Companies in the leisure industry may be left with no choice but to make redundancies, but the real sign of leadership will be how they manage and empower their staff past the downturn.
The world is in recession, and people are nervous about their jobs. For those working in leisure and hospitality, the relative security they enjoyed has long gone. As hotels and leisure facilities make their staff redundant, the question of how to make the most out of remaining employees, whose confidence levels are low, is becoming critical.
It costs four times more to acquire a new employee than to maintain an existing one, so the approach of buying people with money is not going to work.
The fear of losing their own jobs impacts on employees’ overall performance and motivation, and, ultimately, on a company’s ability both to compete, and to recover when the economy improves.
Though redundancies are at times necessary to ensure a company’s survival during downturn, there are many strategies companies can employ to minimise long-term damage, says Ernst & Young’s head of human capital in the Middle East Mohammed Salem. In their haste to cut costs and survive downturn, he admits, many companies not only cut back on more staff than necessary, but do so almost arbitrarily. “Shedding people is a measure that many organisations have to make, but the way they should do it is to link redundancies to the performance of those individuals.”
A company’s key performance indicators (KPI), he continues, should be directly linked to the job description of every employee within the company. When this is done, he says, “each one of them will know where they are heading, making it easier for them to contribute to the success of the organisation.” Companies will then be armed with the right quantitative data to allow them to cut costs while minimising the long-term damage of doing so.
During times of downturn, when management is nervous about cash flow and return on investment, it is easy for companies to concentrate power in the hands of a few, effectively stripping the authority of many middle managers. “Accountability and authority are being taken back,” says director of financial consultancy Berkeley Burke & Co, James Berkeley. “If I’d had the authority on a middle management level to make decisions, now the consequences of my decision are quite big for the organisation. The people at the top fear the consequences of those, so they’re going to take that decision out of my hands.”
When decision-making powers are taken away, he continues, job insecurity increases, thus affecting employees’ ability to make every day decisions about their work. “If the consequences of me making a decision could ultimately cost me my job, and if I don’t think there are opportunities elsewhere to find that role, then I’m going to be very nervous about making those tough calls, and I’m almost going to duck to avoid making them.”
Though centralising decision-making may make sense in the short-term, Berkeley warns companies to beware of the long-term consequences. “No company has ever grown through reduction,” he says. “No company has ever grown through reducing accountability and authority over the long term.”
The key to maintaining sound management strategy through a downturn, says Salem, is by implementing a policy of decentralisation, backed up by clear corporate governance. “The concept of decentralisation is very important to give more power to the various departments within the organisation, and corporate governance provides the right controls.”
Within this strategy, he continues, it is crucial that companies provide an ‘authority matrix’ for their every individual and department. “This governs the exact kind of power that each individual within the organisation should have, whether that is derived from financial or administrative power.”
Many companies have attached a new importance to incentive schemes as a way of motivating staff. Though these schemes can be effective, says Berkeley, they will be all but useless if the company hasn’t first address the fear factor. “There are companies with incentives programmes of one sort or another, but if I fear losing my job, I don’t care what incentive you throw in front of me, I’m still not going to make that decision.”
Director of public relations for the Ritz Carlton in Doha Lauren Fryer agrees. The company’s incentive and reward scheme is an extension of the empowerment strategy it already has in place to provide guests with unrivalled customer service. “All our ladies and gentlemen are empowered to make decisions regarding our guests without seeking managerial approval,” she says.
“We encourage them to take ownership and responsibility of guest opportunities and problems, so that no matter who they are, what level they are, or what department they work in, they all have the ability to engage with the guest, provide an exceptional guest experience and help resolve problems if they have them.”
There will always be those types of companies that have a knee-jerk reaction and want to copy the competition, but those companies will not last long.
As the downturn continues, the most important point of difference between leisure and hospitality facilities will be the value they give to their people, says general manager of Shangri La Barr Al Jissah Resort and Spa in Muscat Arbind Shrestha. To put this ideology into practice, the property has elevated human resources from an administrative function within the hotel, to a department with real decision-making powers. “We are focusing on making HR a strategic partner, rather than a department that recruits and maintains records,” he says. “We are realigning everything that we do in HR with our future strategy.”
Berkeley agrees that giving HR a more critical role in a company’s operations will put it in a stronger position once the economy improves. “HR is a classic area where there’s a big withdrawal of accountability and authority going on; where there’s a real need to change working practices. Visibility at that level has rarely been allowed at the top table.”
Empowering the human resources department now, before the economy improves, will be crucial in making sure that a company is prepared to deal with increase in business when it comes, he continues. “What you’re going to find is that operational performance will improve by 10, 15 or 20%, but the number of people the company has will have a lot more on their plates, so organisations need to start thinking about how they’re going to manage those internal resources.
“Most companies in this environment over cut the number of people they need, and then have problems with rehiring, so they won’t be fully equipped to increase market share, customer loyalty or client responsiveness.”
As the economy does improve, new management trends will emerge, particularly in the leisure and hospitality industries, says Shrestha. Whereas companies simply used to poach staff when times were good, the onus now will be on training and retaining existing employees.
“It costs four times more to acquire a new employee than to maintain an existing one, so the approach of buying people with money is not going to work. There will now be a focus on maintaining employee engagement, motivation and loyalty; on career development and productivity-driven employment.”
The downturn will also alter the transient nature of the Middle East’s work environment, and encourage the leisure and hospitality industry to adopt more mature practices akin to its counterparts in more developed markets. “People are staying longer,” explains Berkeley. “Average stays are moving from two to four years, to four to six years. The consequences of that are that organisations will have to look at historical base pay, allowances, insurance, bonuses, and the elements of reward that will allow people to share in the organisation’s success over a period of time.”
Though not all properties and facilities will adopt such measures, Shrestha says, those which do will be leading the industry in the near future. “Leaders will definitely adopt a more mature position, and will focus on making employees more loyal. Employees should get feedback, and can also provide feedback to management.
“There will always be those types of companies that have a knee-jerk reaction and want to copy the competition, but those companies will not last long.”
For those enterprising businesses that have already started thinking about a post-downturn business model, opportunities to forge new ground and cement a market-leading position in the industry abound.
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