Study finds hidden costs of hotel employee turnover

December 22, 2006

Worker turnover costs employers a bundle. For example, in the lodging business, where some 60 percent of frontline workers and 25 percent of managers leave their jobs each year, turnover costs employers, on average, almost $6,000 per frontline worker and almost $10,000 per manager, reports a new Cornell study.

By far, the biggest expense is lost productivity -- up to 70 percent of the total cost in some cases, report Professor Timothy Hinkin and Associate Professor J. Bruce Tracey in Cornell's School of Hotel Administration.

"Most of the damage to productivity is caused by the inexperience of new employees," said Tracy, noting that lost productivity is also the costliest turnover expense in other industries as well.

In their Web-based survey of 33 hotels, the researchers divided the costs of turnover into five categories: predeparture, recruitment, selection, orientation and training, and productivity loss. They also compared turnover costs of low-complexity jobs with high-complexity jobs, among other factors.

"We found that hotels that spend a higher percentage of their turnover costs on exit interviews had a relatively lower cost of turnover. Likewise, hotels that involve a wider group of supervisors and peers in the selection process saw relatively lower turnover expenses," said Hinkin.

Surprisingly, the researchers also found that selection costs in choosing workers for low-complexity jobs takes more of the total turnover costs than the selection costs for high-complexity jobs. They believe that the source of this relatively high expense comes from the difficulty of developing a pool of qualified candidates for low-complexity positions.
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The study is available at no charge from Cornell's Center for Hospitality Research at http://www.hotelschool.cornell.edu/chr/research/centerreports.html.

Cornell University

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