Effects Of Reward Management Practices On Employee Retention In The Hotel Industry In Kenya

ABSTRACT

The hotels in Kenya fall short of the industries turnover average and still leads in employee turnover. In the year 2011, labor turnover was at 68% in five star rated hotels. Today, the industry is confronted with the continuously evolving challenge of demand for retention of appropriate talent. Consequently, this has impacted negatively on hotel business sustainability due to high costs of training new employees, replacement and separation for the departing employees as well as affecting customer satisfaction. The purpose of this study was to examine the effect of reward management practices on employee retention in the hotel industry in Kenya. The objectives of the study were to establish the effect of career development, remuneration, job promotion and employee recognition on employee retention in the hotels in Kenya. This study used descriptive survey research design. The target population of this study comprised of two hundred and thirteen hotels registered under Kenya Association of Hotelkeepers and Caterers in Kenya. A representative sample of one hundred and thirty seven hotels was selected from each region using stratified random sampling. A pilot test was conducted to test the reliability and validity of the data collection instruments. Data was collected by use of a questionnaire and was analyzed using descriptive and inferential statistics. The study established that there was a positive and significant relationship between career development and employee retention in the hotel industry. In addition, the study found that job promotion had positive and significant influence employee retention in the hotel industry in Kenya. Further, the study established that remuneration influences employee retention in the hotel industry in Kenya both positively and significantly. The study revealed that there was a positive and significant relationship between employee recognition and employee retention in the hotel industry. The study also found that hotel rating moderates the effect of reward management practices on employee retention in the hotel industry in Kenya. The study recommended that human resource managers in the hotel industry should develop Career Development Programs indicating various types of career developments in the organizations and who is eligible for them. In addition, the managements of the hotel industry should review their remuneration structure to consider the current high cost of living. Further, the study recommended that the hotel industry should develop a policy indicating who and when a person should be promoted, this will help to deal with issues of discrimination in job promotions as indicated in the study. Job promotions should not be an increase in roles and responsibilities only, but should be accompanied by an increase in salary and allowances. Lastly, the study recommended that the management of hotels should enhance employee recognition through a monthly or yearly recognition program and should be communicated to all staff.

CHAPTER ONE

INTRODUCTION

This chapter discusses the background of the study, which has sub-sections namely the global perspective of employee retention, regional perspective of employee retention, local perspective of employee retention, and Kenya association of hotelkeepers and caterers in Kenya. The chapter also presents the statement of the problem which brings out how and why the study was to be undertaken by comparison of statistical evidence. The objectives of the study, the general and the specific as well as hypotheses that support the study have been clearly outlined. Further on, justification, scope, and limitations of the study have been discussed.

1.1 Background of the Study

According to Barky (2006), a hotel is an enterprise that provides accommodation on a temporary basis. Bharwani and Butt (2012) indicates that the provision of essential accommodation, in the past, consisting only of a room with a bed, a wardrobe, a small table and a wash hand basin has widely been replaced by quarters with modern amenities, including integral bathrooms and air conditioning or climate control. Supplementary common features found in hotel rooms are a telephone, an alarm clock, a television, a safe, a mini-bar with bite foods and munchies, and amenities for making tea and coffee (Bharwani & Butt, 2012). Executive hotels usually provide additional guest services such as a swimming pool, health center, production center, childcare, convention centre and social utility amenities (Gu & Siu, 2009).

Hotel industry has not failed to receive meticulous consideration of academics, industry tycoons and monetary analysts because of its increasing effect on the GDP of a nation (Uddin, Das & Rahman, 2008). The hotel business is a lively service industry where best human resource management is essential to make sure professionalism and competence in delivery of service (Hanzaee & Mirvaisi, 2011).

Employee retention is fundamental for the hotel sector as it hires more people than any other sector within the private divide, equally domestically and globally (Peric, Mujacevic, Simunic, 2011). Advancing employee retention entails efficient management with a lasting view (Enderwick, 2011). Dealing with organizational hurdles including employee retention calls for the cooperation of academia (Olson, 2010), business sector (Cavico & Mujtaba, 2010), and the government (Molian, 2012). Employee retention is attainable if employees are competent and professional in their area of work (Singh, 2012). The challenge is that today’s human resources especially the millennials have diverse ideas than those from five or six decades ago (Solnet Kralj, & Kandampully, 2012). The millennial employees are not likely to stay with the same corporation or industry for their full work engagement. The organization ought to distinguish this by acting proactively and retaining brilliant people (Parry & Kelliher, 2009; Solnet et al., 2012).

1.1.1 Global Perspective of Employee Retention

According to Kusluvan, IIhan, & Buyruk (2010), one of the most important benefits of the growth of the hotel business in any market is the provision of employment. The hotel consists of a number of different sectors including travel agencies, tour operators, travel and shipping, lodging, food and drink, and attractions which entail a diversity of industrial skills and competencies. The World Tourism and Travel Corporation (2012) shows that, employment in the hotel industry was projected to be over 230 million jobs and over ten percent of the gross domestic product worldwide by 2007. This depicts a fraction of one in every 11.2 jobs. This figure was estimated to reach 260, 417, 000 jobs or nine percent of entire employment in the world by 2017.

Nevertheless, the employee turnover trend is an ongoing matter affecting the hotel industry worldwide (Yang, 2011; Poulston, 2008; Slåtten & Mehmetoglu, 2011; Parry & Kelliher, 2009). High loss of employees in hotels is attributed to their environment which is normally not part of the organization priority (Smith, 2015). Furthermore, the undertaking of these roles as jobs rather than careers means investment in skill acquisition, growth and development is usually just enough for the person and the company to carry on (Kusluvan et al., 2010). There is an issue of causality, but the challenge is for companies in the sector to initiate proactive procedures to develop conditions for such workers in the hope of benefiting from minimized loss of employees.

A research conducted by to Sut and Perry (2011) confirmed that empowering employees generates constructive conduct and individual fulfillment. Since hotel industry is an interactive sector, personal fulfillment leads to employee retention. In some European and Russian hotel industry, getting employees to stay requires organization commitment, continuous motivation and prospects for progression (Latukha, 2011). Moncarz, Zhao, & Kay (2009) also observed that effective training is critical in retaining employees with lasting objectives in the US hotel market.

Middle East region advocates the execution of human resource policies that promote pleasant corporate relationships and employee reliability which result to employees’ retention (Demir, Çolakoğlu & Güzel, 2007). Such policies have the potential to attract and retain top performers, enhancing the capacity of organizations to remain champions in their particular industries (Tracey & Hinkin, 2008). According to Solnet et al. (2012), improved service opportunities, professionalism, and better job atmosphere are some of the prime reasons for employment mobility apart from increased pay, which are seen to be the basis to depart from their present jobs in the Middle East region. Solnet et al., (2012) indicate that organizations offering benefits such as experiential opportunities, a clear career path, promotion options, transport, and operational conditions that moderate work, individual and family development are more likely to retain their group of talent.

It is also obvious from the hotel market in Turkey that there is a strong negative bond between loss of staff and organizational loyalty, signifying that employees with low commitment are likely to pull out from the organization (Demir et al., 2007).

The study indicates that organizations that have embraced valuable training, feedback, communication and career progression programs are not only ongoing but even flourishing despite presently demanding global economic conditions. This serves as a strong impetus to help organization all over the region in enhancing the efficiency and performance of their employees (Sangaran & Jeetesh, 2015).

It has been observed in Austria that minimal loss of employees has been achieved by stressing on quality staffing, providing better education and onboarding, establishing practical career opportunities, and creating lasting incentive and payment systems. A turnover research study carried out in 2009 in 64 four to five star Australian hotels showed that turnover costs can be reflected into client discontent, low employee drive, decreased output, low service excellence, negative business insight and organizational performance. (Cho, Woods Jang & Erdem, 2009).

1.1.2 Regional Perspective of Employee Retention

The largest figure of tourism arrivals is recorded for the region of North Africa seconded by Southern Africa, then East Africa. By distinction, the regions of West Africa and Central Africa have recorded fewer number of tourism arrivals (Twining-Ward, 2009). The Africa Travel Association and the World Bank (2010); World Bank (2012). Individually the countries that reported regularly the biggest number of arrivals from tourism are South Africa, Egypt, Morocco, Tunisia and Mauritius (Rogerson, 2007; World Bank, 2012). Although the global economic recession and decline in international tourism trips, the continent of Africa continues to show tourism visits which are growing quicker than the world custom. While the hotel industry gives many employees the preferred and rewarding opportunities, it also requires attraction and retention of many service delivery staff.

Employee retention is a problem faced daily in the African hotel industry. According to the International Labor Organization (2010), turnover rates are still higher in hospitality than any other industry. It is well known from the ILO that the costs associated with recruitment and hiring are much greater than those of engaging and retaining current employees (ILO, 2010).

As the economy begins to show signs of improvement, it is important for companies to find ways to retain employees in order to stay competitive and maintain a strong bottom line.

Consequently, the hotel environment is characterized by long, unfriendly hours and salaries, insecurity and lack of employee recognition make it abhorrent as a career option, making the industry to suffer from high workforce turnover and difficulties in employing suitable staff (Bharwani & Butt, 2012). This tends to deal with the skills gaps that are in existence. Collectively, these negative factors harm the image and perception of the hotel industry. The major hurdle is to correct this negative perception, first by improving working environment to attract appropriate employees and retain them, and second by investing in their career progression and work life balance.

African hotel industry has attempted to introduce strategies in reducing employees’ turnover. For instance in Ghana, Seychelles, Zanzibar, Morocco, Mozambique and Tanzania, strategies are based on the fact that hotel industry is so dynamic and maintaining employees is depended on the job opportunities in the country (Honyenuga & Adzoyi, 2012). The major cause for the high turnover has to do with low salaries and poor conditions of service. This is followed by young people who leave their serving position for further studies. This is in line with Boella and Goss-Turner (2005) who said that due to the unrestricted entry into the industry, the industry provides job avenues to a number of students and young people who use the industry as a stepping stone for better working life elsewhere.

The strategies adopted to retain employees include some measures such as offering end of year allowances although not regular in some instances, attachment to higher hotels for the acquisition of skills, provision of free accommodation and the provision of special allowance to highly skilled workers such as chefs. Research also shows that employees in the four star hotels in particular are satisfied with the incentive packages put in place (Honyenuga & Adzoyi, 2012).

1.1.3 Local Perspective of Employee Retention

According to the ILO (2010), Kenyan economy is becoming a service driven nation. Worldwide, the service industry represents for 20 per cent of the economy, while the trade industry in Kenya presently stands at 62 per cent of GDP, with an equivalent over 68 per cent of employees deployed with major business sectors like transport and logistics, information communication technology, hotel and banking services taking the lead. Nonetheless, one of the major challenges affecting the hotel industry in Kenya has been scarcity of competent and experienced employees across an extensive continuum of experts (ILO, 2010).

The Kenyan hotel industry has by and large struggled to retain top personnel due to low and unfriendly remuneration scales. Moreover, the working hours and shifts in the hotel sector has remained to be unfriendly, for instance; working odd hours, working in shifts and the social stigma of working in the hotels curtailed many females in joining the industry (Samuel & Chipunza, 2009). Research has therefore shown the need for the management to review the employee welfare by giving better salaries, introducing flexible working hours, balancing individual work and personal life; among other incentives in order to promote employee retention.

The other strategic initiative recommended in the Kenyan hotels is the improvement of the working conditions in the hotel sector in order to boost employees’ morale as these are the ingredients to employees’ commitment to the organization (Kuria, Alice, & Wanderi, 2012). In a study evaluating on the quality of service offered by the retained employees, Njoroge (2013) pointed out that some fringe benefits like medical cover, bonuses, paid for holidays and promotions/ demotions are ranked moderate while job security ranked low when it comes to employees retention factors. Other competitive strategies to retain the employees involve staff motivation, clear job descriptions, and competitive remunerate which would retain many of the employees and in return to keep their customers satisfied (Njoroge, 2013).

1.1.4 Kenya Association of Hotel Keepers and Caterers in Kenya

The Hotelkeepers and Caterers Association was founded in 1944. KAHC is the main umbrella group bringing together hotels, lodges, restaurants, membership clubs and prominent airline caterers whose general idea is to provide services in the hospitality sector. The association is the key voice for hotels and restaurants to the government and other agencies on matters of rules and regulations, licensing, and policy. This role is achieved through representation in the Kenya Tourist Board, Kenya Tourism Federation, Federation of Kenya Employers, Hotels and Restaurants Authority, Kenya Utalii College, East Africa Tourism Council, Catering and Tourism Development Levy Trustees, Tourism Trust Fund, Nairobi Central Business District Association, Mombasa and Coast Tourism Association, Coast Development Authority and other forums. It also liaises with the ministries of Tourism, Trade, Finance and Labor.

The association is the primary information exchange system for members and the hotel industry by carrying out research, updating business database and communicating with members on employment policies, tax and pricing policies, human resource, hotel licensing and rating, welfare and safety, legislation, labor laws and documentation. The association promotes harmonious labour relations through Collective Bargaining Agreements (CBA) negotiated and signed with trade unions and coordinates career and development programmes with the Kenya Utalii College. KAHC membership gives hotels a stamp of recognition and affords them an environment to talk about common issues in a joint front, (KAHC, 2015)

1.2 Statement of the Problem

The hotel industry plays a fundamental and vital role in the growth of the Kenyan economy. A study carried out by Kuria, Wanderi and Ondigi, (2011) in Kenya revealed that labor turnover was at 68% in five star rated hotels. Armstrong (2012) defines employees’ turnover as the rate of people leaving an organization, he asserts that turnover can be disruptive and costly to the organization. A high number of staff leaving an organization at any given period is detrimental to both the employees and the employer in terms of performance and efficiency. For instance, high loss of 7 employees can make first time employees fresh from college to reduce, give rise to use of casual labour on temporary terms, affect negatively on output and sustainability, and hinders career progression (Long, Perumal, & Ajagbe, 2012). The hotel working environment contributes to the high rate of unwillingness to stay long by the employees compared to other businesses (Mohanty & Mohanty, 2014; Shani, Uriely, Reichel, & Ginsburg, 2014). The high turnover, low retention and severe scarcity of skilled employees in the tourism sector have extensively affected the hotel industry (Silva, 2006).

A new report from Deloitte (Hospitality, 2015), established that employee turnover in the hotel sector can be as high as 31% and may rise further as the decline is left behind. This is nearly twice the percentage rate for other sectors and can be costly for businesses. At present, the hotel industry is faced with the endlessly developing challenges of demand for retention of appropriate talent and competitive employees on permanent and pensionable basis. Recruitment costs account for a tremendous proportion of hotel operation expenses. Deloitte’s report states that, ‘An average hotelier spends 45% of operating expenses and 33% of revenues on labour costs.’ High turnover rates cause extra overheads in recruitment and career development. According to the report 52% of the cost of recruiting employees is productivity loss and 14% is on-boarding and career development. Additionally, to the normal operation expenses, there are broad arrays of other express and indirect costs associated with turnover, and organizations must attempt to avoid these costs at all times (Allen, Bryant & Vardaman, 2010).

Consequently, employee turnover is a considerable expense to hotels and it may be the most important characteristic impacting hotel productivity, service excellence and career development. (Davidson et al., 2009). Employee turnover is caused by diverse factors such as low self esteem, low productivity, inefficiency, low employee engagement and commitment. Human Resources Managers need to recognize the impact of loss of employees in the organization and how to deal with employee turnover issues (Allen, Bryant & Vardaman, 2010). According to Mayfield and Mayfield (2008) retention of important employees is one of the most noteworthy issue confronting leaders. The main goal of retention is to prevent the loss of competent employees from the organization as this could have adverse effect on productivity and service delivery.

Empirical studies have been conducted on employee retention in various sectors in Kenya. Onyango (2014) conducted a study on the relationship between rewards and employee retention in Non-Governmental conservation organizations in Nairobi and established that work environment, learning and development, direct financial rewards and the indirect financial rewards had a positive correlation to employee retention. The study focused on Conservation NGOs and therefore it cannot be generalized to KAHC. Kimunge (2014) did a study on Kenya Vision 2030 Delivery Secretariat, it was established that reward, balance between life and work, acquisition of skills and career progression have constructive effect in employees’ resolution to stay or leave an organization. However, a poor salary structure and lack of career growth were seen to be the components that have the most profound impact on employee retention at Kenya Vision 2030 Delivery Secretariat. The study was limited to Kenya Vision 2030 secretariat; it did not address issues facing hotels registered by KAHC in Kenya.

The study research gap was established by lack of empirical studies on reward management practices that affect retention of employees in the hotel industry in Kenya. Empirical studies (Kimunge, 2014; Onyango, 2014; Wanderi & Ondigi, 2011) were insufficient as they concentrated on other sectors. None of these studies undertook a study on the hotels registered under the hotel keepers and caterers association in Kenya. For that reason, this study embarked on tackling this gap by undertaking an empirical study on the effect of reward management practices on employee retention in hotels that are registered with the hotel keepers and caterers association in Kenya.

1.3 Research Objectives

The study was guided by one general objective and five specific objectives.

1.3.1 General Objective

The main objective of this study was to examine the effects of reward management practices on employee retention in the hotel industry in Kenya.

1.3.2  Specific Objectives

1. To determine how career development influence employee retention in the hotel industry in Kenya.
2. To examine the effect of job promotion on employee retention in the hotel industry in Kenya.
3. To establish how remuneration influence employee retention in the hotel industry in Kenya
4. To examine the effect of employee recognition on employee retention in the hotel industry in Kenya.
5. To establish the moderating effect of hotel rating on the relationship between reward management practices and employee retention in the hotel industry in Kenya

1.4 Hypotheses

The study was guided by the following hypotheses;

1. H_a1: There is a positive significant relationship between career development and employee retention in the hotel industry in Kenya.
2. H_a2: Job promotion has a positive significant influence on employee retention in the hotel industry in Kenya.

• H_a3: Remuneration has a positive significant influence on employee retention in the hotel industry in Kenya.

1. H_a4: There is a positive significant relationship between employee recognition and employee retention in the hotel industry in Kenya.
2. H_a5: The strength of the relationship between reward management practices and employee retention in the hotel industry in Kenya depends on hotel rating.

1.5 Justification of the Study

This study was of great importance to the management of medium and large hotels in Kenya, to employees of five star hotels, government of Kenya and policy makers as well as academicians and researchers.

1.5.1 Management of Hotels

To the management of hotels in Kenya, the study provides information on how various reward practices influence employee retention and how they can be used to reduce labor turnover. It is well known that this service industry is highly dependent on the “human factor” which has become a major part of the hospitality product. High turnover can lead to more issues in the workplace, such as understaffing, low morale, and poor customer service. Without strong retention strategies, companies spend more on hiring and training costs.

1.5.2 Government of Kenya and Policy makers

The study provides information on reward management practices and their role on employee retention in hotels in Kenya. The study also provides vital information to the human resource departments of other manufacturing industries, government institutions, non-governmental organizations and to the entire corporate sector that can be used to improve reward management policies in relation to retention of employees. This information may be used to develop a policy framework to protect both the employees and the employer. To the policy makers, the findings will provide viable opportunities to revise policies related to reward management practices and retention employees in organizations in Kenya.

1.5.3 Academicians and other Researchers

The study adds more information to the body of knowledge on the role of reward practices on employee retention in the hotel industry. The study also provides a base upon which further studies can be conducted on reward management practices and employee retention.

1.6 Scope of the Study

The study focused on hotels registered with the Hotel Keepers and Caterers Association in Kenya between the year 2010 to 2016. The study was limited to four reward management practices, namely; career development, remuneration, job promotion and employee recognition.

1.7 Limitations of the Study

There were some limitations during data collection as some of the respondents failed to provide the required information due to their attitude towards the study and for fear of victimization. However, to mitigate this challenge, time was taken to convince the respondent’s confidence by providing the reasons behind the research and assuring the respondents that the information they provided would be treated with utmost confidentiality. The study obtained a letter of data collection from the University as an assurance to the respondents that the information being collected was to be used for academic purposes alone. The study also encountered a challenge in returning of questionnaires, to mitigate this, the questionnaires were self-administered to the respondents by research assistants who dropped and picked the questionnaires. There was a limitation of accessibility to a wide geographical spread of respondents in different regions in the country, to mitigate this; the study used two research assistants to collect data from each region.

Pages:  150

Category: Project

Format:  Word & PDF         

Chapters: 1-5                                                               

Material contains Table of Content, Abstract, References & Appendix.