Human resource management

To enhance labour productivity, firms have commonly relied on HRM, and such managerial practices have been identified as a significant contributor to performance and survival in an ever-increasingly competitive business environment (Huselid, 1995; Datta, Guthrie and Wright, 2005; Battisti and Iona, 2009; Benavides-Chicón and Ortega, 2014; Li, Joppe and Meis, 2016; Madera et al., 2017). HRM practices focus on the acquisition and development of the human capital of a firm, influencing employee skills and flexibility. The significance of human capital and skilled labour on labour productivity has been emphasised above, but to

manage and deliver this impact, management practices are essential. Additionally, as managerial effort is key to competitiveness, and as human resources are considered a key competitive advantage of a firm, HRM is crucial in terms of increasing labour productivity (Huselid, 1995).

Whilst HRM takes a more functionalistic perspective of human resources, strategic HRM considers the strategic role of labour in terms of the functioning of an organisation (Delery and Shaw, 2001). The direct integration of human resources and business strategy began about thirty years ago and most studies have acknowledged that firm’s business objectives influence its HRM (Madera et al., 2017). The strategic approach implies that the firms want to realise the impact of HRM on their performance (Delery and Doty, 1996), and henceforth the following studies have focussed on explaining the difference in financial performance across firms, or how operational performance influences financial performance (e.g. Wright and McMahan, 1992; Huselid, 1995; Huselid and Becker, 2011; Madera et al., 2017). HRM practices can be categorised into three systems or strategies: recruiting and selection systems, reward systems and training and development strategies which are in line with the firm’s strategy and objectives (Huselid, 1995). According to the existing literature, such practices contribute to improving firm performance including profit (Kalleberg and Moody, 1994), returns on assets and equity (Delery and Doty, 1996), turnover rate (Huselid, 1995) and labour productivity (Youndt et al., 1996; Datta, Guthrie and Wright, 2005).

However, scholars have recently acknowledged that the process of HRM practices influencing firm performance is vague (Paauwe, 2009). Buller and McEvoy (2012) examined this issue and found that there are mediators between HRM and firm performance: human capital, social capital (e.g. social networks, trust, cooperation) and employee motivation. A concerning issue of strategic HRM is its sustainability, i.e. how can a firm maintain its human resource (Delery and Shaw, 2001). With temporal demand variations and high seasonality in the T&H industry, how you manage labour to deal with the fluctuations is a challenge. In response, researchers have demonstrated increasing interest in labour flexibility since the 1980s (Kelliher and McKenna, 1988; Riley, 1992; Riley and Lockwood, 1997; Kelliher and Riley, 2003). Flexibility in the working hours (numerical flexibility) and job roles (functional flexibility) allows workers to respond to changes in demand and minimise the gap between the supply and demand of labour in a firm at a point of time (Kalleberg, 2001; Preenen et al., 2015). This allows multi-skilling and increases employee motivation (Mortia, 2005).

Labour turnover is also an issue when it comes to productivity due to low employee motivation and negative perceptions of the work environment, especially in the T&H industry (People1st, 2015; Madera et al., 2017). Coff (1997) argued that a low voluntary turnover rate in the workforce is an essential condition for competitive advantage, but this is not the case for T&H firms (Delery and Shaw, 2001; People1st, 2013). The high labour turnover rate is a persistent issue in the T&H industry given that labour markets are relatively open and mobility is accessible, but this does not mean that there is no competitive advantage to be obtained in this respect within the industry. Consequently, many T&H firms continue to implement HRM practices to drive success and survival.

Training is one of the key HRM practices in the T&H industry because it allows individuals to learn new knowledge and skills, an important component for labour productivity and competitiveness (Wright and Snell, 1998; Cho et al., 2006; Li and Hsu, 2016). Bartel (1994) found that formal training raises labour productivity by 17%, and Úbeda-García et al. (2013) concluded in their study of training policy and firm performance in the Spanish hotel industry that training and firm performance are positively correlated, both in terms of productivity and human resource outcomes, such as customer satisfaction. It is important to note that labour markets have national, institutional and cultural characteristics, thus such findings by Úbeda- García et al. (2013) cannot be generally applicable to other national contexts. There is also evidence of a negative relationship between training and firm performance: for example, Aragón-Sánchez, Barba-Aragón and Sanz-Valle (2003) found that in-house training poses a positive impact on productivity, whereas external training courses or distance training shows a negative effect. Another issue is that human resource outcomes, such as employee satisfaction and customer satisfaction or complaints, are usually intangible which lead to measurements difficulties with respect to the impact on productivity (Cho et al., 2006). Measuring training and learning is also a challenge, and thus only surrogate variables such as educational attainment and vocational qualifications are used, which fails to portray fully their real effects in research. Nevertheless, training has always been a focus in HRM studies in the T&H industry (Singh, Motwani and Kumar, 2000) and is still important, but the focus now should not be on whether there is training or not, but what you train the workers in and the degree of continuity of training as a quality component of labour in relation to productivity (Black and Lynch, 1996; Benavides-Chicón and Ortega, 2014).

Despite the high prioritisation in training, it has been reported that the UK T&H industry has been lagging-behind in skills, further affecting the industry’s productivity levels (Kelliher and Johnson, 1997; McGunnigle and Jameson, 2000; Galbraith and Bankhead, 2012). This has created the skills and productivity gap between T&H and the other sectors of the economy (Dearden, Reed and Van Reenen, 2006; Bloom and Van Reenen, 2011; People1st, 2013, 2015), which arguably implies that existing HRM practices such as training have not been impactful; to bring change, requires examining an alternative factor of labour productivity to strategically tackle this problem.