Hospitality Workers In A Quest To Transform The Industry
Supply and Demand, and New Compensation Models for the Hospitality Industry.
The very essence and definition of hospitality is people. We must truly embrace people and their expectations as the most important variable and asset we have in the hospitality industry. No, it is not real estate, this is worthless if no one wants to run it or consume good and services from it.
In my previous article "Where are The Workers? The Great Transformation I call it" , I discussed the state of the labor market and its many constrains, providing a broader perspective and listing the reasons why I think it has been deteriorating over the past few years. Sure, the current pandemic maximized the damage to levels never experienced before, and made millions evaluate their jobs and careers closely, and question many variables, hence resulting in a resignation en masse - the "Great Resignation" it has been coined.
What we now know is that employees are looking for a different type of experience in the workplace, away from the old. After all, we do spend more time at work than we do at home, with loved ones, or doing the things we love so it must be at the very least as enjoyable. In Europe -they have always been ahead, and some countries are already experimenting with 4-day work weeks and shorter shifts, in an attempt to improve work life balance.
There is also something that we are not fully accounting for in my opinion, and that is the generational shift in the workforce. You see, Millennials ignited the workplace makeover -a transformation of sorts- that first began in Silicon Valley startups and then branched out to other industries due to the lockdowns and the monetary stimulus that incentivized everyone to stay at home. A lot of free time to re-evaluate things, they were forced to embrace technological solutions and learn to enjoy other comforts. As we discussed previously, we now know what employees look for and want.
We clearly see that employees now look for experiences at work just like they do when they travel (interesting correlation that supports the generational aspect I mentioned earlier). Remember that this generation is also revolutionizing hospitality, travel and tourism, as they slowly become our customers and show us the way to offering experiences not just rooms to sleep in or places to eat and drink!
Then came Generation Z (colloquially 'Generation Zoomers'), born between 1997 and 2009 (depending who you ask). Some already joined the workforce actively. Right after it comes Generation Alpha, which will embrace and expand the Millennial and Gen Z revolution to new dimensions, mostly via technology, as their view of the world varies significantly from that of Baby Boomer's. We may not give these generations enough credit yet but we should because they are about to become the largest population of customers and employees alive.
A study from Bankrate in August 2021 surveyed 2,452 adults in the US and found out that 55% of the US workforce was planning to change jobs within the following 12 months, the reasons are below but this only proves the lack of conformity and loyalty. Now, 77% of those were Gen Z and 68% Millennials, the same ones driving the transformation of the labor market. They seek workplace flexibility and higher pay, and interestingly enough and against our proud-filled monologues, Company Culture was not at the very top of their concerns, which only proves why we just can't aim right at a solution to the end of the resignation en masse taking place.
The post-pandemic exodus made us revisit our compensation models too like headless chickens, sprinting to increase pay without foundation or empirical method; what mattered was to be the first one doing so, but that alone didn't buy loyalty back, did it. We tried everything we could think of. From doubling or tripling wages and salaries in some cases, to hefty signing bonuses, incentives and other monetary experimental perks. I remember watching hotels offering signing bonuses to new housekeepers who joined of $800, so did the restaurant industry! Yet they often lasted weeks or months at best, and the exodus continued just like the data shows, even to this day, when the cost of living in the US is record high and keeps growing our economy into a recession, as I explained in my previous article Be Asset-light and Cash Flow Efficient Ahead ! So having suffered the constrains and transformation of the workforce first hand, I dove down a rabbit hole of analysis. It became clear to me that we were not successful in our quest, that new problems required new solutions, solutions that should be as transformational as the problem itself.
If it is valuable, measurable, comparable (there is exchange of value, monetary or not, between parties), it would be seen as a type of compensation, and one could argue that it would strengthen the relationship between effort and reward, while helping solidify loyalty somewhat...
Supply and Demand, and New Compensation Models.
I'm an advocate of Free Markets the like of those embraced by Austrian Economics, where price/value of things and services is dictated by the intrinsic relationship between its demand and its supply alone, completely uninfluenced artificially (Government of course), and to a certain extend, we sort of apply this (at least in theory) when we decide how much we are willing to pay to hire someone, and why we are willing to pay more when we do. Then bidding/auctioning came to mind; a successful exchange of value long forgotten, unaffected by external forces; supply and demand in its purus essentia. History tells us this practice began in ancient Mesopotamia, and saw its renaissance during later Greek and Roman markets, so bare with me for a bit longer, as I promise that the following discussion will be interesting and provoking enough.
For 2 decades now, the most competitive industry in our economy -the tech industry- has successfully applied their own model to recruiting and retention. A multitude of different perks like never experienced before, paired with competitive pay and the ability to own a small piece of the very business you are helping build with your effort and sacrifice -Employee Stock Options- was a treasure they kept for themselves. Did you know new hospitality startups in the Short Term Rental space actually require candidates to put together a pitch and presentation for the roles they are applying for -Silicon Valley style- rather thank wasting time checking references? They must be doing some innovative if they keep taking masterminds away from the old feuds into the new, while receiving millions in funding while at it.
Giving employees (prospective or current) stock of the very organization and profit-share feast they participate in, can bolster their loyalty and performance; it can't get any more collaborative than that in my opinion. The formula is simple: the better someone performs and the longer their loyalty to the brand, the larger their contribution to the business, which in turn deserves appreciation and makes them wealthier as a result (literally). This can be achieved through signing perks like Equity Plans, and via Equity Compensation in the form of Restricted Stock Grants, Stock Appreciation Rights, Phantom Stock, and Employee Stock Purchase Plans or the so called Employee Stock Ownership plans (ESOs). But more of this in future articles, when we dive deeper into how to implement something alike.
领英推荐
In 2000, Rutgers produced a study that demonstrated that companies grew 2.3% to 2.4% faster after implementing ESOs than those that didn't. This was much earlier than the recent supra expansion of our economy. Awarding stock as an incentive or bonus, constrained by obvious thorough rules that require longevity, certain levels of performance, and other milestones would seem the most appropriate. Who wouldn't like to feel a little bit owner of their professional future, earning additional wealth as a product of their work? Performance improves like the Rutgers study proved, and it would work like this: If a hotel or a restaurant is profitable, then their small ownership grows in value and so does their wage (variable that is), maybe even resulting in a dividend of sorts, and motivating the employee-now-owner towards loyalty and effort. I always thought that a variable component of someone's compensation was critical to one's growth, involvement, and motivation, and should always be linked to performance of both, the business and the individual, but this is something to discuss with hospitality owners and capital investors more than it is with management companies trapped in their Internal Rate of Return (IRR) obligations.
Package all this with the same level of innovation in scheduling and payroll cadence, and I truly believe that we have a breakthrough worth testing.
The majority of US workers want to be paid daily.
According to a November 2021 poll from Ernst & Young ,
So, we learned that the underlying factor here is also "On-Demand", which nicely aligns with my idea of a Free Market relationship between employee and employer, and the claimed flexibility. It also highlights the generational shift. You see, Millennials and more specifically Gen Z are known for their lack of patience; they want things now, time passes differently in their dimension. This approach would obviously require thorough work on its dynamics and mechanics, and I know that the first that comes to mind is Cash Flow and Taxation, but I invite you to remain focus on the associate's well being for now, and work financial velocity later.
Imagine a hospitality in which employees not only received a competitive wage or salary but were also awarded certain number of business shares that grew in value overtime with achieved seniority (loyalty) and performance milestones, providing them with an opportunity to enjoy the profits of their labor. Imagine workplaces that provided nearby childcare assistance at low cost (or no cost); Access to funds that helped associates and their families cover school materials or meal plans when in difficulties for example. "One of the most creative (initiatives) I've seen this week is that the company will reimburse up to $75 per week of transportation costs to its hourly staff" -added Dr. Peter Ricci, Clinical Associate Professor and Director of the Hospitality & Tourism Management Program at Florida Atlantic University, who found the measure very innovative. Others, ensure that all their employees have a hot meal daily, and snacks throughout the day even. Would we go as far as to allow them to purchase basic food and sanitation items from our hotels and restaurants at cost? After all, we get better pricing than they do, buying retail, since we purchase in bulk! and this would help offset inflation much quicker than any useless political stunt. Some (bottom-line-driven) will argue that these are expensive solutions, but again, isn't it too when hotels have to close inventory or restaurants turn customers away, because they don't have enough staff, or they just were not incentive to come to work... aren't we talking about improving our associates' experience? I don't blame them. I carried out a study back in 2011 for Spanish Labor Unions with my housekeeping team of the time, and discovered how physically damaging (and dangerous) their work truly is.
What if we offered an associate experience that was truly on-demand, and associates would be able to access their wages instantly, schedule themselves based on shift slots available and daily pay rate offered, etc. Pay rates could dynamically change daily, based on demand for each shift, occupancy or other specific management reasons -a revenue management of sorts applied to payroll- and managers could tactically balance scheduling demand and supply, while ensuring everyone enjoys the flexibility of working the days and shifts they wanted, just like we dynamically price occupancy daily. If the discipline of Revenue Management was born as a result of on-demand pricing need, one could fantasize about roles like Head of Associate Experience (instead of Human Resources, which has an taste that reminds the old ways), a role that could ultimately be responsible for ensuring that the company provides a best-in-class employee experience, and remains competitive and attractive in the labor market when compared to others.
Quite honestly, hospitality companies like hotels should also be measured and compared in terms of employee wellbeing and retention, not just ADR, Occupancy and RevPAR or GOPPAR. The next generation wants 'on-demand' experiences, then why not embrace their vision and adapt our workplaces to cater to their particular understanding of time and space I reason. I think they would be ok with letting us defining what flexibility really means at a granular level, in a highly productive and profit-seeking work environment. After all, we are still For Profit businesses.
This crisis is producing one of those opportunities when thinking outside the box is actually not only good but could mean surviving in the industry of the future as it morphs, so the sooner this discussion is included in our agendas, the larger the gamma advantage in my opinion.
---------
Disclaimer:?I am not a financial advisor nor an advisor of any kind by trade and this is not financial or any other type of advice. I'm just an experienced hotelier with a passion for economics and data analysis, who enjoys research and innovation. I post my personal opinion on the discussed topics only. Therefore, the information I share should never be observed and accepted as any type of advice, implied or not, nor used to make any financial or other decision whatsoever, as I make no warranty nor representation about the information, including its completeness, accuracy, truthfulness or reliability, and I disclaim, expressly and impliedly, all warranties of any kind, of such information I share.