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Ghani, B.; Han, H.; Zada, M.; Memon, K.; Ullah, R.; Khattak, A.; Ariza-Montes, A.; Araya-Castillo, L. Strategies for Employee Retention in Hospitality Industry. Encyclopedia. Available online: https://encyclopedia.pub/entry/24051 (accessed on 14 June 2024).
Ghani B, Han H, Zada M, Memon K, Ullah R, Khattak A, et al. Strategies for Employee Retention in Hospitality Industry. Encyclopedia. Available at: https://encyclopedia.pub/entry/24051. Accessed June 14, 2024.
Ghani, Bilqees, Heesup Han, Muhammad Zada, Khalid Memon, Rezwan Ullah, Afraseyab Khattak, Antonio Ariza-Montes, Luis Araya-Castillo. "Strategies for Employee Retention in Hospitality Industry" Encyclopedia, https://encyclopedia.pub/entry/24051 (accessed June 14, 2024).
Ghani, B., Han, H., Zada, M., Memon, K., Ullah, R., Khattak, A., Ariza-Montes, A., & Araya-Castillo, L. (2022, June 15). Strategies for Employee Retention in Hospitality Industry. In Encyclopedia. https://encyclopedia.pub/entry/24051
Ghani, Bilqees, et al. "Strategies for Employee Retention in Hospitality Industry." Encyclopedia. Web. 15 June, 2022.
Strategies for Employee Retention in Hospitality Industry
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Employee retention is contingent on employee satisfaction, which is comprised of four factors: sustainable positive work environment; sustainable growth opportunities; sustainable & effective communication; and sustainable & effective recruitment and selection practices. 

recruitment and selection HR practices employee retention hospitality industry

1. Introduction

It has been acknowledged that people are a significant source of competitive advantage; organisations adopt numerous policies and procedures in order to retain their talented employees for a long time. As a result, employee retention has emerged as one of the key drivers for organizational success, alongside reducing unnecessary expenses and improving employees’ motivation and capabilities [1]. Employee retention, on the other hand, has been identified one of the biggest challenges in the 21st century, particularly in the hospitality industry. Because the hospitality industry is continuously dealing with the problem of shifting a workforce, retention is an ongoing and ever-evolving endeavor to keep its skilled personnel [2][3]. It is implied that environmental and social activities in the hospitality industry contribute a lot more to revamping the HR activities, especially when it comes to retaining the employees. Through sustainable HR, the hospitality industry can better address its employees issues and their employment concerns, which ultimately help them to develop a positive attitude and a strong commitment towards longer staying [4]. It is expected that in the next 10 years, the hospitality industry will offer around 72 million jobs [5]. The hospitality industry, therefore, found a most dynamic and globally growing industry, plays a significant role in the economic and social development. Furthermore, it is a significant component in boosting economic growth by attracting millions of foreign visitors annually. The spectacular development of this industry is necessary for the growth of the economic health, since it’s may create great employment opportunities and attract foreign investment into the country. Research shows that human resource management is one of the most important organizational functions that influences employee retention [6][7]. Organizations that do not focus on their human resource practices are more likely to lose their skilled and trained employees, in turn they bear twice cost on account of financial and operational ineffectiveness [8]. Human resource management practices such as compensation management, recruitment and selection, training and development, performance appraisal and management, and benefits administration shape employees’ overall experience in an organization. Human resource practices that contribute to employee growth and development increase employee retention. Additionally, effective human resource management practices not only ensure the desired skills, abilities, and knowledge of employees but also employee motivation. It also helps to reduce turnover, increase productivity, and improve employees’ performance, job satisfaction, and overall organizational performance [9]. The global turnover rate is increasing, and employee retention has become a global challenge for the industry like hospitality industry [10]. Research highlights that production and service are major constituents of the hospitality industry. This shows that rendering services to customers is contingent on employees. Hence, the primary objective of the hospitality industry is to manage their employees effectively and keep them on staff in order to get the best out of them [11]. From this point of view, keeping employees longer and gaining an advantage from them is an important task, which is perhaps the biggest challenge for the hospitality industry [12].

2. Problem in Employee Retention in Hospitality Industry

Research posits that retaining employees, especially in the hospitality industry, is highly challenging due to varying demand and job-hopping by a number of employees from time to time [11]. The employees working in the hospitality industry are supposed to deal with visitors and customers globally on a day-to-day basis, which causes stress. As a result, their satisfaction level may be reduced, and they may be unwilling to stay there [13][14]. The lack of growth and development is highlighted as the most discussed cause of the high turnover rate globally, particularly in the hospitality industry. Research highlights that the management of the hospitality industry still focuses on old traditional methods to retain employees, i.e., one-way communication and feedback, where employees cannot share their long-term plans with their respective bosses and cannot get feedback or suggestions for their career development. In view of the 21st century, such methods are no longer effective to reduce the employee turnover rate [15].
Although the hospitality industry continue to put in efforts to maintain proper staffing levels, issues relating to retaining employees continue to surface. Alongside the challenges, there are a series of employment opportunities in the hospitality industry [16][17]. Of these, employee retention is one of the most demanding challenges around the globe. The research highlighted that the hospitality industry is encountering difficulty in maintaining the balance between the supply and demand of human capital [18]. Employee turnover is expensive, as it accounts for around 40% of total expenses. In order to control labor expenses or labor costs, this industry needs to retain its employees.

3. Theories for Employee Retention in Hospitality Industry

Figure 1, showing the identified theories and factors that can help to retain the employees.
Figure 1. Model of theories which are relevant to employee retention.

3.1. Equity Theory

This theory, from John Stacey Adams, claims that people not only consider the reward that they receive in return for their performance or efforts but also what other people are receiving [19][20][21]. They consider the relationship between their reward and the rewards of other people. If scholars implement this theory in an organizational context, scholars can conclude that employees compare their efforts—such as qualification, experience, performance, competence, and skills—and rewards—such as appraisal, promotion, bonuses, salary increase, and recognition—to other employees’ efforts and rewards. When employees perceive disparities or differences in the rewards that they are receiving relative to other employees, conflict is created. These employees have a difficult time receiving their expected or perceived fair reward [22][23]. Equity theory is based on the following three main components or assumptions.
People perceive rewards as fair or equitable according to their own beliefs or expectations for their efforts. People compare their reward with the reward of other employees according to their perception of their contribution. When people realize that their contributions or efforts are not equitable compared to those of other people, they act to contribute more or to improve their performance.
This theory helps managers to create a positive association between the performance and rewards of employees. According to this concept, scholars can assume that an employee who leaves an organization due to biased, unfair, and inequitable treatment develops these feelings when they do not receive a fair reward for their contributions or efforts [24][25][26]. These feelings can be based on actual inequity as well as perceived inequity. This is why it is challenging for organizations to develop reward systems such as compensation, growth opportunities, and appraisals that are perceived as equitable and fair by employees. In addition to this, it is also very important to distribute rewards according to the actual performance of employees [27]. Employees reduce their contribution and efforts, start to search for better opportunities in the job market, and restrict their work output when they perceive that there is an imbalance in their reward compared to other employees’ rewards. Consequentially, this behavior of employees leads to high turnover and lower productivity.

3.2. Job Characteristics Theory

The approach of this theory is to develop jobs that satisfy and motivate employees. This theory suggests some features that can help managers make the jobs of their subordinates attractive [28][29]. The theory proposes that intrinsic motivation can be experienced by employees if their job produces three important psychological factors, including the personal responsibility of the employee, the meaningfulness of work, and the contribution of the employee [30]. Employees are intrinsically motivated when the job is meaningful and the consequences of the job are considered the personal responsibility of the employee. This helps the employee to understand that their contribution directly affects the overall effectiveness of the organization [31][32][33]. To sum up this concept, it can say that a job should be designed in a way that creates an experience of responsibility, meaningfulness, and knowledge of the consequences of the contribution. Skill variety, i.e., different activities in a job using different skills; task identity, i.e., the degree to which employees identify the outcome of their efforts; and task significance, i.e., the impact of the job on other people, are three main elements to the creation of an experience of feeling intrinsically motivated.
Autonomy and feedback are the remaining two factors required to make a job meaningful. An employee needs substantial freedom and continuous feedback on their work. If scholars use this theory for the retention of employees, it can see that this model helps the employee to consider their work as being meaningful, which motivates them to take responsibility and contribute through better performance. This automatically leads to employee satisfaction, which is essential to employee retention. Thus, this theory suggests that, along with other factors, feedback is also very critical for reducing turnover. A proper feedback system can be implemented through effective communication in the organization.

3.3. Expectancy Theory

This theory claims that people behave in a certain way due to the expected outcome. According to Victor Vroom, behavior is reinforced by consequences. In light of this theory, it can say that employees behave in a certain way based on the expected consequences. For example, employees will perform better if they are rewarded, but the reward needs to be meaningful. This theory helps managers to identify factors that affect employee motivation and choose among various alternatives [34][35]. In the workplace, employees exchange their performance, efforts, or contributions for salary, compensation, or any other reward. This input may also include the qualifications, work experience, and skills of employees. Here, the important outcomes exchanged for inputs are cash and non-cash benefits, titles, and recognition.
Employees put more effort in when they know they will receive a reward for their efforts. The behavior of task accomplishment is motivated by the type of reward or value that the employee receives. Porter explained this behavior in terms of the relationship between the effort and the performance of the employee. He stated that, in the prediction of the performance of an employee, this relationship acts as a moderator [36]. Furthermore, employees who are skilled and have more abilities put in more effort than less-skilled employees. For employee retention, this theory can be used to predict the level of employee satisfaction. Employee satisfaction can be achieved through an employee’s perception of equity in the organization [37][38][39]. They are more satisfied when they know that they are receiving fair rewards, because they expect fair and unbiased rewards.

3.4. Social Exchange Theory

George Homans proposed the social exchange theory. According to this theory, human behavior is directed by an exchange process, because their decisions are based on rational thinking. Employee commitment, employee motivation, and employee retention are predicted by social exchange. For example, if employees are working hard and putting their maximum effort into performing better but are not getting any reward in exchange for their efforts, these employees will no longer put in effort and their performance will go down [40][41]. This theory is usually used by researchers to explain the desired attitude and behavior of employees. From the perspective of this theory, organizational justice, organizational trust, and effective communication are important components for the retention of employees.

3.5. Maslow’s Theory

According to Maslow, people want to become self-actualized, and they have different needs at different levels. This idea was proposed by Abraham Maslow in 1943. According to this theory, there are five levels, or stages, of needs (physiological, security, affiliation, esteem, and self-actualization) for humans (refer Table 2). Levels of motivation increase as needs are met. This theory is used in organizations to determine the level of needs of employees, and to motivate them through the provision of rewards. Furthermore, it offers useful insights for managers and organizations to retain their employees through a better reward system [42]. It is important to satisfy the unmet or emerging needs of employees through different programs. When managers design a reward system without knowing the unmet or emerging needs of employees, it results in poorer performance and lower employee satisfaction, and ultimately leads to an increase in the turnover rate. According to this theory, compensation, job security, safe working conditions, work relations, recognition, growth, and training and development are critical for retaining employees because these factors lead to employee satisfaction [43][44].

4. Interventions to Improve Retention Strategies in the Hospitality Industry

Based on the above-mentioned theories, a model (Figure 1) was developed. This model clearly shows that employee retention is dependent on employee satisfaction, and employee satisfaction depends on four factors including sustainable and positive work environment, sustainable and effective communication, sustainable growth opportunities, and sustainable and effective recruitment and selection practices [45][46][47]. These factors will not only lead to high satisfaction and, subsequently, a high retention rate but will also assist them in the development of economic and social sustainability growth. The notion of sustainability in HRM practices is important because it can intensify employment relationships and social participation, as well as helping employees to stimulate their positive attitude towards workplace retention. It has been found that there is a strong association between the identified factors and employee retention, as the organization’s HR support, along with the social and economic contributions, facilitates employees’ behavior to develop long-term retention commitment [48][49][50][51]. Hence, it has been deduced that the existence of such organizational factors and the promotion of sustainability growth through having good internal and external relationships will not only help the organization to reduce turnover but also attract new and talented employees [52].

4.1. Sustainable and Positive Work Environment

The work environment is a very critical factor for employee satisfaction. It has an impact on employees’ perceptions of the organization. A conducive and environmentally protected work environment encourages and motivates employees to perform better, and this behavior is sustained throughout the day. Researchers believe that the working conditions, workplace culture, and work environment play important roles in deciding if employees will leave the organization or stay with it. The low employee retention rate in the hospitality industry is the result of low satisfaction levels and a poor quality of leadership [53]. The relevant literature suggests that employees’ perceptions regarding the working environment in which they work is crucial and holds immense importance due to its impact on their intention to remain, customer retention, profitability, and customer loyalty [54][55]. Scott conducted a study in 2016 regarding employee retention in the hospitality industry. He found out that the operations of an organization in the hospitality industry are greatly affected or influenced by environmental factors, i.e., the person and environment fit together to create the appearance of a positive work environment. It is suggested that it’s the manager’s responsibility to create a conducive and sustainable work environment that motivates and inspires employees to perform better, accomplish their goals, and achieve organizational objectives. Employee dissatisfaction, low morale, poor performance, low productivity, and emotional exhaustion result from poor or negative work environments [56]. The work environment, flexible work hours, a humanistic workplace, a culture of recognition, and a diverse work environment influence employee decisions regarding quitting their jobs [57].
In the hospitality industry, employees usually do not have a balance between their work and private lives, and their workplace is not aligned with environmentally sustainable programs; this makes them more stressed at work as well as outside of work. These employees, with their poor work/life balance, also experience conflicts at work as well as in their private life. They experience more problems in their relationships, which lead to mental and physical health issues. Employees usually work night shifts as well. The industry puts burdens on their employees where they are expected to complete their work before leaving without considering the time. Most of the employees leave because they don’t have opportunities to participate in the sustainable growth programs and/or have a clash between their personal life and professional life.
Work/life balance is affected by factors such as a lack of working hours, poor leave policies, an increased quantity of workload, and the unavailability of support structures within the workplace. When an organization or sector faces such challenges, they design policies that can help them handle the situation, but in the hospitality industry, strict policies have been implemented. The industry has designed and implemented very strict policies where employees do not have the authority to decide their working shift, benefits, or working hours, etc. Job rotation and job enrichment add variety to employees’ daily responsibilities. Furthermore, employee empowerment helps employees to make decisions regarding their job responsibilities and working hours. However, in the hospitality industry, there is very little focus on these (mentioned) strategies. In the hospitality industry, the working hours are usually long. Employees have to work more than 9 h per day, which means that per week, the total number of working hours exceed 48 h. Organizations need to show their employees that they are a valuable resource by creating a sustainable and positive working environment.

4.2. Sustainible Growth Opportunities

Sustainable growth opportunities refer to the sustainability of financial growth, career growth, and professional and personal growth opportunities for employees. Career growth or development can be defined as a formal perspective that is followed by companies/organizations to determine whether employees are available who are skilled and meet every aspect of the required job. It is the process of providing an ongoing mechanism that enhances the skills and knowledge of employees. Career development and growth opportunities are very critical for the success of the hospitality industry. The hospitality industry is growing very fast, but still, it has not adopted modern HR practices in its workplaces, and it is encountering challenges of environmental uncertainty. In 2016, most organizations in the hospitality industry introduced management trainee programs in which all of the employees (fresh graduates) completed their 6 months of training, but they always failed to promote them. For this reason, after 6 months of training, when employees are not promoted, they leave the organization. The industry invests a huge amount in its MTOs but fails to retain them. The main reason is that the industry not have structured career development programs or sustainable and environmental initiatives. The industry is not focusing on succession planning, talent management, and leadership development. The majority of the employees join this industry for a short period of time and use it as a stepping stone, not as a long-term career [58].
Employee career satisfaction can be achieved by providing a high level of career adaptability [59], which ultimately leads to a high retention rate [60][61]. According to Messmer, for employee retention, investing in training and career development programs is essential [62]. It is the responsibility of an organization to ensure that employees are growing and their skills are being developed [63]. Hospitality is a target-driven job, which is why the uncertainty and job insecurity level are very high at the entry level. Employees want to meet their desired level of productivity, for which they need support from the human resource department. Most organizations in the hospitality industry do not have sustainable management programs, and they don’t have room to find the right direction for growth and development. This discourages the employee, and then they start looking for alternative options in other organizations and leave the company when they find another better opportunity. For this purpose,  Figure 2 suggests that career development opportunities and self-directed and dynamic learning opportunities are essential for employee retention because they lead to employee satisfaction.
/media/item_content/202206/62a99ed68d5c8sustainability-14-02885-g003.png
Figure 2. Impact of HR policies on employee retention.

4.3. Sustainible and Effective Communication

Sustainable and effective communication is a strategy that involves the integration of sustainable activities into the industry’s operational and strategic objectives. A sustainable communication strategy assists organizations in developing and maintaining a healthy work culture by allowing them to effectively develop interpersonal, group, departmental, and intercultural communication. It also plays an important role in creating an open environment where employees have more opportunities to speak up in terms of suggestions regarding the organization’s sustainable growth. The most effective way of communicating in the workplace is by creating a quality relationship between employees and their supervisors. When effective communication is implemented through the lowering of the power distance, providing regular feedback, conducting performance management meetings, conducting effective orientation programs, and encouraging teamwork, it helps employers to retain their employees. In the hospitality industry, if employees are allowed to participate in decision-making and they are provided with information regarding what is happening in the organization, they are more likely to stick with the organization because they consider themselves part of that company. Currently, this industry is struggling to engage employees. The power distance between managers and their subordinates is higher. Furthermore, due to poor communication, employees are not satisfied with their current salaries, rewards, or other benefits. The primary causes for this poor communication are that employees do not receive feedback, there is no idea of performance management meetings, no sustainability measures are implemented to ensure the organization's long-term survival, and there is no concept of mentorship. This is why employees lack confidence in their abilities [64]. In order to increase employee retention rates, managers must genuinely care about employees’ social and environmental concerns, and must encourage effective communication in the workplace by providing timely feedback, conducting performance management meetings, encouraging transparency, and encouraging teamwork [65]. Researchers believe that employee engagement leads to employee retention because it encourages an employee to stick with the same organization for a longer period of time, and it gives a sense of satisfaction to employees [66]. Figure 2 shows the HR policies and their impacts on employee retention.

4.4. Sustainable Recruitment and Selection Process

The most significant reason behind the high turnover rate is the seasonal nature of the hospitality industry [67]. Usually, in the hospitality industry, managers recruit employees based on seasonal fluctuations. They remain ignorant of proper staffing plans and pre-recruitment planning. Moreover, the hospitality industry greatly overlooks economic and social sustainability practices in the recruitment and selection process, which may cause employees’ negative attitudes and them quitting the job.
Currently, the hospitality industry is focusing on hiring new fresh graduates with good academic backgrounds, and introducing their management trainee programs in universities to hire candidates with formal education, as many of their senior employees do not have a sound academic background. However, the industry is unable to retain them.
The recruitment and selection process of an organization determines the behavior and attitude of the hired employee, and whether or not the employee behavior and attitude are in accordance with the internal culture of the organization. Furthermore, it determines who might be the best fit for the organization. A properly designed recruitment process attracts competent candidates who are best matched with the job position and internal culture of the organization. When organizations use the best sustainability recruitment and selection practices, i.e., person–job fit and person–environment fit, it helps and enables them to choose the right person to fill a vacancy for a longer period. Skilled and best-fit employees introduce innovative ideas and unique methodologies for performing different processes; they increase the efficiency level of the task, which helps the organization to meet its organizational goals by increasing its productivity. Different researchers have identified positive relations or associations between the effective recruitment process and the retention rate of the organization. The use of formal selection and recruitment processes helps the organization to earn profits.
Sophisticated recruitment and selection procedures, as well as the critical role of sustainability practices, aid in the selection of the right person and increase the likelihood of retention for the organization. It has been found that the best recruitment practices and organizational performance are positively related. They help the company to achieve good results and improve the quality of its products and services. When the best employees are hired and then retained, it saves the cost of hiring the wrong people, who frequently leave the organization after some time. When the best people are identified, hired, trained, and retained, the financial burden is reduced. The role of sustainability in fostering and enabling an effective recruitment and selection process is crucial because, through sustainable practices, organizations can attain economic development and social participation that can help them greatly to attract and retain talented staff. A fast and efficient recruitment and selection process enhances the reputation of the company, makes it attractive to the best candidates, reduces the costs of the organization, and ensures that the very best talent is identified, engaged, and brought into the business.

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