By John Hendrie
Naturally, we want to incentivize our hospitality managers, push for results, and drive for the numbers. The bottom line is how we evaluate performance, what pleases our stockholders, and, theoretically, encourages our stakeholders. But a "pay for performance" scheme is not always the best way to encourage results in the hotel industry.
It does not take an expert to design a performance plan for your managers and executives. The concept is very straightforward: you simply benchmark objectives, set a performance bar and create a reward scheme, usually a percentage of a base salary.
As almost all objectives can be quantified, those goals are explicit, clear and concise. However, the means can get in the way, just as the ends can become difficult to find. Therefore, the plan you have deftly crafted to incentivize performance, meet organizational strategies and push profits can become dysfunctional, cumbersome and, actually, a de-motivator for your management team. It becomes a blur!
The best hotel performance plan is kept simple, and it is usually composed of two sides of the ledger: company revenue and participant objectives. The company needs to meet or exceed its numbers, just as the management participant must meet their objectives. These objectives can be hard, like increasing sales by 20%, or soft, like reducing customer complaints by 10%. The company's objectives are distributed through the management ranks, thereby also becoming shared objectives for the participants. Theoretically, if the majority of these goals are met, the company prospers and everyone benefits.
Experts far more sophisticated than I will demonstrate that this compensation "onion" can be sliced many ways and in many angles and layers, but the above is the typical framework. I am of the school that the more complex, the more distant; I want immediacy and simplicity–something I can touch.
On paper, this sounds reasonable and easy to administer. But there are some hidden pitfalls. First, hotel management goals and objectives must be approved by senior management during the initial stage of your negotiation. The next barrier is the measurement of our progress, typically tracked by the budget.
But how can you place any credibility in a twelve month budget, much less a five and ten year plan? There are far too many assumptions which change the numbers and the projections. Also, managers understand the directive to stretch themselves and their resources, but in this age of doing more with less, we shoot ourselves in the foot rather than shod ourselves with the finest Italian shoes. And, now, we really need to hold the negotiations on a monthly basis, in order to retain or regain the light, rather than further the blur.
The landscape does shift, priorities change, the travel market is variable, so a quarterly review is suggested, at a minimum. This is where the worthwhile discussions (battles) should take place. It is timely, and plan accountability is critical. Objectives can be adjusted or modified accordingly.
There is no perfect reward plan out there. Personally, I cannot think of one hospitality company which has had the same plan in place for a long time. The consultants come in and recreate and redecorate the modules and methods. It usually boils down to the same gift, just packaged differently.
Does such a pay for performance plan for management make sense? Absolutely. Share the strategic goals, regale in the progress and share the bounty! What happens is that variables and inattention can scuttle your best intentions. Some parameters to keep in mind:
1) Keep the Formula simple.
2) Objectives must be in the control of the participant.
3) The Financial Reporting System must have some credibility.
4) This is not an HR project. They can administer the Program, but Senior Management must be the driver.
5) Scheduled Progress Reviews are essential.
6) Remuneration must be made in a timely fashion.
Yes, hotel employees want the company to succeed, they want to be part of that, and they want their contributions noted and rewarded. A successful program need not be sorcery. It has a place in the very fabric of our motivation to achieve. Incentivize me, please.
By John R. Hendrie
CEO, Hospitality Performance, Inc.
John Hendrie believes that Remarkable Hospitality is the portal for the memorable Visitor Experience. Contact him at www.hospitalityperformance.com with your comments.