The Palm Riviera Resort (The Resort) is a hospitality organization, a subsidiary of a global resorts group headquartered in Europe. The group serves a diverse array of patrons with highly skilled chefs and other staff. The group’s strategy is the high focus on exceptional customer care, and smooth customer experience. The Resort is one of the flagship brands and sites of the group.
The resort has been established 12 years ago in the suburbs of Shanghai to serve the Group’s clients in the quickly growing Chinese market. Thanks to global key accounts and cheaper airfares, the business grew fast, and the Resort quickly became profitable and was more profitable than the group’s similar sized resort in Cappadocia, Turkey.
Things were going well, until the competitive pressure started to erode profits. The management and stakeholders looked towards the General Manager (GM) who was now looking more anxious than ever. The was consistently failing to meet the profitability expectations of the owners. The ownership eventually lost confidence in the management at the time and decided to make a change. The GM was replaced with a younger GM. Clients wanted a wider range of services but at competitive costs. Costs of doing business were increasing; staff cost was increasing; while holiday and normal sales were shrinking, causing the resort incur losses. Two previous GM’s have already failed to make the turnaround and got fired. Now it is the third General Manager, who is hired with the mission of making the turnaround. Failing to make profits in the last three years made the owners cautious about further investment, so the turnaround should be achieved with a low budget. Evaluate and recommend a model of change that might be utilised in order to develop an environment that would allow the organisation to be competitive.
Why is the Resort in crisis?
Based on the industry and economic factors, the Resort should still be profitable. Why is it in the red then? According to the HRD who has been hired one year ago, it was caused by bad leadership, by top management complacency, neglecting continuous improvement and development for many years. Realizing the ineffectiveness of top management, the owners made a major personnel change one year ago, replacing not only the General Manager, but also most of the Directors. The new Management Team – the GM and the Directors – agree that change is needed, and it is needed now.
Plans for the turnaround
The Management Team discussed about and decided the following changes:
- The workforce will be reduced to 600 (250 people will be laid off);
- Staff will be trained to handle more positions, so that they could be deployed more efficiently
- Business processes will be streamlined; there will be more detailed new KPIs introduced; P/L will be calculated for each service offered, and managers will be hold accountable for them
- Currently, overtime fee is a “standard employee benefit”, regardless of the actual need for overtime. This practice will be changed: overtime pay will be reduced to the necessary minimal.
The other changes must be implemented within the next 12 months, but there is no detailed schedule yet.
Current situation and challenges
According to the HRD, there are major roadblocks standing in the way of successful transition:
- The Management Team has consensus about the direction, but the new business processes and the future organizational structure have not been clarified and worked out in details, and it is not sure whether they will be able to come up with a convincing solution.
- The Middle Managers are not supporting the change. It seems they don’t want to understand the new direction. They are passive in the meetings, and skeptic or opposing one-on-one. They started as porters in the company for 10-12 years ago and have been gradually promoted to become managers. According to the observations of the HRD, many of them show very low managerial and leadership competencies. Many of them show little capability for independent thinking and decision making in general, and don’t have much influencing power with their staff members. Some of them may lack the potential to adapt to their expanded future managerial roles.
- The General Manager and the Directors are all task focused people with low “people” awareness and communication skills. They underestimate the resistance of the people. They don’t recognize the competency gap of the Middle Managers. They don’t think much about the communication strategy and the human aspects of change management.
- The morale is already very low in the entire resort. The planned changes would put higher demands on staff, while their income would decrease, or in best case equal their current income. This will very likely further undermine their motivation and productivity.
To ensure that the top management achieves success, you are expected to produce a 2750 word report. In this report you will be required to evidence the following with reference to the issues highlighted in the case study above:
Task 1 : Evaluate and recommend a model of change that might be utilised in order to develop an environment that would allow the organisation to be competitive. (60%)
Task 2: Analyse what might be the major resistance from employees on the recommendations made above and, using appropriate change models and interventions, how might the CEO mitigate this employee resistance? (40%)
Learning outcomes assessed
1. Explore and critically appraise strategies and methods used for the planning and management of change
2. Develop a plan to effectively manage a specified change.