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Hospitality Management 25 (2006) 262277

www.elsevier.com/locate/ijhosman

Measuring the impact of human resource

management practices on hospitality rms
performances
Seonghee Choa,, Robert H. Woodsb,
SooCheong (Shawn) Jangc, Mehmet Erdemd,1
a

Hotel & Restaurant Management, College of Agriculture, Food and Natural Resources,
University of Missouri, Columbia, 122 Eckles Hall, Columbia, MO 65211, USA
b
William F. Harrah College of Hotel Administration, University of Nevada, Las Vegas,
4505 S. Maryland Pkwy. BEH459, Las Vegas, NV 89154, USA
c
Department of Hospitality and Tourism Management, Purdue University, 1266 Stone Hall,
West Lafayette, IN 47907-2059, USA
d
The Lester E. Kabacoff School of Hotel, Restaurant, & Tourism Administration, University of New Orleans,
BA 205, 2000 Lakeshore Drive, New Orleans, LA 70148, USA

Abstract
This study investigated the relationship between the use of 12 human resource management
(HRM) practices and organizational performance measured by turnover rates for managerial
and non-managerial employees, labor productivity, and return on assets. The results of
regression analyses indicated that companies implementing HRM practices such as labormanagement participation program, incentive plans, and pre-employment tests are more likely
to experience lower turnover rates for non-managerial employees.
r 2006 Elsevier Ltd. All rights reserved.
Keywords: Human resource management practices; Organizational performance; Employee turnover

Corresponding author.

E-mail address: choseo@missouri.edu (S. Cho).

Current address: Hotel Management Department, William F. Harrah College of Hotel Administration,
University of Nevada, Las Vegas, 4505 Maryland Parkway, Las Vegas, NV 89154, USA.
1

0278-4319/$ - see front matter r 2006 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ijhm.2005.04.001

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1. Introduction
Human resource management (HRM) departments of hospitality companies are
often criticized for being a cost center. This criticism is raised because it is not clear
to see the results of employee management and difcult to measure outcomes of
HRM efforts. Human resource outcomes are generally measured with intangible
factors such as employee satisfaction, customer satisfaction, customer complaints,
etc. Thus, results of these measurements are often too blurred to see the impact on
bottom line. A rapidly changing business environment, featuring a tight labor
market, changing customer demands, and increasing competition, has been a
challenge for many of todays hospitality companies. Moreover, rapidly changing
technologies make it easier to share information and to replicate competitors
strategies and work practices.
To address these challenges, academicians and professionals have emphasized the
use of competitive strategies that account for core competencies and capabilities
within human resources. The emphasis of human resources to improve organizational performance has become stronger, not only because they cannot be easily
imitated by competitors, but because they provide an effective and rapid response to
market demands (Huselid and Becker, 1996; Prahalad and Hamel, 1990; Stalk et al.,
1992). Furthermore, numerous academicians have asserted that HRM issues are
increasingly essential to organizational performance, under labels such as core
competence, intellectual capital, organizational capability, high performance work
systems, process management, value-based teams, and high performing teams
(Ulrich et al., 1997, p. 1).
Becker and Gerhart (1996) argued HRM decisions inuence organizational
performance by either improving organizational efciency or increasing business
revenue. According to previous studies, HRM practices contribute to improving
organizational performance including turnover rate (Huselid, 1995), labor productivity (Datta et al., 2003; Huselid, 1995; MacDufe, 1995; Youndt et al., 1996),
return on assets and return on equity (Delery and Doty, 1996), and prot margin
(Kalleberg and Moody, 1994).
Many studies on the impact of HRM on organizational performance have been
conducted dealing with many different industries at the same time (e.g. Davision et
al., 1996; Ichniowski, 1990; Huselid, 1995; Watson Wyatts, 2002). However,
Cappelli and Neumark (2001) stated that there is an advantage in investigating
HRM within a single industry. Such a limited population, they argued, ensures that
measured organizational performance is comparable across observations. Ichniowski et al. (1995) supported the advantage of studying within a single industry by
suggesting that measurements of organizational performance, HRM practices, and
control variables were more precise when a study focused on a particular industry.
They also added that within an industry studies automatically control for factors
that differ among industries (Ichniowski et al., 1995, p. 304).
Despite the hospitality industrys unique feature of labor intensity, only a few
studies investigated the impact of HRM practices on organizational performance
such as decreased turnover rates, increased labor productivity, and increased prot

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S. Cho et al. / Hospitality Management 25 (2006) 262277

margin within the industry. Those few studies, moreover, examined the impact of
only a single HRM practice on organizational performance (Ball et al., 1986;
Dienhart, 1993; Lawrence, 1992). Thus, the results of the studies might be considered
as biased to some extent. Since a single practice can represent only a part of the
effects of overall HRM practices, examining relationship between a single practice
and company-wide organizational performance may inate the true effects of the
single practice. Therefore, this study attempted to investigate the impact of various
HRM practices on organizational performance in the hospitality industry.

2. Literature review
For the last decade, researchers have emphasized the effect of HRM practices on
organizational performance (Becker and Gerhart, 1996; Delery and Doty, 1996;
Huselid, 1995; MacDufe, 1995). They have argued for best practices, known as
innovative HRM practices, that some HRM practices are always better than others;
therefore, all organizations were encouraged to adopt these practices (Delery and
Doty, 1996). The adoption of best practices has resulted in lowered costs, increased
revenue, and the creation of more effective HRM (Best Practices in the U.S.
Lodging Industry, 2000).
Bartel (1994) reported that organizations introducing a formal training program
from 1981 to 1986 showed productivity improvement by at least 20%. Terpstra and
Rozell (1993) analyzed data from 201 organizations regarding the use of ve stafng
practices, examining whether organizations using more of these practices had higher
levels of protability and sales growth with samples collected from four different
types of industries. The ve stafng practices were (1) existence of measuring system
for ROI of recruiting sources, (2) measuring validity of pre-employment tests, (3)
structured, standardized interviews, (4) intelligence tests, and (5) biographical
information blanks or weighted application blanks tests. They found a signicant
positive relationship between the level of implementation of the ve stafng practices
and nancial performance, including annual prot and prot growth across all
industries. The strength of the relationship was also found to vary by industry.
Based on the aforementioned studies, it may be concluded that there is a positive
relationship between HRM practices and organizational performance. Furthermore,
effectiveness of the implementation of HRM practices varies by industry while a few
studies have been conducted within a single industry. The ndings of this study
focusing on the hospitality companies are expected to contribute to the industry and
academic research alike by providing more industry specied information. Table 1
illustrates variables used in previous studies to measure effectiveness of HRM
practices.
2.1. Measures of organizational performance influenced by HRM
Organizational performance is a widely used terminology to describe improvements on a rms bottom line performance that is inuenced by HRM. It can cover

Training
Teamwork
Problem-solving
Job rotation
Job design
Organizational
structure
Compensation
Decentralization
Stafng
Performance
appraisal
HR strategy
Employee
motivation
Employee
development
Internal career
opportunities
Results-oriented
appraisals

Human resource
management
practices

Huselid
(1995)

Kalleberg
MacDufe
and Moody (1995)
(1994)

Youndt et
al. (1996)

Table 1
Variables of human resource management practices

CutcherIchniowski
Gershenfeld (1990)
(1991)

Becker and
Huselid
(1998)

Pfeffer
(1994)

Delery and U.S. Dept.

Doty (1996) of Labor
(1993)

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Employment
security
Participation
Job descriptions
Prot sharing
Personnel selection
Information
sharing
Promotion
assessment
Incentive systems
High wages
Grievance
procedures
Labor
management
participation

Human resource
management
practices

Table 1 (continued )

Huselid
(1995)

Youndt et
al. (1996)

Kalleberg
MacDufe
and Moody (1995)
(1994)

CutcherIchniowski
Gershenfeld (1990)
(1991)

Becker and
Huselid
(1998)

266

Delery and U.S. Dept.

Doty (1996) of Labor
(1993)

Pfeffer
(1994)

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from employee turnover rates to changes in market share. Organizational

performance is a complex and multidimensional concept. One area of organizational
performance such as employee turnover rates or prot margin is not enough to
represent the whole picture of organizational performance. Therefore, this study
utilized several measures of organizational performance that are often employed to
examine the effect of HRM.
A number of academic researchers have investigated the inuence of HRM on
monetary and non-monetary organizational goals (Cutcher-Gershenfeld, 1991;
Delaney and Huselid, 1996; Ichniowski et al., 1995; Terpstra and Rozell, 1993).
Appelbaum et al. (2000) classied measures of organizational performance
inuenced by HRM into two categories: monetary and non-monetary measures.
Monetary measures are divided as nancial performance and labor costs. Financial
performance includes revenue growth, prot margin, market valuation, etc. Nonmonetary measures include employee trust, intrinsic rewards, organizational
commitment, job satisfaction, and employee stress. Dyer and Reeves (1995)
proposed four types of measures for organizational performance affected by
HRM: (1) HR outcomes (turnover, absenteeism, and job satisfaction), (2)
organizational outcomes (productivity, quality, and service), (3) nancial accounting
outcomes (ROA, ROE, and protability), and (4) capital market outcomes (stock
price, growth, and returns).
The high turnover rate is one of the most important issues in the hospitality
industry. The National Restaurant Association (NRA) estimated turnover costs for
an employee in restaurants at about $5000. In addition, Woods (1997) reported that
turnover costs for managers could be up to $50,000. According to Fortino and
Ninemeier (1996), turnover rates in the hospitality industry range from 32 to 300%.
Turnover rate in the lodging industry was estimated at 52% in 1997 (Woods et al.,
1998). Ebbin (1999) reported that turnover rate in full-service restaurants was 61%
in 1997, down from 75% in 1996, and a median annual turnover rate in limitedservice restaurants decreased from 116% in 1996 to 85% in 1997 as well. He
provided four reasons for decreasing turnover rate: (1) developing a motivated
workforce by training, (2) offering competitive compensation, (3) showing workers
that they are respected and valued, and (4) providing rewards tied to performance.
According to NRAs 1998 quick-service operator survey, four types of rewards such
as pay raises, promotions, bonuses, and prot sharing had positive impacts on
lowering turnover rates (Ebbin, 1999). This study also employed turnover rate to
investigate whether HRM practices took effect in the hotel and restaurant industries.
Labor productivity has been frequently used to describe efciency of utilizing
employees in workplace (Banker et al., 2001; Datta et al., 2003; Gittell et al., 2004).
The primary benets of labor productivity are that it provides a single index that can
be used to compare rms productivities as well as to assess the dollar value of
returns for investments in human resources (Huselid, 1995). The revenue per
employee is a common measure for labor productivity and employed in this study to
examine the impact of HRM on organizational performance (Ichniowski, 1990;
Guthrie, 2001). Bartel (1994) found that labor productivity was raised by 17% after
implementing a formal training program. According to Levine and Tyson (1990), the

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analysis of 14 empirical studies showed that companies with high performance work
practices had positive relationships with labor productivity.
Return on equity (ROE) and return on asset (ROA) are often used as measures for
an organizations nancial performance among HRM researchers (Delery and Doty,
1996; Snell and Youndt, 1995). ROE can be broken down (Firer, 1999; Tezel and
McManus, 2003) as
ROE PMTATEM
where, PM is the prot margin, TAT the total asset turnover, EM the equity
multiplier.
Prot margin is a measure of a companys operating efciency. This efciency can
be achieved as a decrease in operating expenses or improved use of human resources
(Horton, 1999). Total asset turnover represents how hard a rms assets are being
put to use. The high ratio of total asset turnover indicates that the rm is working
close to capacity, while the low ratio means that it is not fully utilizing its assets.
Equity multiplier is a measure of nancial structure commonly called as nancial
leverage. It is often used to gauge a rms nancial composition and health.
Thus, the equity multiplier may not be appropriate to measure the impact of
HRM. Therefore, ROE was not adopted in this study. Instead, ROA was employed
for a measure for nancial performance in this study, because ROA ( NI/TA
(PM)(TAT)) contains only PM and TAT that might be associated with the HRM
practices.

3. Methodology
3.1. Sample and data collection
The population of this study was lodging and restaurant companies in the United
States. The sample was drawn from Compact Disclosure, a database containing
comprehensive nancial information on nearly 12,000 publicly held companies in the
U.S. Standard Industrial Classication (SIC) codes used for the sample were 5812
(Eating Place) and 7011 (Hotels and Motels). The companies with less than 100
employees were screened out, and hotels with gambling service and facilities were
excluded as well. The sample selection procedure ended up with 219 companies for
this study. Therefore, the sample frame of this study was 219 publicly traded hotel
and restaurant companies in the U.S.
A questionnaire was constructed to measure HRM practices and organizational
performance. The detailed items and scales are presented in the following section.
The self-administrated questionnaire was mailed to HRM directors at 219 hotel and
restaurant companies. Nineteen questionnaires were returned due to incorrect
addresses and 83 companies responded. Out of the returned 83, ve responses were
excluded for incomplete information. A total of 78 responses were used for the
analyses, resulting in 36% usable response rate. This response rate was much higher
than a minimum recommended response rate in mail surveys (Malhotra, 1996).

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One year of nancial performance information, January 1998 to December 1998,

was collected, using Compact Disclosure and Hoovers. Return on assets, a total
number of employees, and total revenue were collected using Compact Disclosure
and Hoovers. Return on assets, the number of employees, and net sales were
collected using Compact Disclosure on line (http://ga.primark.com/ga/dga-net4plus.asp). Hoovers Online (www.hoovers.com) was used whenever a particular type of
data was not available on Compact Disclosure.
3.2. HRM practices
The items used in Huselids study (1995) were adapted to measure HRM practices
in this study. Huselid (1995) used 13 items for his study. One of the 13 items,
effectiveness of a rms recruiting efforts, showed low reliability level, thus the item
was not included in this study. A total of 12 items were adapted to measure HRM
practices. The twelve items are described in Table 2. The respondents were asked to
indicate the degree of implementation of each HRM practice on the companys
workforce on a 5-point scale, 1 representing 020% of total employees and 5
meaning 81100% of total employees.
Organizational performance was measured with four items, turnover rate of nonmanagerial employees, turnover rate of managerial employees, labor productivity,
Table 2
HRM practices items used in the survey
HRM practices items

Questions

Information sharing

What is the proportion of the workforce who is included in a formal

information-sharing program (e.g. newsletter)?
What is the proportion of the workforce whose job has been subjected to a
formal job analysis?
What proportion of non-entry level jobs has been lled from within in
recent years?
What is the proportion of the workforce who is administered attitude
surveys on a regular basis?
What is the proportion of the workforce who participates in Quality of
Work life (QWL) programs, Quality Circles (QC), and/or labormanagement participation teams?
What is the proportion of the workforce who has access to company
incentive plans, prot-sharing plans, and/or gain-sharing plans?
What is the proportion of the workforce who has access to a formal
grievance procedure and/or complaint resolution systems?
What proportion of the workforce is administered an employment test prior
to hiring?
What is the proportion of the workforce whose performance appraisals are
used to determine their compensation?
What proportion of the workforce receives formal performance appraisals?
Which of the following promotion decision rules do you use most often?
What is the average number of hour of training received by a typical
employee over the last 12 months?

Job analysis
Internal recruiting
Attitude surveys
Labor-management
participation program
Incentive plans
Grievance procedure
Pre-employment tests
Compensation on job
performance
Performance appraisal
Promotion criteria
Training

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and ROA. The respondents were asked to provide their companies annual average
turnover rates of non-managerial employees and managerial employees. Total
revenue, total number of employees, and ROA were collected from Compact
Disclosure and Hoovers database system. Labor productivity was calculated by
dividing total revenue by the total number of employees.
3.3. Analyses
The analysis used in this study is different from Huselids study (1995). Huselid
(1995) used an exploratory factor analysis to factorize the 13 items, and the factor
analysis produced two factors, employee skills and organizational structure and
employee motivation. Employee skills and organizational structure, for example,
included 9 items (information sharing, job analysis, internal recruiting, attitude
survey, labor-management participation program, incentive compensation, training,
grievance procedure, and pre-employment tests). Although employee skills and
organizational structure had a positive relationship with organizational performance, the result did not provide much applicable information for the industry. In
general, the study indicated that companies implementing all nine practices to more
employees had higher organizational performance, but it did not distinguish whether
a particular HRM practice has greater impact on a rms performance than others
have. It was presumed that it would be more informative to examine the impact of
each HRM practice on organizational performance measures. Therefore, multiple
regression analyses were employed to examine the relationship between twelve HRM
practices and organizational performance measures. Due to normal distribution
assumption for regression analysis, logarithm transformation was applied to
turnover rates and labor productivity to obtain multivariate normal distribution.

4. Results
Table 3 presents means and standard deviations of turnover rates of nonmanagerial employees and managerial employees, labor productivity, ROA, number
of employees, and net sales before logarithm transformation was applied.
The average turnover rate of non-managerial employees was 115% and the rate of
managerial employees was 35%. Since published statistics of turnover rates do not
distinguish between turnover rate of non-managerial employees and managerial
employees, it is difcult to compare the ndings of this study with those of previous
studies. Still, the turnover rates of non-managerial employees and managerial
employees were much higher than the statistics of 1997 reported by Woods et al.
(1998) and Ebbin (1999): lodging industry (52%) and restaurants (61%). The
participated hospitality companies employed 5376 employees on average. The
average total revenue was about $542,077,000 and the average ROA was 3%.
Table 4 presents the participated companies responses on 12 HRM practices. Of
78 companies, about 64% of companies indicated that more than 60% of employees
were participating in a formal information-sharing program. About 86% of

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Table 3
Prole of the sampled companies

Turnover rates of non-managerial employees

Turnover rate for managerial employees
Number of employees
Total revenue (in thousand)
Labor productivity
ROA

SD

115%
35%
5,376
$542,077
$39,148
3%

74
22
34,801
1,162,211
16,035
7

Table 4
Human resource management practices
HRM practices

Information sharing
Job analysis
Internal recruiting
Attitude surveys
Labor-management participation programs
Incentive plans
Grievance procedure
Pre-employment tests
Compensation on job performance
Performance appraisals
Promotion criteria
Seniority
Seniority among employees who meet a
minimum merit requirement
Seniority only if merit is equal
Merit or performance rating alone
Training hours

26.9%
33.3
23.1
52.6
75.6
29.5
10.3
76.9
10.3
7.7

6.4%
16.7
34.6
5.1
12.8
21.8
3.8
11.5
16.7
10.3

2.6%
12.8
30.8
3.8
7.7
6.4
0
2.6
6.4
9.0

11.5%
19.2
11.5
5.1
1.3
15.4
2.6
5.1
17.9
11.5

52.6%
17.9
0
33.3
2.6
26.9
83.3
3.8
48.7
61.5

1.3%
3.8%
12.8%
75.6%
Mean 30.2

SD 33.2

15 refers to the proportion of total employees participating in HRM practices: 1 (020%), 2 (2140%), 3
(4160%), 4 (6180%), 5 (81100%).

participated companies responded that more than 60% of their workforce had access
to a formal grievance procedures or complaint resolution system. Of the companies,
73% of them responded more than 60% of employees received a formal performance
appraisal and 75.6% of the companies were using merit or performance rating as
promotion criteria. By contrast, 75.6% of the companies answered less than 20% of
their employees participated in quality of work life (QWL) programs, quality circles
(QC), and/or labor-management participation teams. In addition, 76.9% of the
participated companies indicated that less than 20% of their workforce had
employment tests before hiring. The average of training hours was 30 h.
Four multiple regression analyses were conducted to examine the relationships
between 12 HRM practices and turnover rate of non-managerial employees,

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turnover rate of managerial employees, labor productivity, and ROA. Variances in

the dependent variables were controlled by the number of employees. The number of
employees was used as a control variable under an assumption that larger companies
are more likely to apply the HRM practices to employees than smaller companies
do. Due to limited statistical power, a signicant level of 0.1 was adopted (Keppel,
1991).
Table 5 presents the results of the multiple regression analyses. The results
indicated that the 12 HRM practices had a signicant relationship with only one
measure of organizational performance, turnover rate of non-managerial employees.
No signicant evidence was found for the impact of the HRM practices on other
organizational performance measures, turnover rate of managerial employees, labor
productivity, and ROA.
As R-square indicates, 41% of variance in turnover rate of non-managerial
employees was explained by the independent variables. The result indicates if more
employees have access to labor-management participation program, the turnover
rate of non-managerial employees would be decreased (standardized parameter
estimate: b :28). Labor-management participation programs including qualityof-work-life programs, quality circles, and labor-management participation programs was proposed, based on that line employees have generally more accurate and
complete knowledge and information about their work and products than do
managers (Levine and Tyson, 1990; Miller and Monge, 1986). Labor-management
participation programs also satisfy employees self-esteem needs by providing them
with intrinsic rewards since employees have voice to suggest or participate in
Table 5
Regression results of rm performances at HRM practices
Log turnover rate Log turnover rate Log labor
ROA
of employees
Of managers
productivity
Beta

Beta

Beta

Beta

Number of employees
Information sharing
Job analysis
Internal recruiting
Attitude survey
Labor-management participation program
Incentive plans
Grievance procedure
Pre-employment tests
Compensation on job performance
Performance appraisal
Promotion criteria
Training hours

.18
.09
.06
.24*
.09
.28**
.24*
.24*
.26*
.03
.06
.10
.07

.01
.06
.02
.02
.02
.24
.15
.20
.32
.03
.06
.08
.17

.10
.10
.12
.06
.20
.09
.09
.26
.12
.08
.02
.08
.14

.36
.10
.07
.01
.19
.00
.12
.26
.16
.05
.24
.13
.18

R2
F-value

.41**
2.33

.27
1.26

.15
.58

.22
.72

* Signicant at 0.1 level; ** signicant at 0.05 level.

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planning work tasks and identifying obstacles to achieve optimal work performance
(Cooke, 1994; Hammer, 1988). Moreover, participating labor-management programs make employees feel that they are recognized to be one of important
stakeholders, which help develop employees trust in their company (Fryxell and
Gordon, 1991). Employees trust leads to higher commitment and loyalty (Colquitt
et al., 2001), which consequently results in lower turnover.
Incentive plans had a signicant relationship with turnover rate of non-managerial
employees b :24. If a company applies incentive plans to more employees, the
company would experience low turnover rate of non-managerial employees. The
effects of incentive plans on organizational performance have been in controversy.
For instance, Banker et al. (2001) conducted a longitudinal study of the effectiveness
of incentive plans in the hotel industry. The study showed incentive plans resulted in
increased revenue and prot and in decreased cost. According to Medoff and
Abraham (1980), however, two large manufacturing rms showed that monetary
incentive was not closely related to employee performance, despite the rms merit
pay reward systems. The nding of this study is consistent with the study by Banker
et al. (2001). Although Banker et al. (2001) did not examine the effectiveness of
incentive plans directly on turnover rates, it could be presumed that low turnover
rates reduce operating costs and ultimately help increase a companys protability.
Pre-employment tests were also found to signicantly lower turnover rate of nonmanagerial employees b :26. According to Gale (2002), turnover costs can
reach about 150% of an employees salary and the main reason of a high turnover
rate is wrong hiring decisions. Pre-employment tests are assumed to be effective to
select the right people for the company (Cho and Woods, 2000; Ineson and Brown,
1992). Hiring the right people could lead to low turnover rates (Gale, 2002). The
nding of this study suggests that pre-employment tests are indeed effective to hire
the person who tends to stay with a company longer. This phenomenon may be
explained from another viewpoint. Passing pre-employment tests may give an
applicant a stronger sense of belonging to the company and is also likely to motivate
him/her to have a sense of commitment to the company through an individuals
attachment, identication with, and involvement in the organization. Thus, those
who pass pre-employment tests may be less likely to leave companies than those who
are hired without pre-employment tests.
Interesting ndings were detected in two HRM practices. Internal recruiting b
:24 and grievance procedures b :24 had positive relationships with turnover rate
of non-managerial employees. In other words, if a company applies these HRM
practices to more employees, the companys turnover rate of non-managerial
employees would increase. The possible reasons for this nding are discussed in
following section.

5. Conclusion
The primary purpose of this study was to evaluate the impact of HRM practices
on organizational performance in the lodging and restaurant industries. The results

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of the study showed that some of HRM practices had signicant effects on turnover
rate of non-managerial employees. However, no statistical evidence was found
regarding the effects of implementation of HRM practices on turnover rate of
managerial employees, labor productivity, and ROA.
Companies which involve more employees in quality of life, quality circle, or
labor-management participation programs are more likely to experience lower
turnover rate of non-managerial employees. Companies which exercise incentive
plans for greater number of employees based on job performance showed lower
turnover rate of non-managerial employees. Although small percentage of
companies (about 9% of the participate companies of this study) implemented
pre-employment tests to more than 60% of the total employees, the companies were
experiencing low turnover rate of non-managerial employees.
As noted earlier, two HRM practices (internal recruitment and grievance
procedures) took unexpected effects by increasing turnover rate of non-managerial
employees. One of the reasons for the increased turnover rate by internal recruiting
may be that companies might not successfully provided appropriate training and
development for those employees promoted or recruited within organizations.
Employees promoted without proper training and development may feel frustration
and be stressed by heavier responsibility because of a lack of sufcient skills and
knowledge. The frustration and stress may cause employees to leave the companies.
However, to identify the accurate reasons, it is strongly recommend for future study
to investigate why a company hiring more employees internally is more likely to
experience higher turnover rate among non-managerial employees. The result of the
impact of grievance procedures on turnover rates was not consistent with the study
by Shaw et al. (1998). Their study found grievance procedures did not have a
signicant relationship with turnover rates. There might be a perceptional gap
between HRM managers and non-managerial employees about grievance procedures. Grievance procedures are developed to assist employees to solve workplace
conicts. However, if the procedures have impact on increases in turnover rates, it is
possible that non-managerial employees may perceive the procedures as threats.
Further research on this topic is strongly recommended as well.
This study is expected to be helpful to the managers of the hospitality companies
in planning and executing HRM practices. High turnover rates have been viewed as
one of the most serious problems in the hospitality industry. Increased turnover
causes high costs of training and recruiting, lower productivity, and emotional
instability among employees. To mitigate the turnover rates, such a variety of
innovative ways have been developed as competitive compensation, training,
recruiting, etc. This study suggests that pre-employment tests, incentive plans, and
labor-participation management are indeed effective in decreasing turnover rates.
For future research, it is recommended to use longitudinal data to examine longterm effects of HRM on organizational performance. Over time, the effects of HRM
on organizational performance may produce diverse results and could have different
impacts. It is also suggested to investigate the effects of internal recruitment and
grievance procedures on organizational performance. It is not deniable that this
study has some limitations. First, small sample size n 78 makes it difcult to

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generalize the ndings of the study for all the hospitality companies in the U.S.
Second, this study did not consider the impact of late-adopters. The initial cost of
implementing new practices might affect the companies short-term nancial
performance, and late-adopters might not show the effectiveness of HRM. Thus,
the result of the study might be partially biased. The third limitation is the potential
bias in responses such as turnover rates. A company with high turnover rates may
tend to either reduce their actual turnover rate or not respond to such a study.

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