Management by Regency Grand Hotel

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Executive Summary

A large number of studies examine a variety of organisational behaviour theories and cases studies arising in real life. Acknowledging these models and theories enables the managers to find out the most effective ways to solve conflicts and guide their organizations to achieve the predetermined goals.

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The regency hotel provides a case study that shows some of the problems that occur during and after takeovers. It contrasts Asian management style integrated with culture and western style of management.

The case study of the Regency Hotel lays out a scenario where assumptions of past success misleads the new owners into ignoring basic facts on the ground that have guided the success of the hotel previously.

The first section of this paper introduces the current situation of this case study of Regency Hotel. The second section then examines the causes which lead to the management problems taking place in the hotel during the take-over period as well as find out a number of theories in relation to those above issues. Lastly, the third section of the paper suggests recommendations and most feasible approaches on these problems.

Introduction

The case of the Regency Hotel reflects the complications that usually come along with business takeovers. Generally, takeovers have an almost 50/50 chance of either success or failure in the whole process and it is mired in the different situations that each takeover case comes with.

The Regency Hotel provides a unique but almost identical story of takeovers gone haywire due to either ignorance on the part of the new management or simply due to assumptions provided by their previous takeovers that have so far been successful. The new owners from the USA have come in with a new style to take over a successful business that has risen over a period of more than 15 years to become one of the best hotels in East Asia.

At hand in this case is a clash between Asia and America in terms of management style, success and management of a venture in an Asian country using western style and tactics and therefore the question in this case is; “between western management style and Asian management style, who will win the battle of successful management of the Regency hotel?” (Stoneman 2001)

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The report is divided into three parts. The first part of the study provides a brief overview of the case study of Regency Hotel including the situation, problems, causes and recommendations for this case study. The second part of this research provides further explorations on the main causes of this situation, the implication of management. In the last part, relevant theories or models on the leadership and empowerment issues will be examined in detail to find the appropriate solutions to arising problems.

Content

Problem identification

The situation took place at the Regency Hotel. This prestigious five star hotel was set up about 15 years ago and has a current capacity of 700 employees. Previously, the hotel was well known for providing high quality benefits to its employees including welfare benefits, high salaries and job security. In addition to this, the hotel set a fixed bonus equivalent to four month salary at the end of the year regardless of the hotel’s performance. Traditionally, the hotel staff worked under strict instructions and strict procedures which made everything to be bureaucratic with no innovations being encouraged.

Recently the hotel has been taken over by a large American hotel chain, resulting in a major change in management styles. The new manager called John Becker, had ten years experience in hotel management and strongly believed in empowerment in workplace and succeeded in managing newly purchased hotels with low performance and morale.

Becker came in with a new way of doing things in that he empowered employees to take decisions in their own hands, decisions that previously lay in the hands of their superiors only.

However, after applying the new management styles, the employees felt confused and could not distinguish between the minor and major issues arising while the subordinate contacted with Becker more frequently than he had expected. Becker saw that the productivity in hotel’s operation was decreased, going along with the hotel’s fame. Beside this, the relationship between employees and management became strained. Stress level of employees mounted while absenteeism increased at an alarming rate. Employees were no longer supportive and united as before. As a result, many employees left the Regency hotel.

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Causes

Cultural difference

Organizational culture was identified and discussed as being the key influence of empowerment practices. Research by Eylon (1999) and Robert (2000) showed that the most important factor of cultural dimension when applying empowerment method is power distance, which influences the individual value of equal power sharing and the agreeableness of employees to accept power. Power distance related to the degree of which people assume and agree that power is allocated unequally between the different ranks of the organizational hierarchy (Elyon & Au 1999).

Thailand is a typical example of high power-distance society (Andó 2008) in which subordinates ought to play the role of taking directions and commands from their supervisors. Accordingly, in this case study, mid-level managers tended to be more willing to authorize decisions and employees tended to be more willing to accept power than in low power-distance nations such as American. Therefore, requiring mid-manager to change from role of controlling to role of guiding and requiring employees to actively make decision are extremely huge challenges to Thai people.

As mentioned in (Blanchard 1999), atmosphere of trust is another factor for successful empowerment. Nevertheless, trust is a real problem in Asian country such as Thailand, where most of the societies are individualism; everyone put the individual interest before the community interest, which is contrary to communitarian culture in USA (Andó 2008). If a mid level manager cannot believe in the ability to solve the problems of employees and the employees cannot have faith in the competence of leaders, the empowerment will not work.

That is the reason why previous researchers (Spreitzer 1995; Robert, et al 2000) stated that leader should apply four pre-empowerment dimensions in Asian culture in order to achieve a good empowerment system. They are: atmosphere of trust, harmonizing values, willingness to take responsibility and working in the network.

People in Thailand tend not to involve in the network or share the information to others (Thanasankit & Corbitt 2002), so the decision will not be supported and contain a big amount of mistakes. In other words, we can say that hierarchical system in Thailand is very hard to be replaced by the empowerment system because of self-managed teams without an atmosphere of trust and lack of real decision-makers.

People in Thailand also have uncertainty avoidance behaviour (Thanasankit & Corbitt 2002); they feel threatened by ambiguous and unknown situations. They lack confidence in decision making, and rely on superiors even on easy decisions. Willingness to take responsibility is also a critical point in empowerment method but residents of Thailand do not have (Thanasankit & Corbitt 2002). Becker was successful in the past at USA somehow because American people can face difficulties with confidence as well as responsibility.

In USA, people can display their emotions naturally while in Thailand, showing one’s feelings overly are incorrect (Ralston, et al 2005). It means that the supervisors and mid-level managers tend to avoid expressive and enthusiastic behavior, which makes a big gap between them and employees. In addition, Smothermann and Krooros (2001) said that empowerment cannot work without effective motivation. Although this kind of system requires leaders to give support and feedback frequently, in Thailand’s culture, where good performance is not awarded by supervisor, it leads to the circumstance that employee will not welcome empowerment.

This characteristic does not influence the effectiveness of empowerment in a direct way, but it can make all the process become formal, which are prolix and reduce the effectiveness of information sharing (Smothermann 2001). Moreover, residents of Thailand have low human-orientation value (Ralston, et al 2005), resulting in poor interrelationship between manager and subordinates as well as forming a big barrier to empowerment.

Management styles

In addition to the unexpected effect of difference in culture, leadership and management style of new manager also had a significantly negative impact on hotel’s operation and performance. The new manager proposed a totally proactive approach in order to motivate his employees to perform their tasks beyond their guidelines and standards. This is absolutely the transformational leadership style as described by Giri & Santra (2010).

Although a transformational leader is normally very effective in improving the organization performance and profitability, however, in this case the results were totally contrary to his expectation. He was perhaps a successful manager with much great experience in America, but it is worth noticing that all of his previous successes were with hotels in poor profitability and low-morale employee condition. However, the Regency Grand hotel was totally different. It was operating very well at the time of management change, and it did not show any signal that it needed any change to its management system.

Empowerment is the process by which the manager shares his power and authority to his subordinates (Conger & Kanungo 1998). Many researches show that empowerment applying in the service industry increases job performance and employees satisfaction (Hui, et al 2004). He thought that empowerment could effectively motivate his employees but in fact, it made several senior managers in the hotel feel powerless because their subordinates no longer needed to work according to their instructions as before. Conger & Kanungo (1998) believed that any strategy that weakens employees’ self-determination and self-efficacy will increase their powerlessness.

Obviously, empowerment approach in this situation was extremely contrary to the motivation real essence. Real efficient motivation must have positive effect on employees’ direction (choice), intensity (effort) and duration (persistence) as proposed by Locke & Latham (2004). But empowerment actually made senior managers upset and disappointed due to the loss of their decision-making authority over front-line employees. Consequently, several senior managers quit their job and left the hotel. This was really a critical issue because an organization’s performance will be definitely weakened due to the absence of important and experienced employees.

It was the new manager’s responsibility for letting skilled and experienced subordinates leave the hotel. He only thought that empowerment would be an effective vehicle to boost up the hotel performance and profitability but he did not try to understand his subordinates’ feelings during the implementation of new approach. Therefore he did not have any proper strategy to support and encourage his subordinates to continue to work with him.

Besides the leaving of senior managers, new manager also had responsibility for letting employees lose their trust to each other, which was another factor decreasing the hotel’s performance. Since the introduction of empowerment, the employees were not united and supportive of each other anymore due to the increasing stress level. According to Sosik & Dionne (1997), teamwork and trust-building are two most important factors in total quality management behaviour. But in this case, there was no trust or teamwork in the hotel anymore. Therefore, the quality of the hotel dramatically decreased. When the problems just emerged, he did not make any steps to solve them.

He did not figure out why his subordinates always came to seek for his advice for either major issues or minor issues. Instead, he tried to avoid seeing his subordinates. He only waited until the problems were becoming out of control and unsolvable. On the other hand, he stressed that making the mistake twice would not be tolerated. He accidentally increased the stress level in the workplace. As such, the employees could not know how to perform properly and were always afraid of making mistakes.

The lack of suitable training should also be taken into account in this case. The new manager did not provide any proper training before bringing empowerment into practice. The employees were so familiar with old administrative control and many bureaucratic procedures that they could not adapt immediately and well cooperate with new approach which required them to make decisions by themselves. As a result, they continuously made mistakes, which brought down the performance and quality of the hotel.

Another mistake that the new manager committed was to keep all previous employees who already got used to administrative mode. It was not a wise move in this case. The administrative mode and empowerment mode were totally different, and they require employees’ different expertise and values. As such the new manager could not create a consensus between all employees when introducing empowerment method. In their paper, Hui, et al (2004) also showed two factors that are essential to the success of empowerment policy. The first factor is the willingness of employees to apply and exercise their power when serving customers.

However, in the first meeting with the new manager, some employees were reluctant to apply empowerment. The reluctance manifests itself through the gesture of simply nodding the head, especially in high power-distance countries like Thailand. Secondly, “employees must be motivated to satisfy customer needs and wants when playing out the role of boundary-spanners” (Hui, et al (2004). However, in new manager’s plan, he did not plan any motivation measure to encourage employees working under new system. Previously, the employees only needed to fulfil their duties, and they would receive not only salary and but also bonuses. When changing to the empowerment system, the employees needed to work harder because they were given more authority, they were required to actively solve the customers’ problems.

However, they were not given any more salary or incentive. In many cases, when they thought that they efficiently solved the problems, they did not receive any positive feedback from their supervisors. In other cases, sometimes their decisions were even reverted back by their supervisors. It made them lose their eagerness, and forced them to come back to previously passive attitude. The Expectancy Theory of Motivation can well explain this situation.

This theory states that the motivational force: MF = Expectancy x Instrumentality x Valancy (McShane & Travaglione 2010). In this case, the expectancy probability was reduced because effort increased but performance was worse. The Instrumentality probability was also reduced because whether performance increased or decreased, the reward was the same. The performance-reward relationship was not altered from the previous management system.

Nevertheless, no clear task description should also be taken into account. They were only general instructions such as the employees could take initiatives to creatively solve minor issues but have to report the major issues to their supervisors. Because of this unclear description, it led to the conflict between employees and mid-managers, which resulted in poor performance of the hotel.

Management Implications and Recommendations

Leadership

Thai traditional leadership model advocates for a paternalistic kind of leadership whereby the leaders and the employees come together and pool their abilities to achieve mutual organizational goals (Joiner, Bakalis & Rattanapitan 2009, pp. 1-5). Traditionalistic refers to reverence for hierarchical order, for power and the significance of tuneful relationship. The traditional leadership style in Thailand has always acted as a compass for every ethnic group, economic class as well as religious background.

The paternalistic leadership model advocates for authority being vested in the leadership of the organization which makes all decisions that are to be followed by workers diligently. The workers wait for instructions from above and only do as instructed out of the leader’s ideas and not on their own ideas. Punishment is also meted on any worker who tries out new ideas not approved by the management.

Under this type of leadership, the local Thai manager was able to come up with a management mix that produced good results in the performance of the hotel and at the same time achieved high levels of employee satisfaction.

The entry of new owners in to the hotel is seen to have upset the whole equilibrium in terms of management as the local Thai manager resigned immediately. This can be attributed to rigidity on the side of the local manager who could not see himself doing things in a different way or adopting a new and foreign way of doing things.

The local manager who resigned was immediately replaced by a foreign manager who had no experience in managing foreign establishments and who came from a different cultural background. Though Becker had been credited with the revival of new but failing acquisitions, he had no experience in taking over fledging establishments and more so in a foreign country. Therefore this was a totally new experience different from what he had excelled in back in America.

Use of a Transitional Program

Ideally, the new owners should have come up with a transitional program that would be used to manage change. In organizations, change is always associated with fear and therefore managing change basically means fear management (Reh 2010, p. 2). With the resignation of the local manager, transitional structures should have been put in place to manage the change as it involved a drastic departure from the usual way of doing things. This transition should have seen one of the local assistant managers take over from the departed manager. The promoted assistant manager would have overseen the gradual introduction of changes with Becker as his deputy until they are fully integrated into the system and accepted by the employees of the hotel.

In the case of Becker’s entry into the general manager’s position, he immediately introduced changes to the way issues were being sorted out by using his past experience as a manager. He believed in empowerment as a way to motivate employees against the paternalistic mode that the employees were used to. The paternalistic mode gave staffs at all levels a sense of seniority.With the introduction of empowerment, all employees’ sense of seniority was eroded thus eroding the sense of pride. Introduction of new rules without consulting or involving other staffs ignored the basic tenets of change that require setting of the stage before the real change can be introduced (Goman 2000, p. 506).

Generally, employee empowerment as a strategy ought to be gradually introduced within an organization. This is to give employees time to adjust and shift from their initial way of doing things. A good example where employee empowerment helped in improving organizational performance is in General Electric. By the company empowering it employees, they came to realize the vital contribution they made to the success of the entire organization. Eventually, these employees ended up forming a teamwork that helped the company rise to its current status.

Close Supervision and Employee Training

Studies show that Thai employees prefer close supervision rather than general supervision (Deyo 1978, pp. 68-72). Therefore with the introduction of empowerment, most of them became confused as their superiors were instructed to coach them and assist them instead of giving direct orders. This effectively led to a total breakdown of operations as the superiors were also confused about what assisting and coaching meant. An ideal situation would have seen the training of senior managers taking place so as to induct them into the new way of doing things and thus eliminating any chances of confusion taking place.

This training should have involved the definition of all tasks as well as the scope of authority to be invested in a given supervisor, and the new changes should have been introduced gradually. Generally Becker should have consulted with the other senior staffs on the way to implement the new methods of doing things so as to achieve the best mix between old and new systems as well as the traditional values held high by the local Thai staffs.

Such a move can only be brought about by an enhanced communication system within the organization that allows for constant consultation between the different parties. This would eliminate the frustration that the senior managers were experiencing wherever they received queries from junior staffs. It would also give the employees a grace period to learn the new system and make mistakes. In this way; they would not feel the frustration in trying to be perfect without having the necessary knowledge of the way a system works.

Working without fear will boost the morale of the worker thus uplifting their job satisfaction which will in turn eliminate any frustrations that may be driving the employees crazy. Becker should also find solutions to problems or queries from junior staffs that come to consult him instead of running away from the same. By facing the problems as they come, he will be leading by example which is a huge requirement for a paternalistic kind of leadership that Thai people prefer. This fear can only be eliminated through training and development. According to Noe and Winkler (2009), employee training and development facilitates in equipping them with the necessary skills. As a result, employees are able to deal with all organizational changes with a lot of confidence.

Therefore Becker should employ a mix of both the transactional type of leadership and situational type of leadership which will allow him adopt his preferred style of leadership as well as the preferred Thai way of doing things so as to come up with a perfect mix (Center for leadership studies 2010).

Employee Motivation and Emotional Intelligence

Emotional intelligence and employee motivation are other vital tools of improving the performance of Regency Hotel. Through emotional intelligence, the hotel management would be able to identify the different emotional responses of varied staffs thus being able to identify the best ways of motivating them. Employee motivation would act as reinforcement to the established empowerment thus making employees commit themselves to the hotel’s business.

Generally, employees are reluctant to change implementation due to fear of losing their jobs or being overloaded (Reh 2010, p. 3). As a result, the hotel’s management ought to use emotional intelligence to identify the underlying fears in the employees thus taking strategies to reassure the employees that the changes are geared towards improving hotel’s performance as well as their working condition.

To motivate employees, the management ought to involve them in making decisions affecting the organization rather than turning down their opinions without explaining to them the reasons. The management need to come up with a strategy where employees would be rewarded based on their performance. This would make them feel to be appreciated in the hotel thus committing themselves to the organizational goals. Enhancing communication between the supervisors and the employees would help the employees understand their duties thus gaining skills and improving the hotel’s efficiency.

Conclusion

This study examines the whole main issues of case study of Regency Hotel which caused by the main difference in cultures and management styles. After all, the western managerial styles cannot be applied rigidly in a country where the employees were working with little responsibility and creativity at their roots. Therefore, training programmes need to be applied thoroughly with the involvement of hotel’s staff from the beginning.

Tasks authority as well as the importance of empowerment should be defined while factor of cultures should be taken into account by the management to reduce the high pressure on employees who get used to working diligently under supervision. Moreover, transactional management styles should be applied hand in hand with the paternalistic leadership model, which is traditionally used in Thailand.

Therefore, the management mix strategies will be the most suitable solutions for the case study of Regency hotel. In addition to this, EI training plays an important role to identify employees’ underlying fears in order to reassure them about their secure position in the hotel as well as the hotel’s stable improvement after take-over period. Finally, motivating incentives including individual decision making and reward based on performance should be applied to serve the employees’ need of being appreciated.

Although the implications are proposed in theory and should be verified in reality, the study creates a systematic and relevant approach from the theoretical aspect of the case study. The new management can maximize the output and efficiency of the hotel by considering all the recommendations mentioned above.

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