Incentives to Hotel Staff - Literature review Example

Option 4: Incentives to hotel staff Name Institutional affiliation Tutor Date (2991 words) Abstract Key words: productivity, incentives, performance, motivation The focus of this paper will be on assessing the role of incentives in improving productivity and performance by hotel staff. The paper will first introduce the key terms and define the meaning of such terms to help understand the content of the paper. The paper will base its analysis on a literature review from journal articles and books. This will help to understand what the different types of incentives available are and how such incentives affect the employees’ behaviours. The literature review will be backed by theoretical frameworks which explain what the needs of employees in a work environment are. Based on the analysis and finding of the literature review, the paper will conclude by giving a recommendation to human resource managers to emphasis the need for incentives in motivating their employees. Table of Contents Abstract 2 Table of Contents 2 Introduction 3 Literature Review 4 Introduction 4 Monetary and Non-monetary incentives 5 Ahmad, R., Solnet, D. & Scott, N. (2010). Human Resource Practices System Differentiation: A Hotel Industry Study. Journal of Hospitality and Tourism Management, 17 (1): 72-82. 6 Effects of Organizational Incentives 8 Effects on attitude 8 Effects on behaviours 9 Effects on motivation 10 Theoretical Framework 11 Maslow’s Hierarchy of Needs 12 The Two-Factor Theory 14 Conclusion 15 References 16 Ahmad, R., Solnet, D. & Scott, N. (2010). Human Resource Practices System Differentiation: A Hotel Industry Study. Journal of Hospitality and Tourism Management, 17 (1): 72- 82. 16 Introduction Michael, C., Davidson, G. & Wang, Y. (2011). Sustainable Labor Practices? Hotel Human Resource Managers Views on Turnover and Skill Shortages. Journal of Human Resources in Hospitality & Tourism, 10(3): 235-253. In an enabling environment, an employee is required to improve his or her performance for the sake of accomplishing an organization’s goals as well as objectives. The hotel industry is not exemption when it comes to human resource management. On this basis, the hotel manager is required to understand the attitude of the employees or subordinate for the interest of the organization. An employee’s positive attitude is vital in achieving organization’s goals and the average performance at work. The employee’s improvement can be influence through monetary or non-monetary incentives. However, such incentives used in influencing employees’ attitude for the purposes of future improvement have their own strengths and weakness that need to be rediscovered. According (Michael, Davidson, Timo & Wang (2010, p.456) to the effectiveness of such incentives also needs to be assessed as such an assessment will help to engage the management and staff in improving productivity. Additionally, analysing the strength and weakness of the incentives will help to determine the frustrations, anxiety and the problems that the hotel staffs go through when the incentives are not available. The focus of this paper will be on the strength and weakness of the incentive to hotel staff in improving the overall performance and advice whether it is advisable to use incentives based on the findings. The paper will review literature from books and peer reviewed articles and analyse the findings in order to advice the Head of human resource (HR) of a major hotel on whether to us incentives or not. Literature Review Introduction Thomas, D. & Carsten, B. (2012). Perception of cost, cost drivers, human resource management, long and short term critical success factors in the hotel industry: Recommendations for hotel management. African Journal of Business Management, .6 (41): 10578-10590. According to Thomas and Carsten (2012, p.10580) productivity in a hotel is concerned with the total value of output in a work environment while production is the volume of goods or services produced in a specified period of time by employees. Therefore, employees output or performance in the production process is very immense. Job performance by a hotel staff depends on the ability of the employee to execute his or her duties well and based on the motivation provided by the work environment which is fundamentally important in productivity. Thomas and Carsten (2012) research focused on the attitude of employees towards the incentives provided hotel management with an assumption that hotel managers would understand the importance of the incentives in improving employee attitudes. Monetary and Non-monetary incentives Banker, R., Potter, G., & Srinivasan, D. (2000). An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures. The Accounting Review: 75, (1): 65-92. Banker, Potter and Srinivasan (2000, p.69) are of the position that the most important aspect in understanding human behaviours is to understand their needs. People invest their energy in work so that they can satisfy their needs, such needs can be met when monetary incentives are provided. Monetary incentives are repayments done in cash or in form of money for some specific work done by employees of an organization. Guided by their needs, employees will do anything possible to increase their income as well as protect their income from being subtracted or in worst case eliminated. Cacioppe, R. (1998). Structured empowerment: an award-winning program at the Burswood Resort Hotel. Leadership & Organization Development Journal, 19 (5). 264 – 27. Michael, C., Davidson, G. & Wang, Y. (2011). Sustainable Labor Practices? Hotel Human Resource Managers Views on Turnover and Skill Shortages. Journal of Human Resources in Hospitality & Tourism, 10(3): 235-253. According to Cacioppe (1998, p.267) money is indispensable for human beings to thrive in the economy implying that money has been an increasingly effective motivator at work. Cacioppe further argue that monetary incentives form the most transferable means of satisfy human beings with basic needs in the modern society. Other forms of human needs like psychological, social and security needs can hardly be realized with monetary incentives. According to Michael, et al, (2010, p.458) if other incentives to satisfy such needs are provided in absence of monetary values, the motivation achieved in such a scenario is very low. Kamenica, E. (2012). Behavioral Economics and Psychology of Incentives. The Annual Review of Economics, 4(13): 1-26. Michael, C., Davidson, G., Timo, N., & Wang, Y. (2010). How much does labour turnover cost?: A case study of Australian four- and five-star hotels. International Journal of Contemporary Hospitality Management, 22(4): 451 – 466. Ahmad, R., Solnet, D. & Scott, N. (2010). Human Resource Practices System Differentiation: A Hotel Industry Study. Journal of Hospitality and Tourism Management, 17 (1): 72-82. Monetary incentives to hotel staff can be provided in the form of salary, wages, allowances and bonuses. Kamenica (2012, p.7) considers the salary system as the best mechanism through which a hotel can plan how to attract, retain motivate and reward its salaried employees in order to provide a fair reward to the staff performing specific roles so as to keep pace with the rate of inflation. Bonuses are meant to provide greater rewards to the staff for output achieved above a specifically agreed level; bonuses can be based on an individual performance or a group’ achievement as asserted by Michael, Davidson and Wang (2011, p.237). Bonuses are helpful in that they increase flexibility to a compensation plan unlike salary which is a fixed amount and payable over a specified time to the employee on monthly basis irrespective of the output and the time taken. On the other hand, benefits are forms of compensation realized above wages for the time an employee works; they can include the protection accorded to the employee, income supplements (for instance house and transport allowances) and pay for the time not worked as observed by Ahmad, Solnet and Scott (2010, p.76). Lucas, R., Marinova, M., Kucerova, J. & Vetrokova, M. (2004). HRM practice in emerging economies: a long way to go in the Slovak hotel industry? The International Journal of Human Resource Management, 15 (7): 1262-1279. Michael, C., Davidson, G., Timo, N., & Wang, Y. (2010). How much does labour turnover cost?: A case study of Australian four- and five-star hotels. International Journal of Contemporary Hospitality Management, 22(4): 451 – 466. Lucas, Marinova, Kucerova and Vetrokova (2004, p.1263) observe that hotel staff tend to have diverse opinions towards monetary incentives despite the positive motivational role the incentives play. Most employees are of the position that once salaries and wages exceed the minimum level, it is considered to be a measure of fairness. In such circumstances, non-monetary incentives which can also be referred as fridge benefits which are provided to staff above the salaries and wages can be considered as the better alternative for reward. The no-monetary benefits can be provided in both direct and indirect means. Direct benefits are those are beneficial to an individual employee based on a circumstance like pension schemes, profit-sharing and sick pay. While as indirect benefits are those benefits felt by all the staff members as a team for instance social and recreational facilities and welfare amenities as noted by Michael, Davidson and Wang (2011, p.239). Thomas and Carsten (2012, p. 10583) revisits the issue of pay to the hotel employees this time arguing that pay whether salary or wage if well packaged can bring the desired outcome in terms of motivation of the staff in order to ensure that there is increased productivity and better services to the guests. Banker, Potter, and Srinivasan (2000, p.69) argue that employees’ perception of what he or she earns while compared to other employees of their similar status may affect the satisfaction that the employee gets for the specific job. A discrepancy from what an employee get rewarded from his or her effort in relation to what employees of the same status get may lead to dissatisfaction. It is the role of hotel managers and supervisors to ensure that they apply situational motivational factors which are appropriate to the context of the organization’s environment. Maroudas, Kyriakidou and Vacharis (2008, p.261) emphasizes that the role of monetary incentives is to reward employees for the good performance through money but not to form the basis for discrimination against different employees (Lucas, et al, 2004, p.1271). Effects of Organizational Incentives Incentives, whether monetary or non-monetary are likely to affect the attitude, motivation and the behaviors of hotel workers. Hotel managers have the responsibility to understand and appreciate the role and importance of the incentives in affecting the employees’ behaviors. Effects on attitude Michael, C., Davidson, G., Timo, N., & Wang, Y. (2010). How much does labour turnover cost?: A case study of Australian four- and five-star hotels. International Journal of Contemporary Hospitality Management, 22(4): 451 – 466. Kamenica, E. (2012). Behavioral Economics and Psychology of Incentives. The Annual Review of Economics, 4(13): 1-26. Maroudas, L., Kyriakidou, O. & Vacharis, A. (2008). Employees' motivation in the luxury hotel industry: the perceived effectiveness of human-resource practices. Managing Leisure, (13): 3-4, 258-271. Michael, C., Davidson, G. & Wang, Y. (2011). Sustainable Labor Practices? Hotel Human Resource Managers Views on Turnover and Skill Shortages. Journal of Human Resources in Hospitality & Tourism, 10(3): 235-253. Employee’s attitude arising from the satisfaction that he or she gets from the work does not have a major effect on job performance but nonetheless it affects productivity. Attitude can either encourage or discourage absenteeism which in turn affects turnover; as such, attitude helps to the organization culture as observed by Maroudas, Kyriakidou and Vacharis, (2008, p.264). Kamenica (2012, p.13) identifies for major generalization of employee’s attitude based on the incentives available. First, the satisfaction an employee gets is influenced by how much he or she receives and how much the employee thinks should be received based on the work done. Secondly, the satisfaction that employee gets is based on comparing what happens to colleagues to same job status. Third, there is a misconception of what employees think of the incentives given to others. That is, when an employee believes that an employee is making more money than him or her, the chances for dissatisfaction tend to increase. Fourth, the overall job satisfaction is based on both extrinsic and intrinsic rewards derived from the specific jobs according to Michael, Davidson and Wang, (2011, p.240). Effects on behaviours Michael, C., Davidson, G., Timo, N., & Wang, Y. (2010). How much does labour turnover cost?: A case study of Australian four- and five-star hotels. International Journal of Contemporary Hospitality Management, 22(4): 451 – 466. Michael, et al (2010, p.459) observe that incentives are primarily given to hotel employees to influence the behaviors of these employees. Extrinsic incentives have major effect on employee satisfaction which in turn should have a major role in determining how an employee reward system should be established. The formal as well as informal mechanisms through which employee’s performance is rewarded, defined or evaluated should be based on the specific job. Therefore, employees are aware that their jobs are subject to evaluation which will in turn determine reward they take home. Additionally, reward systems influence the pattern of job attendance and absenteeism. For instance, if the rewards are to be based on actual impressive performance, employees will develop the habit of work working in order to ensure that they earn these rewards. Effects on motivation Banker, R., Potter, G., & Srinivasan, D. (2000). An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures. The Accounting Review: 75, (1): 65-92. Michael, C., Davidson, G., Timo, N., & Wang, Y. (2010). How much does labour turnover cost?: A case study of Australian four- and five-star hotels. International Journal of Contemporary Hospitality Management, 22(4): 451 – 466. The expectancy theory of motivation forms the basis of incentives systems. The effort to perform hard is strongly determined by the performance appraisal that associated with the reward system as observed Banker, Potter and Srinivasan (2000, p.76). An employee is ready to make extra efforts to his or her job if he or she is sure that the performance will be determined by measurement, evaluation and be rewarded based on the appraisal. The performance-to-outcome expectancy is greatly influenced by the level to which the employee believes that his or her performance will be attributed to specific rewards. As predicted by the expectancy theory, each reward or potential reward has a unique value for the specific individual. For instance, an employee may be motivated to work hard to get a promotion while another employee may work hard for monetary reward as Michael et al, (2010, p. 461) observe. Theoretical Framework Freedman, M. & Kosova, R. (2010). Agency and Compensation: Evidence from the Hotel. Industry. Ithaca: Cornell University. Maroudas, L., Kyriakidou, O. & Vacharis, A. (2008). Employees' motivation in the luxury hotel industry: the perceived effectiveness of human-resource practices. Managing Leisure, (13): 3-4, 258-271. According to Freedman and Kosova (2010, p.6) motivation is defined as the set of driving force that make people behave in a certain manner. One day or duration of time, an employee may decide to work as hard as possible while on other day/s, an employee may decide to do little as possible. Hotel managers should maximize the possibility of the first behavior while reducing the likelihood of the second one. This goal by the hotel manager is driven by the fact that the manger should understand how motivation in workplace in very critical. An employee’s performance in an organization is generally influenced by three main factors: motivation, ability to do the work and the work environment (resources available to work). If an employee’s ability to do the work is poor, the manager can train the employee to acquire the right skills or in the worst case replace the employee with a competent one. When there are no adequate resources, the manager can rectify the situation by acquiring the need resources. However, if the problem to do the work is motivation, then the manager’s task to solve the problem becomes more challenging. Employee’s behavior is a complex problem which may call for in-depth analysis by the manager to understand the problem and get the solutions. Motivation is intangible and very important factor that determines employee’s performance according toMaroudas, Kyriakidou & Vacharis (2008, p.268). The situation can be well explained by need hierarchy theories which assume that people have different needs which can be arranged by in a hierarchy of importance or priority. Maslow’s Hierarchy of Needs Maslow, A. (1943). A Theory of Human Motivation. Psychology Review, 50, 370-396. Freedman, M. & Kosova, R. (2010). Agency and Compensation: Evidence from the Hotel. Industry. Ithaca: Cornell University. Maslow’s Hierarchy of Needs is one such theory formulated by Abraham Maslow in 1954. Maslow argued that people are motivated to satisfy five need levels based on priority as shown in figure 1.1 below. At the bottom of the hierarchy, Maslow considers physiological needs which can also be referred to as basic needs like food, sex, clothing and air; this level comprises of the basic needs for biological function as well as survival according to Maslow (1943). At the organization level like a hotel, such needs are provided by adequate salaries and wages, and work environment which provides its employees with, rest places, ventilations, favorable temperatures and lighting. The next level of needs is safety and security needs; such needs may include need to be free from fear of job and financial security as well as the desire to own a house. At an organizational level, the needs are satisfied by lack of layoffs or job continuity, prevalence of a grievance system to prevent employees from arbitrary supervisory decisions, insurance as well as insurance benefit to ensure that there will be security against illness and income during retirement time as observed by Freedman & Kosova (2010, p.7). Freedman, M. & Kosova, R. (2010). Agency and Compensation: Evidence from the Hotel. Industry. Ithaca: Cornell University. The third level deals with social needs which comprise of belongingness, friendship and affection. Such needs are provided by family members and communities out of the workplace and having friends at work. A manager can provide such needs by encouraging social interactions at workplace and making the employees feel as if they are part of the big HR team. The forth level of needs are classified as ego needs which entail the need to have a positive image and self respect as well as to earn respect and recognition from others. A hotel manager can provide the extrinsic needs by giving job titles and providing good offices. At an intrinsic level, the manager can provide the staff with challenging roles and opportunities for the employees to feel some sense of accomplishment according to Freedman and Kosova (2010, p.11). The top of the hierarchy (fifth level) is self actualization. Such needs involve an employee realizing individual potential for self growth and development; such needs may not be providing by a manager. Cacioppe, R. (1998). Structured empowerment: an award-winning program at the Burswood Resort Hotel. Leadership & Organization Development Journal, 19 (5). 264 – 27. Maslow is of the position that the five types of needs makes up a hierarchy. The first important thing is that an employee is motivated to satisfy the physiological needs. As along as these needs remain, an employee is motivated to ensure that he or she fulfils them. When an employee fulfills the physiological needs, they no longer act as the motivators and the individual moves up the hierarchy to be concerned with satisfying the security needs. The process of satisfaction and motivation continues up the hierarchy until the employee reaches the self-actualization needs. Maslow’s theory present some logic which has been universally been accepted by HR managers in many organizations even though there are few criticism as noted by Cacioppe (1998, p.267). For instance, some scholars argue that the order of needs may be different in relation to different communities and cultures. Fig 1.1. Maslow’s Hierarchy of Needs: Reprinted from Maslow, A. (1943). A Theory of Human Motivation. Psychology Review, 50, 370-396 The Two-Factor Theory Herzberg, F. (1999). The Motivation to Work. New – York. Wiley. Formulated by Frederick Herzberg in 1959, the Two-Factor theory deals with motivation at work place. Herzberg developed his theory by interviewing 200 engineers and accountants. The participants were requested to recall the times when they were satisfied and motivated and the occasions when the felt dissatisfied and unmotivated. Herzberg’s findings found out two sets of factors related to satisfaction and dissatisfaction; a person would cite low pay as the cause of dissatisfaction but would not suggest high pay as the cause of satisfaction. Two factors were considered to be the cause of satisfaction and motivation: recognition and accomplishment. Herzberg was able to draw a conclusion from his finding that contradicted the traditional believe that satisfaction and dissatisfaction lie at the far ends. Herzberg argued that people may be dissatisfied, satisfied or may be somewhere between the two situations as observed Herzberg (1999, p.39). Herzberg, F. (1999). The Motivation to Work. New – York. Wiley. Banker, R., Potter, G., & Srinivasan, D. (2000). An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures. The Accounting Review: 75, (1): 65-92. The factors that cause satisfaction according to Herzberg are referred to motivational factors like achievement, responsibility, advancement and growth while those causing dissatisfaction are referred to hygiene factors- such factor are related to work environment for instance pay and security, supervisors, company policies and work condition according Herzberg (1999, p.41). Herzberg concluded that there are two stages of motivating employees; the first stage is to ensure that the hygiene factors are minimized. That is, pay and security must be set in an appropriate manner, working conditions made safe and supervision made acceptable. By ensuring hygiene factors are set at an acceptable level, the managers do not simply cause motivation to their employees but instead ensure that the employees are not dissatisfied. The next stage is for the managers to allow the employees experience the motivational factors like achievement and recognition; the outcome would be satisfaction and motivation. Though Herzberg’s theory has been faced with several shortcomings, it is recommended by many HR managers for emphasizing the need of motivation employees according to Banker, Potter and Srinivasan (2000, p.85). Conclusion In conclusion, there is a close relationship between incentives and workers’ performance in a hotel. The ability of a hotel to retain and hire new employees depends on how much incentives are provided or the hotel is willing to offer. Poor salaries and wages as well as lack of good working conditions lead to frustration to the hotel staff and when the staff engages the management in battle for higher pay, productivity falls. The nature in which incentives are offered should not portray any form of discrepancy to employees of same job status as it will lead to some of the staff members to feel discriminated resulting to dissatisfaction. Non-monetary incentives like, training promotion, social benefits, medical benefits among others, should be provided as well without discrimination. Therefore, this paper recommends hotels to provide satisfactory incentives to the employees without favor because employees’ satisfaction boosts higher performance. References Ahmad, R., Solnet, D. & Scott, N. (2010). Human Resource Practices System Differentiation: A Hotel Industry Study. Journal of Hospitality and Tourism Management, 17 (1): 72- 82. Banker, R., Potter, G., & Srinivasan, D. (2000). An Empirical Investigation of an Incentive Plan that Includes Nonfinancial Performance Measures. The Accounting Review: 75, (1): 65-92. Cacioppe, R. (1998). Structured empowerment: an award-winning program at the Burswood Resort Hotel. Leadership & Organization Development Journal, 19 (5). 264 – 27. Chitiris, L. (2010). Herzberg's Proposals and Their Applicability to the Hotel Industry. Journal of Hospitality & Tourism Research, 12 (1): 67-79. Freedman, M. & Kosova, R. (2010). Agency and Compensation: Evidence from the Hotel. Industry. Ithaca: Cornell University. Herzberg, F. (1999). The Motivation to Work. New – York. Wiley. Kamenica, E. (2012). Behavioral Economics and Psychology of Incentives. The Annual Review of Economics, 4(13): 1-26. Lucas, R., Marinova, M., Kucerova, J. & Vetrokova, M. (2004). HRM practice in emerging economies: a long way to go in the Slovak hotel industry? The International Journal of Human Resource Management, 15 (7): 1262-1279. Maroudas, L., Kyriakidou, O. & Vacharis, A. (2008). Employees' motivation in the luxury hotel industry: the perceived effectiveness of human-resource practices. Managing Leisure, (13): 3-4, 258-271. Maslow, A. (1943). A Theory of Human Motivation. Psychology Review, 50, 370-396. Michael, C., Davidson, G. & Wang, Y. (2011). Sustainable Labor Practices? Hotel Human Resource Managers Views on Turnover and Skill Shortages. Journal of Human Resources in Hospitality & Tourism, 10(3): 235-253. Michael, C., Davidson, G., Timo, N., & Wang, Y. (2010). How much does labour turnover cost?: A case study of Australian four- and five-star hotels. International Journal of Contemporary Hospitality Management, 22(4): 451 – 466. Thomas, D. & Carsten, B. (2012). Perception of cost, cost drivers, human resource management, long and short term critical success factors in the hotel industry: Recommendations for hotel management. African Journal of Business Management, .6 (41): 10578-10590. Read More