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The Role of HR Functions in Strategy Formulation

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1. Brief synopsis/Introduction of the topic/Aim
1.1 Strategic human resource management is created to tackle the issues and challenges that arise in the workings of an organisation. It aims to create a plan which ultimately supports an organisation and its human capital to achieve organisational goals. Strategic human resource management plans ahead to help human capital meet the needs of an organisation by improving on human resource practices such as recruitment, training and development and the retention of skilled employees. 1.2 This report will detail the use of strategic human resource management in relation to the hospitality industry. Gautam (2005) explained that the hospitality industry worldwide is the industry with the highest employee turnover. Narrowing down this industry, the hotel industry within hospitality has one of the highest turnover rates and because strategic human resource management is focused on the efficiency of human capital, the industry must find a way to hire, train and retain skilled employees.

2. Problems and Issues

There are many issues within the hotel industry relating to human capital. This includes the shift in the labour market from gen x to gen y employees, customer service, hours and so on. This report will focus on the more easily controllable and major issues such as turnover, training and retainment of employees. 2.1 It is common knowledge that employee turnover is of the highest in the hospitality industry. This can easily be seen from going to any café, hotel, theme parks, bars etc. and finding that most of the employees are young and most likely are not creating a career path in that direction but more of just looking for a way to earn some money. Kysilka & Csaba (2013) suggests that the five reasons for high turnover is seasonality, organisational culture & leadership, labour pool, customer service issues and pay rates and hours.

Because a hotels business fluctuates depending on which season it is the amount of staff they employee also has to fluctuate. This affects employees a great deal because they are called to work a lot more during festive seasons such as the Christmas period where they themselves be busy and are more of somewhat discarded in the quiet seasons when work and school picks up. Kysilka & Csaba (2013) state that this has a negative impact on employee morale and the employees that are not selected to work in the quieter seasons tend to quit and during the busy seasons employees may submit to too much pressure and stress from continuous work.

2.2 Training is also a major issue as high turnover only leads to the constant training of new employees. A publication by Protel, Hotel Software, state that employee turnover can cost from anywhere between 25 and 250 percent of annual salary depending on the position of the exiting employee. This can create a big dent in organisations assets as the same publication stated a research had found employee turnover in the hotel industry to range from 60-300 percent annually.

2.3 Retaining skilled employees is a challenge as most of the labour market who enter the hospitality industry are not there to create a career. Kramar, Bartram & De Cieri (2014) adapted a case study that detailed the problems with certain characteristics of gen y employees are generally not loyal to employers, ambitious and focus exclusively on themselves. As they want to maintain a balance between their work and their social lives it is quite difficult for the hotel industry to accommodate as they are mostly 24 hour establishments.

3. Human resource practices currently used
As worldwide the hospitality industry is seen as the one with the highest turnover rate. Human resource practices are implemented to try retain staff. A survey was done on the Hong Kong jobsearch website detailing that 67% of employers believed increasing salary was one of most effective ways to retain employees. Other notable practices include promotions, providing better work arrangements and career development. As working in the hotel industry is about efficiency, simply increasing salaries is not a common human resource practice done for lower level employees. Management and above are the only ones able to be convinced to stay from all the practices listed above. Gautam (2005) explained that about 50% of turnover in hotels is by non-management employees. As most of the turnover is non-management. The practices emphasised by human resources must focus more on that level of employee as they are the bulk of their work force and most costly.

I have experienced firsthand the practices used in a particular organisation, Park Hyatt Melbourne, on how they maintain lower level employees. As my department was only 12 people I was able to relate closely to the 60% annual employee turnover (Kysilka & Csaba, 2013). With my one year working there, my department had a turnover of 5 people which is a 41% turnover. Of course this doesn’t match the 60% but certain practices were used to try maintaining employees. As all hires were done either in casual or full time to try attract employees by either the higher salary or permanent hours, managers attempted to entice any hard working or skilled casual into a part/full-time position. This allows them to choose those employees to work during quieter periods as they are cheaper than casuals/agency workers in the short term and it also gives them hours which keeps morale up as they are seen as still wanted even in quieter seasons.

Other practices used include training in bursts and shortening the gap between employee evaluations. At Park Hyatt Melbourne, you are trained as you go from day 1. Because full training sessions would be costly they are done as you go from experienced employees and in one sitting with entire departments every few months. This is the same with employee evaluations. These practices help reduce costs of training and ultimately lead to the organisations goal of becoming the most preferred brand in the hotel industry (Hyatt website).

4. Recommendation/s and Implementation
4.1 As most of the labour market for hospitality are gen y employees, one or more strategies need to be implemented to help against seasonality, training costs and retaining skilled employees. A recommended solution I propose would be to hire a lot of workers at once for a certain busy season. Holiday seasons such as Christmas would be the best time as people will be looking for jobs as they are free from school/other work. This would then be a trial period where everyone hired would be trained at once and only admitting permanent positions to those with characteristics the industry require from their employees to achieve their organisational goals. This in conjunction with human resource practices already used would reduce the cost of training, the amount of hires needed to be retained for busy periods and more accurately select suitable employees for the industry.

4.2 Appendix A is a model for strategic management process. This model splits strategic management into three main processes of strategy formulation, implementation and evaluation. Firstly with the strategy formulation, the organisation must have a clear goal. As referred to before, an example would be Hyatt’s mission to achieve the goal of being the most preferred brand in the hotel industry. Maintaining employees during and after the busy seasons is the weakness of Hyatt and other hotel industries and their strength lies in the fact that the amount of training required to get people into the work straight away is minimal. Hence, my recommendation to hire a lot of people for a busy period being the strategic choice.

The strategy implementation is then left towards both human resources and managers. Human resource must find a way to advertise and recruit a good amount of employees before the busy period starts. This can be done with incentives, increased pay, job descriptions etc. Managers then have to find a way to train them all at once and roster all of them. They also must find a way to evaluate all the workers equally as they will be playing a major role in the next part of strategic management. Strategy evaluation will be done at the end of the busy period. The most outstanding person/people would be admitted to permanent positions as somewhat a “reward/incentive” and the rest would be let go. This helps filters out hard working and skilled employees from those that are just in it for the money. This may somewhat help retain employees as they have a sense of value that they were kept but the rest were let go.

Gautam, A.M 2005, Knowledge Flight: The challenge of Hotel Employee Turnover, 3 March, HVS Global Hospitality Services, viewed 28 April 2014,

Kramar, R, Bartram, T & De Cieri, H 2014 Human resource management in Australia: strategy, people and performance, 5th edn, McGraw-Hill, Sydney.

Kysilka, D & Csaba, N 2013, Employee Turnover in the Hospitality Industry, Vol 19, no. 63, viewed 29 April 2014,

Protel Hotel Software, High employee fluctuation in the hospitality industry, viewed 30 April 2014,

Lin, R 2014, Hotels and Resorts in Australia, viewed 29 April 2014,

Staff Turnover and Retention 2013, viewed 28 April 2014,
Appendix A.

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