Definition and management of service quality - Essay Example

Operations Definition and Management of Service Quality According to the manager of the Chesthunt Hotel, service quality is based on the quality, customer satisfaction and identification of customer value as either important or very important. Those companies that have high quality of services as well as goods had higher market share, higher return on investment and asset turnover than companies with perceived low quality. If consumers somehow become better customers -- that is, more knowledgeable, participative, or productive -- the quality of the service experience will likely be enhanced for the customer and the organization (Berry,Zeithaml and Parasuman,1988, p.35). Because it affects those factors, then it certainly affects customer satisfaction, the link of service quality with customer satisfaction, which is, the degree of fit between customer's expectations and perceptions of service. Based on the perception of the manager, customer criteria determine the definition of quality and the variables that affect perceptions of quality. They explained that variables may change with circumstance, experience, and time. In addition, service providers may influence the variables that drive customer perception to service quality. The perception of the customers may also vary by circumstances, time, and experiences. He also explained that the total perceived value of a service comes from two sources. First, customers perceive value that originates from the service act itself; second, customers perceive value that originates from the quality of the service act. However, as mentioned in the introduction, it is difficult to measure the perception of the customers because of its intangible nature - and this complexity triggers the complexity of controlling or managing service quality. For instance, the intangibility of services and the simultaneity of service production and consumption make it complicated for customers to evaluate the quality of the desired service before it is provided or rendered (Wakefield, 2001,p. 8). There is only one key term here and that is service quality. Service quality basically refers to the quality of service delivery (East, 1993, p. 67). Service is any intangible material that is purchased by the customer i.e. teaching services, the ambiance of the school, the reliability of the school system, etc. On the other hand, quality is much difficult to define as it depends on the perception of the consumer. Basically it is defined in terms of being transcendent, customer led, or value led. The provision of quality customer service is a multi-faceted concept as a number of factors must be met by the hotel in order to achieve it. To integrate quality in service provision, it is important that the hotel has the right skills, resources and values. As quality customer service is influenced by various factors, the involvement of both hotel management and the employees must be present; in the case of Chesthunt it has been made clear that training alone is not sufficient for service quality (Ghobadian,Speller and Jones, 1994,p. 43). The commitment, leadership and adaptability of the management towards change are also important for quality service. The values and skills of the employees on the other hand, must be prioritized as well. They must be given enough empowerment to contribute effectively towards customer satisfaction. The importance of quality in customer service has been recognized by Chesthunt hotel. The management of Chesthunt hotel have applied prioritized quality in customer services, resulting to positive business outcome. Customer satisfaction, loyalty, employee satisfaction and profit growth are some of the main advantages of this business practice. In order to cope with the present business challenges, Chesthunt hotel have implemented different strategies that will enhance their respective customer services. Consumer studies, trainings and application of information technology are some examples of the most commonly used strategies for customer services. Service delivery especially in Chesthunt hotel is an interactive and dynamic process that from the consumer's point of view is much more than a passive exchange of money for a particular service. Characteristics of the hotel's services are intangibility, heterogeneity, simultaneity, and perishability often require customers to be actively involved in helping to create the service value -- either by serving themselves as in getting food in the buffet line of the hotel or by cooperating and often working collaboratively with service personnel (Min, Min and Chung,2002,p. 302). Investigating Methods of Customer Feedback There had been a number of strategies implemented by the hotel in order to investigate customer feedback regarding the quality of their service. From customer studies to the application of information technology, several international businesses have conhoteled that putting quality into customer service results to positive outcomes (Anderson and Fornell, 1994, p. 241). While the benefits of quality customer service have already been recognized, it is important to consider that quality customer service is not dependent on the quantity of trainings or seminars an organization undergoes but on the level of collaborative effort exerted. Based on the response of other hotel personnel the hotel's customers change as well, they are becoming more demanding knowledgeable than before. In turn, hotel management had shifted their focus on their clients or customers so as to stay successfully in business. This transition meant that hotel have to completely reformulate their conventional business aims and purposes from being process-focused to customer-centered. Rethinking and reformulating the company on the other hand, entail the consideration of several factors such as various processes, technology, the environment as well as the success factors of people. Hence, in order to bring out exceptional customer services within the hotel operations, the management should employ fine-tuned organizational restructuring (Groth and Die, 1999, p. 274). Moreover, employing proactive customer commitment involves the consideration on culture and infrastructure. The success of integrating quality in a company's customer services depends heavily on the management. While some hotel management send their employees to training, some managerial factors would have to be used as well. As discussed by Parasuman, Zeithaml and Berry (1985, p. 42), the manner to which management train, motivate and recognized their employees results to a significant effect on the quality of customer service they deliver. The level of commitment the management provides for instance has a direct impact to the quality of customer service the company provides. According to Anderson and Fornell (1994, p. 241), it is a common mistake for most management to think that they are highly committed in servicing the customers with quality when in fact their commitment is only based on internal and technical viewpoints. Nowadays, Customer Relationship Management (CRM) has been a common system applied by businesses like Chesthunt hotel to ensure quality customer service. According to Jacobs and Lee (1998,p. 165), CRM aids the management to stay abreast of its customers' needs and concerns. In addition, customer relationship management also helps the management to respond in time and appropriately to their customers' calls. The approach on CRM covers all business processes that the hotel employs so as to determine, select, obtain, enhance and retain its customers. Indeed, at present, CRM is regarded as the integration of business processes, technological solutions and advanced analysis, which enables companies to understand clients from a multifaceted perspective. Through this understanding, companies are able to establish deeper and more profitable customer relations. Bibliography Anderson, E. W. and C. Fornell 1994, "A customer satisfaction research prospectus."In Service Quality: New Directions in Theory and Practice. Eds R. T. Rust and R. L. Oliver (pp. 241-268). Thousand Oaks, CA: Sage Publications. Berry, A.A., Zeithaml, V.A. and Parasuraman, A. 1988, The Service Quality Puzzle. Business Horizons, Sept-Oct.Issue; pp.35-43. Cohen, S & Moore, J 2002, Today's Buzzword: CRM. Public Management, 82 (4), p.10. Cole,G .A.2003, Management Theory& Practice' Thompsonl,, London, pp.110-125. Davis B, Lockwood and Stone, S , 1998, Food and BeverageM anasemen(t 3d Edition) Butterworth Heinemann.pp. 25-40. East J.p. 1993, ManagingO uality in the CaterinqI ndustr.v.C ronerP ublicationsL td, Kingston Upon Thames, pp. 65-70. Ghobadian, A, Speller, S. and Jones, M. 1994, Service Quality: Concepts and Models. International Journal of Quality & Reliability Management, Vol. 11 No. 9, 1994, pp. 43-66. Greger, K.R. and Peterson, J.S. 2000, "Leadership Profiles for the New Millennium". Cornell Hotel and Restaurant Administration Quarterly, Vol. 41, Issue 1, pp 16-29. Groth, J.C. and Die, R.T. 1999, Service Quality: Perceived Value, Expectations, Shortfalls, and Bonuses. Managing Service Quality, Vol.9. No.4; pp. 274-285 Jacobs, FA, Latham, C, & Lee, C 1998, 'The relationship of customer satisfaction to strategic decisions', Journal of Managerial Issues, vol. 10, no. 2, pp. 165+. Johnston, R.,2005, Service Operations Management 2 * Edition, Harlow Pearson Education, pp.95-105. Min, H., Min, H. & Chung, K. 2002, Dynamic benchmarking of hotel service quality. Journal of Service Marketing, 16(4), 302-321 Parasuraman, A., Zeithaml, V.A., and Berry, A.A. 1985, A Conceptual Model of Service Quality and its Implication for Future Research. Journal of Marketing, Vol. 49, No.4, pp. 41-50. Subroto, B 2003, January 1, Effects of management commitment on service quality to increase customer satisfaction of domestic airlines in Indonesia. Singapore Management Review, pp. 85-96. Wakefield, R.A. 2001, Service Quality. The CPA Journal, International Journal of Contemporary Hospitality Management 7(8),p.8. Zeithaml, V 1990, In D. Bowen, Service Management Effectiveness: Balancing Strategy, Organization and Human Resources, Operations and Marketing (pp. 369-381), Jossey-Bass, Inc. Publishing, pp. 22-28. Marketing Food and Beverage Target Market Chesthunt Hotel's top seller in their food and beverage can be subdivided into its target markets (special events.com 2006, n.p.): The target markets of this food product are families, both parents and children, teenagers or young adults, single professionals both men and women: back to basics and sized order with chef-crafted plates of different serving sizes that has tastes and flavors, that can just be casual dining gathering. The target market of this food product are families, both parents and children, teenagers or young adults, single professionals both men and women. Breakfast is back- to start the day of their guests with eggs cooked upon order, healthy food to start a long day, healthy carbs, low fat food, French toast, waffles and pancakes. In good company- F&B arenas in living and dining room areas that can be used as "gathering area." Healthy-not-diet-food- low carb, low calorie food depending on the customer's choices. There's always room for-desserts such as gelatin squares from Chef Gordon Ramsey's Rhubarb Parfait, puddings and Amaretto Bourbon. High on Heritage- serves salmon, goulash, stuffed cabbage. Non-engineered product- organic vegetables such as greens and lettuce. Try a taste- grocery food and appetizers showing the hotel chef's style. Young single professionals, single middle aged and married middle aged professionals. Kitchen meets bar- serving food, cocktails and spirits, liquor with fresh juices and herbs such as Cosmo and basil mojito Competitor and Criteria of Comparison Today's UK market is characterised by highly competitive organisations which are all vying for consumer's loyalty. Hotels are faced with the challenge to maintain their own competitive edge to be able to survive and be successful (Bowie and Buttle, 2004, p. 10). Strategies are carefully planned and executed to gain the ultimate goal of all: company growth. However, external factors are not the only elements which influence growth. There are also internal factors, components working within the organisation which shape the direction of the company. Despite the economic and technological conditions that make it possible now to promote products and services in a larger consumer market, there are other factors that still need to be considered for a business organisation reach out easier to their target market. Looking into the characteristics and thought processes of the people still holds as the most significant factor to be looked into by the individuals in the field of sales and marketing. The large scope of market can pose a hindrance to a successful marketing strategy in terms of over generalised definition of the target or niche market (Ehrenberg, 2000, p. 35). The direct competitors of Chestnut hotel are High Wycombe Hotel, a Kings Hotel with High Wycombe business and pleasure boutique hotel and Scunthorpe Hotel, offers great deal for families and groups of tourist, one of the beautiful hotel resorts in Hertfortshire. There are many components which influence consumer behaviour namely: cultural, social, personal and psychological (Kotler, Bowens and Makens, 2000, p. 74). These characteristics cannot be controlled by the companies; therefore, a need to assess these elements in order to create an effective marketing plan. Cultural factors include culture, subculture and social class which all exert the broadest and deepest influence on buyer behaviour. Culture is the most basic cause of the wants and behaviours of a consumer because it cultivates how a person chooses its values and learns its standards for achievement and success (Monnier et al, 1986 p. 3). Moreover, it varies from country to country and it can also have a shift within its own sphere which may cause a new product entry. On the other hand, subculture refers it the smaller groups of people who share the same value system and it can include nationalities, religions, racial groups and geographic regions. Many of these subcultures compose the important market segments for which products are specifically designed and marketed. Lastly, social classes are the divisions in a society composed of people who share similar values, interests and behaviours. These form the social class structure which exists in almost every society. It is not determined by a single component alone but a combination of different elements such as occupation, income, education, wealth and other variables (Kotler, Bowens and Makens, 2000, p. 75). These social classes show individual product and brand preferences in areas such as clothing, furniture, cars and leisure activities. Social factors also influence consumer behaviour. It includes the following: small groups, family, social roles and status. Groups are two or more people who interact in order to accomplish mutual goals. Usually, these groups have their own opinion leaders who are the members of a reference group that wields influence on others because of various reasons such as special skills, knowledge and personality. Companies often use the opinion leader as the basis on how to properly execute its marketing strategy. The next social factor is the family which is considered as the most important consumer buying organization in a society (Lewis and Chambers, 2006, p. 96). There is a need to be constantly updated of the shifting roles of family members because each - father, mother, child - has a different role and influence on the purchase of goods and services. The last factors are roles and status (Kotabe and Helsen, 2004, p.95). These factors refer to the positions held by each person in each of the groups he belongs to but they are completely different in definition (Wightman, 1999, p.18). A role is composed of activities which people are expected to do in the group while status is the position which goes along with a role that reflects the general esteem accorded by society. Bibliography Bowie D and Buttle F., 2004, Feoitalitv Marketine:An Introduction. Butterworth-Heinemann Oxford.p. 10. Ehrenberg, A. S. C. 2000, Repetitive Advertising and the Consumer. Journal of Advertising Research, Vol. 40. pp. 35-45. Kotabe, M. and Helsen, K, 2004, Global Marketing Management, Wiley.p. 95 Kotler P, Bowen J and Makens, J.,2006, Marketing for Hospitalitv and Tourism. 4' Ed, Prentice Hall.p. 74-75 Lewis R C and Chambers, R.E., 2000, Marketing Leadership in Hospitalitv, Foundations and Practices.p. 96 Monnier, E, Gaskell, G., Ester, P., Joerges, B., LaPillone, B., Midden, C., andPuiseux, L. 1986, Consumer Behaviour and Energy Policy: An International Perspective, Praeger Publishers, New York, p. 3 Special Events, 2006, Chestnut Hotel's Food and Beverages, www.specialevents.com. Wightman, Ben 1999, Integrated Communications: Organization and education. Public Relations Quarterly, Vol. 44, Issue 2, pp. 18-22 Human Resources Managing Diversity in the Workforce Diversity in the workplace has been a common in Chestnut Hotel. However, diversity in the workplace may also be observed through differences in profession, age, lifestyle, sexual preference, functional expertise, organizational tenure or geographic origin (Brotherton, 2003, p. 9). In most cases, this work issue is already considered a typical occurrence, which needs to be addressed by the management; otherwise, this work issue can widen the gap among employees and could lead to negative outcomes to the hotel. The most common negative outcome brought about workplace diversity is the rise of conflicts. According to Human Resource Manager of the hotel, vertical and horizontal conflicts are the usual types of conflicts observed in Chestnut. Vertical conflicts are observed between employees with different position levels whereas the horizontal type is observed between employees of the same position levels. In the concept of workforce diversity, the vertical conflict is the most common issue (Arnold, 2000, p. 23). Aside from identifying the causes of workforce diversity in the hotel, previous researches had also discussed how diversity can be harmful or beneficial to organizations; ways on how diversity in the workplace can be managed is also among the common topics for research. In this literature review, articles and studies related to workforce diversity will be presented. One of the most common factors that results to workplace diversity issues in Chestnut is how the company perceive individual functions and capabilities of the employees. For in stance, in management and leadership aspects, how the management perceive gender roles can promote or prevent employees to certain job positions (Goldsmith, Nickson, Sloan and Wood, 1997, p. 12). In most cases, the manners to which men and women behave and act socially often serve as the basis of how people see them as managers or leaders. Communication abilities for example, which is an important factor of an effective leader, are different among men and women. As the communication styles of men are perceived to be the most appropriate for managerial functions, males typically dominate the top management positions. The characteristics of both men and women are also different from each other and can be considered as a source of diversity issues. According to the HR manager, men are typically characterized by agentic attributes, which explains male confidence, forcefulness, dominance, independence, competitiveness and ambitiousness (Bonache and Canberra, 1999, P. 51). Agentic character of men allows them to use a more assertive leadership style, which is useful in influencing others and drawing out significant skills of the employees. On the other hand, women have a more communal character that represents affection, kindness, sympathy and sensitivity. Women with communal personalities usually speak tentatively, maintain a low profile and give support to colleagues (Guerrier, 1999, p. 14). As these qualities are not part of how major communicators and leaders are usually perceived, women are not the usual choice for these positions in the organization. Men on the other hand, remain dominant as organizational leaders. Aside from gender, cultural difference is another major factor that leads to workplace diversity problems (Dean and Snell, 1993, p. 776). Based from the observations in the hotel, this common occurrence is attributable to the fact that others have this tendency to act or behave differently towards people who have a cultural origin different from their own (Mullins, 2001, p. 11). This behavior stems from various factors, such as communication barriers that lead to misunderstandings and argument. In the events of these disagreements, personal differences are often overly stressed. One of the major problems related to this issue is the inadequacy of awareness or knowledge people have for other cultures. Having limited perspectives on diverse cultures and lifestyles then creates a close-minded view towards the members of the minority groups. Unfortunately, rather than extend the effort of knowing the culture, lifestyles and strengths of the minority groups, people prefer to act and treat them negatively as a defense for not being knowledgeable and aware (Drucker, 1992, p.95). For example, some employees of the hotel perceive that multiculturalism has negative effects on their productivity; these employees stated that problems arising from this issue are related to communication and interpersonal aspects as the dissimilarity between members become apparent in their interaction (Goldsmith, Nickson, Sloan and Wood, 1997, p. 13). Employing a diverse workforce can lead to certain difficulties, particularly in recruiting and training. As employees differ in culture, gender and lifestyles, organizations typically encounter difficulties in establishing integration among them without causing conflicts. Though some companies employ certain strategies on how to manage diversity, these processes are usually time-consuming and can lead to even more workforce problems, resulting to a more inefficient performance of the employees. According to the research findings of Mullins (2001, p. 12), employees whose gender, age or cultural backgrounds are different from others tend to be absent more frequently. Moreover, workforce diversity can also lead to higher employee turnover rate; this can be disadvantageous to the company due to wasted hiring costs (Hornsby and Kuratko, 1990, p. 9). Former studies also stated that diversity in the workplace can only work if the employees had been able to work together for a long time. As they have grown more accustomed to each others differences, employees become more cooperative and participative, especially in providing ideas. Despite the many issues and problems related to workforce diversity in Chestnut, the HR Manager claims that this is an important element of an effective organization as well as provides several advantages (Mullins, 2001, p. 14). According to Guerrier (1999, p. 15), the recruitment of a highly diverse workforce in terms of culture and age is very useful as it provides the organization a larger pool of skills and talents. This also increases the opportunity of the organization to hire employees that are highly appropriate for specific company needs and requirements. In actual company operations, workforce diversity can also help in generating a multitude of useful ideas for decision-making. In other words, workforce diversity broadens the company's perspectives and increases its options for developing decisions. Brotherthon (2003, p. 10) noted that the quality of decisions is significantly improved through workforce diversity. For companies who intend to operate globally, workforce diversity is an important factor. In the marketing aspect, success is more attainable if diverse employees will conduct marketing efforts to ethnic minority and foreign communities (Mullins, 2001, p. 15). Moreover, using locals to handle some of the activities in the organization can help in developing more appropriate international strategies. In general, diversity in the workplace can help organizations in adapting to the challenges of global operations (Mullins, 2001, p. 16). The role of workforce diversity should be stressed not only because of its beneficial effects but also because it is a legal matter. At present, certain legislations are implemented so as to protect people from discrimination and other diversity issues. Hence, organizations who are not handling workforce diversity issues effectively may encounter certain legal penalties (Rowden, 2002, p. 79). Aside from the prevention of legal issues, workforce diversity should also be handled effectively so as to protect the public image of the company. Legal matters are typically public matters; hence, a company involved in illegal discrimination can encounter the problem on reduced talent pool (Mullins, 2001, p. 17). This matter can also affect the morale and loyalty of the current employees of the organization, and may cause them to resign. Means of Managing Diversity of Chestnut Hotel The HR Manager noted that the strategic cultural change in the organization can be a useful means of managing workforce diversity. Through the multicultural and systematic change in the organizational culture, the potentials of each employee can be enhanced, diversity issues can be identified and addressed, managerial support can be provided and employees will be more encouraged to become involved and participative. According to Mullins (2001, p. 18), the management of workforce diversity should involve the examination of the organizational culture, identification of organizational behavior elements, and determination of these elements' effect on diversity management and the transformation of these behavioral aspects so as to support workforce diversity. In this company, the strategic cultural change of the company involves four steps. These steps include the creation of the change momentum, establishment of the change foundation, and implementation of the developed change and the evaluation of the change effects (Goldsmith, Nickson, Sloan and Wood, 1997, p. 16). In the first step, the purpose of employing change in the organizational culture is determined; this includes the identification of the affected factors, benefits and risks involved in the change. Informing and educating the hotel employees about the need for enhancing diversity principles and objectives is done on the second phase. The third step is concentrated on the development and implementation of the actual interventions to be used for initiating change. Finally, the change process and its effect to the organization will be monitored regularly (Goldsmith, Nickson, Sloan and Wood, 1997, p. 17). Similar to what was claimed by other literatures, employing this means of workforce diversity management is a long process In addition, as the organization's culture influences the practices, values and operations of the company, changing it needs the transformation of several aspects of the organization; this suggests that a considerable time for planning, implementation and adjustment is necessary for this strategy to be effective. According to Guerrier (1999, p. 16), the use of a proactive model can also be an effective means of managing workforce diversity. This model is particularly useful for human resource managers in implementing a recruitment and management program applicable for a diversified workforce. This model is actually made up of 5 steps. In the first phase, the manager must have a complete understanding of the available labor resources as well as the current labor pool who are working in the organization. The second step emphasizes that the manager must be able to comprehend the operational aims of the organization as well as its labor requirements. In the third step, the short and long term goals of the company so as to develop a more reactive work environment. The fourth phase involves the distribution of responsibilities, determining deadlines as well as review dates. The final step is the monitoring of the overall program applied by the human resource department. The proactive model implies that aside from the top management, human resource managers also play a role in managing diversity issues in the workplace. Another possible means of managing work force diversity is through efficient leadership. Similar to what has been discussed earlier; the HR Manager noted that the conventional leadership style observed in most organizations is influenced by gender roles and stereotypes where white males are commonly viewed as leader material. Although, such leadership style has been useful in motivating employees to perform efficiently, a different leadership approach must be applied so as to manage workforce diversity. A simpatico or diversity-friendly leadership approach is said to be the most appropriate method for handling highly diverse workplaces (Mullins, 2001, p. 19). Despite the difficulty of managing workplace diversity, organizations should not be hesitant in employing the different methods of diversity management, mainly because this is an essential source of competitive advantages. The management who are willing to manage their diverse workforces are able to optimize its human resource. Through diversity management, companies are able to improve their overall performance and gain more profits. The proper management of workplace diversity can help in achieving company goals, including resource optimization, revenue generation and profitability. Such significant benefits of workforce diversity management should be stressed to senior company management so as to convince them that this aspect is important for their business success and development. There are several other possible benefits that can be gained through the proper management of workforce diversity. These include the improvement of the recruitment processes, augmentation of marketing capabilities, improved morale, reduction of discrimination issues, higher innovations and creativity and less costs acquired through frequent absenteeism and fast turnover. Aside from competitive advantages, managerial competencies can also be improved through diversity management. The organization becomes more adept in developing ways how to manage workforce diversity and can implement them with less interpersonal conflicts involved (Brotherthon, 2003, p. 11). Naturally, if workplace diversity is effectively managed in the organization, the benefit of diversity will be achieved as well. For instance, decisions developed by the company will have a higher quality; organizations will be able to have a greater talent pool and chances of hiring the employees who are most appropriate for the job; and ideas that will contribute for the company's progress will also be varied. Effective communications and relations are also developed through diversity management. With this, productivity of the employees will be improved significantly. Stronger relations between the management and the subordinates will also be promoted, resulting to higher employee loyalty and less turnover. Bibliography Arnold, U 2000, 'New dimensions of outsourcing: a combination of transaction cost economics and the core competencies concept', European Journal of Purchasing & Supply Management, vol. 6, pp. 23-29. Bonache, J & Canberra, E 1999, 'An expert HR system for aligning organizational culture and strategy', Human Resource Planning, vol. 22, no. 1, pp. 51-59. Sage: London Brotherton, B., 2003, The International Hospitality Industry: Structure, Characteristics and Issues, Oxford Butterworth Heineman, p. 9-11. Dean, JW & Snell, SA (1993) 'Integrated manufacturing and job design: The moderating effect of organizational inertia', Academy of Management Journal, vol. 36, pp. 776-804. Drucker, PF 1992, 'The new society of organizations', Journal of Small Business Management, September-October, pp. 95-104. Goldsmith, A. L., Nickson, D. Sloan, D. and Wood, R., 1997, Human Resources Management for Hospitality Services, Thompson International Press.p. 12-17. Guerier, y., 1999, Organizational Behavior in Hotels and Restaurants: An International Perspective, Wiley.pp. 14-18. Hornsby, JS & Kuratko, DK 1990, 'Human Resource Management in Small Firms: Critical Issues for the 1990s', Journal of Small Business Management, vol. 28(July), 9-18. Mullins, J., 2001, Managing People in the Hospitality Industry (3rd Edition), Addison-Wesley Longman.pp. 11-20. Rowden, RW, 2002, 'High Performance and Human Resource Characteristics of Successful Small Manufacturing and Processing Companies', Leadership and Organizational Development Journal, vol. 23, no. 2, pp. 79-83. Finance Forecasting Chestnut Hotel is using sales forecast is the amount of sales (in units or dollars) a hotel expects to achieve during some future period under a given marketing plan and expected market conditions (Burgess, 2001, p. 201). The best way to understand this definition is to delve into each of its terms. Amount of Sales. The forecast identifies the amount (usually in a range) of units that are likely to be sold. Thus, next year's forecast for Snow Ace would probably be 3,300-3,500 units, rather than a specific figure, such as 3,417 units. Units or Dollars. Whenever practical, unit sales should be used in the forecast rather than dollar sales. The reason is that most key decisions within a hotel are influenced by the number of units sold rather than the dollars they generate. Decisions on the size of inventories, quantities of raw materials, and the size of the production staff are just a few of the areas affected directly by the number of units expected to be sold. In departments where a variety of low-value, large-volume products are involved, it may be necessary to forecast dollar sales rather than unit sales. For example, the F&B department handles a wide variety of fruits and vegetables, and it is difficult to forecast unit sales for each of those categories. Thus, they may be combined into a few broad categories, and a forecast is made of their expected dollar sales. But it should be noted that whenever sales forecasts are in dollar values, the real sales picture can be distorted by price changes or special promotions (quantity discounts). Expects to Achieve. A forecast should provide an accurate estimate of the sales expected from a given plan and under given business/economic conditions. The forecast should be monitored continually to see how well it matches what is actually occurring. However, the forecast should not become an all-encompassing goal that must be met even if unforeseen changes occur in the business environment. Blindly trying to meet the forecast often results in inefficient use of resources and can be detrimental to a hotel's overall operations. It is important to understand why a forecast missed its mark, but achieving the actual forecast should never become a goal the hotel "must" meet. The Hotel Manager stated that the hotel's forecasts usually came within fifty cases of actual sales. Some Future Period. The length of time covered by the forecast will vary with the needs of the hotel. Typically, the hotel prefers an annual forecast to guide its purchasing and hiring decisions for the coming year. Oftentimes, this annual forecast is separated into quarters or months to acknowledge seasonal influences. The hotel also requires -term forecast (five to ten years in the future) to guide its decisions involving major expenditures for equipment, personnel, or expanded facilities. Given Marketing Plan. The forecast is tied to the hotel's expected promotional and distribution efforts. Thus, the person (or group) responsible for developing the forecast has to be aware of what marketing activities the hotel expects to implement during the forecast period. Expected Market Conditions. Both external forces (factors outside the hotel's control) and internal forces (factors the hotel can control) will influence future sales of the forecasted product. This means that the forecaster has to estimate the changes likely to occur among both sets of forces during the forecast period, and their likely impact on the hotel's sales. In general, forecasting helps businesses serve their customers more efficiently, without the constant fear of excess inventory. Furthermore, the companies also determine appropriate cost management strategies as external purchases of products and services account for more than 50 percent of total costs (Kotas, 1999,p. 78). Without sacrificing quality, services must create a reliable, cost effective supply chain or operational system to be competitive in the marketplace. Technology has increased the reliability of cost management systems through the use of computer packages designed for specific companies. Budgeting Methods As the nature of budgetary method become more and more complex in this information and efficient communication of Chestnut hotel, finance managers face a wide array of challenges, opportunities and options for him or her to enhance the investing and financing activities of the organization as well as the inherent risks and circumstances of the decisions that will be made. The challenge now for the budgetary mangers of the hotel is to explore the options and take advantage of the opportunities while taking caution in managing the risks. Budgetary method was defined by Kotas (1999, p. 79) as the determination, acquisition, allocation and utilization of budgetary resources with the aim of achieving a particular goal. It consist of analyzing the budgetary situations, making budgetary decisions, setting budgetary objectives, formulating budgetary plans and providing a system of effective budgetary control to ensure the progress of the plans towards the attainment of the company aims and objectives. All these are supervised by the budgetary manager in the process of budgetary method. The hotel, in order to effectively execute any business strategy or plan, should be able to determine first and identify the resources that are available. Studying and examining the opportunities of the available resources will help in constructing a business plan which will be profitable. The characteristics of the business should be clearly laid out and the ideas that will be made available should be thoroughly researched (Burgess, 2001, p. 202). This will provide relevant information that the general management can utilize so as to be able to allocate the funds of the group in the most effective way. All the changes that will be made aim to achieve the goals and objectives of the company (McMann and Nanni, 1994, p. 55). That is why it is highly important that the hotel knows the direction it intends to take. The people especially the finance manager should have the expertise, experience and skills to analyze the budgetary situation of the business to be able to make sound decisions. Making a budgetary decision and taking a stand to support the possibility of exploring the strength and advantages of a particular resource of the organization will be handy if it has budgetary personnel who are decisive and practical enough with a daring character to challenge and the social and economic conditions in the organization. All the plans will be put to waste if the company has no effective system of budgetary control that will monitor the investment that the company made. There is a constant and regular report regarding the progress of the investment made. If outputs are expected, there should be immediate application of the advantages that the hotel gained. The results of the investment whether it is profit or performance-related advantages should be duly reported for evaluation and assessment (Kotas, 1999, p. 79). This provided the hotel the black and white transparency which the company can take hold of as guide in the future investment as well as the plans and strategies that its people will employ. The investing strategies likewise assessed and evaluated as well as the capacity and the ability of the people who made the project and the attainment of the plans possible. In monitoring the investment made, the hotel has taken into account the factor or variable of time (McNair Lynch and Cross, 1990, p. 29). Since the company has the options of investing, planning and strategizing long-term and a short-term projects, the nature of the investment in relation to the needed time for the initial execution should be given great consideration, there are just times when the business firm is not in the position to control the flow as well as the circumstances of the investment made. Sometimes the best thing to do is to wait. When the time comes that is but right to take further action, the company may do so. In formulating the budgetary strategies and in making the budgetary method effective, the management of the hotel conducts proper research and studies should be made in order to define and maneuver the direction of the whole business plan. Setting up the ideas and presenting them to the figures of authority for a rich exchange of views will be helpful in generating plans that will be best for the business establishment (Burgess, 2001, p. 203). The company should is conscious and cautious in terms of the savings and the transparency of the expenditures. The people involved should also have the guts and the character to make the long-term plans a success by initiating efforts that will make such conjured ideas possible and tangible in the future. Investing money on banks is not a good idea since economic inflation is unpredictable and a lot more risky as well as time consuming. Specifying the date and time frame of executing the business plans and strategies that will make its attainment possible will push and business to start right on and take the challenge. As much as possible, hesitations should not be acknowledge unless there are enough reasons to postpone the initial execution of the plans that will be more risky than the imagined drawbacks of the project (Nanni, Dixon and Vollman, 1992, 12). The management is sensitive in making delays and lagging off from the defined plan and tactics as well as in the changes and differences of the actual application and that of the plan. It would also be advisable to get help and consult from a professional finance consultant because they can provide information and views that were not pointed out and brought up during the planning period. There is an account to serve as a budgetary back up for the emergencies and difficulties that were not foreseen while coming up with the plans. Kotas (1999, p. 80) introduced the most common mistakes that are encountered in managing the finance of a business organization. These include the failure to research and conduct studies regarding the goals prior or after the planning period, not using an automatic saving plan, being too conservative with long-term investments, the problem of succession, putting off the start of the investment, not getting professional advice, and not setting aside at least three to six months worth of savings in an interest-bearing account. Bibliography Burgess, C., 2001, Caterer and Hotel Keeper Guide to Money Matters for Hospitality Managers, Butterworth Heinemann.pp. 201-220. Kotas, R. 1999, Management Accounting for Hospitality and Tourism (3rd edition), Thompson Business Paper.pp. 78-85. McMann, P., and Nanni, Jr. A. J. 1994, Is Your Company Really Measuring Performance Management Accounting. 76, 55-58. McNair, C. J., Lynch, R. L. and Cross, K. F. 1990, Do Financial and Non- financial Performance Measures Have to Agree Management Accounting. 72, 28-36. Nanni, A.J., Dixon, J.R., and Vollman T.E. 1992, Integrated performance measurement: management accounting to support the new manufacturing realities, Journal of Management Accounting Research, 4, 1-19. Read More