Managing Expansion Change in Business in Mortloch Hotel - Case Study Example

MANAGING EXPANSION CHANGE IN BUSINESS A BUSINESS ORGANIZATION Inserts His/Her Inserts Grade Inserts Tutor's Name 5th November 2008 Abstract PDR Hotel & Resorts plans to buy Mortloch Hotel, which is currently underperforming. This paper evaluates the impact of the acquisition process and how the human resource management should facilitate it. The significance of the project plus an analysis of past research is discussed in broadly. The strategies to be implemented in acquiring the hotel and a SWOT analysis have also been discussed. In conclusion, the project will have benefits, which are projected to be realised over time. Introduction As part of its expansion programme, PDR Hotel & Resorts, which is a highly successful international luxury hotel and resort group, is planning to buy Mortloch Hotel. Mortloch hotel has been in existence for many years but has been under poor management in the last 53 years. The hotel has been running at a loss and the quality of its services has significantly deteriorated. In addition, Mortloch Hotel's manager has been replaced eight times in the last five years, and the departments in the hotel are demoralised. A significant problem is that customers make regular complaints about service at the hotel. Moreover, the hotel has accrued significant debts, meaning that it has been operating below the break-even point. The aforementioned problems comprise part of what PDR Hotel & Resorts will inherit when it finally gets acquisition rights for Mortloch Hotel. To begin with, PDR Hotel & Resorts will have to make a turn around in the quality of services in order to boost customer confidence in the hotel. Secondly, PDR Hotel & Resorts will have to develop mechanisms to improve service delivery, among them deploying qualified personnel in the various departments who will embrace excellent human resource management skills. Thirdly, the group will have to focus on the customers' complaints and provide solutions since customers are the cornerstone of success of any business organization. Additionally, PDR Hotel & Resorts has to look into ways of solving any problems that arise due to debts. The significance of the above problems is that PDR Hotel & Resorts plans to buy Mortloch Hotel as part of its expansion programme, yet it is evident that the hotel currently has a clouded image. If the purchase is not critically appraised, PDR Hotel & Resorts may end up tarnishing its reputation in case the trend at the hotel continues even after the group acquires it. Therefore, when PDR Hotel & Resorts eventually acquires Mortloch Hotel, the group will have to prove indisputably that the hotel is in deed under new management, with new services that will leave customers craving to make subsequent visits. In order to facilitate an effective and problem-specific structure to increase revenue, it is imperative to improve quality and service while minimizing the running costs in order to eliminate debt. The theme of research on the process therefore lies around improving the customer base, staff management, service delivery, and ultimately, revenue collection and expenditure. There has to be a clear pattern of accountability in all departments in order to improve customer-staff relations. Additionally, the management has to work towards common objectives in order to improve service delivery and staff morale. Marchington and Wilkinson (2005) identified effective human resource management such employee participation as the best way to resuscitate a collapsing organization. This review presents the objectives of investing in Mortloch Hotel, the strategies to overhaul its management and limitations to the programme. Such strategies will include improvement of the hotel's facilities and staff training to boost service delivery. A review of ideas by other authors forms part of the discussion and analysis of ideas in this text. Objective of research As part of investment in an expansion programme that involves acquisition of a less vibrant business entity (Mortloch Hotel), the following are the objectives: To develop and implement a realistic premeditated plan that will increase proceeds through increasing occupancy levels at the hotel and increasing daily bookings. To adjust the current debt and if possible eliminate it within the shortest possible time in order to embark on earning profit and corporate responsibility. Limitations A hefty amount of capital is required to initiate all the planned strategies. Literature review Efficient management of a business organization is the key to its success, whether it is at the infancy stage or in the maturity phase (Minniti, 2007). In this context, management is the responsibility of all staffs in an organization, from the managers to the subordinates. It is however notable that although business leaders appreciate the importance of the people aspect, very few have been successful in implementing Human Resource (HR) management techniques effectively (Eigenhuis & Van Dijk 2007). As such, many business organizations have had to collapse due to lapse in management strategies. Eigenhuis and Van Dijk (2007) opined that business who think that they can decide their companies' HR priorities without a clear evaluation of the business strategy, the organization and the staffs will find that their organizations only become perennial underperformers. In addition, managers who believe that they can make HR agenda for their organizations based on the functions of the HR policy itself usually fail to add value to the organizations for which they work (Minniti, 2007). This is the cause of many resignations of managers or termination of their duties in favour of other who are perceived to be more qualified, as seen in the Mortloch Hotel case above. From the above perspective, chief executive officers and HR leaders need to form natural alliances in making decisions whether in starting new projects, investing in others for expansion or in maintaining the existing assets and services (Minniti, 2007). The most important aspect that needs to be considered is a common view in business agenda, which should be delivered in order to achieve an overall success of an organization. Since rapid change is occurring in all aspects of corporate life, only the organizations that show qualities of success such as rapid expansion, innovation and elegance in service delivery have a chance to rule the market (Minniti, 2007). A clear description of what needs to be done on the human side of management is vital in ensuring that high performance of an organization, hence its popularity among the potential customers. In essence, even a collapsing business organization can be resuscitated if four topics are clearly addressed. To begin with there has to be good leadership in place (Eigenhuis & Van Dijk 2007). Good leadership means a lot to an organization and its customers (Minniti, 2007). This begins from the topmost staff position to the lowest point of the organization chart. If good relations exist between members of staff, they are likely to work effectively towards a common goal, hence achieving higher revenue and maintaining a strong customer base (Cunningham, 2001). Secondly, the strategic priorities of an organization have to be clear, well aligned and consistent (Eigenhuis & Van Dijk 2007). The priorities may be expansion, hiring of more staff, acquisition of more assets or carrying out promotions in order to woo more customers and maintain the exiting clients (Cunningham, 2001). These of course have to be done assiduously in order to avoid running into losses or creation of unnecessary debts, as was the case with Mortloch Hotel. Thirdly, an organization has to be well equipped in terms of HR in order to accomplish its priorities. This is in terms of number of staff relative to the number of clients (Cunningham, 2001). In addition, there has to be a winning spirit and a track record of success in delivery as in the case of PDR Hotel & Resorts. The business organization model According to Marchington and Wilkinson (2002), any business organization has a life cycle whose stages are very critical as they determine the path of its success or failure. The stages are start-up phase, growth, maturity and decline phase (Marchington & Wilkinson 2002). In the start-up phase, flexibility of operation is necessary in order to capture the immediate market needs. Marchington and Wilkinson (2002) noted that in this phase, HR managers should have the ability to recruit, train staff and maintain them with motivation to work for long hours and self-development. During the start-up phase, managers aim at gaining employee commitment to the operations. As the business organization grows, it makes changes on formal policies and procedures in order to build on the previous successes (Bragg & Bragg 1999). At this stage there is need to retain expertise and ensure that high levels of commitment are observed (Bragg & Bragg 1999). There is a likelihood of incurring more costs as the organization ventures in more sophisticated methods of advertising and staff recruitment, minor expansions and so on (Armstrong 2006). The decisions made during the growth phase are very vital as they determine whether the organization grows into a popular entity or becomes a stunted project whose future is clouded by debts, customer dissatisfaction and retrogression (Armstrong 2006). In the maturity phase, business strategies have to shift to cope with the low level of growth that is experienced (Duncan 1996). Most business organizations in this phase seem to have flattened growth and performance, and as such, poor collapse is imminent in case there is no critical intervention. The HR strives to adjust labour costs, which in most cases is a difficult task since the staff are used to current remuneration. Duncan (1996) noted that in case some employees exit at this stage, there is no immediate replacement for them. It also becomes hard for the HR to justify training and development programmes since they may not seem to be immediate priorities (Doppelt 2003). Furthermore, job promotions become rare and the staff may be encouraged to leave the organization (Doppelt 2003). Eventually, a decline stage occurs in which problems that may have been apparent in earlier stages now become realistic impact adversely on the organization (McKern, 2003). HR managers may shift emphasis to rationalization and redundancy in order to disguise some of the problems faced by their organizations. They also reconsider policies and make them suit the current setting (Baron & Armstrong, 2007). In order to get multiple suggestions on how to salvage the decline enterprises, managers may disband the specialist functions of the HR and initiate pay cut (McKern, 2003). Training, if any at this stage is done only as a way of re-skilling the existing staff to enable them cope with the current situation. It is evident that all the four stages of growth of an organization have to be taken into consideration success it to be guaranteed. There is need for more emphasis in the initial stages since they determine the vigour with which organizations begin and grow (Harvard Business School Press 2005). The maturity stage is very important as it represents the point at which managers can intervene to avoid unsolicited decline and eventual collapse of organizations (McIvor & McHugh 2000). When acquiring a collapsing business enterprise such as Mortloch Hotel, it is important to regard it as being in the initial phase since very new approaches have to be employed to rebuild reputation. This is the strategy that PDR Hotel & Resorts should apply to give Mortloch hotel a cutting edge over competitors. Relevance of acquiring a new project Acquiring a new project as a form of expansion does nor mean inheriting the problems the problems the project had an grappling with them on a wider scale (Marchington & Wilkinson 2002). Rather, it means adapting to the status of the project and injecting in it a new set of management options as challenges, in essence, creating a very different business (Marchington & Wilkinson 2002). In the process of acquiring or developing new business programs, there are issues such as too fast growth, increase in infrastructure needs, requirement of expansion capital and changes in personnel needs (Blodgett 2007). These are among the issues that need critical evaluation to ascertain the relevance of expansion. The managers should assess they situation before and after acquiring a new project (Kloppenborg, Shriberg, & Venkatraman 2003).They should consult to ascertain its benefits: will it add impetus to growth of is it a liability Managers also need to assess the impact of acquiring a new business on the existing projects. Too fast growth may be welcome but should be viewed with care. This is because while growth is an important objective of an organization, rapid growth can sometimes overwhelm a business owner who is not adequately prepared (Harmon 2004). For instance, if PDR Hotel & Resorts buys Mortloch hotel without a clear evaluation of the consequence, the group may find itself in a situation where it cannot be salvaged. As an example, due improved management at the hotel there may be an overwhelming number of customers outstripping the available service. This may necessitate creation of more space, which may not be beneficial in the long run. In the same way, the new management may find itself embroiled in tussles with creditors and debtors to the former management. Expansion capital is must need since the hotel needs to be refurbished in order to have an appealing look to customers. In addition, a new management has to be deployed into the hotel and even if the some of the old staff are retained, they need pay increment and other incentives in order to restore their morale. Other issues that require capital include new requirements for record keeping, advertising costs and promotional activities. Strategies in acquiring and improving the new hotel The Strengths, Weaknesses, Opportunities and Threats (SWOT) (Profozich 1998) analysis should be conducted to evaluate viability of the new hotel. The project should aim at improving the appearance of the hotel by painting and development of advanced facilities such as provision of internet services, tennis lawns, spacious swimming pools and personalised transport to the hotel. Effective management activities should involve advertising and other promotional activities such as offers (Hsu, Powers & Powers 2001). In addition to advertising, there is need to improve communication among staff and between staff and clients in order to improve hospitality. This is possible through training and regular induction programmes (Hsu, Powers & Powers 2001). Other improvements needed at Mortloch Hotel include creation of a prominent front house and food and beverage departments and providing facilities that facilitate self-service such as water dispensers and automatic tea or coffee urns. Overall, there is need for overhaul of the management in order to win back the trust of disgruntled customers who are not satisfied with the hotel's current management. The HRM should encourage employee participation and be in close contact with clients in order to have their needs addressed effectively (McLagan & McLagan 2002). All these aspects come with additional costs but also have projected benefits. Hence, a simple SWOT analysis (Table 1) for the hotel is shown below. Table 1: SWOT analysis for Mortloch Hotel Programme Strengths The new programme will increase revenue in the long run Better services to customers will boost corporate responsibility. Weaknesses A lot of expenses are to be involved in training of staff, refurbishment of facilities and advertising. Opportunities Many of the hotels facilities are in place and only need refurbishment. There is a chance to introduce modern services such as casino, use e-banking and online booking to woo more customers Threats The hotel has incurred many debts that need immediate settling. Many customers have been lost to other hotels and it may be difficult to win them back From the analysis, introducing modern services at Mortloch Hotel once it is acquired will help win back former customers and capture a new wider market. This will be a boon for PDR Hotel & Resorts in increasing revenue and restructuring the current burden of debts. Conclusion The project by PDR Hotel & Resorts in which it intends to acquire Mortloch is worthwhile since it a chance to introduce modern facilities to the hospitality industry such as spacious swimming pools, casinos, e-banking and online booking, which are some of the most preferred services. This will effectively increase revenue and therefore settle the current debt, which are some of the objectives of the project. The SWOT analysis shows threats but these can be overcome progressively over time. 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