Dr. Hui-O Yang Department Of International Business Wenzao Ursuline College of Languages, Taiwan [email protected] Dr. Hsin-Wei Fu Department Of Tourism I-Shou University, Taiwan [email protected]

This article reports on a study which explored the views of managers in the hotel industry in Taiwan as to the most important issues in human resource management (HRM) in their industry. The results suggested that most participating hotels are focused on dealing with the day-to-day operational challenges, such as shortages of appropriately skilled staff and employee turnover. While they perceive these issues as significant and challenging, they were mostly inclined to view these as ‘facts of life’ in the industry, rather than offering more fundamental and strategic solutions for dealing with them. This study concludes that the current and emerging challenges facing the industry in Taiwan demand an approach to HRM which is far more strategic than the traditional focus on personnel administration; and that HRM has a key role to play in creating and sustaining competitive advantage in organizations. However, this will require a significant shift in the caliber of thinking about HRM at executive level.

Keywords: Human Resource Management, Hotel Industry, Taiwan

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The importance of human resources to business success in any context has been widely recognized. Richard and Johnson (2001) are among the many who argue that human resource management strategies impact on an organization’s overall effectiveness, and that the effective utilization of human resources can give an organization a competitive advantage. The importance of human resources is particularly significant in a ‘people focused’ industry, such as hospitality. Duncan (2005) suggests that there are eight main areas of challenge and concern in the global hospitality industry and that the most important of these concern people and employment. Rather than adopting a ‘single issue’ perspective in the investigation, this study has attempted a broader perspective and intended to be more inclusive in the range of issues covered. This study explores the way managers are thinking about contemporary HRM issues and concerns in the context of the hotel industry in Taiwan. It provides insight which should be helpful for hoteliers, enabling them to compare their perspectives and opinions with the aggregated data and relevant literature. Hopefully, it will encourage them to consider more strategically and systematically the things they can do to more effectively position their HRM efforts.

HRM Issues In The Hotel Industry Globally

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Employee turnover has been one of the biggest concerns in the hotel industry for a long time (Hinkin & Tracey, 2000). The hotel industry globally suffers from high staff turnover levels, which is a pervasive and serious problem resulting in high direct expenditure as well as intangible costs (Cheng & Brown, 1998; Hinkin & Tracey, 2000). Hinkin and Tracey (2000) suggested the indirect costs related to turnover account for more than half of the total costs involved in turnover. Simons and Hinkin (2001) contended that employee turnover is more costly for luxury hotels than for lower budget hotels, due to the more sophisticated operating and training systems of the former. There are many different factors that impact on turnover rates. Riegel (2002) argues that turnover is the consequence of a complicated series of dynamics, which include the obvious ones of job dissatisfaction and limited organizational commitment that influence employee attitudes and ultimately affect employee behavior. Mobley (1982) suggested that the reasons for turnover in general include dissatisfaction with work; availability of attractive alternatives; external factors like housing, transportation, or physical environment; and personal factors like illness or injury. Hinkin and Tracey (2000) added poor supervision, a poor working environment, and inadequate compensation to that list. They further suggested that some managers do not understand the relationship between employee retention and company profitability, and accept turnover as a necessary evil. The International Journal of Organizational Innovation 203

The issue of turnover has attracted many researchers’ attention in different countries. Powell and Wood (1999) suggested one of the most significant problems in the hotel industry worldwide is ‘brain drain’, because the skills and qualifications gained in hotel sectors are easily transferable to others. Cheng and Brown (1998) explored the views of HR managers on the strategic management of employee turnover in medium-to-large hotels in Australia and Singapore. They suggested that the most effective mechanisms for minimizing turnover are initial recruitment and selection. They recommended a greater focus on internal recruitment and development, which create career path options, as a means to reduce staff turnover levels. They also noted induction and socialization that effectively acculturate newcomers into the organization; and training and development that demonstrates the willingness of an organization to invest in people which in turn lead to an increase in employees’ commitment and job satisfaction. At a more fundamental level, Iverson and Deery (1997) investigated ‘turnover culture’ in six five-star hotels in Melbourne, Australia and suggested that the hotel industry has actually created a turnover culture, where there is a normative belief in the legitimacy of relatively high labor turnover. This point has been subsequently endorsed by Hinkin and Tracey (2000). Iverson and Deery suggested a strategic switch to promoting a permanent employment culture and developing an internal labor market to reduce the growth of a turnover culture. They advocate The International Journal of Organizational Innovation 204

that managers need to improve communication channels and highlight the organization’s aim for long-term employment during induction programmes, and also need to develop career path programmes in order to increase employee commitment and the retention of trained and qualified employees. In the Asian context, Zhang and Wu (2004) noted that among human resource challenges facing China’s hotel industry, high staff turnover rates constitute one of the key issues. Many employees regard hospitality work as a pass-through to a job in a higher level industry, instead of a life-time career commitment. Zhang and Wu suggested that low morale and motivation levels are critical contributory factors to high employee turnover and that developing effective retention strategies is imperative to solve this problem. One of the approaches they suggested is selecting a successor as each employee is promoted, as a way of encouraging both the organization and its staff to think longer-term, in terms of mutual commitment. In Taiwan itself, Wu and Chen (2002) conducted research on the labor requirements of the hospitality industry and confirmed that the high turnover rate is one the most difficult issues in human resource management in that context. They reported that the turnover problem in large hotels was much worse than in small hotels. Many hotels are planning to increase the number of people employed simply to cover the turnover situation.

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Besides the turnover issue, service quality is another critical concern since hotels are a service-oriented industry. The delivery of hotel service to customers primarily involves personal contact and so the relationship between HRM effectiveness and customer service is likely to be very strong (Boella & Goss-Turner, 2005). Hoque (1999) argues that service quality focuses on the nature of the interaction between the individual employee and the customer at the point of service, in terms of politeness, and overall professionalism. Hoque also contends that service quality is the main factor in creating competitive advantage in the hotel industry, and that any hotel that does not endeavor to continually improve its service quality will lose ground. Competitive advantage generated from internal sources includes such characteristics as value rareness, inimitability, and non-substitutability (Kim & Oh, 2004) , and the employee at the end of the service delivery system may well be the only differentiated and unique asset of a hotel organization which cannot be easily copied. Hinkin and Tracey (2000) have suggested that there are in fact only two ways to compete and differentiate hospitality services. One is by competing on price and minimizing costs, which locks a hotel into a particular market segment. The other is to compete by providing exceptional service. They note that customer care is not a new concept in the service industry, but it is still a complex thing to control and sustain. In the face of the high level of turnover in the hotel industry, it is possible that some customers are served by staff who are relatively untrained, less The International Journal of Organizational Innovation 206

committed and less capable in their social skills. But dealing with this requires the use of quite systematic approaches to service quality management. Boella and Goss-Turner (2005) suggested that if an organization’s first and foremost objective is to provide a service, a holistic approach to service quality management must be developed and employed, infiltrating all levels of the organization from the chief executive to the entry level employees. The employees must be selected, trained properly, and continually motivated to be committed to the service quality strategy as a part of the organization’s business strategy. Employee turnover and service quality have been identified as the major issues of HRM in the hotel industry globally. The main purpose of the study reported here was to investigate the major HRM issues and concerns in the hotel industry in Taiwan, and to compare them with those that are distinctive for the industry across the world.

Due to the limitations of time and cost, it was not possible to contact all the hotels in Taiwan. The major focus for this research was the chain hotels because they account for the largest market share of the lodging industry globally (Angelo & Vladimir, 2004) and dominate the four to five star hotel market (Timo & Davidson, 2005). Their economic impact, as a group, is therefore significant. At the time of writing, there were eight international hotel chains and nine domestic hotel chains, owning forty-six hotel properties in Taiwan. The International Journal of Organizational Innovation 207

The methodology used in this research was qualitative, using in-depth interviews. The characteristics of such qualitative research are exploratory and descriptive (Creswell, 2003), creating a data set that is not possible to obtain through written questionnaires and surveys. While there are few definitive rules for sample size in qualitative inquiry (Patton, 2002), it has been suggested that twelve to twenty examples are needed when trying to obtain the broadest range of information and perspectives on the subject of study (Kuzel, 1992). Twenty-eight hotels were approached and fourteen hotels participated in this research. The sample selected totaled 14 hotels, which represents 30.43 per cent of the total population of such hotels. The respondents were asked three questions: What are the main human resource management issues confronting the hotel industry in Taiwan currently and for the foreseeable future? What are the human resource management issues which are most front-of-mind for your particular hotel? What are the drivers or causes of these human resource management issues? Findings from this study are presented together with interpretation and commentary offered to compare the themes raised in this study with those identified in the literature.

These three questions were asked separately but the findings are presented together because several issues were common to all and were identified as having cause and effect relationships. Five HRM issues are presented in order of the frequency with which they were The International Journal of Organizational Innovation 208

identified by fourteen participating hotels, namely shortage of suitable employees (100% of the respondents); shortcomings in approach to training and development (64% of the respondents); difficulties with internship employment (50% of the respondents); high levels of employee turnover (50% of the respondents); and the effective use of outsourcing, dispatching, flexible, and casual employment (50% of the respondents).

Shortage of Suitable Employees
Respondents pointed out that as the overall average of education level has risen significantly in Taiwan in the last decade, it has resulted in more and more difficulty in recruiting entry level employees. In the past, it was common to receive many applicants for entry level positions which enabled hotels to select the best employees among the applicants. Currently, however, students with a bachelor degree are not enthusiastic to do the entry level jobs because they regard these service and housekeeping jobs as low level. Instead, this young generation tends to purse high-tech or fashion industry jobs which are seen as leading to appealing careers. The fact that the hotel industry has grown significantly in the past decade has exacerbated the problem of employee shortages. Among forty-six chain hotels, nearly fifty per cent of them were established within the last ten years. The speed of hotel establishments opened has also exceeded the speed of employee development. Once a new hotel establishment opened, many people have been ‘job-hopping’ to pursue a higher level position. In the long term, it is feared The International Journal of Organizational Innovation 209

that the demand for entry level employees will exceed the supply to the extent that this will cause a crisis in hotel operation and management. At middle management levels, respondents believe that while there is not a shortage of people available to do those jobs, their qualifications, competences and capabilities have not kept up with the requirements of the positions they hold. Assistant Managers are promoted to be Managers, or Managers are promoted to be Directors simply because the vacancy needs to be filled, rather than because the person has the skills or qualifications needed. These managers have not accumulated sufficient training and experiences during their ‘job-hopping’, so that their management proficiency is very limited, ultimately resulting in a shortage of managerial skills in the hotel industry. Respondents predict that it will be more and more difficult and challenging to recruit and that ‘grabbing’ talented individuals will be characteristic of a very competitive demand situation.

Shortcomings in Approaches to Training and Development
Due to the shortage of appropriate people, hoteliers are often forced to recruit employees simply to fill in a vacancy without considering the background of the applicants. And while some employees may have a hospitality educational background, what is learned in education is too theoretical to be applied in a practical industry setting. Even when employees are from within the industry, they may not be well trained during the ‘job-hopping’ and their level of competence The International Journal of Organizational Innovation 210

may be limited. Each hotel also has different Standard Operating Procedures (SOP) which makes re-training necessary. These problems highlight the importance of providing sophisticated and efficient training and development programs. However, some hoteliers do not see that as a problem, because they believe that knowledge and technical skills can be learned easily by orientation and on-the-job training. Their concern is with the personal characteristics, such as attitude and values. Respondents thought that it is difficult to develop positive values and work ethics in young people after entering the industry and these attributes needed to be obtained in school education. It seems that when they have the opportunity to hire trained staff, they are looking for education and preparation that will do more than simply focus on skills and knowledge. What they expect is that appropriate attitudes and values can be developed by hospitality education providers. This gap results in the waste of educational effort and resources and raises the question of ‘are we teaching what we should?’ (Collins, 2002)

Difficulties with Internship Employment
In order to provide a sufficient and suitable workforce for the tourism and hospitality industry in Taiwan, the government had promoted tourism and hospitality education and allowed many related programs to be established in the 1990s. The major characteristic of this educational system is focusing on training by establishing ‘sandwich’ courses that incorporate The International Journal of Organizational Innovation 211

periods of industrial placement and formalized coursework (Collins, 2002). Internships are beneficial for both students themselves and for the industry, because students have opportunities to work and gain practical experience while studying. Hospitality organizations can fulfill their social responsibility by providing the internship opportunities for students and solve problems in attracting entry level employees in the short term. However, the educational experience provided to the hospitality industry appears not to have helped because respondents reported a significant gap between what students expect and their actual experience of the industry. It was observed that most hospitality students were not willing to commit themselves to the industry after they graduated. Students were said to choose hospitality programs for their major because they were attracted by the prospect of working in a luxurious and exciting environment. These students then received two or four years of higher level education in university, but before graduating were required to take internships in the hospitality industry. Most students were shocked suddenly when they found the reality was totally different to their expectation. They were not willing to enter the industry after graduation because they found the workplace to be undesirable. High work loads, shift work and unattractive payment levels made these young people want to escape from the hospitality industry.

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In addition, hospitality organizations also suffer from the disadvantages of employing internship students. They need to provide training to internship students during a fixed period. These internship students ‘come and go’ every three months or six months so it is hard for hotels to develop career paths and contribute to employee development in the long-term. The training they provide to these internship students only meets the short-term demand and is wasted when these internship students are not willing to come back to the industry after they graduate.

High Levels of Employee Turnover
A high level of turnover was seen by most respondents as an unavoidable problem and a ‘fact of life’. Many respondents thought that the characteristics of the hotel industry, such as high work loads, unattractive payment and just-in-time and seasonal variation demand for labor, are not contestable. These characteristics seem to be an original sin of the hotel industry, and leads to a ‘turnover culture’ in the hospitality industry. They believe it is very difficult to manage employee turnover because the nature of the hotel industry makes people avoid working in such an unfavorable environment. One of the respondents said that high levels of turnover were seen to be not only a normal trend in the hospitality industry but increasingly common for all industries because ‘young people nowadays have no loyalty’. However, high levels of turnover were not seen as necessarily being bad for hotels. This view, put by a number of respondents, suggests that enthusiasm is an important characteristic for hotel The International Journal of Organizational Innovation 213

employees. To some extent, high levels of turnover might be seen as positive because it removes de-motivated employees. One of the participating hotels had a turnover rate of less than 2% in 2005. However, this was thought to have limited career path opportunities, and that as a result long-term employees were not energetic. The low turnover rate also meant that the overall average of employees’ age was higher (28% of employees were between 40 and 49; 38% of employees were between 50 and 59). The respondent from this hotel suggested that older employees resulted in a lack of innovation, creation, and infusion of fresh ideas into the organization.

The Effective Use of Outsourcing, Dispatching, Flexible, And Casual Employment
Most of the hotels outsourced non-core employee functions, including security and public area cleaning. Some hotels outsourced part of housekeeping, and food and beverage operation as well, which in the past have been seen as core functions in the hotel. At the time of this research being conducted, two of the participating hotels are negotiating with ‘dispatching companies’. They are expecting that the problem of seasonal employee shortages can be solved by dispatching companies. They also expect that dispatching companies can provide stable and skilled casual employees during the peak seasons. However, the outsourcing of hotel functions is still developing and has not matured yet in Taiwan. Hotel employers need to carefully consider the advantages and disadvantages in The International Journal of Organizational Innovation 214

outsourcing hotel functions. In terms of advantages, personnel costs can be decreased because the hotel employers do not need to fund labor insurance, retirement, and health insurance fees for those workers. In terms of disadvantages, service quality and customer security might be affected. There is much room for improvement in outsourcing or dispatching but it is seen as an inevitable trend in the hotel industry. Casual or part-time workers are employed for particular occasions (such as banquets, conventions) or in peak seasons. These casual workers are employed on a ‘come and go’ basis and have no contract or formal agreement with the hotel. Hotels enjoy the flexibility of casual workers; however, the service quality can be compromised since these casual workers generally do not have the opportunity to be well trained. One of the respondents said that casual workers are the last choice for hotels because they are seen as fire-fighters. What casual workers provide is service quantity not service quality. It seems that hotels themselves are ambivalent about these workers.

On the basis of these in-depth interviews, it was possible to make a comparison between the issues identified by writers and researchers, and those identified by people actually working in the industry. It can be argued that the issues of skill shortages, shortcomings in training and development, and difficulties with internship employment are all linked to the issues of customer The International Journal of Organizational Innovation 215

service quality raised in the literature. In theory, employing interns provides a solution to the shortage of employees to some extent because internship provides a stable employment source for hotels in recruiting at entry level. Internship students are able to integrate theoretical knowledge with practical experiences through experimental learning, while the industry has opportunities to employ interns to meet both seasonal and long-term needs. However, if the hotel industry cannot utilize internships strategically, the benefits of this win-win situation will not exist in the long-term. Some interviewees regard internships as cheap labor and one of the interviewees is even proud of their financial performance by employing internships. Some hotels regard internships as a supportive workforce for seasonal variations, rather than a long-term investment, because they think these interns will leave at the end of the internship period. It seems that these hoteliers do not understand that these internships could be a potential asset in the organization. It is suggested that hoteliers need to develop a sense of belonging for their interns and raise their interest to come back to work in the hotel. Hoteliers should provide a career vision for these internships that the hotel industry is worthy of commitment. They should also differentiate career planning development to identify these interns as superior to others who have no internship experience. This approach not only provides an incentive and motivation for these interns remaining employed after they graduate, but also contributes to human capital accumulation for the organizations. The International Journal of Organizational Innovation 216

The training and development resources provided by the hotels will not be wasted if these interns are willing to come back to the hotel industry. Garavan (1997) is one of those who has articulated how training and development can be used to reinforce certain behaviors and attitudes which contribute to effective service. Many service encounters occur during the frequent day-today interactions in a hotel that ultimately determine the level of service delivery quality. Hotels are not simply in the business of selling accommodation, food and beverages but rather, in the business of providing people with memorable experiences of service. Employees themselves are the personification of the service organization and customers’ overall impression of an organization is often generated from contact with first-line employees. The high level of turnover is a significant problem in the hotel industry that has attracted many researchers’ attention (Cheng & Brown, 1998; Deery, 2002; Hinkin & Tracey, 2000; Iverson & Deery, 1997; Riegel, 2002; Simons & Hinkin, 2001). However, most participants in this study seemed to accept Hoque’s (1999) view that the high level of turnover is a ‘fact of life’ and a normal and acceptable phenomenon in the hospitality industry (Iverson & Deery, 1997). In the fact, turnover still can be improved by better management, as long as human resource managers can see it as an opportunity, not just an inevitable problem. Some researchers have suggested that specific HRM practices can enhance employee satisfaction which in turns reduces the turnover rate. Empowerment is one of the effective The International Journal of Organizational Innovation 217

approaches recommended by many researchers (Bowen & Ford, 2004; Enz & Siguaw, 2000a, 2000b; Lashley, 1999). They suggested that it is important to empower the employees who provide services by focusing on customers’ needs. Service encounters are the main activity in a customer service industry and employees may encounter many different unique situations which can not be covered by the organizational policies and procedures (Bowen & Ford, 2004). If organizations are able to empower their employees, then they are able to exercise discretion in delivering customer service and do whatever is necessary to satisfy customers’ needs (Enz & Siguaw, 2000a; Lashley, 1999). It has been argued that empowered employees also tend to have a strong sense of control and personal worth because they can take responsibility for the service encounter and have the power to effect customer satisfaction (Lashley, 1999). At another level, it has been suggested that empowered employees are motivated by doing meaningful work that ultimately enhances their job satisfaction and reduces the turnover rate (Bowen & Ford, 2004). Not surprisingly, acceptance of a turnover culture sits side by side with practices which are easier to implement: outsourcing, dispatching, flexible employment, and casual employment. Kalleberg (2000) has seen flexible employment as a way of being responsive to sweeping social and economic changes. Global economic turbulence increases competition and uncertainty which forces organizations to be much more flexible in employee resourcing and responding to customers. Compared to most other industries, the fluctuation of workforce demand is more The International Journal of Organizational Innovation 218

significant in the hotel industry. Human resource managers understandably seize approaches which give them the flexibility to deploy employees in response to the variation, and to recruit a ‘just-in-time’ workforce in the peak seasons or during periods of commercial or institutionalized seasonality. Flexible employment practices enable organizations to not only cut direct and indirect labor costs but also provide flexibility for both employers and employees. Employers can adapt to variations in the demand and increase flexible workers on an as-needed basis while providing opportunities for people who are glad to take flexible or casual work. While flexible employment may be convenient for all parties, it does raise some key issues of employee management. Different work arrangements may lead to different levels of recognition, commitment, attachment, and obligation between employers and employees. As well as the benefits, hoteliers should consider the side effects of flexible employment. One of

the possible negative aspects is that dispatching workers have a limited relationship with hotels in which they will work resulting in low trust and low commitment. These might, in turn, lead to conflict between direct-hire and dispatching workers, and between management and employees (Kalleberg, 2000). Another possibility is that it is more expensive to manage the outsourcing activity than originally expected, so that the goal of cost saving is not achieved (Albertson, 2000).

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The trend towards flexible working has become unstoppable in such a fluctuating environment (Purcell & Purcell, 1998), and dispatching is one of the arrangements which is likely to be a permanent dynamic of the hotel industry in the future. While becoming more popular in Taiwan, but there is no regulation of the process at the time of writing. It has been argued that it is imperative to regulate dispatching employment, because of the complex triangular employment relationship between dispatching company, dispatched worker, and the firm to which they have been dispatched (Kalleberg, 2000; Purcell & Purcell, 1998). The issue of control and supervision of dispatching workers is ambiguous because the dispatching company is the employer while the firm dispatched to supervise the employees. This complicated issue can not be covered by traditional employment law which recognizes only two parties: employer and employee. It highlights the urgency and imperative to clarify the obligation and responsibility between three parties.

Given that the hotel industry in Taiwan already has suffered from significant shortages of suitable employees, it can be predicted that serious competition for employees is probable and the problem will become even more severe when new entries enter the market. Human resource managers should be long-term oriented and proactive, and utilize internships strategically because effectively handled internship student employment has the potential to make a much The International Journal of Organizational Innovation 220

more useful contribution to dealing with the pervasive issue of employee shortages. They need to consider how they can make internships more attractive and more effective as a way of attracting and keeping suitable staff. Although empowerment is recommended by many researchers to reduce the turnover rate, it seems that this approach has not been widely taken up because the term ‘empowerment’ was not used by the participants at all in this study. Given the possible benefits in terms of service quality, customer and staff satisfaction, and turnover, there is much to be gained from considering empowerment options. Although a teething period is unavoidable in starting a new management approach, hoteliers should not be too conservative to attempt it. Sufficient communication and facilitation skills training are important to minimize the possible negative effects.

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