Strategic human resource management in u s luxury resorts a case study

Luxury Resorts—A Case Study MARCIA TAYLOR and DORI FINLEY Department of Hospitality Management, East Carolina University, Greenville, NC A labor shortage has been experienced in the hosp

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Journal of Human Resources in Hospitality & Tourism

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Strategic Human Resource Management in U.S.

Luxury Resorts—A Case Study Marcia Taylor & Dori Finley

To cite this article: Marcia Taylor & Dori Finley (2008) Strategic Human Resource Management

in U.S Luxury Resorts—A Case Study, Journal of Human Resources in Hospitality & Tourism, 8:1, 82-95, DOI: 10.1080/15332840802274460

To link to this article: http://dx.doi.org/10.1080/15332840802274460

Published online: 02 Jan 2009.

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ISSN: 1533-2845 print / 1533-2853 online

DOI: 10.1080/15332840802274460

Strategic Human Resource Management

in U.S Luxury Resorts—A Case Study

MARCIA TAYLOR and DORI FINLEY

Department of Hospitality Management, East Carolina University, Greenville, NC

A labor shortage has been experienced in the hospitality industry and is predicted to continue into the future with a greater impact on luxury resorts Resort managers typically look to human resource (HR) directors to develop strategies to solve this problem The co-alignment model can give managers a competitive advantage in the marketplace This study presents the results of a case study

of five luxury resorts in North Carolina HR directors identified forces driving change in the environment, strategy choices, firm structure, and outcomes reflected in firm performance There was little evidence that co-alignment was being used as a basis for planning.

KEYWORDS Strategic management, co-alignment, human re-sources, resorts

INTRODUCTION

The labor shortage has been recognized nationally as a major force driving change for decades and is predicted to continue into the future with the shortage having greater impact on the hospitality industry (Terry, 2005) This shortage is even more amplified for resorts that are typically located

in remote areas with a high cost of living, low unemployment rates, and a seasonal need for employees (Angelo & Vladimir, 2004) These three factors have led to increased turnover and higher overall costs for resorts In the past 3 years, there have been many media reports on the seriousness of the

Address correspondence to Marcia Taylor, PhD, Department of Hospitality Manage-ment at East Carolina University, RW 312 Rivers, Greenville, NC 27858–4353 E-mail: taylormar@ecu.edu

82

labor shortage in seasonal resorts due to changes in immigration laws (Berta, 2004; Hedlund, 2004)

Solving the labor shortage problem is the responsibility of the human resources (HR) department Traditionally, this department has served as sup-port for operations and was viewed as a funnel to provide workers Admin-istrative functions of the department were viewed as the only contribution

of HR to the total organization This view changed due to a movement in business and industry that treated HR as human capital Today, in some companies, the HR department has been viewed as a source of competitive advantage and has become a strategic partner at the executive level (Kearns, 2004) This has served to differentiate companies with a strategic HR empha-sis from those without According to Cooper (2005), what differentiates great companies from their peers is the ability to hire, develop, and retain the best people The effect of a strategic emphasis in hospitality HR departments has not been documented in the United States, thus the need for research in this area

This article reports the results of a case study of five luxury resorts in North Carolina The issues investigated in this article include:

(1) recognition by luxury resort HR managers of the forces driving change

in the environment;

(2) competitive methods being utilized to solve the labor shortage;

(3) resources allocated to these competitive methods;

(4) alignment of the three elements of the model with firm performance

REVIEW OF THE LITERATURE

Beginning with a review of literature on the labor shortage issue, changes in

HR, and the co-alignment model, this study reports results using the elements

of the co-alignment model, and identifies solutions and strategies used by

HR directors in luxury resorts The hotel industry has been segmented by Smith Travel Research The top three categories are luxury, upper upscale, and upscale (O’Neill, 2006) However, luxury has been redefined as an experience versus a product (Schiller, 2006) This definition was repeated by Weinstein (2002) who defined luxury as employees who deliver service that anticipates needs and who pay attention to guests

Labor Shortage in Hospitality Management

An evaporating pool of workers, coupled with other labor concerns, may be the biggest challenge that the hospitality industry faces The labor force is expected to grow as little as 16% over the next 20 years, compared with the 50% growth of the previous two decades (Gillette, 1996) The Employment

Policy Foundation forecasts a deficit of labor needed versus labor available

of 10 million workers in 2015 growing to 35 million by 2030 (Holt, 2006) The National Restaurant Association predicts that the industry will need to fill 1.4 million new jobs by 2010—more jobs than people willing to take them (Berta, 2002) The International Society of Hospitality Consultants has identified a shortage of labor and skills as the number-one issue for 2007 (ISHC, 2006)

Traditionally, seasonal resorts in the United States depended heavily

on workers from other countries for restaurants, housekeeping, and land-scaping positions (Taylor, Finley, & Calvert, 2005) Even when there were plenty of potential employees available, turnover has been a problem in the industry, hovering at 100% for line workers The labor shortage in the hospitality industry has been recognized as a major force driving change for decades; however, the industry has failed to identify solutions to ad-dress this issue Solutions that could be implemented to ease the shortage

of labor in the industry include outsourcing, improving productivity, re-cruiting in target markets, developing attractive employment policies, mar-keting as employer of choice, and increasing skills of employees (Holt, 2006)

According to Ettedgui (2006), the best luxury hotels are known for pro-viding exceptional services and for the sincerity of the people who deliver those services This is true in luxury resorts where the delivery of quality service is usually the number-one priority In a model of impediments to improvements in service quality in luxury hotels, Presbury, Fitzgerald, and Chapman (2005) identified four broad categories of impediments: (1) budget constraints, (2) staff attitude, (3) lack of mentoring, and (4) high customer ex-pectations Two of these categories, staff attitude and lack of mentoring, are impacted by HR policies and procedures The authors indicate that a lack of leadership, inexperienced managers, high turnover, recruitment procedures, and a lack of service ethic in the organization are issues that contribute to the lack of mentoring and staff attitude All of these issues impact labor turnover and should be addressed by hospitality HR directors

Strategic Management in HR

Historically, the role of HR in a hospitality management company has been administrative in nature Fulford and Enz (1995) documented this admin-istrative definition, which they called personnel administration, in the HR department of a multi-unit restaurant chain A national trend in HR is to move from the administrative role to the incorporation of HR in strategic planning This movement was aided by the development of the concept

of human capital or human assets in an organization Human capital is de-fined as including “skills, judgment, and intelligence of the firm’s employees”

(Barney & Wright, 1998, p 32) In a Norwegian hotel chain, Engstrom, West-nes, and Westnes (2003) identified human capital as one of three compo-nents of intellectual capital; the other compocompo-nents were customer capital and structural capital These authors identified measures for human capital

as competence, improvement systems, intellectual agility, performance, and attitude and motivation

One study that investigated human capital in U.S hotels identified a Hos-pitality Human Capital Process Model (Young, McManus, & Canale, 2005) The three components of the model are (1) service-oriented employees, (2) empowered employees, and (3) committed employees Developing service-oriented employees requires training on guest expectations, an appropriate hiring process, and a service-oriented culture Developing empowered em-ployees requires training on problem solving; shared values, norms, and goals; in addition to an appropriate hiring process and service oriented cul-ture Managerial activities that develop committed employees include nur-turing psychological bonds, treating employees fairly, meeting employee expectations, in addition to a hiring process that selects “best fit” employees This model delineates a comprehensive program for maximizing hospitality HR

Building on the view of HR as human capital, strategic human re-sources management (SHRM) includes approaches for matching people

to business strategies (Miles & Snow, 1984) A model of development of the HR function in organizations includes five levels divided into two cat-egories according to Kearns (2004) The two catcat-egories are where em-ployees are seen as a cost/resource and where emem-ployees are seen as a competitive advantage When employees are seen as a competitive advan-tage, HR becomes a strategic partner responsible for getting the maximum value from the company employees Strategic HR managers see the work-force as a source of strategic advantage, not a cost to minimize (Pfeffer, 2005)

An increase in the strategic approach to human resources management

in the U.K hotel industry was reported by Hoque (1999) and was recom-mended for multi-unit restaurants by Fulford and Enz (1995) It was proposed

by Guest (1987) that the integration of HR into strategic plans supported

by policies, a culture that stresses the importance of HR, and employee commitment will lead to the successful implementation of those strategic plans

The results of a project to investigate the impact of technical (the ad-ministrative role) HR and SHRM on firm performance indicated that SHRM has more positive impact on firm performance than technical HR (Huselid, Jackson, & Schuler, 1997) These researchers also linked SHRM to competi-tive advantage and, in turn, to business performance Olsen, West, and Tse (2007) use the co-alignment model to demonstrate the significance of this link

FIGURE 1 Co-alignment Model Adapted from Olsen et al (2007)

Co-Alignment Model

As early as 1983, strategic management has been recognized as impor-tant for managers in the hospitality industry (Reichel, 1983) More re-cently Kim and Oh (2004) recommended the use of a comprehensive, integrated strategic-management method to give hotels a competitive ad-vantage The co-alignment principle is a strategic-management theory that implies that companies can gain a sustainable competitive advantage if management adopts the principles of the theory in their everyday oper-ations (Olsen et al., 2007) In support of this theory, Olsen et al (2007) developed a model that consists of four constructs necessary in achiev-ing co-alignment within business Accordachiev-ing to the co-alignment princi-ple model, if management can (1) identify opportunities that exist in the forces driving change in the environment, (2) invest in competitive meth-ods (strategy choices) that take advantage of these opportunities, and (3) allocate resources to those methods that create the greatest value, then they can (4) achieve sustainable competitive advantage (Olsen et al., 2007; see Figure 1)

A firm’s success depends on the management’s awareness of the envi-ronment and ability to identify and adapt to changes According to Olsen

et al (2007), the co-alignment model is similar to other strategic manage-ment concepts, but it is future oriented The application of the co-alignmanage-ment model to the hospitality industry has been reported by Olsen et al (2007) and in many unpublished dissertations Typically, the hotel industry is con-sidered a “copycat industry.” Hoteliers are quick to copy innovations by others Adopting the co-alignment model can give a resort manager a com-petitive advantage in the marketplace Due to the competition for luxury travelers and the short lifespan of luxury services, application of this model

is appropriate for managers in luxury resorts

PURPOSE OF STUDY

The purpose of this study was to answer two research questions: (1) Are luxury resorts investing in competitive methods to take advantage of the

opportunities that exist in the forces driving change in the environment? (2) Are luxury resorts allocating resources to those competitive methods that create the greatest value? Specifically, the study sought to find out if luxury resort HR managers recognize the forces driving change in the environment, the competitive methods they are utilizing to solve the labor shortage, how they are allocating resources to these competitive methods, and the perfor-mance indicators as a result of implementation

METHODOLOGY

To answer the research questions, the case study method with multiple cases as described by Yin (1993) was used The case study method has been demonstrated as appropriate in testing the co-alignment model because re-searchers must enter into the domain of the firm and study it in depth in order to understand the complexities of the situation (Taylor & Olsen, 2006) The use of face-to-face interviews has proved effective in testing the co-alignment model because the subjects may not be familiar with the concepts included in the co-alignment model, and interviewing allows researchers to probe and use questions to get a valid response Other researchers (mostly unpublished dissertations) have used the case study method in investigat-ing the co-alignment model In addition, Aung (2000) used the case study method to identify the core competencies of the Accor hotel chain

The focus for this study was 4-star resorts in North Carolina Seven

resorts were identified in the Official 2005 North Carolina Travel Guide

(2005) After contacting the HR directors at these resorts, five of the seven

HR directors agreed to participate in the study Yin (1993) suggested the use of multiple cases be viewed as multiple experiments and not multiple respondents to a survey The consensus for numbers of cases falls between two and four as the minimum and ten and fifteen as the maximum (Perry, 1998) Therefore, the five cases were considered to be adequate for this case study

A structured questionnaire consisting of twenty-seven open-ended ques-tions was developed to serve as the basis of the face-to-face interviews with each director on location at the resort Six of the questions were descriptive

of the resort Five questions sought to identify the forces in the environment identified by the HR director as driving change in the hotel industry These forces also have the potential of affecting the resort in the future and are contributing to problems in HR at the resort Four questions addressed the strategy choices or competitive methods utilized by the resorts Specifically, the HR directors were asked to identify the resort’s competitive methods and what was included in each method They were also asked how competi-tive methods were chosen and which methods were perceived as adding the most value to the resort The next five questions sought to identify how

capital and HR were allocated to the competitive methods Firm performance

in terms of financial performance was identified in the final eight questions The questionnaire was e-mailed to the HR director for preparation prior

to the face-to-face interview The interviews ranged from 1.5 to 2.5 hours

in length In addition to the interview, the researchers were able to observe the implemented strategies at each property to confirm information received during the interviews Interviews were transcribed and content analysis was used to evaluate the responses (Neuendorf, 2002)

RESULTS AND DISCUSSION

The results of the case study include demographic information about the resorts, content analysis for components of the co-alignment model, and evaluation of the alignment/nonalignment of the components

Characteristics of the Sample

There was a wide cross-section of locations for the resorts ranging from mountain to ocean and from city to countryside All had convention and meeting spaces, all but one had spas, and all but one had golf courses Three resorts were medium-sized hotels with under 300 rooms One resort had more than 500 rooms The resorts were not chain owned or operated Two of the resorts would be considered historical properties; however, all

of the resorts are recognized as luxury resorts in North Carolina Only one

of the resorts operated as a seasonal resort

Forces in the Environment Driving Change

The first component of the co-alignment model is the identification of forces

in the environment that are driving change All HR directors identified sim-ilar environmental forces driving change in their resorts (see Table 1) All directors cited economic issues related to labor and guests as forces driv-ing change in the environment The labor issues included immigration and diversity of the workforce, unemployment rates, energy costs (gasoline) for employees, changes in benefits and their increasing costs, and the genera-tional mix Economic issues related to guests included growth in family travel and more choices of resorts as a result of new competition Other issues that were identified included the impact of technology and environmental con-cerns

Application of the co-alignment model to the five cases indicated that the HR directors were monitoring forces in the environment However, there was a range of focus used by the directors All but one of the HR directors was

focusing on the environment at the national and international level, which contrasted with the other director who was focused locally As suggested by Schuler and Jackson (2005), looking more broadly will assist HR directors

in becoming strategic partners in operations decisions Three of the HR directors had participated in an executive-level strategic-planning process that identified forces in the environment that were impacting their resorts While at the other end of the continuum, the HR directors monitored local events

Strategy Choices/Competitive Methods

The second component of the co-alignment model is the utilization of strat-egy choices/competitive methods The HR directors identified their stratstrat-egy choices/competitive methods for two of the labor issues and both of the guests’ issues No strategy choices/competitive methods were identified for the technology and environmental issues (see Table 1) Strategies selected to address the unemployment rate issue included use of H2B and H-1 visa em-ployees (guest workers or temporary workers), offering competitive benefits and salaries, leadership development and increased training, developing a company culture and loyalty among employees, offering incentive programs, redefining full-time employment, and extending the seasons with off-season offerings Strategies utilized to address the increased cost and changing na-ture of benefits included redefining full-time employment, flextime, child care, and job sharing No strategies were implemented to address the HR-related issues of immigration and diversity of the workforce, energy costs for employees, or the generational mix

The growth in family travel was addressed by renovated facilities, added amenities, increased service quality, and package pricing New competition resulted in renovated facilities, added amenities, increased service quality, package pricing, leadership development, and increased training and co-branding The strategies identified for the two changes in guest needs were the same with new competition generating the need for leadership develop-ment, increased training, and co-branding

It can be concluded from these findings that HR directors are making strategic choices or developing competitive methods to address the forces driving change in the environment Six methods were developed to address more than one force in the environment, which is similar to the results in other studies (Young et al., 2005) The range in strategy choices varied from comprehensive to piecemeal Three of the HR directors described “People Strategies,” which were very comprehensive programs, while others listed separate competitive methods with no linkage The range of the methods was from those based on data analysis, as in the total rewards strategy described

by Fischer, Gross, and Friedman (2003), to others based on “best guess.”

TABLE 1 Content Analysis Results for Forces in the Environment, Strategy

Choices/Competitive Methods, and Firm Structure

Forces in the Strategy Choices/

Environment Competitive Methods Firm Structure Economic Issues—Labor

Unemployment rates H2B, J-1 Visas Increased HR

budgets Competitive benefits and

salaries

Changing management structure to compliment capital investment Leadership development

and increased training

HR as strategic partner Developing a company

culture

Culture committee Building loyalty among

employees Incentive programs Redefining full-time employment Extending seasons Benefits increasing in

cost and changing in

nature

Redefining full-time employment Flextime Child care Job sharing Immigration and

diversity of the work

force

Energy costs for

employees

Generational mix

Economic Issues—Guests

Growth in family

travel due to

increasing energy

costs or value of time

Renovated facilities Focused marketing Added amenities

Increased service quality Package pricing

New competition Renovated facilities Focused marketing

Added amenities Increased service quality Package pricing

Leadership development and increased training Cobranding

Other Issues

Technology

Environmental