Date: 2013-06-17

Degree: Doctoral Thesis

Programme: Bachelor of Philosophy

Authors: Lo Ka In Helena

Supervisors: Doctor Richard Whitfield, East-West Institute for Advanced Studies Macao

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Abstract:

Employee turnover remains one of the most persistent and expensive challenges faced by management nowadays, and this is especially true in tight labor markets where it is difficult to recruit replacement staff. Moreover, managing labor turnover is particularly vital for service industries because of the relatively high levels of training involved and the large direct impact on business performance that can be attributed to service quality. This study investigates labor turnover among service employees in Macau hotels to identify how organizations can maximize the retention of key staff in high labor demand situations, with a particular emphasis on self-initiated expatriates (SEs), which are frequently employed in Macau.

Retaining the best employees is a key issue for all businesses, and especially at all levels in service industries. Managers formulate a business’ vision and culture while its employees execute tactics to deliver company success. Good management talent and front line employees are difficult to find, and very expensive to train and develop. Good employees shape service quality standards, which are central to the success of service organizations. Hotels have historically suffered from high labor turnover rates, and this is particularly true in Macau, where the main problem is the mismatch between demand and supply of labor with necessary skills.

The casino market in Macau was liberalized in 2002 and this has led to very large investment and expansion that had created 50,000 new service industry jobs by 2010, when the total labor pool was only around 334,000 people. The competition for talent among service establishments to attract and retain good employees is intense. Thus, Macau, a Chinese city with a small working population and a very strong labor market, provides a unique context to study turnover.

In Macau’s intensive labor market, the size of the labor pool remains relatively unchanged yet the demand from the industry keeps growing due to upcoming projects as well as the newly opened hotels. Low paid jobs such as room attendants and food and beverage servers are not welcomed by local people so these areas depend highly on imported labor to meet operational requirements. With Macau’s saturated labor market, its hotel industry depends highly on the above mentioned imported labor, whom we named self-initiated expatriates (SEs) in this study.

This study uses the Unfolding Model of Turnover (Lee and Mitchell, 1994) and the Job Embeddedness Construct (Mitchell et al., 2001b) to investigate labor turnover in Macau. While the way these models treat the act of changing employment as a process shows promise, there are still important gaps in these theories and they have not been tested in high power-distance, collectivist cultures, like that existing in Macau.

A study by Holtom et al. (2005) reports that in more than 60 percent of the voluntary turnover cases they examined across multiple industries, the immediate antecedent to leaving was a shock rather than accumulated job dissatisfaction, thus providing strong support for the Unfolding Model of Turnover. The other theory that adds richness to the study of voluntary turnover is the Job Embeddedness Construct, which Mitchell, Lee and colleagues call a theory of staying (Mitchell, Holtom and Lee, 2001a; Lee et al., 2004). Job embeddedness posits that the greater a person’s connections to an organization and community, the more likely it is that he or she will remain in the organization. Mitchell and Lee (2001) called for integration of the Unfolding Model of Turnover and the Job Embeddedness Construct. The purpose of this study is to do exactly that, while focusing on a common shock – unsolicited job offers.

The Unfolding Model of Turnover and the Job Embeddedness Construct have often been used to explain labor turnover (why people leave), however, researchers have seldom considered the impact of embeddedness and shocks in explaining why employees (both locals and expatriates) maintain their employment in an organization. In this study, I attempt to prove a new concept for this emerging group of SEs: that embeddedness towards ones’ home country might not necessarily lead to the intention to return home, but might be a strong reason for SEs to remain abroad and to stay with the host country organization, to work hard there, and to earn a better living for their families back home.

With a newly developed dimension for the Job Embeddedness Construct and the aim to better understand turnover, this study investigates the relationships of job embeddedness with shocks and turnover intentions for an important emerging group in the worldwide workforce – self-initiated expatriates (SEs). It considers three embedding factors: individual’s community embeddedness towards their home country (home country community embeddedness – HomeCCE – newly developed), embeddedness towards the organization in which they are employed in the host country (host country organization embeddedness – HostCOE) and embeddedness towards the host country community (host country community embeddedness – HostCCE).

This study proceeded in two stages. The first exploratory stage used in-depth interviews (with human resources managers) to explore how people change jobs in the rapidly expanding hotel industry in Macau, and the process through which this unfolds and the factors that affect people’s decision-making along the way when choosing to stay or quit. Then, the findings obtained were confirmed in a quantitative study (with hotel employees) to create models of the relative importance of key factors that influence labor turnover in the most frequently occurring scenarios. Data was collected from hotels in Macau to ensure the generalizability of the proposed conceptual framework.

Findings from the in-depth interviews suggested that most SEs quit voluntarily due to unsolicited job offers with better pay. Regarding their reasons to stay, SEs value the organization and the community in the host country, and do not want to lose the links that they have built with coworkers and the environment around their workplaces. They are also willing to work extra hard in order to earn a better living for their family back home. The managers also agreed that employees’ embeddedness towards their organization do buffer the effect of “shocks” in the Unfolding Model of Turnover, which ultimately improve retention.

Structural equation modeling has been applied to a sample of SEs from 10 three-star to five-star hotels in the Macau SAR. The study shows that HostCOE plays a mediating role between SEs’ HomeCCE and turnover intentions as well as willingness to accept unsolicited job offers; and these mediated relationships are moderated by the variables: expatriate-dominated private sector and the SEs’ HostCCE.

A new concept on an emerging group of SEs has been proved, where survey data supported the hypothesized model. The findings of this study suggested that one’s embeddedness towards his/her home country might not necessarily lead to homesickness, but contrary to general perceptions, strong home country community embeddedness might be a very good reason for SEs to work hard and remain abroad in order to earn a better living for their families back home. The results of this study indicated that SEs’ HomeCCE has a positive relationship with ones’ HostCOE and willingness to accept unsolicited job offers. However, HomeCCE has no direct impact on the turnover intention of SEs unless organization embeddedness (HostCOE) is incorporated, which leads to a negative relationship.

The more SEs embed into their employing organization in the host country, the less likely they are to accept unsolicited job offers or consider leaving. Also, the more expatriates there are in the organization, the more likely SEs feel they are at home, in an environment with a majority of coworkers having similar characteristics to themselves. The SEs-dominated phenomenon in an organization moderates the situation, whereby SEs will work harder and will have lower turnover intention. However, if there better job offers, it is hard for managers to alter quit decisions as SEs will likely take up the better offer. If SEs are highly embedded in the host country community, they will be less willing to accept unsolicited job offers, but will have higher turnover intentions as the numerous networks and off-the job connections might lead to more job opportunity exposures.

This study fills some important theoretical gaps in the increasingly popular Unfolding Model of Turnover and the associated concept of Job Embeddedness. The findings of this study shed light on factors that affect the retention of SEs and have implications for management and future research. It should also lead to quantitative practical models of the factors affecting people’s decisions to change job or stay on a job, which can be used by management practitioners to minimize undesirable, and very expensive, labor turnover.