Creating a Strategic Direction - Assignment Example

Remuneration and Benefits – Human Resource Management – Assignment 3 Student’s Name Course Tutor’s Name Date: Background Maggie’s Eatery is a medium-scale restaurant in New South Wales. It operates in the hospitality industry and as such, its remuneration and benefits strategies are guided by the Hospitality Industry (General) Award (the HIGA) 2010. Like most businesses, the owners of Maggie’s Eatery hope to expand their business in future by opening other branches in different towns and regions. According to Olk, Rainsford and Chung (2010), the presence or absence of a strategic direction depends on whether the management has a clear vision for the firm. Based on Olk et al.’s (2010) views, it is therefore obvious that Maggie’s has a working strategic direction since the restaurant has a shared sense of purpose and direction. Maggie’s mission and goals for example indicate the intent of the restaurant expanding from the current sole restaurant to five more in the next two years. In the short-term however, the restaurant has goals that include increasing sales by providing customers with superior food quality and superior waiting services. Like other players in the hospitality industry, Maggie’s uses a combination of Key Performance Indicators (KPIs). Employment-related KPIs adopted by the firm include wage cost percentage (i.e. the percentage of sales that is used in offering employees remuneration and benefits), average hour pay, and labour turnover. KPIs in stock management include the costs of supplies purchased in a week against the sales obtained in the same period. Maggie’s also uses the number of customers as a measure of its popularity in NSW, the rate of customer satisfaction (often gauged by the number of complaints or no complaints), and the seating efficiency as other KPIs for its popularity. The overall business success of Maggie’s is however indicated by several KPIs which include: Return on investment (i.e. % profit compared to the investment made), taxes paid, and the cash available at bank. The latter is especially an important indicator since it is used as a measure of how soon the restaurant can realise its vision of expanding the business to five more restaurants in the next two years. Remuneration strategy adopted by Maggie’s Eatery According to Baghai, Coley and White (2000, p.5), a strategy (whether remuneration or otherwise) should at the very basic “extend and defend core business”. Additionally, Baghai et al. (2005) observe that a strategy should build “emerging businesses” and “create viable options”. The latter two functions of strategy as identified by Baghai et al (2000, p. 5) happen as the business attains longevity, and as the profits increase. As if prompted by the observations made by Baghai et al. (2000), Maggie’s remuneration strategy at the very basic seems to be modelled toward defending and extending the core business. Specifically, the business ensures that it complies with the HIGA provisions on basic wages, thus avoiding the consequences (e.g. civil penalties, suspension or revocation of the operating licence) of non-compliance. The strategy at Maggie’s is implemented by ensuring that all employees’ remuneration is in accordance with the HIGA provisions. Additionally, the management provides pay incentives for the best performing department, hence motivating them to provide superior products and/or services to customers. In the event that overall profitability exceeds a certain amount, all departments get bonuses. Employees who stay with the restaurant for more than a year are often employed on a permanent basis subject to their willingness to become permanent employees as well as their skills and expertise, and they are also entitled to several fringe benefits. Through such strategies, Maggie’s protects and defends its core business by ensuring that its remuneration approaches are legally compliant, and that its talent is motivated (at least pay-wise) to keep working in the restaurant. The latter is especially a critical strategy since it prevents Maggie’s from having a high labour turnover, and consequently saves the restaurant significant costs which would otherwise be incurred in recruitment and training. Occupational groups present at Maggie’s Being a restaurant, several occupational groups are represented in Maggie’s workforce. Such include food and beverage attendants, kitchen attendants, cooks, cleaners, store persons, accountants, human resource managers, security officers, waiters and cashiers. Each of the different occupational groups represented is paid differently; first based on the provisions stipulated in the HIGA; second, based on their employment statuses (i.e. permanent/temporary or casual); and third, based on their relative performance at work. People in the same occupation group (e.g. permanently employed cooks), receive the same basic pay but their take-home package may differ depending on their performance at work, and/or their length of service in the restaurant. Paying similar wages to people in the same occupation enhances a sense of fairness and equality, especially if the employees are required to handle similar amounts of work. Different circumstances to be covered by the remuneration strategy In addition to the minimum wages provided for in the HIGA for different occupation groups, Maggie’s Eatery has a rewards and consequences policy whose intention is to encourage top performance, and also to discourage substandard work. The former is meant to act as an incentive to adopt good, efficient and effective work practices, while the latter is meant to act as a disincentive for poor or unacceptable work behaviour and practices. In addition, the rewards and consequences strategy recognises that the nature of the restaurant business makes it hard to separate performance according to departments since ideally; all departments must work as a team for customer satisfaction to be realised. For example, much as the waiters can offer an exemplary waiting service, that alone is not sufficient to keep the customers coming back; rather, the food must complement the waiting services. Additionally, it would be expected that the security officers ushering in customers into the parking area and ensuring that their cars are attended to would also serve as part of the overall service offered by the restaurant. The remuneration strategy at Maggie’s therefore considers the different dynamics in the workplace to determine whether indeed specific departments should receive bonuses, or whether any bonuses should be distributed equitably to all the players in the different departments. External circumstances are also considered by Maggie’s when designing its remuneration strategy. For example, and considering the poaching of talent that goes on in the hospitality industry, the restaurant strives to give its employees competitive remuneration packages to enhance their sense of equality and worthiness. Maggie’s specifically follows the maxims that good performance needs to be rewarded; payoffs need to match performance; and payoffs must be given in an equitable manner to all equitable performance. Overall, Maggie’s combines competitive compensation with retention-based and performance-based compensation to create what the management considers an effective remuneration package. Identification and application of awards and agreements at Maggie’s As indicated by Buultjens and Cairncross (2009, p. 45), the hospitality sector in Australia has “continued to rely on awards” despite the enthusiastic adoption of individual and collective bargaining agreements. Maggie’s uses the HIGA 2010 award, which according to the Australian Hotels Association (NSW) (2011, p. 3) covers “hotels; motor inns and motels; boarding establishments; condominiums and establishments of a like nature; health or recreational firms; private hotels, guest houses, serviced apartments; caravan parks; restaurants...” While applying the modern award, Maggie’s had to confirm if any of its employees was excluded from award coverage by provisions of the Fair Work Act 2009. The application of the award further depends on the job title, and on one’s employment status (i.e. casual or temporally). How the awards and agreements influence and shape the remuneration processes The award and agreements set a minimal wage rate thus making the remuneration process less flexible than it would otherwise be if employers were allowed to set the wages freely without having to adhere to set benchmarks. As indicated by Aidt and Tzannatos (2002) however, such awards and agreements tend to equalize income distribution among employees with little consideration for their skill levels. While such awards and agreements benefit the lower-level workers by ensuring they get sufficient living wages, they often force the remuneration process to consider other methods of motivating and retaining staff. Often, this leads to the provision of fringe benefits, which the employer is often required to pay fringe benefit taxes for. The awards and agreements give employees and other stakeholders (e.g. the government) a chance to influence decisions made regarding the remuneration process. By so doing, the remuneration process ceases being an internal organisational affair handled by the management only, and becomes a more consultative process that includes input from industry stakeholders such as the government, employees, competitors, shareholders, and even consumers of products and services. The consultative process consequently shapes and influences the remuneration process hence making it more just and perhaps inclusive in the eyes of both the internal and external stakeholders in a given industry. Depending on the profitability levels of a given business, and the management’s perceptions about the relative contribution of employees to the organisation’s success, employers are at liberty to customise individual remuneration processes upwards. The benchmarks established by collective agreements and/or awards, should however be ideally followed since they protect workers from exploitation by employers. References Aidt, T & Tzannatos, Z 2002, Unions and collective bargaining- economic effects in a global environment, The World Bank, Washington D.C. Australian Hotels Association (NSW) 2011, ‘Hospitality industry (general) award 2010 2011 wage rates and allowances’, viewed 18 March 2013, < http://www.ahansw.com.au/wp-content/uploads/2011/07/2011-HIGA-Wage-Rates-Allowances-as-at-4-October-2011.pdf>. Baghai, M, Coley, S, & White, D 2000, The alchemy of growth, Texere Publishers, Cheshire WA. Buultjens, J & Cairncross, G 2009, ‘The Australian hospitality industry’s response to formalised enterprise and individual bargaining prior to the Rudd Government’, Journal of Hospitality and Tourism Management, vol. 16, pp. 45-54. Olk, P, Rainsford, P, & Chung, T 2010, ‘Creating a strategic direction: visions and values’, In Enz, C.A (Ed.), The Cornell school of hotel administration handbook of applied hospitality strategy, Sage Publications, London, pp. 1-12. Read More