Strategic Human Resource Management in U.S.

Luxury Resorts—A Case Study
A labour 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 resources, 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 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 support for operations and was viewed as a funnel to provide workers. Administrative 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 emphasis 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

Even when there were plenty of potential employees available. (2) staff attitude. hovering at 100% for line workers. 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. All of these issues impact labor turnover and should be addressed by hospitality HR directors. housekeeping. According to Ettedgui (2006). 1996). The International Society of Hospitality Consultants has identified a shortage of labor and skills as the number-one issue for 2007 (ISHC. (3) lack of mentoring. 2006). and the co-alignment model. which they called personnel administration. 2006). and landscaping positions (Taylor. marketing as employer of choice. developing attractive employment policies. A national trend in HR is to . The National Restaurant Association predicts that the industry will need to fill 1. The hotel industry has been segmented by Smith Travel Research. upper upscale. coupled with other labor concerns. high turnover. this study reports results using the elements of the co-alignment model. improving productivity. 2006). Solutions that could be implemented to ease the shortage of labor in the industry include outsourcing. Fitzgerald. The authors indicate that a lack of leadership. and a lack of service ethic in the organization are issues that contribute to the lack of mentoring and staff attitude. luxury has been redefined as an experience versus a product (Schiller. This definition was repeated by Weinstein (2002) who defined luxury as employees who deliver service that anticipates needs and who pay attention to guests. compared with the 50% growth of the previous two decades (Gillette. in the HR department of a multi-unit restaurant chain. changes in HR. inexperienced managers. and Chapman (2005) identified four broad categories of impediments: (1) budget constraints. In a model of impediments to improvements in service quality in luxury hotels. The top three categories are luxury. The labor force is expected to grow as little as 16% over the next 20 years.Beginning with a review of literature on the labor shortage issue. The labor shortage in the hospitality industry has been recognized as a major force driving change for decades. and identifies solutions and strategies used by HR directors in luxury resorts. however. However. Strategic Management in HR Historically. may be the biggest challenge that the hospitality industry faces. & Calvert. 2002). turnover has been a problem in the industry. and (4) high customer expectations. Labor Shortage in Hospitality Management An evaporating pool of workers. 2006). 2005). Presbury. 2006). Fulford and Enz (1995) documented this administrative definition. Two of these categories. seasonal resorts in the United States depended heavily on workers from other countries for restaurants. This is true in luxury resorts where the delivery of quality service is usually the number-one priority. recruiting in target markets. recruitment procedures. the best luxury hotels are known for providing exceptional services and for the sincerity of the people who deliver those services. are impacted by HR policies and procedures. and upscale (O’Neill. Traditionally. the industry has failed to identify solutions to address this issue. Finley. the role of HR in a hospitality management company has been administrative in nature.4 million new jobs by 2010—more jobs than people willing to take them (Berta. staff attitude and lack of mentoring. and increasing skills of employees (Holt.

K. shared values. an appropriate hiring process. to business performance. and attitude and motivation. in turn. HR becomes a strategic partner responsible for getting the maximum value from the company employees. and Westnes (2003) identified human capital as one of three components of intellectual capital. & Schuler. These authors identified measures for human capital as competence. and (3) committed employees. and employee commitment will lead to the successful implementation of those strategic plans. p. Developing empowered employees requires training on problem solving. Developing serviceoriented employees requires training on guest expectations. hotel industry was reported by Hoque (1999) and was recommended for multi-unit restaurants by Fulford and Enz (1995). strategic human resources management (SHRM) includes approaches for matching people to business strategies (Miles & Snow. West. the other components were customer capital and structural capital. Human capital is defined as including “skills. and goals. meeting employee expectations. McManus. It was proposed by Guest (1987) that the integration of HR into strategic plans supported by policies. not a cost to minimize (Pfeffer. and Tse (2007) use the coalignment model to demonstrate the significance of this link. and intelligence of the firm’s employees” (Barney & Wright. When employees are seen as a competitive advantage. 1997). Strategic HR managers see the workforce as a source of strategic advantage. performance. These researchers also linked SHRM to competitive advantage and. 1998. In a Norwegian hotel chain. hotels identified a Hospitality Human Capital Process Model (Young. & Canale. a culture that stresses the importance of HR. This movement was aided by the development of the concept of human capital or human assets in an organization. One study that investigated human capital in U. (2) empowered employees. norms. This model delineates a comprehensive program for maximizing hospitality HR. 32). A model of development of the HR function in organizations includes five levels divided into two categories according to Kearns (2004). 1984). Building on the view of HR as human capital. Olsen. treating employees fairly. . Managerial activities that develop committed employees include nurturing psychological bonds. in addition to a hiring process that selects “best fit” employees. Jackson.move from the administrative role to the incorporation of HR in strategic planning. 2005).S. 2005). in addition to an appropriate hiring process and service oriented culture. improvement systems. The three components of the model are (1) service-oriented employees. The two categories are where employees are seen as a cost/resource and where employees are seen as a competitive advantage. The results of a project to investigate the impact of technical (the administrative role) HR and SHRM on firm performance indicated that SHRM has more positive impact on firm performance than technical HR (Huselid. Engstrom. An increase in the strategic approach to human resources management in the U. intellectual agility. judgment. Westnes. and a service-oriented culture.

The use of face-to-face interviews has proved effective in testing the coalignment model because the subjects may not be familiar with the concepts included in the co-alignment model. the HR directors were asked to identify the resort’s competitive methods and what was included in each method. Five questions sought to identify the forces in the environment identified by the HR director as driving change in the hotel industry. After contacting the HR directors at these resorts. The next five questions sought to identify how capital and HR were allocated to the competitive methods. Six of the questions were descriptive of the resort. the five cases were considered to be adequate for this case study. METHODOLOGY To answer the research questions. Seven resorts were identified in the Official 2005 North Carolina Travel Guide (2005). 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 investigating the co-alignment model.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. A structured questionnaire consisting of twenty-seven open-ended questions was developed to serve as the basis of the face-to-face interviews with each director on location at the resort. 2006). The consensus for numbers of cases falls between two and four as the minimum and ten and fifteen as the maximum (Perry. The case study method has been demonstrated as appropriate in testing the co-alignment model because researchers must enter into the domain of the firm and study it in depth in order to understand the complexities of the situation (Taylor & Olsen. These forces also have the potential of affecting the resort in the future and are contributing to problems in HR at the resort. Yin (1993) suggested the use of multiple cases be viewed as multiple experiments and not multiple respondents to a survey. Firm performance . Four questions addressed the strategy choices or competitive methods utilized by the resorts. In addition. the competitive methods they are utilizing to solve the labor shortage. the case study method with multiple cases as described by Yin (1993) was used. the study sought to find out if luxury resort HR managers recognize the forces driving change in the environment. Therefore. Specifically. and the performance indicators as a result of implementation. They were also asked how competitive methods were chosen and which methods were perceived as adding the most value to the resort. 1998). Aung (2000) used the case study method to identify the core competencies of the Accor hotel chain. five of the seven HR directors agreed to participate in the study. The focus for this study was 4-star resorts in North Carolina. how they are allocating resources to these competitive methods.

Other issues that were identified included the impact of technology and environmental concerns. The HR directors identified their strategy choices/competitive methods for two of the labor issues and both of the guests’ issues. Two of the resorts would be considered historical properties.5 hours in length. the HR directors monitored local events. content analysis for components of the co-alignment model. While at the other end of the continuum. All had convention and meeting spaces. which contrasted with the other director who was focused locally. One resort had more than 500 rooms. Three resorts were medium-sized hotels with under 300 rooms. However. however. All HR directors identified similar environmental forces driving change in their resorts (see Table 1). 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. The questionnaire was e-mailed to the HR director for preparation prior o the face-toface interview. and evaluation of the alignment/nonalignment of the components. changes in benefits and their increasing costs. Strategy Choices/Competitive Methods The second component of the co-alignment model is the utilization of strategy choices/competitive methods. The resorts were not chain owned or operated. Interviews were transcribed and content analysis was used to evaluate the responses (Neuendorf. all but one had spas. all of the resorts are recognized as luxury resorts in North Carolina. 2002). As suggested by Schuler and Jackson (2005).in terms of financial performance was identified in the final eight questions. All but one of the HR directors was focusing on the environment at the national and international level. The labor issues included immigration and diversity of the workforce. and the generational mix. In addition to the interview. the researchers were able to observe the implemented strategies at each property to confirm information received during the interviews. All directors cited economic issues related to labor and guests as forces driving change in the environment. Strategies selected to address the unemployment rate issue included use of H2B and H-1 visa employees (guest workers or temporary workers). Only one of the resorts operated as a seasonal resort. The interviews ranged from 1. No strategy choices/competitive methods were identified for the technology and environmental issues (see Table 1). energy costs (gasoline) for employees. and all but one had golf courses. 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. offering competitive benefits . Application of the co-alignment model to the five cases indicated that the HR directors were monitoring forces in the environment. unemployment rates. 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. there was a range of focus used by the directors. Economic issues related to guests included growth in family travel and more choices of resorts as a result of new competition.5 to 2. RESULTS AND DISCUSSION The results of the case study include demographic information about the resorts.

increased training. developing a company culture and loyalty among employees. offering incentive programs. increased service quality. New competition resulted in renovated facilities. The growth in family travel was addressed by renovated facilities. added amenities.and salaries. while others listed separate competitive methods with no linkage. Strategies utilized to address the increased cost and changing nature of benefits included redefining full-time employment. 2005). to others based on “best guess. package pricing.” which were very comprehensive programs.” .. Gross. flextime. and job sharing. child care. and co-branding. and package pricing. Six methods were developed to address more than one force in the environment. as in the total rewards strategy described by Fischer. The strategies identified for the two changes in guest needs were the same with new competition generating the need for leadership development. which is similar to the results in other studies (Young et al. or the generational mix. 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. The range in strategy choices varied from comprehensive to piecemeal. leadership development and increased training. The range of the methods was from those based on data analysis. leadership development. No strategies were implemented to address the HRrelated issues of immigration and diversity of the workforce. and increased training and cobranding. energy costs for employees. Three of the HR directors described “People Strategies. added amenities. increased service quality. redefining full-time employment. and extending the seasons with off-season offerings. and Friedman (2003).

Examples of how a family environment type of work culture was created included fundraisers. and a variety of changes to encourage a more-stable workforce. This change allowed employees to stay on the payroll and receive benefits during slower seasons. A variety of wellness programs and incentive programs were described as methods for increasing the health and well-being of employees and to reward employees for contributing to the bottom line of the resort. the minimum number of hours required for an employee to receive full-time benefits was decreased from 40 hours per week to 30 hours per week. creating loyalty in employees. At another resort. Changes made to encourage a more stable workforce included extending the seasons by offering . Competitive strategies that impacted employees directly included redefining fulltime work. and paid time for employees to assist community organizations.For example. offering competitive wages and benefits. company support for employees with need. in one resort. In one resort. The HR director at one resort reported treating employees like family as a method used to create loyalty in the workforce. any increase in revenue was interpreted as meaning that they were doing the right thing. supporting the community with funds. for every dollar invested in their employees an increase of three dollars in profit was generated.

Turnover rates were also impacted by the use of temporary guest workers. The increase in training allowed the resorts to capitalize on the strengths of their current employees. which leads to an outcome reflected in the (4) firm performance (Olsen et al. year-round workforce. and offering flextime. From the interviews with the HR directors. there was a trend for lower turnover rates in the resorts with a more comprehensive “People Strategy. In addition. and developing a full-time. It is interesting to note that none of the resorts used outsourcing to solve labor problems and the implementation of all of these changes decreased the need to use guest workers. 2007). Traditional measures of performance in the lodging industry (average daily rate [ADR].) were identified by all but two of the HR directors. Competitive HR strategies that were implemented in response to the changes in guest needs included more training and leadership development.themed weekend events. the resorts could offer consistent quality service as demanded by guests at a luxury resort. .1 to 1. The annual ADR ranged from $185 to $300. and annual RevPar ranged from $125 to $559. annual occupancy rates ranged from 59% to 96%. they were not tied directly to a strategy choice as the co-alignment model would indicate. Only one HR director reported seasonal data. revenue per available Room [RevPar]. promoting job sharing. Results in Table 1 indicate increased HR budgets.5% to 65%.” IMPLICATIONS AND CONCLUSION Succeeding in the resort industry requires alignment between the four elements of the co-alignment model: (1) the environment. etc. Firm Performance The final component of the co-alignment model is the firm performance measures that are used to determine the impact of the changes.9. turnover. It was interesting to note that almost all of the respondents did not have access to the operating data on a regular basis and in no case could alignment be determined. The comprehensiveness of the responses received from the HR directors ranged from all of the structural changes included in Table 1 to listing only one— increased HR budgets. change of management structure to compliment capital investment.5%. The wide range in RevPar. The HR directors reported that turnover rates were not increasing. and establishing a culture committee as needed to address the unemployment rate issue. Structural changes that were identified by the HR directors were not as comprehensive as the strategy choices. Employee data included payroll percentages ranging from 32% to 38. By decreasing the need for part-time or seasonal workers. involving HR as a strategic partner. and turnover percentages ranging from 16.. (2) strategy choice(s). While it is difficult to link these data as outcomes for a strategy choice and change in firm structure. employees to rooms ranging from 1. This trend is different from a study by the Society for Human Resource Management where 38% of the members reported increasing turnover rates (Feeney. Focused marketing was implemented to address both of the guest issues. Firm Structure The third component of the co-alignment model is the firm structure required to implement the strategy choices/competitive methods that have been selected. These results are similar to those reported by Mandelbaum (2006). 2007). and (3) firm structure. occupancy rates and turnover were due to data from one seasonal resort.

the use of SHRM and the co-alignment model could be documented as providing a competitive advantage in resorts. Further research needs to be conducted using the general manager as the source for information. the findings indicate the need to duplicate this research project with data gathered from more resorts across the country. In the other three resorts. Through additional case studies. the HR director was viewed as a source for strategies to address the changes in the environment.it was clear that the forces driving change in the hospitality industry environment. The results of such a study would be strengthened by their knowledge of performance measures. The forces driving change in the environment and competitive methods were identified by all HR directors. there is very little evidence that co-alignment is being used as a basis for planning.S. were identified as economic issues related to labor and guests. and more specifically the resort industry. Despite the limited number of cases in this study. The allocation of resources to these methods was not clearly delineated. Each of the HR directors identified forces in the environment. the formation gathered should help HR directors in the hotel industry as they identify and react to the forces driving change in the environment. In all but one of the resorts creative structural changes are being made to achieve competitive advantage. Use of the coalignment model could give these resorts a competitive advantage due to their constant need for outstanding service as expected in a luxury resort. Although limited to resorts in only one southeastern U. the critical difference was in looking locally versus nationally for changes. however. the HR director was not. In two of the five resorts. When applying the co-alignment model in this case study. state. In addition. the outcome measures and the effectiveness of each method were not identified by the directors. .

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