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Understanding what we measure and making it count!

publication date: Jun 25, 2012
author/source: Dr. John Hogan CHE CHA MHS

 "Too often we measure everything and understand nothing."

The three most important things you need to measure in a business are customer satisfaction, employee satisfaction and cash flow.

  If you're growing customer satisfaction, your global market is sure to grow, too.    Employee satisfaction feeds you productivity, quality, pride and creativity. And cash flow is the pulse - the key vital sign of a company." [1]

Jack Welch, retired President and CEO of General Electric

I recently wrote a column that is part of a continuing series. This particular column was  titled A "Bakers Dozen" of Strategies for Hotel Controllers  and it offered 13 thoughts for the person who is charged with being the financial manager of the hotel.

There is an enormous range of responsibilities for financial controls in today's hotels and much of this depends on the type and size of the hotel property.  Finance and accounting do not usually provide much reader feedback, but I was pleased to have requests from groups and associations asking to reprint it in their publications.

This column will follow up on the strategies to a degree, but it will focus much more on the approach and message contained in the Jack Welch quote above.

The hospitality industry is facing serious issues with the global economic and political uncertainties.

While Welch retired as CEO of one of the world's most complex conglomerates in 2000, his message above remains accurate.   Welch served as a leader who was not afraid to be a change agent. The many books about his style and approaches include reflections on very challenging economic cycles in his 20-year tenure as well.

With that in mind, I have taken Welch's three points and offer the following discussion points to hoteliers at the property level.

  1. Measuring customer satisfaction.  The advancement of technology has virtually eliminated much of the value of comment cards, but the need for feedback remains very real.    Online services such as TRIP ADVISOR, Orbitz, Sabre and priceline.com have avenues to allow immediate and widely shared assessment.  There are allegations of planted or false postings on some of these sites, but follow up usually identifies those situations.    The question then becomes "how to measure customer satisfaction?"   There are a number of reasonable approaches, remembering how timely responsiveness must be to ongoing success.  These include:
  • Mystery shopping can be an excellent way to view a picture in time of your total business or perhaps one outlet or aspect of your hotel. If done correctly, these unexpected, anonymous evaluations of your operations can provide insights to the customer experience.  If conducted frequently enough, one can identify strengths, revenue trends and other opportunities.
  • There are assessments that are more inclusive available, including those provided by a number of members in The International Society of Hospitality Consultants.  They and others specialize in extensive analysis of operations, which can enhance the customer's experience.

Welch's quote refers to growing markets "globally".  With the advances in technology and simplified means to book travel,  global market penetration can increase on an individual market and hotel basis.

2. Measuring employee satisfaction.    Welch had his share of critics relating to how  GE evolved during his tenure.  He sold many businesses that he and the GE Board did not view as long-term contributors to the company success and he reduced the total number of GE employees with those sales.

He also made major inroads in professional development and training at all levels. In his autobiography "JACK: STRAIGHT FROM THE GUT",  he identified Crotonville, a 52-acre campus in Ossining, New York as a major component of the changes needed to be implemented to make GE continuously successful.  It was used for both a training ground for leadership and as a forum to deliver technical training or important messages in times of crisis. [2]

With multi-generations working at our hotels today embracing both the high tech and high touch of hospitality, the need has increased for additional training and development at all levels.

A handful of the major brands and management companies have evolved their corporate culture to address the need to maximize employee engagement and satisfaction , but I continue to see too many managers and owners paying minimal attention to their staff.

The successful owners and managers of the future will increase the commitment to professional development

and training whenever and wherever possible throughout the hotel. The results will be better qualified

professionals in more departments,  providing better service while enjoying their careers.

3. Measuring cash flow.    Many people understand the concept, but not enough actively engage in measuring all the components.

ReVPAR obviously affects cash flow, and measuring trends via www.strglobal.com (formerly Smith Travel) or other sources helps anticipate revenues and expenses  Regular proactive interaction with the sales team and front office management will help project more accurate short and long-term forecasts..   Understanding cash flow and position helps long-term profit improvement decisions, as well as anticipating capital needs and the ROI needed to justify them.

Measuring cash flow also helps ownership and managers realistically assess the operational performance of their hotel.

Hotel controllers are often the chief financial officer of the hotel.  I have recapped the Strategies from last week's article on  Hotel Controllers" and encourage you to go to the archives of this publication for the full column.

Those strategies include:

  • Take the lead on establishing and administering all financial systems and internal controls.
  • Create the guidelines and expectations for the preparation and updates of all operational budgets, forecasts, operating results, financial reports.
  • Identify the annual hotel's capital plan and establish time lines and protocols for implementation.
  • Implement firm procedures for the preparation of operational statements returns in compliance with government regulations, company, franchise and ownership requirements.
  • Set up and administer all government reporting and tax filing activities
  • Formulate and manage local accounting policies that coordinate with ownership's or brand systems and procedures.
  • Operate as if you were a financial consultant for your hotel(s).
  • Monitor compliance with hotel and accounting policies and procedures, legal requirements and contractual obligations .
  • Manage the accounting department and other areas as appropriate.
  • Supervise the installation and maintenance of accounting computer systems and equipment to secure optimum performance.
  • Maintain a fiduciary accountability to the company and management.
  • As a member of the hotel executive team, share the professional expectations provided to you from ownership and/or management clearly with all members of the staff.
  • Increase the commitment to training whenever and wherever possible throughout the hotel.

[1] Welch speech at the 50th anniversary annual meeting of the North Carolina Citizens for Business and Industry, Raleigh NC 3/18/92

[2]  "JACK: STRAIGHT FROM THE GUT", Warner Business Books, 2001  Chapter 12 Remaking Crotonville to Remake GE

Success does not come by accident or chance.

Contact us for assistance.

John.Hogan@HospitalityEducators.com or 602-799-5375

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John Hogan is a successful hospitality executive, educator, author and consultant and is a frequent keynote speaker and seminar leader at many hospitality industry events. He is CEO and Co-Founder of www.HospitalityEducators.com , which delivers focused and affordable counsel in solving specific challenges facing hospitality today.
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