Hotel Paris Case Study ( The New Compensation Plan)

Background:
The hotel Paris utilizes a competitive strategy to increase length of stay and return rate of guest
by providing superior service. This strategy formulated has had impact to boost revenues and
profitability. However, the Compensation plan for the employees can be termed as unplanned
and unsophisticated. The hotel operates under a payment policy where the employees are paid
a competitive salary. The salary structure is based on the market average for similar roles and
no performance-based appraisal system exists in the hotels setup. This can be deemed a
detrimental and contradictory practice to retain and employ an extraordinarily service-oriented
workforce. In an effort to identify and resolve these underlying issues by the HR and CFO that
the company’s compensation plan wasn’t designed to support the firm’s new strategic goals.
Additionally, they had also found out that employees are being paid same as industry average
and occasionally even lower. This existing compensation plan has therefore created a division
between pay and performance. This has demotivated the employees’ performances as they
have identified that their individual performance has no co-relation with the compensation
package.
In order to overturn the scenario, after consulting the CEO and Board, the CFO provided the go
ahead to HR to design and implement a revised compensation plan to Improved employee
morale, contribute to employee engagement, reduced employee turnover. The new
compensation plan incorporated multiple measurable policies that included job evaluation
study to provide fair and rational pay rates and formal compensation surveys and move all its
salaries into the 75th percentile over the next 3 years.
The revised compensation instigated several positive changes, The employee turnover reduced
by 80% while there was an increase of applicants by 50%. In addition, morale and service
commitment also increased. As a part of the revision process in near future the HR team
expressed an interest to introduce pay for performance structure where employees may be
rewarded through bonuses and incentives.

Reference:
1. Dessler, Gary. (2017). Human resource management (15th. ed.). Boston: Pearson Education.