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The Role of B2E in Increasing Human Capital Value in H&L

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October 27, 2014
CIO/CFO Column: What Keeps Me Up at Night
Marvin Erdly

© 2001 Hospitality Upgrade. No reproduction or transmission without written permission.

In the hospitality and leisure (H&L) industries, employee contact with guests is perhaps the most critical part of the guest experience. Guest service, guest satisfaction, spend rates and return rates are all affected by these interactions. The best in the industry are known for their service, having made these touch points a competitive advantage. But can further improvements be made? What are the connections between employees and guests, and how can we take advantage of that connection in a competitive labor market with increasingly discerning guests?

This article both explores the relationship between human capital and guest satisfaction and examines the role of business to employee (B2E) practices in this relationship. Specifically, we make several assertions. The first is one that H&L companies implicitly know: as we increase the value of our human capital, we influence guest behavior, which results in improved top and bottom line performance. Second, the use of B2E solutions can lead to increased human capital value. Third, compared with companies in other industries, H&L companies have the most to gain by increasing human capital value through the implementation of B2E technologies and processes. This last assertion is perhaps the most poignant given that H&L companies are among the latest to adopt B2E practices.

First, this article explores these contentions and then provides a more comprehensive definition of B2E and summarizes the components of a B2E solution.

The Connection between Human Capital and Guest Satisfaction
It is well known that employees and guests have extensive contact during the delivery of products and services for businesses in H&L industries. Do you know how an employee’s attitude and ability to deliver top quality service affects guests’ experiences? A recent study published by Cornell Hotel & Restaurant Administration Quarterly shows that there is a strong correlation between employee satisfaction and guest satisfaction1. The most strongly correlated factors included whether the staff was friendly, quick and responsive to guests, and for employees it was whether the employees felt responsive, caring and friendly in delivering their services2.

For example, in the cruise line industry, where companies continue to leapfrog each other with larger, newer and more advanced ships, the difference comes down to guest service. Notes Adam Goldstein, Royal Caribbean International’s senior vice president for hotel operations, “In today’s service environment, employee and guest satisfaction are inseparable. To provide world class guest service, you must have satisfied employees who are knowledgeable and well trained.” Remarks Bjorn Hanson, PricewaterhouseCoopers’ global H&L lead, “Among H&L companies employee recruitment, retention and development are receiving more attention than ever before. There are cost issues, but even more important than cost is the ability to deliver superior levels of guest service from a properly recruited, oriented, trained, compensated and motivated staff.”

Characteristics of a High-Value Workforce in H&L
What are the best companies doing to increase the value of their human capital? Let’s explore the characteristics of a H&L enterprise with highly valuable employees.

• Employees are more knowledgeable and better trained about products and services
As products and services in H&L have become more complex, and are more frequently up-sold and cross-sold, employees’ contacts with guests have become critical. Employees must be able to respond to inquiries about the products and services, make targeted recommendations and refer the guest to more extensive sources of information. Moreover, with the Internet and other readily available information sources, guests are more knowledgeable about products and services than ever before and they still expect employees to know more than they do. That means that guests shouldn’t surprise employees with information about, for example, a restaurant promotion, newly installed in-room technology or a weekend shopping rate. Employees need extensive information at their fingertips, and they need to have access to it anywhere, anytime.
They also need a program of ongoing, low-cost education. Are the leaders in the field making the connection? Frank Hoffman, former leader of learning and development for Rosenbluth Travel, talked about how they try to instill an understanding of customer service in their employees. In an interview with Fast Company magazine, he discussed their new-hire orientation, which includes a high-tea service, led by a top company officer, “The main purpose is for them to experience service that’s a cut above,” said Hoffman. “The product means nothing - in this case it’s water and tea bags - but the way you do it is everything.”3
• Timely and targeted communications and feedback
There’s no question that employees who feel supported, have the proper information at the right time, feel engaged and connected, and feel that their opinions matter, will project a positive image to guests. The Cornell study4 showed how employees who feel empowered and who are happier correlate to more satisfied guests. But how can this be achieved? Communication. As Lloyd Hill, president and CEO of Applebee’s said about his employee feedback program, “It’s a way for me to find out whether our culture is taking hold in a given restaurant, city or region, and to learn if the leadership there needs to be developed. The culture of an organization really drives its performance — particularly in the hospitality industry. In our business, you’re only as good as the last guest who came through the door thinks you are.”5

Communicating in a timely, consistent manner with employees is perhaps more important in H&L industries than in others, as employees are the mouthpiece of the company with customers; however, because large numbers of employees are geographically dispersed across properties around the world, the challenges of communicating effectively are significant.

• Higher retention, less turnover, increased tenure
It is no surprise that employee turnover is an expensive proposition. One study showed that front desk personnel at hotels could cost more than $6,000 - $11,000 to replace, excluding salary6 . Even wait staff can cost more than $1,300 and sales clerks more than $3,3007 . Longer tenure in guest-facing employees will also lead to a more seasoned workforce who can handle the inevitable complications with guest service that can arise. This can mean the difference between a happy guest and a dissatisfied one. How can turnover be reduced? One way is by improving employees’ experiences, working proactively to develop their career options and skills, creating a sense of community and generally improving the employer/employee relationship.

Royal Caribbean, for example, is extending Intranet access to the crew. Its newest ship, Radiance of the Seas, has Intranet access in each crew cabin. This allows crew to stay in tune with the latest company news. Moreover, it allows the mostly international work force to keep in touch with friends and family during extended stays at sea. Says Royal Caribbean’s Director of Employee Transformation Julie Ponder, “We are very aware that our employees and crew need the tools and support to keep them motivated and happy while they perform their jobs under demanding circumstances. This technology helps us keep in touch with them wherever they are in the world.”

So critical is this employee relationship that when Royal Caribbean embarked on a major IT transformation, employee projects were among the highest priority. “Our business requires that we use the latest technology to stay in touch with our employees, whether here in the office or out at sea. Whether it is a portal, workflow or Intranet sites, it is a key to our company’s success,” said Tom Murphy, CIO of Royal Caribbean. Royal Caribbean is working on implementing everything from knowledge management to employee self-service. Julie Ponder said, “It is our objective to make it easier and more efficient for our people to take advantage of the knowledge and benefits that are available. This is a multi-faceted approach, but it is all built on the foundation of our objective to improve employee connectivity.”

• More efficient back-office admin.
No matter how satisfied an employee is, taking care of administrative matters takes time and money. These transactions, such as enrolling in a 401K or changing an address, are often cumbersome and require the attention of professional staff in the HR, finance or benefits departments. It also keeps these professionals from focusing on tasks of strategic value and complex service issues requiring the direct contact of a person. Worse, these transactions are prone to error. The result is increased cost and complexity of delivering services to employees, which downstream undoubtedly impacts employees’ deliveries of service to guests. Leading H&L companies are recognizing this and are streamlining their back-office functions, notably introducing process improvements and increasingly self-service capabilities.
• More satisfied guests

Of course the ultimate objective is satisfying guests, and nothing achieves this better than strong personal contact between a guest and an employee. Often it’s how an employee deals with a guest’s problem. Notes Prof. Timothy R. Hinkin, Cornell Hotel School’s Department of Management, Operations and Human Resources, “Sometimes the most loyal customers are those who have experienced a problem and had it effectively solved. With service recovery, if you are going to err make it in favor of the guest.”

So just what is the role of B2E in enabling a more knowledgeable and trained work force, facilitating better communications with employees, improving the employee/employer relationship, increasing back-office efficiencies, and ultimately increasing the level of guest service? First, we’ll define and discuss the evolution of B2E.

The Evolution of B2E
B2E has evolved over the last few years. It was born as Business to Employee in its first iteration as a simple Intranet. It was an effort to use what was then new Internet technology to allow businesses to communicate with employees. Businesses posted mostly internal information for employees to look up. Human resources was often the most active beneficiary, posting company policies and insurance changes in an effort to reduce the number of phone calls and paper memos and to reach employees who were on the road. As the first effort to bring Internet technology and employees growing familiarity with it into the workplace, business to employee was hugely successful and produced massive savings for companies who were able to use it well. Enthusiastic users were eager to use the technology, but it was largely one-dimensional.

As the technology continued to grow, people began to realize more significant ways to use it. Business to Enterprise evolved into a vehicle for companies to share important business information with their employees. Sales forecasts, product launches, personnel changes and reorganizations were reported to employees via the Intranet. E-mail was used to alert employees to go to the Intranet for important news. We saw the beginning of integration. Business to enterprise is the current state-of-the-art and many companies are using it to transform the way they work and harness the power of the Web to change business processes.
Business to Everything is coming quickly and will allow suppliers, customers and employees to work together in ways we could only dream of just a few years ago. Business to everything is changing the world of work and the way people live. B2E is about competitive advantage via people, enabling employee relationship management. It’s about connecting and aligning workers, communicating the enterprise strategy, enhancing the employee experience and mobilizing a global work force. It’s also about worker productivity, cost containment and driving operational efficiencies.

Today, B2E solutions may incorporate one or more of the following:

  • Employee/enterprise portal
  • Web-based self-service (i.e., HR, finance, procurement, travel and more)
  • Integrated content management
  • Knowledge management
  • Workforce analytics; data warehousing
  • Access solutions (i.e., mobile access, kiosk access, home PCs and more)

The B2E portal (or enterprise portal) is the latest iteration of businesses rushing to take advantage of not only new technology but also a new mindset in their employees that reflects growing comfort with the Internet. B2E portals enable companies to operate internally at Internet speed, by providing employees with immediate access to the information, the tools and self-service applications they need to be effective. The portal serves as the heart of an overall B2E program, providing a single point of entry, aggregating and personalizing content, managing security, presenting a common look and feel, and providing a scalable and extendable technology platform.

A B2E portal provides a/an:

  • Single channel for communicating with employees - instantly, consistently, globally
  • Platform for a new way of doing business through access to information anywhere, anytime
  • Link between employees and their customers and suppliers, internal teams, tools and work
  • Approach that moves work to the Web, reduces work, slashes cycle times, cuts costs and increases revenues
  • Foundation to deliver integrated, cross-functional information and services
  • Vehicle to e-enable the organization, bringing e-business inside for the employees
The Adoption of B2E
Companies are increasingly taking on B2E initiatives:
  • 55 percent of large companies have portal projects today and 25 percent more are planning portal projects in the next two years-Delphi Group
  • 85 percent of companies plan to implement a portal by 2004-Meta Group
  • 67 percent of large companies have a portal strategy; 19 percent of companies have implemented employee and managerial self-service transactions; 71 percent of companies plan to add this functionality-Hunter study
  • 92 percent of companies expect to implement e-learning solutions-IOMA Report

Consider Hewlett-Packard, for example. HP implemented an enterprise-wide B2E portal that was deployed globally in multiple languages. It generates more than 3 million clicks daily. HP estimates that it saved $75 million by moving personal functions onto the Web, $10 million alone by letting employees log their hours online rather than on cardboard time cards. A critical element in the business strategy was to reinvent the company and drive cultural change. In the process, HP improved the quality of and access to data and increased the capability for employees to access company information anywhere. HP’s Susan Bowick notes, “The B2E portal is truly the freeway now for all employee functions...using this as the central place for employee information and transactions. Employees have unlimited, seamless access to everything they need for their jobs and to run their personal lives.”
A telecommunications company estimates that its B2E solution (portal, knowledge management, e-learning and HR self service) will save $6 million annually in hard cost savings through server consolidation, HR headcount reduction, training cost reductions and reduction of mass e-mail distributions. This company estimates that it will save twice that amount in employee productivity enhancements through the likes of faster on-boarding of new hires and reduced time for information searches. The investment will be recouped within a year of implementation.

The Application of B2E in H&L
B2E solutions aren’t just for high-tech companies. In fact, they’re of particular relevance in H&L industries. Not surprisingly, however, H&L companies have been later than those in other industries to embrace this mindset. “There are few hospitality organizations at the cutting edge of technology,” says Cornell’s Professor Hinkin. “This is because many existing systems do not add the value necessary to substantiate their purchase. For technology to be accepted and utilized by employees, it must be simple and easy to use. A single portal that would integrate a variety of systems such as training information, compensation and benefits, e-mail, scheduling and company news could provide great benefits to a lodging company. Many of these systems may currently exist in an organization, but it is the interconnectedness that makes them usable that is missing.”

B2E portals are an efficient and effective way to deliver product information, company goals and initiatives, stock performance, corporate financial information, competitive intelligence and rules, policies and procedures. They can help create an agile, knowledge-rich work environment that attracts and retains the best and brightest.

Moreover, communications can be tailored to the audience. A global lodging company that operates multiple brands, for example, can deliver company-wide messages while at the same time tailoring other content to the employees of a specific brand and/or particular property. These communications can be further tailored to the type of employee—front desk, reservations, management—or even to a specific employee. B2E portals are an ideal way for franchise operators to communicate and work with their franchisees.

B2E portals can also serve as a virtual water cooler for employee feedback and support. Familiar Web tools such as discussion forums, news groups, instant messaging and Web conferencing can be employed. These all serve to increase the sense of community and connectedness of employees in a large, geographically dispersed organization.
In addition, B2E portals are ideal channels for delivering computer-based training and development tools directly to employees. Online training can support both property-based technologies such as property management systems and POS as well as centrally housed systems such as central reservations and e-procurement. Just-in-time training can have an impact on guest service delivery by arming staff with the skills and knowledge they need, when they need it.

As mentioned earlier, B2E fosters an approach that moves work to the Web, reduces work, slashes cycle times and cuts costs. Moving work to the Web means transforming work processes into Internet-/Intranet-enabled self-service processes, often replacing bureaucratic processes with self service.

Let’s consider Royal Caribbean once again. Their fully integrated job posting and requisition system has eliminated the paper processes of the past. With the recent implementation of a PeopleSoft HRMS, Royal Caribbean was able to perform the salary budgeting process in record time with little paper. With the implementation of the Internet version of PeopleSoft later this year, they will have an electronic benefits enrollment with less cost and effort than ever before.

Las Vegas’s Bellagio Hotel is another good example. They had a monumental task before they opened—hire 9,600 staff. Arte Nathan, then the VP for human resources, and his team put in place a program that screened 84,000 applicants in 12 weeks, interviewed 27,000 finalists in 10 weeks, and processed 9,600 hires in 11 days. How? They moved everything online. This program was so successful that MGM, who subsequently purchased Bellagio, is deploying the technology across 15 more properties.

Overall Portal Capabilities
There are numerous vendor offerings and implementation alternatives to consider when deploying a B2E portal solution. Some key portal framework capabilities include the ability to:

  • Provide a mechanism to categorize content through a Yahoo-like structure that organizes information using a taxonomy;
  • Publish and manage content in an integrated fashion using workflow technologies;
  • Personalize the user interface and content delivered by role, individual preference, organization, security profile, etc.;
  • Provide or integrate collaboration tools such as discussion forums, news groups, calendars, e-mail, etc.;
  • Syndicate content across organizational boundaries;
  • Include globalization capabilities such as support for multiple languages;
  • Provide integrated search capabilities across multiple information repositories;
  • Employ an extensibility framework via modular components (sometimes called gadgets); and
  • Employ standards such as XML and a plug and play architectural approach.

There is no industry in which employees and customers are in closer contact than in hospitality and leisure. There is no industry as dependent on its employees for customer satisfaction than hospitality and leisure. Each contact with a guest is an opportunity to differentiate the product, delivery superior service, make a guest happier, earn a repeat customer and cross- or up-sell. Employees who are better prepared, better supported, have information at their fingertips and have few distractions are in a position to deliver superior guest service.

Developing employees and supporting them with targeted B2E solutions can accelerate the professional growth of employees and increase the quality of the workplace. In addition, turnover costs, training costs and transaction processing costs can be reduced. The convergence of Internet technology, wireless capabilities and portal software products have created a new opportunity to efficiently deliver the right tools and information to employees, anywhere, anytime.

For more information please contact Marvin Erdly, partner, Hospitality & Leisure Industry, Pricewaterhouse Coopers (703) 641-5544, marvin.erdly@us.pwcglobal.com. He can also put you in touch with the other contributors.

1 Investigating the Relationship between Employee Satisfaction and Guest Satisfaction (Spinelli and Canavos, Cornell Hotel and Restaurant Administration Quarterly, December 2000), pp. 32-33.
2 Ibid. p. 33
3 Back to the Farm Rosenbluth International, a $2.5 billion travel service business, combines plain-and-simple values with cutting-edge technology. It’s a down-to-earth strategy designed to take the company back to the farm. by Rob Walker, FC issue 7, p. 110.
4 Spinelli and Canavos pp. 32-33.
5 Down-Home Food, Cutting-Edge Business - Applebee’s Neighborhood Grill & Bar may serve old-fashioned food, but its approach to strategy is a model for the future. by Jill Rosenfeld, FC issue 33, p. 56.
6 The Cost of Turnover – Putting a Price on the Learning Curve. Hinking and Tracey, Cornell Hotel and Restaurant Administration Quarterly, Dec 2000, p. 18.
7 Ibid.

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