Home News Hospitality Incentivizing Staff to Reduce Expenses and Improve Revenue

Incentivizing Staff to Reduce Expenses and Improve Revenue

Nov 15, 2013  By 

Insanity: doing the same thing over and over again and expecting different results.” – Albert Einstein

One of my favorite sayings, but unfortunately, where employee engagement and motivation are concerned, most companies are guilty of it. We carry forward the same patterns from our past experience, knowing it did not work then, yet still expecting different results. Does it happen something like this at your organization too? “Dan is scheduled 40 hours per week at the times scheduled for him. He receives a decent yearly salary, 7 days paid vacation (which he must request in advance and it cannot be during the busiest months), and a bonus at the end of the year-assuming the company makes a profit. When a special project comes up, he must learn how to squeeze that into his regular day. He might get a small raise if it turns out well. He is given the parameters for how the project is to be conducted and a weekly progress report is expected. Dan gets stressed, his enthusiasm for the position wanes thus he gets very little done on both work and the special project.

This model is and has been rooted in the narrow image that corporations exist solely to make a profit, that decisions are made based on financial terms (how do we make the biggest profit)-and nothing else. Unfortunately, this strategy fails to consider the other resources required to make the business endure-people and the surrounding society they influence. Modern science though has given us a new perspective to consider.

Dan Pink, who wrote the book Drive: The Surprising Truth About What Motivates Us explains that science has proven people are more motivated intrinsically rather than extrinsically. The old way of motivating people with a dangling carrot or big stick does not work. And in fact, does the opposite. Instead, people are inspired to perform when they feel what they are doing matters, they enjoy the task at hand, it is interesting and they are part of something important. These concepts have been summarized into three elements: (1)

 

Autonomy – the urge to direct our own lives.

Mastery – the desire to get better and better at something that matters.

Purpose – the yearning to do what we do in the service of something larger than ourselves.

In his Ted video, “Dan Pink: The Puzzle of Motivation”, he offers examples and studies to back his claims. In 2009, the London School of Economics examined 51 pay-for-performance plans. The economists concluded “We find that financial incentives can result in a negative impact on overall performance.” (1)

In a 2004 study conducted by University of California, Berkeley, and Massachusetts Institute of Technology titled Effort for Payment, it was concluded that money motivates if a task only involves mechanical skills. However, if a person has to use even simple mental processing to get to a result, money becomes a demotivator. Once a task moves into the realm of requiring “thinking” in order to be completed, the three elements I mentioned above are the motivators required in order for that same task to be successfully accomplished-and keep the employee engaged. The traditional action of rewarding the top performer’s best, medium performers medially, etc. actually results in poorer performance. This same experiment held even in developing countries such as India where basic needs such as food and clean water are desperately in want. (1)

In a Harvard Business Review article titled “How Great Companies Think Differently”, the author researched companies from over 20 countries on four continents to discuss what makes an organization “widely admired, high-performing, and enduring.” These companies believe they have a broader responsibility than simply making a profit. They also include societal and human values into their decision making criteria. I.e. How can their goods and services improve the lives of users? How can they enhance their employees’ quality of life? Etc. A historical example the author gives is the Houghton family that built Corning Glass and the town of Corning New York.(2)

Unfortunately, that viewpoint fell out of fashion with the invention of shareholder’s profit and it has been the prevailing theory since. However, due to this more global world we live in, companies need to reinvent their thinking-or be left behind. In 2010, Proctor & Gamble’s new CEO Robert McDonald enhanced the company’s purpose from “improving the lives of the world’s consumers” into a business strategy of “improving more lives in more places more completely.” A successful example of this new principle exists in Africa where P&G set up Pampers mobile clinics with the focus of reducing infant mortality. At the end of every mobile visit, the mother receives two free Pampers diapers. The success of this initiative is two-fold. P&G employees are inspired by their mission and proud of the knowledge that West Africa is one of the corporation’s fastest growing markets-due to their efforts.(2)

Did you know Google’s employees can take 20% of their time to work on anything they want? Anything. Half the new products in a typical year stem from that 20%. Products such as Gmail and Google News.

Have you ever heard of ROWE? Results only Work Environment. ROWE’s theory is that employees are evaluated on performance, not presence. The staff does not have set schedules. They simply have to get their work done. Recently, clothing retailer The Gap, decided to test out ROWE at their corporate headquarters. 250 employees were included in the study. The results were astounding. Production turnover dropped by 50%. Employee engagement scores improved by 13 points. Insurance and investment firm JA Counter & Associates reduced expenses by 25% and increased net income by 94% after implementing ROWE. What? Did you read that right? 94%?! Check out the case study here.

Why do these techniques work? Autonomy. The first element mentioned in Dan Pink’s presentation. The ability to be in control of our lives – even when working for someone else.

The Mastery element is achieved by ensuring tasks are given to staff in such a way that they can reach a little beyond their current skill level but not so far that they get discouraged. Let’s look at it from a math point of view. If you put a fractional equation in front of a first grader and tell her to come back to you after she solves it, you will be waiting a long time. However, asking her to add 10 + 2 will get a result much quicker and she solved a task that took some thought. Let’s look at it from a work viewpoint. You have hired a Generation Y right out of school. He is your new Marketing Coordinator. You do not show him his new desk, the papers piled on top of it, and walk away saying good luck. A training program with mentor is put in place where skills and tasks are gradually given. Not too little. Not too much. But with patience

Mastery is Attainable

The Purpose element is incredibly critical. Showing your staff the reason for their position and helping them to envision the importance of their role in your company will get you farther than you ever thought possible-in terms of their engagement. The mobile employees in the previous Proctor & Gamble example have a purpose. How can you do this at your corporation? Consider involving staff in the bigger picture.

For example, give them all a common goal and make it exciting to reach. Share that you want to increase occupancy by 10% and reduce expenses by 5%. Tell them why and how this will benefit them.

Encourage cross-departmental collaboration to make this goal happen. In other words, does Front Desk need an extra hand during the hours of 3pm to 6pm? Can Housekeeping spare a person during that time to assist? Does Housekeeping need help folding laundry after a super busy weekend? Maybe Front Desk can fold during slow times. How else can they work together to reach the goals of increasing sales and reducing expenses? Allow them to work it out. Remember that you as the GM care about the destination not necessarily the journey. You are encouraging them to help each other. Purpose as a collective whole. Removing the us versus them barriers.

What about Google’s idea of allowing staff to spend 20% of their time working on anything they want? The Australian software company, Atlassian, began this with baby steps. A few times per year, they would give employees 24 hours to work on anything they want. The results usually amounted to sorely needed software fixes and patches. They turned it into a fun event by calling it FedEx Days as staff had to deliver something overnight. At the end of these 24 hours, a fun event would ensue where everybody had to present what they developed to their co-workers.

Do you see that motivating employees intrinsically is the way to reduce your expenses and improve revenue? First, an increase in retention will drop your expenses dramatically. Consider that some new hotels have a 100% turnover rate. On average, it costs you 150% of an employee’s salary to replace him or her. Revenue was dramatically improved in West Africa by giving the employees autonomy to take their mobile clinic where it needed to go and the warm fuzzies from the purpose they were given. What can your hotel do to enhance its purpose? Remember to include the employees and your surrounding community. Can you donate the used bathroom amenities to the local shelter? Give staff the task of setting this new program up. Can you schedule a regular day where you take leftover meals to the homeless? Ask your staff where they see waste in your hotel and what their suggestions are for addressing it. Or where is an opportunity to work with the community? Then let the inmates run wild.

References:

(1) http://www.ted.com/talks/dan_pink_on_motivation.html
(2) http://hbr.org/2011/11/how-great-companies-think-differently/ar/3

About Amy Bair

Amy Bair

Amy Bair is a Productivity Improvement Specialist focused on the hospitality and senior living industries. Her company Business Process Excellence (BPe) partners with organizations to improve guest service, increase revenue and decrease

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