Human Resource Management CASE : Paris Hotel


: Pay For Performance and Financial Incentives

Answered by : Irfan Rakhman Hidayat (1101001014)

Case Review :
The hotel Paris competitive strategy is “to use superior guest service to differentiate the Hotel Paris properties and to thereby increase the length to stay and return rate of guest and thus boost revenues and profitability “ HR manager Lisa Cruz must now formulate functional policies and activities that support this competitive strategies by eliciting the required employee behaviors and competencies. One of Lisa Cruz’s biggest pay-related concerns is that the Hotel Paris compensations plan does not link pay to performance in any effective way. Because salaries was historically barely competitive, supervisors tend to award merit raises across the board. so, employee who performed well got only about the same the same raise as did those who performed poorly. Similarly, there was no bonus or incentives plan of any kind aimed at linking employee performance to strategically relevant employee capabilities and behaviors such as greeting guest in friendly manner or providing expeditious check ins and checkouts. Based on their analysis, Lisa Cruz and CFO concluded by any metric, their company’s incentives plan was inadequate , The percentage of workforce whose merit or incentives pay is tied to performance is effectively zero, because managers awarded merit pay across the board.No more than 5 percent of workforce (just the managers) was eligible for incentive pay and the percentage of difference in incentive pay between low performing and high performing employee was less than 2%.Lisa Cruz knew from industry studies that in the top firms, more than 80% of the workforce had merit pay or incentives pay tied to performance. She also knew that in high performing firms there at least a 5% or 6% difference in incentive pay between low performing and high performing employee. The CFO authorized Lisa to design new strategy – oriented incentive plan for The Hotel Paris’s employee. Their Overall aim was to incentivize the pay plan of just about all the company’s employees. Lisa and the company ‘s CFO laid out three measurable criteria that the new incentive plan had to meet. First, at least 90% (and preferably all) of the Hotel Paris’s employees must be eligible for merit increase or incentives pay between a low performing and high performing employee. Second there must be at least 10% difference in incentives pay between a low performing and high performing employee .Third the new incentives plan had to includes specific bonuses and evaluative mechanism that linked employee behaviors in each job categories with strategically relevant employee capabilities and behaviors. For example, Front desk clerks were to be rewarded in part based on the friendliness and speed of their check ins and checkouts and the House cleaning crew was to be evaluated and rewarded in part based on the percentage of room cleaning infractions.

1.Discuss what do you think of the measurable criteria that Lisa and the CFO set for their new incentive Plan. 2.Given what do you know about the hotel Paris’s strategic goals, List three of four specific behaviors you would incentivize for each of the following groups of employee ; Front desk Clerk ,Hotel Manager, Valet, Housekeepers 3.Lay out a complete incentive plan (including long term and short term incentive) for hotel Paris’s Hotel Manager.

Answer : 1.Criteria that must be measured to differentiate between high performing and low performing employees could be based on : a. Speed (Time needed to served the costumer) b. Friendliness (Expression given when serve costumer) c. Delicacy (not only about how fast the service but also include how delicate it was) d. Patience/Complaint Resistance (measure how patience employees could resist costumer complaint) e. On Time / On post (measure how on time employee attend to their post after rest or when their time shift comes) based on this behavior the manager could look the outcome like : a. b. c. d. e. Increasing in stay and return rate of the costumer Willingness of the costumer to recommend this hotel to others Good image, and professionalism of this hotel Feed back from costumer about what is lack from costumer Increasing number of guest

2.Strategic Goal that Hotel Paris want to accomplished is like a. Increasing Employee performance b. Increasing Number of guest that attend this hotel c. Increasing stay and return rate to this hotel d. Increasing effectiveness (linked) of incentive plan to boost employee performance e. Increasing Eligibility rate of employee so that they could got higher incentive f. 10% differentiation payment between low and high performing employee in order to achieve this goal we must specify behavior for each job that related to this goal like A. Front desk clerk - Friendly - Patience - High resist to stress - Fast - delicate B. Hotel Manager - High competence in hotel management experience - Have good leadership - Patience - Calm and high resist to stress - Firm (ks) , Objective oriented and discipline C. Valet - Friendly - Fast - Delicate - On time (especially when serve costumer) D. Housekeeper - Fast - Delicate - Diligent - Tidy

3. Incetive Plan for Hotel Paris


N0 Sallary (16%)

Bonuses (22%)
$ 13,750

Long Term (42%)
$ 26,250

Short Term (20%)
$ 12,500


$ 10,000

$ 62,500

*the percentage used to mixed incentive above based on sarbane-oxley act. Information : 1.Long term payment is stock option, and the plan that I used to determine it’s amount based on performance achievement plan 2.Short term payment that I used is almost same with annual bonuses but it also depend on how well they performed their job so I used multiplier approach to determine their incentive. 3.The amount above only example to make it easier to calculated.

Like I said before,I used multiplier approach to determining Annual (short term) and long term bonuses.

Multiplier Approach
Individual Performance (Based on appraisal weight = 0.5)

Company Perfomance (based on number of guest attending’s target) Excellent
1.00 0.8 0.00 0.00

0.9 0.7 0.00 0.00

0.8 0.6 0.00 0.00

0.7 0.5 0.00 0.00

Excellent Good Fair Poor

To determine the dollar amount of a manager ‘s award multiply the maximum possible (target) to appropriate factor in matrix

And to determine individual performance I used guidance table below

Individual Score for Executive The Hotel Paris FACTOR
Firmness Patience Leadership Stress Resistance Excellent 1.0 1.0 1.0 1.0 Good 0.8 0.8 0.8 0.8 Fair 0.6 0.6 0.6 0.6 Poor 0.4 0.4 0.4 0.4

Individual factor above we mixed with our target outcome (it depend on how much we weight it) and the score we matched with score at multiplier approach and we multiply it with highest possible short term and long term here supervisor rule really important to give objective scoring. And for Non executive employee I used same method but with different factor at individual score,plus I use double checked performance not only by supervisor scoring but also I will use a kind of performance (satisfaction card) that will be filled out by guest.

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