Analyzing Management Practices in the Hospitality Industry: A Case Study of Mantra Group

Introduction

The aim of this paper is to analyze management practices at the Mantra Group, one of Australia’s biggest companies in the hospitality industry. The Mantra Group operates three successful brands, Peppers, Mantra and BreakFree. With 20 years of industry experience, it boasts a network of 140 hotels, resorts and apartments. The decision to focus on a company in the hospitality industry is based on the fact that there is growing literature on the differences in application of total quality management (TQM) in manufacturing and service sectors. Hospitality industry managers often find such application to be a challenging yet highly rewarding task. This paper attempts to document such challenges and offer creative solutions for overcoming them based on primary data collected through in-depth interviews with Mantra Group managers and on-site observations. The interviews have taken place at a Mantra Group’s hotel at Brisbane, Mantra on Queen. Main topics discussed were various management styles, involvement of employees in decision-making processes, customer service excellence, and job design. The paper has the following structure: first, relevant literature on the subject of TQM is surveyed, particular attention being paid to the peculiarities of TQM application in the service sector and Baldrige’s (1987) and Lakhe and Mohanty’s (1995) models; secondly, theoretical models and observations are applied to analyzing interviews with Mantra on Queen’s managers with a view to making conclusions about management practices in general and TQM in particular at the Mantra Group; and, finally, an overall assessment of the effectiveness of management at Mantra on Queen hotel is provided in the concluding section.

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Literature Review

TQM Concept

Total quality management (TQM) is a management philosophy that focuses on embedding principles of quality and commitment to long-term success through customer satisfaction and corporate citizenship on the part of all organization’s members. Under TQM, stakeholders’ needs should be met without violating ethical norms and societal values. The main underpinnings of TQM are customer focus, visionary leadership, employee involvement and ownership of decisions and innovations, process approach, system approach to management, continual improvement, factual approach to decisions, and mutually beneficial ties with suppliers (Chartered Quality Institute 2008).

The benefits of TQM are widely recognized by leading business consultants and practicing managers worldwide. They include enhanced competitiveness; growth and longevity of a firm through more productive corporate culture; reduced stress, waste and friction; and partnership and cooperation at all levels of organization as well as with external stakeholders (Chartered Quality Institute 2008).

Theoretical Models of TQM

The aforementioned principles are embedded in one of the most developed models of TQM, namely the Baldrige model. Elements such as “focus on employee well being and motivation, and attention to the design of work systems and their linkage to other categories, such as process management” (Evans & Jack 2003, p. 18) are of paramount importance according to the model. Formally, the criteria for the Malcolm Baldrige National Quality Award are as follows: leadership; strategic planning; customer focus; measurement, analysis, and knowledge management; workforce focus; process management; and results (Baldrige National Quality Program 2010).

It is important to focus on leadership because of its ability to create an environment necessary for quality improvement: fear-free, supportive, self-directed, and innovative, as Zairi (1999) has discovered in his study of leadership practices at Motorola, a company noted for its consistent application of TQM principles.

The importance of processes management can be explained by the multifaceted nature of the concept: it encompasses a “structured approach to analyze and continually improve fundamental activities such as manufacturing, marketing, communications and other major elements of a company’s operation” (Zairi, 1997, p. 64).

The importance of focusing on workforce is associated with the fact that quality should become a preoccupation of every individual employee. In a study of human resource practices at Baldrige award-winning companies, Blackburn and Rosen (1993) have discovered that several features they all had in common were the ability to communicate the importance of each worker’s contribution to total quality, a focus on quality-related synergies made possible by teamwork, empowerment of employees to “make a difference”, and reinforcement of individual and team commitment to quality by a wide range of instruments.

Another useful and more recent TQM model has been proposed by Lakhe and Mohanty (1995). They argue that total service quality measurement (TSQM) is a function of top management commitment response (CR), product and process improvement (PPI), human resource excellence, customer orientation response (COR), and economic advantage (EA). This functional relationship is represented by Equation 1.

Top management commitment response (CR) implies that leaders of an organization incorporate quality into company’s vision and mission. In addition, they make quality their personal preoccupation on a daily basis and allocate sufficient resources to quality management and measurement. Equation 2 represents top management commitment response, where TD is time devoted, RA is resources allocated and PE is personal effort.

The second element of the model, product and process improvement, consists of enhanced reputation, reduced liability risks, decrease in number of customer complaints, smooth delivery of services and enhanced customer response. Equation 3 represents it mathematically, where R is the reputation, LR is the reduced liability risks, CC is smaller number of customer complaints, D is smooth delivery system, and CR is strengthened response from customers.

Human resource excellence can be perceived as improvement in communication, training, information, and accountability. Equation 4 represents this element of the model, where C, T, I and A stand for improvement in respective areas.

Customer orientation response depends on customer satisfaction and cohesive workforce. It can be achieved through competent and committed staff. Therefore, equation 5 describes customer orientation response as a function of customer satisfaction (CS), employee satisfaction (ES), and cohesive workforce (CWF).

The economic advantage relates TQM to positive change in sales, reduction in costs, and increase in value of services. This can be represented mathematically as equation 6, where CS is the change in sales, C is the reduction in costs and VS is the increase in value of service.

The Baldrige model is considered the classical one in TQM, while the model described above is more recent and more elaborated. Yet, as further analysis will show, the two models are in fact complementary. In applying the theoretical basis in the process of data interpretation, references to both models will be made.

Application of TQM in the Service Sector

The TQM concept has been initially applied to manufacturing; however, services industries have shown a growing interest in TQM practices for several decades already. As Joby (2003) informs, “TQM is practiced extensively by airlines and hotels in the service sector, for example, as they seek to maximize the returns from assets by maximizing the utilization of capacity at maximum margins” (p. 127). Difficulties exist with application of the TQM concept in the service sector in general and hospitality industry in particular:

“TQM originated in a manufacturing environment and its terminology and techniques have largely been developed in that environment. Its application in a service environment thus requires adaptation of the ideas to a different set of circumstances” (Saunders & Graham 1992, p. 245).

As Jessome (1988) observes, service industries have less control over factors which have an impact on quality. Thus, they are characterized by a higher level of external uncertainty, for the reason that services cannot be stored for later, and customers participate in the process of product creation. One more difficulty is associated with the fact that standards are difficult to set, conform to, and measure due to intangible nature of products. Expectations vary from customer to customers and often remain unknown or unstated: subjective nature of service quality makes it even more difficult to assess. As Joby (2003) notes, “[a]n important consequence of the inherent characteristics of services and of service components in products is that the product cannot be produced without customer interaction – production and delivery processes of services are idle unless a customer is being served” (p. 126). Witt and Muhlemann (1994) sum up the issue by stating that the “underlying problems...[of TQM in service industries]...are subjectivity of assessment and heterogeneity of customers, making measurement of effectiveness and quality extremely difficult” (p. 420).

Despite all the problems with implementing TQM in the service sector, many hotels have made a commitment to quality in the form of integrating concepts and tools of TQM. Customer-focused companies in all sectors should base their TQM techniques on knowledge of customer behavior with a view to creating and delivering superior customer value, which in the end leads to the ability to sustain profits for the long term (Barrick, Ryan & Schmitt 2003).

There is a growing consensus that one of the most challenging aspects of the hospitality business is demand and capacity management. For a number of reasons, fluctuating demand is an inevitable fact of life for businesses (Gee 2005). For companies in the service sector, the demand-supply mismatch can lead to a situation when profits are not maximized. In the hospitality industry, TQM appears to be a very useful tool for eliminating this mismatch. Better planning and customer retention are elements of the TQM concept. Demand management, in accordance with TQM principles, should aim at managing volumes and revenues with a view to maximizing long-term profits. Capacity management should aim at minimizing costs of production along with maximizing utilization of value-creating assets. Customer-focused organizations seek to understand customer behavior in order to increase the effectiveness of managing demand and match demand and capacity in a cost-effective manner without compromising customer experience (Barrick, Ryan & Schmitt 2003).

It may sound as a paradox, yet not all customer interactions with a company are of critical importance to customer experience. In order to prioritize the attention of capacity management practices, it is important to focus on those customer interactions that are likely to be critical incidents. These incidents are referred to as “fail-points”. Moreover, costs of value-creating factors for those “fail-points” have to be ascertained by answering the key question of what the feasibility of stretching or shrinking the productive factors is. Costs and customer value are affected by shrinking or stretching for each productive factor (Mwaura, Sutton, and Davis, 2004).

Thus, there are many notable differences between applying TQM in manufacturing and service sectors. While the foundational principles are the same, and TQM can be applied in any sphere (as evidenced by the fact that the Baldrige award is conferred in business, health care, education, and nonprofit sectors), there are some sensitivities to be kept in mind when analyzing companies in the service sector. They will be elaborated on in the process of presenting the results of interviews with Mantra Group’s managers.

Company Analysis

This part of the paper applies the theoretical models presented in the previous section to analyzing management practices and TQM at a Mantra Group’s hotel. While benchmarking is also an aspect of TQM, several examples of best practices from the most successful hotels worldwide will be discussed.

Applying both models to analyzing how Mantra Group incorporates TQM in its service delivery, it is first of all necessary to look at top management commitment response (or leadership in the Balridge model). Managers at Mantra on Queen were well aware of the fact that they should make improving hotel services their primary objective. They have reported that the quality of hotel services is on agenda at every high-level meeting and that they devote their personal time, attention, and resources to improving quality. This is very much in line with Witt and Muhlemann’s (1994) suggestion that “[t]op management should demonstrate con­tinuously total commitment to quality and this should be used in part to motivate the rest of staff” (p. 422).

As for the second element of Lakhe and Mohanty’s (1995) model (or process management in the Balridge model), product and process improvement at Mantra on Queen always starts with identifying major problems with a particular service and looking for effective ways of correcting them. Quality control is implemented for all services, from reception to catering. In extensive discussions about standardization of services, the managers have acknowledged that the three brands the company operates are very different, and the organization’s structure, polices and procedures, training programs, corporate culture, and product offerings are modified for each brand. However, inside each of the three brands, a high level of standardization is seen as desirable. These findings are in line with Witt and Muhlemann’s (1994) observation that processes should be “standardized wherever possible to ensure consistency of delivery but not to the extent of losing competitive advantage, or in conflict with the organization’s strategy” (p. 422).

Finding the right balance between standardization and flexibility of services is a well-known dilemma in the service sector. As Carman and Langeard (1980) warn, “[s]tandardization and specialization create a working environment that lacks flexibility, and any adjustment of the offering is a difficult and hazardous task” (pp. 8-9). When asked to comment on the issue, the managers have reported facing this dilemma. However, they believe that standardization is key to customer retention, since returning customers can be sure they receive the same service as last time if they choose a familiar brand. Thus, a conclusion can be made that if effective process standardization can be achieved without compromising quality and flexibility, it enhances organization’s competitive edge. For instance, Avant Hotel in the UK, the first hotel to received British Quality Standard 5750, focused on “quality specification for each product, determined assignable causes of error and identified ways of improving product performance” (Motwani, Kumar & Youssef 1996, p. 9).

The next principle in Lakhe and Mohanty’s (1995) model is customer orientation response (or customer focus in the Baldrige criteria), which implies motivating hotel staff to provide exceptional customer services. A sense of strategic direction, organizational alignment, and focus on effectiveness should be developed in all employees. The managers have reported treating customer complaints very seriously: employee’s contract can be terminated if they treat customers in a disrespectful or neglectful manner.

Moving on to other elements of Lakhe and Mohanty’s (1995) model, human resource excellence (or workforce focus in the Baldrige model) at Mantra on Queen is achieved through training employees in both technical and interpersonal skills. It is of vital importance that hotel staff speaks other languages in addition to English. The managers have reported encouraging their employees to enroll in language classes by a variety of means. Unfortunately, all of these measures are rather informal; they are not institutionalized yet. While Mantra Group’s top management believes that English is sufficient for most hotel employees, managers of individual facilities often try to hire staff with specific language skills that are needed in their locality or train employees in such languages. In such a way, personal development of employees is linked to the development of the company.

The managers have reported that reasonably quick career progress is possible at the Mantra Group. Most of the interviewees have started at one of Group’s hotels as junior employees and became middle or senior management within five, ten, or fifteen years. They have voiced a general satisfaction with their company’s corporate culture. A productive corporate culture is of paramount importance for TQM. Fostering a sense of belonging and increasing productivity can be achieved through “employee share-ownership, quality circles and excellence teams, joint labor-management consultative committees, autonomous work groups and other forms of worker participation” (Baldacchino, 1995, p. 68).

Out of all the aforementioned measures, Mantra on Queen’s managers have reported using only several. The first one is frequent consultations between employees and management. These consultations usually take place on an informal basis, and a lot depends on personal characteristics of individual managers. However, such consultations are embedded in the overall culture. The second measure used at Mantra on Queen is close to the idea of quality circles. Self-assessment and assessment by colleagues are being increasingly used; together with customer feedback, it is a good way to ensure collective accountability.

The managers at Mantra on Queen have all acknowledged that participation of employees is crucial for ensuring quality. Therefore, the overall management style can be characterized as participatory management, although elements of other styles are also present, mostly of administrative management. Mantra on Queen’s managers believe that some approaches of administrative management are impossible to avoid in a large organizations like their, although most of them personally prefer the so-called “flat” organizational model. They see employee empowerment as a powerful tool for achieving smooth running of all operations. It is true that if employees set their own customer-orientated standards according to what they believe are objective measures of guest satisfaction, overall effectiveness can be greatly improved (Witt & Muhlemann 1994).

Such an approach of Mantra on Queen’s managers is evident in their use of quality circles. They have reported communicating the importance of excellent customer service to their employees on a daily basis. They believe it is important that employee perceive culture of TQM as a necessary and beneficial element of providing customer service. They deem that the culture change should not be presented as a top-down initiative: employees should be encouraged to take part in implementing TQM and maintaining service excellence. This is in line with the following findings:

“No coercive instrument is likely to be devised to promote and ensure total customer care, total employee commitment and a thorough ‘problem-owning’ disposition which spills over from management to the rank and file” (Baldacchino 1995, p. 67).

Witt and Muhlemann (1994) emphasize that developing a culture of TQM involves communicating TQM strategy to all employees and stakeholders, determining clear internal and external expectations, promoting job enrich­ment, using teamwork where possible, encouraging employees to develop ownership of processes which they work with and be responsible for satisfactory delivery.

Since the notion of job enrichment has been mentioned, this is a good opportunity to discuss job design practices at Mantra on Queen. Although the perceived level of job satisfaction among employees is high, some measures are employed to make workers more motivated and committed. The most popular of them is job rotation: since most of the Group’s hotels are located in areas marked by historical interest or exceptional natural beauty, both junior and senior employees are often offered an option to work at a different hotel for half a year. Such a measure allows them to explore new localities, facilitates their training, and strengthens the overall corporate culture at the Mantra Group.

Mutually beneficial relations with suppliers and wholesale customers is another aspect of TQM, although it does not constitute a separate element of any of the models. At Mantra on Queen, all managers are required to treat suppliers in an integral manner, in the light of recognition of the importance of strategic partnership with key contractors. As for relations with wholesale customers, Mantra Group has established more than 300 international and domestic wholesale programs. Mantra Group’s central reservations system links properties to more than 4,000 travel agents worldwide.

The managers at Mantra on Queen have recognized the importance of good relations with suppliers and wholesalers for a variety of reasons. Apart from the obvious consideration about accelerating sales, the Mantra Group is interested in attracting smaller hotels into to its network, thus enhancing its profitability and leverage. Good base of suppliers and wholesalers is one of the main features that persuade smaller hotels into joining the Group.

Conclusions

Overall, the Mantra Group appears to be a company that implements TQM principles in a consistent and creative manner. Although the size of the sample does not allow drawing generalized conclusions, the company’s corporate culture is propitious for quality improvement. The organization is characterized by participatory management style, utilization of various approaches to job design, customer orientation, and effective process management. Both horizontal and vertical communication seems to take place smoothly. The level of job satisfaction is assessed as high; additional measures to increase motivation and commitment are in place, such as encouraging employees to take ownership of their decisions or form quality circles. Although there are difficulties with service standardization and customer satisfaction assessment in the service sector, TQM is a very useful tool for enhancing performance of firms in the hospitality industry.

 
References

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