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.


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
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The lodging industry sees fierce competition, with new products and branding strategies vying for the dollars of increasingly demanding consumers. Technologically, the industry has made tremendous progress in revenue-management systems, computerized reservations, and POS systems, and we can only hazard a guess what the internet will eventually mean to the lodging industry. Virtually all jobs have been altered by technology and downsizing, and hotel employees have more to learn and do than they did two decades ago. The demographic characteristics of the workforce have changed, and in many markets most of the people considered employable are already employed. With predictions of labor shortages to come, competition for qualified employees will only increase, making employee retention an important managerial objective. A recent stream of research has empirically demonstrated a significant relationship between sound human-resources practices and financial performance.3 For example, a recent study by Delerey and Doty found that three HR practices— namely, results-oriented perform mance appraisals, employment security, and profit sharing—were strongly related to return on equity and other financial measures of a firm’s
3 For example, see: Jeffrey Pfeffer and John Viega, “Putting People First for Organizational Success,” Academy of Management Executive, Vol. 13, No. 2 (1999), pp. 37–48; and James L. Heskett, Thomas O. Jones, Gary
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