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Strategic Human Resource Management in U S Luxury Resorts A Case Study
Strategic Human Resource Management in U S Luxury Resorts A Case Study
Tourism
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
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
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Strategic Human Resource Management 83
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”
Strategic Human Resource Management 85
(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 components 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 categories are where em-
ployees are seen as a cost/resource and where employees 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.
86 M. Taylor and D. Finley
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. According 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-alignment
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
Strategic Human Resource Management 87
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
88 M. Taylor and D. Finley
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.
Economic Issues—Labor
Unemployment rates H2B, J-1 Visas Increased HR
budgets
Competitive benefits and Changing
salaries management
structure to
compliment capital
investment
Leadership development HR as strategic
and increased training partner
Developing a company Culture committee
culture
Building loyalty among
employees
Incentive programs
Redefining full-time
employment
Extending seasons
Benefits increasing in Redefining full-time
cost and changing in employment
nature
Flextime
Child care
Job sharing
Immigration and
diversity of the work
force
Energy costs for
employees
Generational mix
Economic Issues—Guests
Growth in family Renovated facilities Focused marketing
travel due to
increasing energy Added amenities
costs or value of time 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
Strategic Human Resource Management 91
For example, in one resort, for every dollar invested in their employees
an increase of three dollars in profit was generated. At another resort, any
increase in revenue was interpreted as meaning that they were doing the
right thing.
Competitive strategies that impacted employees directly included re-
defining full-time work, offering competitive wages and benefits, creating
loyalty in employees, and a variety of changes to encourage a more-stable
workforce. In one resort, the minimum number of hours required for an em-
ployee to receive full-time benefits was decreased from 40 hours per week
to 30 hours per week. 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 HR director at one resort reported treating employees like fam-
ily as a method used to create loyalty in the workforce. Examples of how
a family environment type of work culture was created included fundrais-
ers, company support for employees with need, supporting the community
with funds, and paid time for employees to assist community organizations.
Changes made to encourage a more stable workforce included extending
the seasons by offering themed weekend events, promoting job sharing,
and offering flextime. 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.
Competitive HR strategies that were implemented in response to the
changes in guest needs included more training and leadership development,
and developing a full-time, year-round workforce. The increase in training
allowed the resorts to capitalize on the strengths of their current employees.
By decreasing the need for part-time or seasonal workers, the resorts could
offer consistent quality service as demanded by guests at a luxury resort.
Firm Structure
The third component of the co-alignment model is the firm structure re-
quired to implement the strategy choices/competitive methods that have
been selected. Results in Table 1 indicate increased HR budgets, change of
management structure to compliment capital investment, involving HR as
a strategic partner, and establishing a culture committee as needed to ad-
dress the unemployment rate issue. Focused marketing was implemented to
address both of the guest issues.
Structural changes that were identified by the HR directors were not
as comprehensive as the strategy choices. In addition, they were not tied
directly to a strategy choice as the co-alignment model would indicate. The
comprehensiveness of the responses received from the HR directors ranged
92 M. Taylor and D. Finley
from all of the structural changes included in Table 1 to listing only one—
increased HR budgets.
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. Traditional
measures of performance in the lodging industry (average daily rate [ADR],
revenue per available Room [RevPar], turnover, etc.) were identified by all
but two of the HR directors. These results are similar to those reported
by Mandelbaum (2006). 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 annual ADR ranged
from $185 to $300, annual occupancy rates ranged from 59% to 96%, and
annual RevPar ranged from $125 to $559. Only one HR director reported
seasonal data. Employee data included payroll percentages ranging from
32% to 38.5%, employees to rooms ranging from 1.1 to 1.9, and turnover
percentages ranging from 16.5% to 65%.
The wide range in RevPar, occupancy rates and turnover were due to
data from one seasonal resort. Turnover rates were also impacted by the
use of temporary guest workers. The HR directors reported that turnover
rates were not increasing. This trend is different from a study by the Society
for Human Resource Management where 38% of the members reported in-
creasing turnover rates (Feeney, 2007). While it is difficult to link these data
as outcomes for a strategy choice and change in firm structure, there was
a trend for lower turnover rates in the resorts with a more comprehensive
“People Strategy.”
Succeeding in the resort industry requires alignment between the four ele-
ments of the co-alignment model: (1) the environment, (2) strategy choice(s),
and (3) firm structure, which leads to an outcome reflected in the (4) firm
performance (Olsen et al., 2007). From the interviews with the HR directors,
it was clear that the forces driving change in the hospitality industry environ-
ment, and more specifically the resort industry, were identified as economic
issues related to labor and guests. Each of the HR directors identified forces
in the environment; however, the critical difference was in looking locally
versus nationally for changes. In two of the five resorts, the HR director was
viewed as a source for strategies to address the changes in the environment.
In the other three resorts, the HR director was not. In all but one of the
resorts creative structural changes are being made to achieve competitive
advantage.
Strategic Human Resource Management 93
When applying the co-alignment model in this case study, there is very
little evidence that co-alignment is being used as a basis for planning. The
forces driving change in the environment and competitive methods were
identified by all HR directors. The allocation of resources to these methods
was not clearly delineated. In addition, the outcome measures and the ef-
fectiveness of each method were not identified by the directors. Use of the
co-alignment 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.S. state, the find-
ings indicate the need to duplicate this research project with data gathered
from more resorts across the country. Through additional case studies, 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 results of such a
study would be strengthened by their knowledge of performance measures.
Despite the limited number of cases in this study, the information gath-
ered should help HR directors in the hotel industry as they identify and react
to the forces driving change in the environment.
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