Old Economy Management of Hilton Hotels In Saudi Arabia - Essay Example

Old Economy Management to Corporate Entrepreneurship Hilton Hotels In Saudi Arabia September 14, 2006 Table of Content Traditional Management Strategy 3 The Entrepreneurial Strategy 5 Entrepreneurial Leadership 7 Change Management 9 Implementing the Entrepreneurial Sprit 10 References 13 The Madinah Hilton in Saudi Arabia is located near the Holy Prophet's Mosque and in the heart of the shopping district. The hotel offers comfort, peace and relaxation in a private and luxurious ambience. Amenities include dining, business conference centre and handicapped access. The hotel industry utilises resources between three critical focuses: employees, clientele and education by incorporating: technology; power paradigms; training and development; compensation; employee relations; and family, society, and work balance (Berger, Fulford and Krazmien 1993). This causes a variation in managerial strategies and hotel service objectives in the hopes to balance service and relative cost (Caristo 1988). In the hotel industry, the balance must be between the customer’s expectations and cost of service. Therefore, it becomes important to examine the management strategy of Hilton hotels as being a traditionally ‘old economy’ industry that should examine the impact of entrepreneur-ship as a managerial strategy with the ultimate goal to improve management, employees, and above all, customer service. Traditional Management Strategy The top-down management strategy of Hilton hotels allows employees to start at the bottom of the management career ladder and work towards upper management goals, however, base service employees such as housekeeping do not often have those opportunities due to educational constraints (Ruddy 1990). L.J. Mullins (1995) shows that hotel performance can be improved by better use of human resources, such as increasing employee opportunities through education. The assertion is that the performance of the organisation is strongly relative to the managerial impact and structure of the organisation (Mullins 1995). Another component of the career advancement ladder is the criterion in which the hotel industry generally evaluates management contracts and performance. Many owners are monitoring management through third party managerial companies while basing the management contracts on performance based criteria (Rainsford 1994), which has an effect of increasing owner leverage and holding managers accountable for profitability (Rainsford 1994). Shay and Tracey (1997) explain that the rate and reason of failure in the lodging industry are consistent with other top-down management industries, such as manufacturing. The cause of failures do exhibit different attributes, namely those considered emotional stress, maturity and communicative capability (Shay and Tracey 1997). This shows that programs in management strategy can enhance the emotional well-being and general happiness of employees which in turn affects customers, by understanding ways in which excitement, challenges and opportunistic energy can be enhanced within the hotel industry. As the world has globalise and competition has increased, corporations have a need to develop the entrepreneurial spirit into the managerial and customer service strategy (Timmons 2004). This means that there must be an adjustment away from the traditional school of top-down management that seeks out new talent and innovation to maintain a strong level of competition (Timmons 2004). The importance of entrepreneurial management strategy also relates to the need to incorporate unique skill sets and knowledge management into the corporate environment (Rigsby and Greco 2003). Very often, companies require employees to work long hours, and yet remain flexible in the evolution and growth of the company (Rigsby and Greco 2003, Timmons 2004). This often has an effect on the balance between work and life for the employee, and difficulties often arise when employees do not embrace excitement, innovation and opportunity, the essence of the entrepreneurial spirit (Rigsby and Greco 2003, Timmons 2004). Another issue with traditional top-down management is that it very often imposes restrictions on creativity. An overabundance of policies, especially those that consider what can NOT be done, will not enhance the entrepreneurial spirit, but instead can stifle it and, possibly, be counteractive to the empowerment and encouragement of employees (Rigsby and Greco 2003). The Entrepreneurial Strategy The entrepreneurial spirit can be applied to the large, medium and small business enterprises as a method of developing new ideas and innovative processes in managerial strategy and employee functionality. Kaplan (2003) explains that the foundation of entrepreneur-ship is the development of ideas; re-segmentation and improvement of services; adding value to existing services; designing (or, redesign) versions of existing services. In the hotel industry, the impact of services on customers is highly important. Kaplan (p 15 2003) defines entrepreneur-ship as “including the generation and implementation of an idea” and stresses the importance of teamwork in regards to the entrepreneurial spirit. He (Kaplan p 15 2003) suggests that entrepreneur-ship in a highly competitive environment must incorporate team vision, with the basic goals of an entrepreneurial management strategy to “enormous risks, attempt innovations, leap without the appropriate background research, and succeed by working long hours and persevering at all costs.” The spirit of entrepreneur-ship in relation to innovative customer service that exceeds the customer’s expectations is “the ability to obtain, and then recombine, resources into a bundle that is valuable, rare, and inimitable” (Hisrich et al p 220 2004). Where Kaplan (2003) examines the founding ideals of entrepreneur-ship in relation to customer service, Hisrich (et al 2004) explains the strategy of entrepreneur-ship as having three key stages: “(1)the generation of a new entry opportunity, (2) the exploitation of a new entry opportunity, and (3) a feedback loop from the culmination of a new entry generation and exploitation back to stage 1” (Hisrich et al p 300 2004) Hisrich and associates (2004) explain that the new opportunity is often the result of knowledge and resource management with the goal to develop a sufficiently attractive service value. This includes exploiting the opportunity through implementation and setting benchmarks to gauge the effective performance of the opportunity (Hisrich et al 2004). The phrase ‘entrepreneurial culture’ is explained as the “environment of the entrepreneurial-oriented organisation” (Hisrich et al p 300 2004). Entrepreneurial culture has several key components as outlined below: Organisation operates on frontiers of technology New ideas encouraged New ideas encouraged Trial and error encouraged Failures allowed No opportunity parameters Resources available and accessible (Hisrich et al 2004) Hisrich and associates (2004) also defend Kaplan’s (2003) viewpoint that entrepreneur-ship works best as a team work approach that crosses multiple disciplines. Other key factors in implementing the entrepreneurial spirit into the organisation are that it must focus on the long-term horizon, that is, the opportunities established through creative ideas are not short-term goals (Hisrich et al 2004). The entrepreneurial culture is also a volunteer based program, where employees can not be forced to innovate, but an appropriate reward system will encourage teamwork and support the success of the entrepreneurial opportunity and each individual involved through entrepreneurial leadership. Entrepreneurial Leadership Entrepreneurial leadership is a formal process that incorporates informal ideas. The leadership qualities are often determined by a number of forces, such as “The size of the organisation, its predominant management styles, the complexity of its environment, its production process, its problems, and the purpose of its planning system all play a part in determining the appropriate degree of formality” (Pearce and Robinson p 13 2004). Small firms especially follow the entrepreneurial mode in leadership strategies, where the limitations of service and control generally come from one managerial source (Pearce and Robinson 2004). A large firm, however, is often imbued with strategic processes and policies disseminated from a formal planning system, and a medium sized organisation is often in flux between entrepreneurial and traditional formal strategies (Pearce and Robinson 2004). Many times the organisation, regardless of its size, will fall between these modes of management strategies based on the concern at the time. For example, a business with low employee morale may implement a strong entrepreneurial reward program, while another business that has high employee morale but low production may lean towards a more formal approach. Regardless of the approach to entrepreneur-ship, the “ideal strategic management team includes decision-makers from all three company levels (the corporate, business, and functional)” (Pearce and Robinson p 15 2004). The effective entrepreneurial leadership strategy focuses on four key points, as outlined by Kouzes and Posner (2002): seize the initiative; make challenges meaningful; innovate and create; look outward for fresh ideas. An entrepreneurial leader seizes the initiative through enthusiasm, determination and desire (Kouzes and Posner p 170 2002). This includes embracing obstacles and challenges as the environment changes. Leaders in entrepreneurial programs are committed to the opportunities and possibilities with the ultimate goal to make a difference in themselves, the business, and those surrounding them. Entrepreneurial leaders recognise that employees have goals, in as much as the business has goals, and strive to relate those goals together. An entrepreneurial leader is extremely proactive by investing time not only in opportunity development and implementation, but also in recognising and overcoming adversity (Kouzes and Posner p 175 2002). The importance of the challenge presented is weighed by the outcome, and a meaningful and reachable outcome encourages employee involvement. This also empowers employees to create their own entrepreneurial initiatives. Innovative and creative leaders go beyond seizing the initiative to encourage others and challenge the ‘status quo’ (Kouzes and Posner 2002). This means that the entrepreneurial leader must also have an internal belief that there ability to meet the challenges and opportunities with a successful outcome. The entrepreneurial leader will set the bar higher and understand that the bar must be set at a challenging level, but also at a level that is reachable through specific goals and has some inherent reward or value associated with reaching and overcoming. Lastly, the entrepreneurial leader takes charge by looking outward for fresh ideas (Kouzes and Posner p 175 2002). This is a motivational strategy that instils a sense of adventure in the organisation by finding “ways to radically alter the status quo, and they continuously scan the outside environment for new and fresh ideas” (Kouzes and Posner p 175 2002). The entrepreneurial leader wants to exhibit innovation by seeking new ways and new opportunities through invention and motivation. The concept of innovation requires that the leader be ready to focus on opportunities for ways to do what has never been done (Kouzes and Posner p 175 2002). The concept of entrepreneurial leadership is heavily related to change management and motivation strategies, as noted in the previous sections. No leadership strategy would be effective if the employees do not believe that it can be effective, and therefore incorporating the entrepreneurial spirit includes examining what kinds of motivation strategies will develop changes and set innovative goals with reachable and rewarding challenges implemented by the vision of change. Change Management In human capital management, organisational changes should be administered by a general framework according to Dreher and Doherty (p 16 2001): “motivating change requires that the people within the organisation understand and commit to the change; creating vision in employees is a continuation of commitment where employees know where they fit into that change; developing political support means that stakeholders-from employees to HR professionals-have been assessed according to their place and function in the change; managing the transition must be set by parameters and adequate available technology as well as an understanding employee wide of how the parameters and technology work towards the goals.” The concept of change management is one way that senior management team of an 'old economy' organisation can develop a determined strategic corporate vision to stimulate and maintain long term 'corporate entrepreneurship.' The impact to employees is the changes in communication and expectations. The vision of change is to become a recognised force in the service industry, with the foundation that "human development as a part of economic development puts people back at centre stage, after decades in which a maze of technical concepts has obscured this fundamental vision,” because “Human beings are both ends in themselves and means of production" (Streeten p 84 1994). The assessment of current skills in relation to dependent skills for new techniques to be integrated into the sales spectrum with the final goal to maintain knowledgeable solutions based sales staff (Streeten 1994). The end stage goal requires that sales force move from product applications to an intricate knowledge in regards to issues in sanitation, environmental regulations and government standards, to the conclusion that the employee must understand regulatory, safety, legal and ethical issues that affect the service industry in various settings (Streeten 1994). Implementing the Entrepreneurial Sprit Entrepreneurial spirit is a seed to be sowed with the futuristic goal of improving the state of the organisation’s culture and competitive environment, especially in regards to utilising education and innovation to develop new customer service capabilities. Strategic management therefore must look at the short-term and long-term goals by including employee development and declaring an objective of developing highly skilled and flexible employees and, thus, providing steady employment for a reduced number of workers (Pearce and Robinson p 137 2003). A proactive declaration anticipates the needs of employees and customer expectations through employee satisfaction, loyalty and team commitments. It is therefore recommended that a strategic management plan be implemented that is “acceptable, flexible, measurable over time, motivating, suitable, understandable, and achievable” (Pearce and Robinson p 138 2003). The following outlines a strategic management plan: Examine current state of employee innovation. Define acceptable goals for improving. An acceptable goal is both challenging and has an intrinsic or extrinsic reward for motivation. Define time-set goals. Use steps, such as one week, one month, one year, with implications towards the long-term achievement. Motivate and communicate. Employees must be able to see that management is consistent in applying rewards without bias, that communication is a revolving door. Employees should be able to confront and criticise management without fear of retribution. Ask employees what we can do better and what motivates them to achieve. Maintain flexibility. Ensure that the organisation is constantly looking at what can be done better, different and how ideas can be implemented using the idea of continuous improvement as a basis for establishing changes. It is recommended to enhance the entrepreneurial culture of the hotel industry by focusing on identification and direction of the company culture’s initiative to become an entrepreneurial. This includes exhibiting a commitment to the employees and utilising short-term goals to endorse discourse and training through the development of new role models for employees and structural management alternatives (Buchen 2005). “Like an extended family, a clan culture is an open and friendly place to work, where leaders are considered mentors or parental figures. A dynamic, entrepreneurial and creative place to work, the adhocracy culture's commitment to experimentation and thinking differently are what unify the organisation” (ed. C. Valade p B-3 2006). References Berger, F., Fulford, M.D. and Krazmien, M. "Human Resources Management in the 21st Century: Predicting Partnerships for Profit" Hospitality Research Journal Vol. 17 No. 1 (1993) pp. 87-102. Buchen, Irving H. (2005) Developing an Innovation Quotient. Chief Learning Officer; Jul2005, Vol. 4 Issue 7, p26-53, 4p Caristo, G. "Hotel Management and the Programmed Planning of Productive Activity in the Modern Hotel" Rassegna di Studi Turistica [English Version] No. 8 (1988) pp. 103-106. Dreher & Dougherty. (2001). Human Resource Strategy: A behavioral Perspective for the General Manager. New York: McGraw-Hill ISBN: 0256211892 Hisrich, Robert; Peters, Michael and Shepherd, Dean (2004) Entrepreneurship, 6e Copyright © 2004 The McGraw-Hill Companies EAST PATCHOGUE, NY, U.S.A. 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