Managing People in the Hospitality Industry

Michael Riley

• Publisher: Routledge
• Year: 2018
• eBook ISBN: 9781351583831
• Topic: Business
• Subtopic: Hospitality, Travel & Tourism Industry
• Index: Business

This is a book about being a successful manager in the complex hospitality industry. Approaching the subject in the context of personal development, it offers future managers essential knowledge and insight into the opportunities, the constraints, the problems and the solutions that face management at any level in the industry.

Structured in six parts, this comprehensive volume is not merely concerned with the social and psychological aspects of people management, but also with the economics of labour, including: labour costs, utilisation, labour market behaviour and pay. These aspects are conjoined in the book with the skills of people management to reflect the dynamics of real-life practice.

Combining theory and practice, Managing People in the Hospitality Industry offers a concise portrait of the industry at work and is essential reading for the hospitality managers of tomorrow.

PART I
Management judgement and decision-making

CHAPTER 1
Management judgement and decision-making

In this chapter we are concerned with knowledge of the decision-making processes and how reflection on these can assist you to improve. We know something about decision processes and why they are important. They are at the heart of your personal development; as a leader/manager you will think and reflect on how you make decisions and take action. Experience just doesn’t happen – you have to evaluate it: what works and what doesn’t work and why. Your decision-making process will change over time. You will develop techniques which work for you – a personal style that carries authority and which you feel comfortable with when giving orders. Your decision-making will be influenced by your perception of your role and the organisation.

Chapter objectives

The principal objective of this chapter is to encourage you to reflect on your own personal way of making decisions and taking action. To achieve this you must understand and be mindful of these fundamentals:

• to appreciate the context of decision-making in hospitality;
• to understand the fundamental task of managers and mental tasks that flow from that;
• to understand that the act of judgement links information, knowledge, communication and action;
• to understand that the standard rational model of decision-making needs to be carefully interpreted;
• to understand that handling uncertainty is a distinguishing feature of individual performance.

Let’s get straight to the heart of the matter; you will never have all the information you need to make a decision. You can Google-away a day and it still won’t be enough or, worse still, it might even be too much and confuse. There will always be uncertainty and you have to handle it. That said, the question as to what constitutes good leadership can be addressed in many legitimate ways, but the resulting complexity can hide something obvious and fundamental – that you need to make good decisions. The hospitality manager lives in a vibrant environment and has to constantly make contingent decisions; it is not something that can be avoided or postponed. What, then, constitutes a good decision?

There is an old saying in motivational practice that people go towards what they can see. Whilst true, it carries the corollary that someone has to paint the picture that inspires. Is that you? It should be because here is one big clue as to career success in hospitality management – being able to make your decisions clear and inspirational. Not easy at all! Yet the one thing you cannot be is indecisive. There is no magic wand to help nor any one-size-fits-all formula for being decisive and making good decisions, but it is worth remembering that this ability can be developed and should be seen as part of your personal development. Decision-making and, just as importantly, the communication of your judgement is at the heart of the personal development of a leader/manager. Your decision-making will change over time, but what will never change is that the response you get from those people you manage will, to a large part, be based on the quality of your decisions. Decisions are in fact active reflections of judgements and it is judgement that leads us to knowledge. So when we think about decision-making we must subsume it within the notion of judgement, which is dependent on knowledge and the idea that a decision has to be communicated. Communication is inseparable from the decision itself. We know three things about decisions:

1. that they are always context specific and therefore your judgement will be tempered by your understanding the situational, organisational and industry context. The circumstances and the broad setting are inseparable in your deliberation on what decision to make. Knowing how it all works is part of everyday life in a complex industry such as hospitality. Liking people and being good with people is fine but not enough. The message is clear; you have understand your industry to manage within it.
2. that there is always time pressure. The pressure from action is for a limited amount of information-gathering and a limited amount of alternatives evaluated. This pushes the decision-maker towards what they already know – prior beliefs about what works.
3. that decisions have to be acceptable. The individual manager is a sovereign thinker and self-determining agent but one who functions within a social organisation. The decision-maker has to process their judgement through the acceptability of outcomes to those who have to implement the decision and to colleagues.

The hospitality context

In the light of the above, it is now worth looking at decision-making in the context of operational management in the hospitality industry. The aim here is to outline the choices that face operational management in the short-term and in the long-term by analysing the dilemmas that they must confront. The notion of a dilemma always implies, and often combines, three particular properties: choice – which path to go down? Uncertainty – what are the paths and where do they lead? And, to make it harder for the decision-maker, possible conflict between the alternatives – the essence of a dilemma!

In looking at the dilemmas that face operational management, it is difficult to avoid two conclusions that might at first appear rather strange. Namely, that the problems of running an operation seem always to be there as if they were inherent in the very activity of managing hospitality and, perhaps more significantly, that they appear the same in units of different sizes, which only goes to reinforce the sense of permanence. This is not a counsel of ‘there is nothing new’ or one of ‘managers do not solve problems’ – on the contrary, there are new approaches including some technological solutions, and managers do solve their problems. However, managerial initiatives only solve the problems that stem from the fundamental dilemmas that are inherent in operations management. In a world of constant change it is easy to forget that many things remain constant.

It follows, therefore, that in understanding operational dilemmas we must seek out key managerial problems that require decisions and then identify the sources and level of uncertainty, the range of alternative solutions possible and the in-built conflicts that attach themselves to the problems. At one level the generic sources of the uncertainty are fairly obvious – the marketplace, competition and the human dimension. Some of the alternative solutions are equally conspicuous – to make or buy-in, to seek new markets or to stay loyal to the existing customers, to use full-time or part-time staff, to sub-contract. Similarly, it is relatively easy to see the sources of conflict within decisions – economic imperatives, of which profitability is central, versus sustainable quality. In production terms, there is, for example, the speed versus quality balance to be struck. This broad sweep analysis is important for perspective, but in operational terms what really matters is the detail but, equally, in looking at the detail it is important to remember the three properties that are invariably at work – uncertainty, competing alternatives and built-in conflicts.

Management in hospitality lives in a world dominated by two primary sources of uncertainty – variable consumer demand and the subjective evaluation, by the consumers, of the products and services they provide. It is from these twin pillars that many operational dilemmas ensue. A good place to start, therefore, might be with the consequences of uncertain demand. Given that hospitality operating units have a fixed capacity and that the products are perishable (that is – a room not sold or a restaurant seat not occupied cannot be resold), the goal of maximising occupancy is problematic. There are two components to this problem – the level of demand and the fluctuating nature of demand.

The appeal of the product and the level of demand

The economics of all hospitality units are based on throughput for which the key concept is the breakeven point. In a sense, achieving this overrides almost everything. Given a degree of cost control, the solutions lie mainly within the realm of marketing, but marketing can only work from the product or service itself and here there are operational dilemmas. There are three issues – how wide to pitch the appeal of the product, how much choice to offer and how to maximise the average spends. The decision to go for a wide range of market segments implies that the product has properties that will appeal to different consumers. For example, within the same range of disposable income might lie retired, middle-aged and youth markets, business and tourist markets, and local, national and international markets. This may be good for business, especially as they all seek the same satisfaction from the product, but it may not be so, in which case management have to work to make the same product satisfy different sets of expectations. If the latter is the case, the solution is to know which attributes of the product appeal to which markets – the dilemma is that there is a limit to how far a product can be altered to have multiple appeals to a differentiated market. Creating an image, which has multiple appeal and a reality that satisfies it is the point where operations and marketing meet. The alternative is for the product to be positioned in a way that it appeals to a specific market or small range of markets. In this case, it is more crucial for marketing to know what attributes would appeal to that market and then for operational management to design the product and service to meet that demand. What lies behind both cases is the argument that the less uncertainty there is for the customer, the more likely they are to consume.

The second issue relates directly to this problem of controlling uncertainty for customers. How much choice do we give customers? The initial dilemma here is if wide choice is attractive. If wide choice is deemed to be an attractive attribute, then another dilemma follows, which is that wide choice leaves open the opportunity for products and service to be provided but not consumed. For example, a large range of dishes on a menu may entice the customers to dine, but if they choose narrowly, then the avoidance of waste becomes an economic issue and a managerial objective. In these circumstances, the ideal solution would be that everything be cooked to order. The culinary expression à la carte has resonance with the modern production management technique of ‘just in time management’, where products are not made until they are sold. The problem is that the very attractions of cuisine work against cooking to order – some dishes require long cooking times. The solutions lie in the technology of food production, storage and regeneration. The alternative to wide choice is specialisation – offering to produce a small variety at a controlled level of quality. This would be more productive but may reduce the size of the market. In a sense, the width of choice dilemma is about appeal versus productivity. One concept, which straddles both these ideas, is that of branding, whereby although the choices on offer can be wide or narrow, specifying the choices within the overall concept of the brand reduces some of the uncertainty for the customer. It does not remove the issue of range of choice versus productivity but takes it into the identity of the product and by so doing handles the attractiveness issue separately from the production issues. The uncertainty of consumer choice presents problems for management, but such issues are subsumed by the major one of the fluctuating nature of overall demand.

Fluctuating demand

At the macro level it is easy to see a pattern of seasonality in consumer demand, but for operational purposes the key issues lie in the handling of short-term fluctuations in demand. In the context of accommodation, the key decision is how many rooms are there left to sell that day. The guiding stars are the ‘house count’ for that night, advanced reservations and scheduled checkouts for that day. It is a decision based on some information, and its consequences are the degree of alacrity with which sales strategies are pursued. However, uncertainty intervenes in the form of:

• how many advance reservations for that day will actually show up;
• how many ‘chance’ customers will turn up without reservations;
• how many customers who said they would check-out that day decide not to.

The only solid fact is the number of rooms occupied. Management’s solution to this problem is to take the three unknown variables and one know variable and model them into an equation which uses historical data and forms the basis of a ‘rolling forecast’.

If to the problem of maximising occupancy is added the issue of maximising revenue, then the equation takes on another set of dimensions. One way of filling up rooms is to alter the price. This has led to a sophisticated form of pricing (or discounting) known as yield management. In this scheme of things prices are altered at a rate that reflects the state of demand and rooms vacant ratio. This is merely a formalised way of expressing the inherent dilemma of the need to fill the house versus the need to maximise revenue. Selling cheap might fill the house but reduce revenue and profits. The arrival of an unexpected coach party only willing to pay at a large discount for numbers may give the duty manager a headache.

Of course, pricing is one of many competition mechanisms, and it is competition that lies at the heart of uncertainty in management. The key questions are: who is the competition? And, how do we compete? Market information is never perfect, but the best information we have is, on the one hand, on the performance of units in our market category (similarly positioned) and, on the other, whatever we can glean from our own customers. There are two basic dilemmas here: firstly, do we compete on price and therefore logically on discount in line with competitors or on other dimensions? If it is on qualitative dimensions, should we be negative about the competition or simply emphasise the merits of our unit? Marketing always speaks of ‘differentiating the product’ even within the same market – but how?

Irrespective of how fluctuating demand is handled, there are consequences for the supply side of operations. In order to maintain profitability, the unit needs to adjust supplies in line with fluctuating demand. The hardest part of this dilemma surrounds labour costs. If demand is fluctuating, then that means a degree of flexibility of labour supply. Most advocates of quality in services suggest that employment continuity is a key element. The dilemma here is simply profitability versus continuity of service in circumstances where the demand for labour varies. Resolution of this dilemma is difficult and is the driving force of human resource management in hospitality. In hospitality, the permanent and the temporary, the skilled and the unskilled, the high tech and low tech all have to live together. So you have the dilemma of managing diversity and workforce instability. The dilemma for human resource management is whether to manage the whole workforce as if it were skilled and permanent or as unskilled and temporary. Economics goes for the latter, whilst the consumer demands for quality advocates the former. As a manager it is your call!

Let’s pause for a moment from dilemmas to think about efficiency. Although the hospitality business is usually referred to as a ‘service industry’, any of its units contain both service, distribution and production functions. As all processes have priorities, this sometimes leads to what are known as technological or work process conflicts. For example, in a hotel, reception wants the rooms ready now! Whereas housekeeping wants them clean – it is a speed versus quality dilemma....

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Contents
• List of figures
• List of tables
• Preface
• PART I Management judgement and decision-making
• PART II People at work
• PART III The economics of labour in hospitality
• PART IV Human resource management in practice
• PART V The wider perspective
• PART VI Development and careers
• Bibliography and further reading
• Index