in some financial terms, governed by the contract between the brand owner and the franchisee, but this information is not available and outside the purview of this document. We have to assess it in terms of customer density and branding. All visits to the outlet, during relatively lean times between meals and during working hours, showed relatively high table occupancy, no evidence of unhappy customers, and every sign that the outlet only varies between rather full and reasonably full. Therefore, we can conclude that the operation is successful and doing much better than most other convenience food outlets in the vicinity. Staff Profile Information has been collected informally from employees, rather than by any official communication with the franchisee or the brand owner. It appears that the franchisee has about 50 employees at this outlet, who work in two shifts, and with different weekly and other holidays. Security and pest control are on contract, as are emergency services for power, plumbing, and related maintenance of utilities. No front line employee appears to be over thirty years, and the supervisors are visibly below 40. The brand owner seems to be particular that all interaction with customers are through people of their own age group, so middle-aged and older employees, if they exist, are out-of-sight! All employees have finished primary education, and are knowledgeable about the latest trends in music, fashion, and related matters, which matter to the young, but none of these people, have finished college. The course of the survey for this document gave the impression that people recruited by this franchisee are almost adolescent in their attitudes, with no signs of any scholastic excellence or academic aspirations. However, they are extroverts, with high spending habits of their own as well. Not one of the employees surveyed felt proud of their work, but seemed to be highly dependant on their financial remunerations. Loyalty to either the franchise owner or to the company which owns the brand is non-existent. Fear of dismissal drives people to conform, and positions are viewed as interim as everyone looks for better opportunities. The training and experience is universally valued however, and everyone met in the survey knows that working for this brand is a sound way to build a future career in hospitality. Most front-line workers have been with the franchisee for less than three years, and even supervisors have not more than 5 years of experience. Nature of Human Resources Management Though the Human Resources function is highly regulated and determined by the brand owner, none of their direct representatives, or those of the franchise owner were available for the survey. All information has been gleaned from the employees. Team building is the primary focus of human resources management at this franchised outlet (Adair, 1986). There seem to be systematic efforts to bond franchised employees with the main corporate brand, and to secure their commitment to the international brand values of service excellence, product quality, and international symbolism. Internal processes consider even minor details of service in great detail (Payne, 2002). Aspects such as correct invoicing, customer greetings, and work place cleanliness, are ingrained in employees with thoroughness and precision. Considerable efforts are made to foster team spirit, with special efforts made to orient new recruits, and to help colleagues meet tough service standards. Though supervision is close, every employee is empowered in matters related to customer satisfaction. No one can slack off while on duty, but their decisions to handle objections are never questioned, even when it extends to free replacements. Though focus group interviews yielded many insights about employee grievances, none of them are even remotely visible when customers are served or even present. Service excellence and product standardization are so much higher than at other outlets in the neighborhood, that trained employees are invaluable assets. However, they are not treated as such, and employees are turned away at the first suggestion that they wish to leave. The brand owner seems to accept that it acts as a kind of training school for the whole industry, and appears not to care as there is always a plentiful supply of new recruits. Most aspirants are taken on immediately, and many of the employees surveyed were called at their residences even months after they had first applied for jobs. Pattern and Extent of Labor Turnover & Reasons The only accepted way of staying on beyond a period of 3 years is to be promoted to the position of a supervisor. Each supervisor controls around 12 employees, so most recruits eventually leave within less than 3 years. There is high demand for people trained by the brand owner. Supervisors do not normally leave. They aspire for positions within the brand owner’s own organization. However, managerial appointments in fine dining establishments, and in deluxe hotels of the city, draw them away. Overall, long term employment with the franchisee is almost unknown. All stake holders seem to accept that a job here is only a transient step towards building a career in hospitality. No single employee surveyed expressed any ambition to retire with the franchisee, though hopes of jobs with the brand owner were shared by almost all. Future Directions The professionalism of the brand owner indicates that they must have budgets and accounts of how much they spend on training new recruits. However, indirect costs of socialization and of disruption as well, may not be accounted properly (Phillips, 2002). The door delivery service was disrupted twice during the service period for want of trained people, and the speed with which new recruits could service orders was less than half that of the most experienced operators. Additionally, new recruits are rarely able to complete tasks by themselves. These costs may catch up with the brand owner when new franchise contracts are negotiated. Turnover should be monitored (Phillips and Connell, 2003); it should also be categorized between involuntary wastage such as in the case of dismissals and voluntary wastage where people leave for better prospects (Walters, 1996). This turnover should be benchmarked against indirect competitors such as fashion outlets in the area (Phillips and Connell, 2003), and new targets should be set for accepted turnover (Walters, 1996). The brand owner should not just look at the full costs of staff turnover at franchisee organizations, but also insist on improvements in work environments at these locations (Phillips and Connell, 2003). Some of the most important changes required are in the recruitment process, so that employees do not join the franchisee with limited and short-term aims alone (Russo, 2000). It would also help if the brand owner were to influence the franchise owner to use recognition measures to reward loyal employees of long standing (Phillips, 2002). Overall, the brand owner is participating in the dilution of its own competitive edge, helping other outlets with a regular supply of highly trained employees! Conclusions An employer may not know about the true feelings of its employees, as people may conform to instructions and to norms, without really believing in them. The problem of staff turnover may even more severe than imagined, because many employees think of and want to leave, but do not want to take the risk-they therefore work without commitment (Horn and Griffeth, 2004). This franchisee not only has a problem of turnover, but it even has employees who work overtly, while secreting planning all the time for opportunities to leave! Reducing employee turnover has significant profit implications, which can rival the other productivity efforts being made by an organization (Phillips, 2002). Turnover has to be addressed strategically, analyzing the reasons and correcting them. All employees should have career development facilities (Career Development, 2003), rather than being viewed as expendable and replaceable resources. References Adair, J. 1986. Effective Teambuilding, Pan Books Horn, P. W. and Griffeth, R. W. 2004 Innovative Theory and Empirical Research on Employee Turnover, IAP Payne, A. 2002 Services Marketing, Prentice-Hall Phillips, J.J. and Connell, A. O. 2003 Managing Employee Retention: A Strategic Accountability Approach, Elsevier Phillips, P. P. 2002 Retaining Your Best Employees, American Society for Training and Development Russo, A. T. 2000 Minimizing Employee Turnover by Focusing on the New Hire Process, Universal Publishers Walters, M. 1996 Employee Attitude and Opinion Surveys, CIPD Publishing Career Development, 2003, A Policy Statement of the National Career Development Association, accessed January 2007from: < http://www.ncda.org/pdf/Policy.pdf> Read More