Tough HR

J. Bruce Tracey, Ph.D.
Associate Professor of Management
Cornell University School of Hotel Administration

Forecasts for the industry are bleak – at best. The lead article in the December 2009 issue of the PKF’s Quarterly Trends stated that “US hotels are entering the initial stages of one of the deepest and longest recessions in the history of the domestic lodging industry.”[1] But most of us don’t need a trends report to know that things are tough. It has become increasingly clear that tough times call for tough measures. However, the tough decisions have less to do with managing budget cuts or making RIFs. Rather, the most important challenge for HR leaders to maintain focus on the things that matter most – your brand and your employees – and defend the policies and programs that add value to the firm.

We saw a similar situation after the tragic events of 9/11. Worldwide, the industry went into tailspin and recovery in some markets wasn’t realized until 2005. However, the firms which bounced back the quickest were those that stayed true to their ideals and didn’t compromise on HR programs that contributed most to their success. One of the shining examples from this time period was Four Seasons. While most firms put the axe to their training budgets – one of the first HR activities to be cut when the economy goes south – John Young, Executive Vice President of HR at the time, knew that the company’s service quality would be jeopardized if they scaled back. As such, Young, Ellen duBellay, Vice President of Learning and Development, and the rest of the corporate HR leadership, made what they knew to be the only right decision – find other ways to trim the HR budget, but don’t touch one of the activities was instrumental in driving performance and maintaining the brand.

Does this mean that training shouldn’t be subject to scrutiny? On the contrary – everything should be on the table (if it isn’t already). However, while the immediate term isn’t very pretty, we’ve seen this kind of situation before. As such, the first requirement for managing the current economic crisis – and there’s no question we’re in crisis mode – is don’t panic. HR leaders need to follow the Four Seasons example and maintain an unflinching focus on the core ideals and fundamental values that define your firm’s identity. Of course, this only applies if your firm has a strong culture and cogent brand. If not, then you’ve got bigger problems, and panic may be justified.

It is also critical that you have a clear understanding of the programs and policies that create economic value. HR leaders must be measurement savvy and be able to show – in rigorous, business-related terms – the ways in which the HR function contributes to firm performance. This doesn’t mean that presenting a laundry list of time-to-fill and health care cost statistics will provide the necessary foundation for justifying your efforts. You need to go well-beyond activity-based reporting and demonstrate how your firm’s HR policies, programs, and systems contribute to revenue growth, net operating income, EBITDA, and other outcomes important to c-level folks and ownership. Roger Ahlfeld, the Senior Vice President of HR and training at Uno Chicago Grill, provides an excellent referent in this regard. A couple of years ago, Roger and me (Note: I’ve worked with Roger for many years, and have been looking for the opportunity to steal the title from Roger Moore’s infamous documentary about the auto industry and use it in one of my articles. Not sure if it’s is appropriate here, but what the hell!) conducted an evaluation of one of Uno’s technical skill training programs for front-line service staff. We went well beyond an analysis of the “happy sheets” and competency assessments and utilized several rigorous and sophisticated analytic procedures to demonstrate that this particular program had a sustainable and long-term influence on lowering employee turnover and increasing store sales.[2] This effort was important not only for planning purposes, but instrumental in showing others in the executive suite that the company should maintain on-going investments in this program. Roger has repeated this process many times as a means for determining which functional programs contribute most to firm performance.

A third requirement for weathering the current storm, and a corollary to the “don’t panic” ideology, is to look for and exploit new opportunities. One silver lining of the current economic crisis is that many firms have been forced to scrutinize their HR programs as never before. Sacred cows are no longer sacred, and a lot of low-hanging and unproductive fruit has been pulled from the tree. As a result, you will certainly lower your expenses, but you will also be able to make distinctions between the nice-to-haves and the must-haves. So in the longer-term when the economy heats up, you will have established a clearer sense of priorities that enables you to make smarter investments in the activities that are critical to sustained firm success.

And finally, it’s vitally important to manage the fears and anxieties of your workforce. This is especially crucial if you’ve had to layoff employees or eliminate positions. The extent to which you manage this process effectively today will not only dictate how well you survive the current context, but also have important implications when business picks up. Employees can tell when senior managers try to sugarcoat bad news, so it’s crucial to communicate openly and maintain transparency about what is going on. Be specific with your plans and include timelines so that employees know what’s coming next. And you know, communication is a two-way street. You can learn a lot by listening to the concerns that are expressed by your staff – including those who may be displaced. By treating your staff fairly and with respect, commitment will grow and ultimately lead to improved productivity and higher service quality.


Professor Tracey may be reached at jbt6@cornell.edu


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[1] Eaton, B. (2008, December). “So Many Questions – Here are the Answers.” PKF Quarterly Trends in the Hotel Industry, 27(4), p. 1.
[2] For this study, we utilized econometric and time-series procedures to assess the impact of training, turnover, and sales over a 36-month time frame.