Industry Update
Opinion Article26 March 2020

Human Resources: Strategies and Solutions for an Industry on the Verge of Crisis

By Mark Van Amerongen , Chief Operating Officer for Prism Hotels & Resorts

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Van Amerongen

Hotel management professionals responsible for hiring are raising the bar to deal with the ongoing and worsening labor shortage. The costs and consequences of a bad hire have become so significant, that the HR team quite literally can't afford to get it wrong.

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While it is possible that AI and other technical solutions and efficiencies could be part of the labor-shortage solution, great recruiting and retention remains the bread and butter of the most successful hotel management outfits. The identification, cultivation and retention of outstanding talent will continue to be an urgent priority for hotel management companies. Not just in the months and years ahead, but for a very long time to come.

With that in mind, it's important to take a look at what works, what doesn't work, and what are some of the most effective (and cost-effective) solutions to an increasingly tight labor market.

A Better Way

For some hotel management companies, the cost of acquisition of human capital has become almost prohibitive. One place to start addressing that is on the front end, developing different and more effective ways to screen and test potential candidates-beyond the traditional rounds of time-consuming and resource-heavy interviews. Predictive tests for future behaviors and successes can be helpful, but have shown to be imperfect. And in today's marketplace, interviewees are becoming savvier and better able to navigate the interview process by essentially telling prospective employers what they want to hear.

One promising solution is to get practical: to find ways to more accurately evaluate each applicant's ability to get the job done. Hoteliers have been successfully doing something similar in F&B for some time now, asking prospective chefs to provide concrete examples or demonstrations of their cooking prowess, and to demonstrate their ability to thoughtfully build and explain a menu.

For example, that might mean giving applicants for a sales position a STR Report and asking them to develop a potential sales strategy. Prism is beginning to do just this with GM candidates, providing them with a mock P&L statement or a relevant data set and asking them to devise a strategy based on that information. The goal is to make sure they have the insight and skillset to recognize and analyze critical information, and put together an action plan based on that information. The ability to not just come up with, but also effectively articulate and communicate strategy is an increasingly important responsibility in the modern hotel business, and should be emphasized during any such evaluation process.

With the costs and consequences associated with a "bad" hire going up exponentially, the need for hotel management companies to ask candidates to demonstrate a specific skillset and articulate a clear strategy will continue to become more compelling.

Culture Cash

Culture is one of those words that may seem overused. The reality, however, is that this trendy industry term is on everyone's lips for a very good reason: culture matters. Not in in an ephemeral, feel-good way, but in a nuts-and-bolts, bottom-line impact kind of way.

The single best way to reduce labor costs is to be culture conscious. Not just in hiring, but in your everyday operations. That starts with finding and hiring candidates that are a good fit with your professional culture, and also requires actively cultivating and supporting the kind of sustainable company culture that quality talent is drawn to-and that ultimately helps with retention. To be clear, culture means more than just inspirational posters on the wall or a monthly employee luncheon. Culture isn't simply "perks" or slogans: it's much deeper and more profound. A certain degree of flexibility with respect to work hours and work/life balance can be helpful, but the key is to support and accommodate your team without compromising continuity, face-to-face team-building time, and operational integrity.

Hotel management company executives and HR professionals need to be asking themselves one critical question: what is going to get my team feeling connected? While the specific answers will vary from one company to the next, culture and connectivity have to be reinforced daily with practical ideas, meaningful initiatives, and impactful team-building. HR professionals today have to function almost like behavioral psychologists.

But the payoff is worth it. Because there is power in that sense of connection-being part of a family that is working collaboratively together toward team goals. The posters on the wall have to be brought to life through engagement and the employee luncheon can't just be about lunch. In both cases it's the comradery of staff, the expression of genuine appreciation for the hard work they are doing and the rally-cry in the pursuit of a common goal that makes these common every-day programs culture-building events.

Because associate attitude and personality is so vitally important to building a close team dynamic and forging a genuine connection with company culture, the interview process needs to become both more personal and more sophisticated. Interviewers should look for candidates who are genuinely excited and challenged by the opportunity. Cultural fit is hugely important. The more they are connected to and engaged with your overarching vision and strategy, the more effectively they will be driven to perform and produce results. When confronted with the practical scenarios referenced above, don't just evaluate applicant aptitude, but also their attitude: how they react to challenging scenarios. Are they overwhelmed and stressed? Or capable, positive, engaged, and inspired?

Finally, no discussion of hotel management culture would be complete without covering the issue of size. There is nothing inherently "good" or "bad" about small or large companies. But beyond a certain point it is logistically impossible to conduct the kind of daily personal engagement and face to face interaction with employees and professional partners that fosters strong company culture, and ensures that employees never feel like a number or an anonymous cog in a wheel. It's not a coincidence that many of the hotel management companies with the most notable upward trend-lines in associate engagement survey scores are small-to-mid-sized organizations.

Regardless of the size of your operation, it's important to recognize that culture costs. It doesn't just "happen"-it takes a meaningful investment of time and resources. The good news, however, is that it also pays-and the return on your investment can be significant, even dramatic. In other words: your values have value. A collaborative and connected workplace fosters creativity and innovation, and promotes a general sense of unity and cohesion that boosts productivity and improves service.

The bottom line is that culture isn't just buzzword. It's a core operational priority with the potential to have an enormous impact on recruitment and retention, to the guest experience-and, ultimately, to the bottom line.

What's Next

You don't need to a crystal ball to recognize the industry trend lines. The cost of acquisition, retention and execution is going to continue to go up. And revenues and ADR are going to flatten or go down as new supply is still coming online. And that is going to be a huge problem. Even the most profitable properties and companies aren't operating with unlimited resources. The need to reduce labor costs is only going to become more urgent-and there is real potential for things to get rough down the road for those that cannot successfully adapt and evolve.

With that in mind hiring managers have to operate differently, and that begins by accepting the fact that the status quo simply won't do. With serious shortages looming, some innovators have worked to determine if certain repetitive labor jobs can be automated or eased through AI and other technology-driven solutions. But the reality is that you aren't going to be able to magically automate everything, and there is no tech magic bullet.

While new efficiencies will need to be part of the long-term solution-and introducing new tools and technologies in ways that enhance, rather than detract from the guest experience-can add real value, there is a ceiling on how much of an impact technology can make in a space where personal engagement plays such a big role. Outsourcing concepts can help take some of the edge off of the worsening labor shortage, and decision-makers can also be more selective and creative about identifying possible roles for applicants-even in cases where those candidates might have applied for a different position entirely.

But hotel management companies won't be able to keep going to owners and asking for more investment in their hotels. There is a limit, and the larger structural and economic dynamics are going to shift to a point where hotel management companies need to fundamentally alter their operational and cultural trajectory. Getting smarter about how and where to invest limited (and, in many cases, diminishing) resources is going to have to be part of the solution, and that begins with better recruiting and retention. Retention is by far the space where there is the most room for improvement across the industry.

The situation will get worse before it gets better. But that isn't necessarily a bad thing. As the market trends toward rate flattening, more supply, and scarce labor, weaker management companies won't be able to stay afloat. The best operators will rise to the top, continue to strengthen their cultures, and become increasingly attractive to top talent. For better or for worse, hotel management is a "people business." Those who can get better at finding, hiring, connecting with, and retaining great people will flourish.

Human resource professionals who can figure out the right triggers for associate satisfaction and engagement to support and perpetuate a strong company culture, will find themselves emerging as critical components of the strongest and most successful hotel management companies.

Reprinted from the Hotel Business Review with permission from www.HotelExecutive.com

Mark Van Amerongen

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