The Cost of Turnover

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The Cost of Turnover
Putting a Price on the Learning Curve
by Timothy R. Hinkin and J.BruceTracey
Employee turnover does more than reduce service quality and damage employee morale—it hits a hotel’s pocketbook.

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mployee turnover has long been a concern of the hospitality industry, and therefore of researchers who examine industry human-resources concerns. One stream of research that arose in the past 20 years was an effort to quantify the cost of employee turnover. Although most managers agreed that turnover was bothersome, calculating a dollar figure for employee departures would provide those Timothy R. Hinkin, Ph.D., is a professorof managementorganization, human resources, and law (MOHRL) and director for undergraduate studies at the Cornell University School of Hotel Administration «trh2@cornell.edu», where J. Bruce Tracey, Ph.D., is an associate professor of MOHRL «jbt6@cornell.edu». © 2000, Cornell University

managers with information to help them make better human-resources decisions. One of the earliest comprehensive efforts to quantify turnover was published in 1983, when William Wasmuth and Stanley Davis published in the Cornell Hotel and Restaurant Administration Quarterly the results of a three-year study of voluntary employee turnover.1 The subjects of the study were from five departments in each of 20 hotels located in North America and 1 William J. Wasmuth and Stanley W. Davis, “Managing Employee Turnover,” Cornell Hotel and Restaurant Administration Quarterly, Vol. 24, No. 1 (February 1983), pp. 15–22; William J. Wasmuth and Stanley W. Davis, “Managing Employee Turnover: Why Employees Leave,” Cornell Hotel and Restaurant Administration Quarterly, Vol. 24, No. 2 (May 1993), pp. 11–18; and William J. Wasmuth and Stanley W. Davis, “Strategies for Managing Employee Turnover,” Cornell Hotel and Restaurant Administration Quarterly, Vol. 24, No. 3 (August 1983), pp. 65–75.

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Europe. The five departments were accounting, engineering, food and beverage, front office, and housekeeping. They found that turnover averaged 60 percent for the five departments, but it was disproportionately above that average in food and beverage, front office, and housekeeping. Wasmuth and Davis concluded that turnover resulted primarily from dissatisfaction with the current job rather than attraction to other job opportunities. Pay was often cited as the reason for leaving, but poor quality of supervision and poor working conditions were the more frequent reasons given. Those findings were replicated almost exactly in a study of six restaurant companies and six hotel companies published in Cornell Quarterly in 1989 and by a third study of over 4,000 lodging properties published in 1998 by the American Hotel Foundation.2 In short, we know that turnover is high, and we have a good idea of why people leave. First, employees are poorly supervised, and they are often given little responsibility or authority in the work that they perform. Second, many jobs are mundane and repetitive, and working conditions are often unpleasant. Finally, compensation is low for work that can involve intensive interaction with guests. One conclusion of the research is that the hotel industry has been mired in many outdated human-resources (HR) practices for decades, while innovative management has resulted in major organizational and individual improvements in other industries. Practices such as balanced HR scorecards, “smart” HR infor2 See: Robert H. Woods and James F. Macaulay, “Rx for Turnover: Retention Programs that Work,” Cornell Hotel and Restaurant Administration Quarterly, Vol. 30, No. 1 (May 1991), pp. 79–90; and Turnover and Diversity in the Lodging Industry (East Lansing, MI: American Hotel Foundation, 1998).

mation systems, and comprehensive diversity initiatives that are being used with increasing frequency in other industry segments...
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