A RESEARCH PROPOSAL SUBMITTED TO THE DEPARTMENT OF ECONOMICS AND STATISTICS IN PARTIAL FULFILMENT OF THE REQUIREMENT OF A BACHELORS DEGREE OF ARTS IN ECONOMICS
OF KYAMBOGO UNIVERSITY
The study has considerable interests in investigating the determinants of labour turnover in Lake Victoria Serena Hotel Mutungo, Wakiso district. This chapter presents the introduction, the background to the study, statement of the problem, purpose of the study research questions, objectives, significance of the study, scope of the study and operational definitions.
1.1Background of the study
Labour turnover refers to the rate at which people come and leave the organization which reduces the performance of the organization. Analysis of the numbers of people leaving the organizations provides data for us in fore casting so that research can be made on a number of people lost who may have to be replaced. More importantly however, the analysis of the numbers of leaves and reasons why they leave provides information that will indicate whether any action is required to improve retention rates at lake Victoria Serena. This can prompt further investigations to establish underlying causes and identify remedies for better performance at Lake Victoria Serena.
Although there’s no standards framework for understanding employee turnover process as whole, a wide range of factors have been found useful in interpreting employee turnover. The sources and what determines employee’s turnover enables the Lake Victoria Serena manager to come up with employee benefits to minimize the labor turnover. Employee benefits include; medical insurance, employee engagement housing fees, transport etc, whereby the lake Victoria Serena capacity to engage, retain and optimize the value of its employee hinges on having well jobs are designed, how employees time is used and the commitment shown to employees by the management hence motivating employees to stay in lake Victoria Serena.
Incase labor turnover in lake Victoria Serena is not managed properly, it will affect the organization adversely in terms of personnel costs and in the long run it will affect its liquidity position, however voluntary turnover incurs significant costs both in terms of direct costs lie replacement, recruitment and selection, temporary staff management time and also in terms of direct cost morale, pressure on remaining staff, costs of learning product/services quantity, organizational memory and the loss of social capital.
Labour turnover is expensive from the view of lake Victoria Serena whereby the voluntary quits represent an exodus of human capital investment of the organization fair and subsequent replacement process which entails manifold costs to the organizations for example replacement costs may include search of the external labor market for a possible substitute, selection between competition substitutes, induction of the chosen substitute until he or she attains performance levels equivalent to the individuals who cut from lake Victoria Serena.
According to Abassi, et’al (2008), employee turnover is the rotation of workers around the labor market between firms, jobs and occupation and between the states of employment and unemployment. Employees are the back bone of any business success and therefore they need to be motivated and maintained in organization at all costs to aid it to be globally competitive in terms of providing quality products and services to the society. Therefore empowerment of employees could help to enhance the continuity of employees in an organization. Empowered employees where managers supervise more people than in at traditional hierarchy and delegating responsibilities to them leads to subordinates who are more satisfied with their leaders, and consider when to be fair and in turn to perform up to the superior expectations, this ends up building employee commitment to the organization and chances of quality are minimal.
However, though managers are working hard to minimize their rate of employee turnover in lake Victoria Serena, there invest a lot in their employees in terms of induction and training, maintaining and retaining them in their organization. Therefore at all costs managers should minimize employees’ turnover for the success of the organization.
1.2 Statement of the problem
Lake Victoria Serena Hotel has done a lot to improve on the working conditions of employees and increase on the employee benefits. It provides medical insurance to its employees, provides accommodation to permanent staff and transport means to those staying outside the premises of the Hotel. It does all the above to motivate, attract and retain the right talented employees for better performance and productivity. However employees think what is provided to them does not match their efforts and this leads to poor quality output that fails the employees to score internal or external standards of excellence leading to poor services and low commitment to work. Even though the Hotel is doing all the above mentioned to motivate the employees, there are still incidences of employees leaving the hotel before their contract expires and others coming in. So this prompted the researcher to assess the determinants of labor turnover in Lake Victoria Serena Hotel.
1.3 Objectives of the study
1.3.1 General objective
To investigate the determinants of labor turnover in Lake Victoria Serena Hotel. 1.3.2 Specific objectives
i. To assess the causes of labor turnover in Lake Victoria Serena Hotel. ii. To establish the impact of renumeration on labor turnover in Lake Victoria Serena Hotel. iii. To establish the prevention measures to labour turnover in Lake Victoria Serena Hotel.
1.4 Research questions
i. What are the causes of labor turnover in Lake Victoria Serena Hotel? ii. What is the impact of renumeration on labour turnover in Lake Victoria Serena Hotel? iii. What are the prevention measures to labour turnover in Lake Victoria Serena Hotel?
1.5 Scope of the Research Study
1.5.1 Subject Scope
The study will focus on the determinants of labour turnover. The causes of labor turnover, the impact of renumeration on labor turnover, the relationship between voluntary and involuntary turnover, and the prevention measures to labour turnover in Lake Victoria Serena Hotel. 1.5.2 Geographical Scope
The study will be carried out at Lake Victoria Serena Hotel, Mutungo Kigo-Wakiso District. 1.5.3 Time Scope
The study will cover a period of 4 years, from 2009-2013.
1.6 Significance of the study
This study will enable the policy makers realize the major causes of labor turnover and develop appropriate measures to address the increased rate of labor turnover which affects the performance of Lake Victoria Serena Hotel and the economy as a whole. This study will provide literature to future researchers and academicians in areas concerning labor turnover in Lake Victoria Serena Hotel. The study will give a platform to workers and workers union to voice their grievances, to the concerned people in policy making, labor legislation and most importantly Lake Victoria Serena Hotel. The study will help the researcher acquire more research skills that he might apply after his Bachelor’s degree in other fields.
This chapter discusses the opinions, findings from different authors, publications, magazines, websites, and all possible sources as a basis foundation for this research study. It is divided into definition of the key variables and other parts are according to the research questions as seen below; 2.1 LABOUR TURNOVER
According to Armstrong (1990), labour is defined as the supply of human resources both physical and mental which is available to engage in production of goods and services. He further said labour is a vital element in an organization and payment for labour is a wage. Ahuja, 1986 defined labour turnover as the relationship between the number of persons joining the organization and leaving due to the resignations or retrenchments to the average number on the payroll. Labour turnover is the cessation of membership in an organization by an individual who received monetary compensation from the organization (Mobley, 1982). Labour turnover is the rate of displacement of personnel employed in an organization (Kamukama, 2006). He further said that a higher turnover is a sign of instability of labour, and labour turnover is expressed as the ratio of the number of persons leaving the company in a period to the average number on the payroll. Shelley (2008), defined Labour turnover as employees who voluntarily leave their jobs and must then be replaced. He added that turnover is shown as an annual percentage, so if 25 people leave a company with 100 people, that is 25 percent turnover a year, and he also said employees often leave companies for higher pay elsewhere, but many other factors contribute as well, and the negative effects of employee turnover should motivate managers to increase retention. Basing on the above definitions, the researcher asserts that labour turnover is the movement of workforce into and out of the organization. 2.2 CLASSIFICATION OF LABOUR TURNOVER
According to Bwire (2008), there are two categories of labour turnover depending on the circumstances that is to say; voluntary labour turnover and involuntary labour turnover. These include; Voluntary labour turnover refers to the employees leaving the organization due to retirement quits, resignations and death. With retirement, most organization have age limit beyond which an employee’s services are rendered unbeneficial to the company and he/ she is let to go after calculating a compensation benefit for the services rendered earlier, whereas quit is when the employees foregoes his services to the company. Resignation is a term initiated by the employee him or herself (Davour, 1995). Involuntary labour turnover on the other hand is where the employees are forced to leave the company against their wish (Davour, 1995). For example, dismissal; these are terminations initiated by the company, it must be done with great care and must be supported with a just and sufficient cause. Dismissals are generally done as a last resort after all attempts at salvaging the employee have failed. In addition, he attributes the cause of dismissals as unsatisfactory performance, misconduct, absenteeism and tardiness. Cuming (1993) adds that retrenchment refers to the involuntary labour turnover brought as a result of the company trying to restructure its organization by abandoning other operations or to improve its efficiency and effectiveness by removing labour force which is not attractive. 2.3 CAUSES OF LABOUR TURNOVER
A number of factors are responsible for the high labour turnover in different organization and these include the following: Clint (2004), notes that the prospects of getting higher pay elsewhere leads to turnover. He further said that this is one of the most obvious contributors to turnover. This practice can be regularly observed at all levels of the economic ladder, from executives and generously paid professionals in high-stress positions to entry-level workers in relatively low demanding jobs. However, (Stewart, 1994) found out that there is evidence that money is often not the root cause of turnover, even when it is a factor in an employee's decision to quit. In one survey, for example, more than half of the respondents didn't even list pay in the top three reasons they believed people quit their jobs, instead that high turnover persists in certain jobs and companies because they have an atmosphere in which employees look for reasons to leave, and others money is a convenient and sometimes compelling justification. Goldthorpe (1969) said when there is competition in the labour market the demand for labour from different sources of employment is also high, which leads to instability in labour especially when it comes to casual labour force. Management practices, Armstrong (1996), found that turnover tends to be higher in environments where employees feel they are taken advantage of, where they feel undervalued or ignored, and where they feel helpless or not important. Clearly, if managers are impersonal, arbitrary, and demanding, there is greater risk of alienation and turnover. Management policies can also affect the environment in basic ways such as whether employee benefits and incentives appear generous or stingy, or whether the company is responsive to employees' needs and wants. Management's handling of major corporate events such as mergers or layoffs is also an important influence on the work environment afterwards. Lansor & Terence (1987) said that there is a challenge of Job dissatisfaction. They further said when the relationship between job satisfaction and turnover is negative implying that the greater the satisfaction, the lower the turnover and hence better performance. Mullins (2003) argues that some labour turnover is demographically specific, particularly for women who are balancing significant work and family duties at the same time. Such women (or men) may choose to leave a company instead of sacrificing their other interests and responsibilities in order to make the job work out. Some women select to quit their jobs at childbirth, rather than simply taking a maternity leave. Pencavel (1972) further found out that woman’s perceptions of their career paths might also be tinted by their awareness of the glass ceiling, which may lower their level of commitment to any particular firm, since they believe they're not in contention for top-level jobs. These factors translate into higher turnover rates for women in many companies. Retirement of experienced employees can cause high rates of turnover and extreme loss in productivity, particularly in industries where there is little competition. For example, in the National Aeronautics and Space Administration Report (1970), members expressed concern about its future launch capability as thousands of “space race" engineers simply age out of the workforce. Armstrong (1996) said work stress experienced at particular types of jobs can also create turnover. Childcare workers watching over constantly crying children, waiters dealing with demanding dinnertime customers, police officers in high-crime areas, and truck drivers facing long hours and heavy traffic are all in job categories experiencing high levels of turnover. Even seasonal changes such as the beginning of a school year can cause high turnover when part-time, school-age employees return to their classrooms. In this case, however, turnover is less likely to be unexpected by management. Mullins (2003) asserts that labour turnover arises because of various factors including dissatisfaction with job, low rate of wages and salary, unsatisfactory working conditions, and non availability of adequate basic amenities. So there is need for management to attend to all the above if they are to reduce on the costs of production and interruption in the smooth flow of work since labour is directly used in the production of goods and services. Organizational justice –an upshot of individual’s perception –also plays an important role in quitting intention of an employee. Organizational justice refers to the overall perception of what is fair in the workplace and is composed of distributive justice, procedural justice, and interactional justice. Researchers have tried to investigate the relationship between organizational justice and turnover intentions of employees. A few studies reveal that individuals tend to discontinue their relationship with their employer/ organization if they perceive that there is low distributive justice i.e. they feel that the employer/ organization is practicing inequity (Hendrix et al., 1998; Hom et al., 1984). In fact, distributive justice was observed to have a significant effect on the employees quitting intentions (Fields et al. 2000). Additionally, procedural justice was found to be negatively related to actual turnover (Cohen et al. 2001; Dailey et al. 1992). However, a few studies indicated contrary to be true, that is, there existed negative relationship between turnover intention and both procedural and distributional justice (Loi et al. 2006).
Another study disclosed that the perception of organizational justice had an influence on work outcomes. A low degree of turnover intention was observed on employees who showed positive feelings towards procedural and distributive justice (Elanain Abu, 2010).
Going beyond the cognitive factors, researchers tried to find out the relationship between non-cognitive factors like ability, gender, number of years of experience, etc on the one hand and turnover intentions amongst employees on the other. Ability refers to the capacity of an individual to perform tasks on a job. The overall ability of an individual is essentially composed of two sets of factors: intellectual ability and physical ability. Jackofsky & Peters (1983) hypothesized that ability has an indirect and multifaceted effect on the desirability of movement. Further, the model hypothesized that as people with high ability are dissatisfied working on routine tasks, they have a high desirability to move to an alternative job. However, a further study on Jackofsky & Peter’s (1983) model showed that ability has only a marginal effect on an individual’s perceived desirability of movement from his current organization.
Maslow (1954) in his need hierarchy theory of motivation introduced the concept of social needs. An employee in his organization looks towards his superiors, subordinates, and peer group to satisfy his social need or for social support. Studies have found social support to play an important role in mitigating intentions to quit.
Moore (2002) observed that social support from supervisors reduced their burnout levels, and this effect, indirectly diminished their turnover intentions. A further study on nurses proved that supervisory support not only reduced the two components of burnout, namely depersonalization and emotional exhaustion, but also directly or indirectly, reduced their turnover intentions (Kalliath & Beck 2001).
Additionally, a research on retail salesmen also consolidated the relationship between support from managers and turnover intention (Firth et al. 2004). However, a few studies have also observed that social support had no moderating effect in the relationship between-job stressors and intention to quit (Rahim et al. 1996). Even the gender of supervisor was found to have a significant impact on employees’ intentions to quit. In a large-scale survey of 12,000 young working Americans, it was observed that employees, who had a female manager perceived relatively reduced job responsibility and had higher job search intentions as compared to those employees who had a male manager (Valentine et al. 2001). There is a greater need to look at the issue of turnover intentions vis-à-vis gender in Europe, Australia and Asia as well where we do not have enough literature available. Social comparison is another organizational factor that might fuel turnover intentions as well. Festinger (1954) in his self-comparison theory expounded the motive of an individual to compare his abilities with those of others. Social comparison is a group to which an individual refers to while comparing issues concerning his career (Major et al. (1984)). Employees tend to compare himself with people above him and below him in the hierarchy in order to evaluate his own performance (Major et al. 1991; Sheppard et al. 1992). A study on association between social comparison and turnover intentions revealed a negative relationship between downward comparison and turnover intentions.
Additionally, downward comparison was found to be positively related to career satisfaction. Conversely, upward comparisons were observed to be positively associated with both turnover intentions and career satisfaction (Eddleston, 2009).
2.4 EFFECTS OF LABOUR TURNOVER ON A COMPANY
Mullins (2003) said high turnover can be a serious obstacle to productivity, quality, and profitability at firms of all sizes. For the smallest of companies, a high turnover rate can mean that simply having enough staff to fulfill daily functions is a challenge, even beyond the issue of how well the work is done when staff is available. He further argued that turnover is no less a problem for major companies, which often spend millions of dollars a year on turnover-related costs. For service-oriented professions, such as consulting or account management, high employee turnover can also lead to customer dissatisfaction and turnover, as clients feel little attachment to a revolving contact. Shelley (2008) said customers are also likely to experience dips in the quality of service each time their representative changes. Stahl (1995) believed that the cost of turnover varies with the difficulty of the job to be performed. For example, in a food-processing company, showing someone how to put jars of jam into a cardboard box may take five minutes, so the cost of training someone to handle this job would not be high. If, however, the tyrannical manager of the food processing line at the company kept driving away food cookers and quality-control workers, the cost of constantly training employees in this critical area could be high. In general, reducing employee turnover saves money. Money saved from not having to find and train replacement workers can be used elsewhere, including the bottom line of the company's profit statement. For example, the U.S. Department of Labour estimates that it costs about 33 percent of a new recruit's salary to replace an employee. In other words, it could cost $11,000 in direct training expenses and lost productivity to replace an experienced employee making $33,000. Private industry estimates for highly skilled jobs peg turnover losses at a much higher level, up to 150 percent of the position's annual salary. Hiring Process .A study published in "Entrepreneur" magazine in 2001 looked at the effects of hotel employee turnover and discovered the high price of recruiting, interviewing and hiring new workers, in addition to lost productivity. Clint (2004) asserts that high turnover can sometimes be useful, though. Employers who are poor interviewers may not discover that new employees are actually poor employees until after the workers have been on the payroll for several weeks. Rather than go for the trouble and documentation of firing these underperforming employees, some companies rely on turnover to weed out the bad employees. When the learning curve is small and the consequences of always having inexperienced workers are minimal, high turnover may not be seen as a significant problem (Staw, 1980). 2.5 EMPLOYEE REMUNERATION AND LABOUR TURNOVER
Parker & Burton (1970) developed a theory relating wage to labour turnover which they labeled incentive to quit. According to them as quoted in their book entitled Management attitudes and performance it was shown that; Inter-industry wage differentials are examples of those variables which measure the incentives of workers to quit because of comparisons they make of attributes of their own firms and other firms. One of the early theorists F.W. Taylor and M. Armstrong in their publication personnel management assumed that; Man is a rational animal concerned with maximizing his economic gains. Goldthorpe (1969) conducted a study from three manufacturing firms in Luton England and his book “changing supervisory behavior revealed that work that offers relatively intrinsic rewards may not in fact form the basis of a powerful tie between the worker and his employment because of inter-veiling dissatisfaction, grievances and work which by its nature entails severe depression for those who perform it may non-the-less offer intrinsic rewards which are to attract workers fairly and firmly to the employer who offers his work. Professor Herzeburg’s theory on motivation was illustrated in his book entitled “work and the nature of man” he divided the factors into two categories that is to say motivators (strategies) and hygienic factors (dissatisfies) under motivators he pointed out that they include; company policy, supervisory style, and salaries and wages. Professor Abraham Maslow as quoted in their book; “Theory of motivation, fundamental of human behavior “proposed a hierarchy of human needs in his theory of motivation. He contends that human needs in his theory seeks to satisfy the more basic needs first before satisfying needs at a higher level up the hierarchy. The other levels of the hierarchy are physiological needs, safety/ security needs, love needs, esteem needs and finally self-actualization and all most of these can be achieved when the company has a good remuneration. In the book of William H. Davis (2000), “Behavior in organizations”. A multi-dimensional view said that there is no single factor in the whole field of labour relations that does more to break down morale, create individual dissatisfaction, encourage absenteeism, increase labour turnover, hamper production that the obviously unjust inequalities in remunerations given or wage rate paid to different individuals in the same labour group within the same workplace.
In conclusion, Employee remuneration has a direct effect on labour turnover in a company. Therefore the effect of employee remuneration on labour turnover in all sectors is likely to affect their performance in terms of efficiency and effectiveness, hence increasing the cost of production.
2.6 PREVENTION MEASURES OF LABOUR TURNOVER
Maslow,A (1970), Labour turnover is a major problem in many organizations. When a company is able to recognize how to keep skilled workers in line when others may retire then the company will be able to work efficiently. Staying ahead of the competition relies upon the organization being able to re-adjust to turnover.
According to Biz-Development, employee turnover is the number of permanent employees leaving the company within the reported period versus the number of actual Active Permanent employees on the last day of the previous reported period (physical headcount). Technology that would assist in an organization being able to re-adjust to turnover is to put some tactics into place to ensure that the employees are satisfied and remain satisfied. Employers must also make sure that when an employee leaves due to retirement that they are able to pass those skills onto the employees left behind.(Mullins,2003) The first solution to employee turnover is to make sure that the employees are satisfied and that they remain satisfied. Motivating employees can be a challenge because not all employees are motivated in the same way. Some employees would rather take a longer vacation while others may want a pay increase. Whatever the option, it is best to cater to one employee rather than offering the same benefit to all employees. Employees have to know that they are appreciated so that means that they need individual attention.(Maslow, 2001). Another solution is to make sure that employees remain ahead in the workforce. When employees are able to remain current, then that means that they are improving in their skill level. If they are improving in their skill levels then they will be more likely to earn higher positions. Employees need to know that they can advance by learning new things. This will not only benefit the employee in the long run but it will also benefit the employer because they will have highly skilled employees in their corner. The productivity levels will improve and the efficiency of the work will improve as well. Other benefits that may come from employee training is that you will gain their trust and that will cause them to be loyal to you in return. (Pencavel J. H. 2008). Mullins, L.J. (2003); In order to reduce turnover an organization must sometimes outsource in order to get the best quality workers. When turnover becomes a problem recruiting firms are ones to help with the needs of replacement. Recruitment firms help the organizations to find qualified employees with the work experience, knowledge, skills, and the ability to be molded into successful employees.
This chapter involves the details of the methods and tools that will be used in the collection of data. It includes the research design, sample design, the target population, measurement and reliability of research instruments, source of data, procedure of data collection, data analysis and limitations encountered during the study. 3.1 RESEARCH DESIGN
In carrying out research, quantitative and descriptive methods of analysis will be used to obtain data about determinants of labour turnover. This study design will be used because of the need to describe and account for labour turnover and its causes. Emphasis will be put on the causes, effects, employee remuneration and prevention measures to labor turnover. Analysis of the questionnaires will provide the basis for comparison in order to arrive at a conclusion. 3.2 MEASUREMENT OF VARIABLES
The researcher will be able to ensure the viability of all the variables by ensuring that all the research objectives are answered by use of the data collection tools like the questionnaires that will be distributed to the 30 respondents in the hotel, the interview will also be used in order to come up with a clear picture of the problem and this will help the researcher to manipulate the variables and come up with a clear and reliable conclusion on the research topic. 3.3 SAMPLING DESIGN
The research will target a number of respondents which will include the personnel managers, supervisors, store keepers, chefs and casual laborers and other staff members of the Lake Victoria Serena Hotel. 3.3.2 SAMPLE SIZE
Due to the big number of the population, the researcher will use a sample size of only 30 respondents as illustrated below.
Table: Showing the sample size to be used
Respondents and their Categories
Number of Respondents used in the sample
3.3.3 Sampling method and criteria
The researcher will use Purposive Sampling technique where by respondents will be selected by the researcher basing on the duty they perform, the level of knowledge about the hotel and the topic of the study as well. 3.4 TOOLS/INSTRUMENTS OF DATA COLLECTION
The main instrument of data collection will be the questionnaires and these questionnaires will be in form of likert scale, open and closed ended questions set to the respondents. This will allow the respondents to respond because more will be of five- likert scale questions. 3.4.2 Interviews
An interview will be conducted with the well informed personnel like the Personnel Manager, Chefs and supervisors and also some lecturers and this is because the researcher wants to get some clear Information from them. The researcher will prepare an interview guide that will be used while conducting the interview. 3.5 DATA SOURCE
The data that will be used in the study is both primary and secondary. 3.5.1 Primary data / source
Primary data will be obtained from the open and closed ended questions that will be distributed to the 30 respondents used in the sample size. An interview will be conducted to get data on the research topic. 3.5.2 Secondary data / source
This will involve data from internet, news papers, text books, documents and reports from different organizations which are relevant to the topic. 3.6 DATA VALIDITY, QUALITY AND RELIABILITY
The data collected will confirm to the tests of validity and reliability. The researcher believes that the data will be valid because the questionnaire and the interview that will be used in the study will be designed to capture all the relevant information that will be required to fill all the study objectives as stated in chapter one . Where the questionnaires will not apply, the researcher will carry out interviews. The reliability of the data will be confirmed after the approval of data collection tools by the supervisor.
3.7 PROCEDURE OF DATA COLLECTION
After approval of the research proposal, the researcher will get a letter of introduction from the department of economics research coordinator and then he will proceed to collect data from the organization using the data collection instruments identified above. 3.8 UNIT OF ANALYSIS
The study will be carried out at Lake Victoria Serena Hotel in Mutungo Kigo Wakiso District. The respondents include; Personnel managers, Chefs, Supervisors, Casual labourers and other members of the hotel. 3.10 DATA ANALYSIS, INTERPRETATION AND PRESENTATION
The data will be presented in simple essay format where the researcher will use tables which will be interpreted in form of percentages using the frequency to allow more analysis. Discussion will be carried out, the summary of the findings will be got, a conclusion will be made and the researcher will go ahead to give recommendations to the study. 3.11 LIMITATION AND DELIMITATION OF THE STUDY
Limited sources of information, most organizations keep their information confidential, especially to strangers making the information on the study topic scarce. However possible ways like the internet will be used to get enough information.
Limited time, Since the researcher is still a student, he will have a challenge of limited time to handle both the research work and school work, however, the researcher will get means of budgeting the limited time he had to finish the study.
Financial constraints, the study requires a lot of financial resources to carry out the internet surfing, transport, typing, printing and binding among others. However, the researcher will try to solicit enough funds from relatives and friends to enable her finish work successfully.
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