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Hotel Owner Jeff Vander Wolk Employee Bonus Program
 Makes Running the Governors Inn in Santa Fe Very Easy
By Kathaleen Roberts, Albuquerque Journal, N.M.
Knight Ridder/Tribune Business News

Aug. 30, 2005 - SANTA FE, N.M. - The first year the Inn of the Governors launched its employment laboratory in downtown Santa Fe, its human guinea pigs took home $3,000 bonuses.

This year, those employees will likely fetch $4,500 in profit sharing.

"It makes running a business very easy," hotel owner and chief researcher Jeff Vander Wolk said. "You have a wonderful rapport with your people."

It also makes sound business sense, he maintained.

In June, the hotel logged a 90-percent occupancy rate, compared with a downtown average of 77 percent, according to the Rocky Mountain Lodging Association. Turnover among its 80-some employees is minuscule, with the average worker spending 4.3 years at the inn, compared with an industry average of 2 years, manager Sam Gerberding said. This month, Yahoo rated the Inn of the Governors Santa Fe's No. 1 hotel on its Web site, travel.yahoo.com.

Vander Wolk based his employee reward system on the management philosophy of W. Edwards Deming, which has been widely adopted in Japan, mostly famously by Toyota. Deming believed companies could boost both business and employee morale by fostering teamwork.

"Toyota paid $8,000 per employee last year," Vander Wolk said. "They put a better car together than Detroit in one-third the time."

Two years ago, Vander Wolk capped the amount of profit the hotel keeps, using any surplus for incentives. Employees share about 70 percent of that surplus profit in bonuses or "gainshares." Managers set aside 30 percent in a growth fund for future investment opportunities in which the staff can participate.

In November 2003, the month the program started, the hotel made $1.8 million annually. As of June 30, annual income climbed to $2.2 million, Vander Wolk said. Last month, the business was $40,000 ahead of July 2004, he added. June's bonuses topped the previous years' by about $300, Gerberding said.

"Everybody in this hotel is going to work very hard to earn that money," Gerberding said. "Vander Wolk is saying, 'I want you to protect me from a downturn in the economy. And I'll reward you for that creativity.' In a way, he looks at the employees as the stockholders."

The hotel also started a series of workshops led by Connecticut-based Matthew Cross. Employees learn about long-range financial planning and setting career goals. Cross based his workshops on Deming's philosophy.

"If you focus on the people and on the quality of your service, the quality of business and the quality of profit will come," he said.

Although Deming's ideas make good long-term business sense, American business has been reluctant to adopt them because of a myopic focus on short-term profits, he added.

"And yet the short-term focus has led us to Enron," Cross said.

Bar and restaurant shift supervisor Lauren Yannarella started out as a waitress in the hotel's Del Charro Saloon a year ago. She had worked at hotels where treating yourself to a free beer was a common employee practice.

"I don't notice any stealing here, which I've seen everywhere," she said. "It's coming out of your paycheck."

One bartender gathers all the hotel pens he has pilfered and returns them in a bag every six months.

"I put them out in the restaurant," Yannarella said. "We want our guests to take them, but there's no need for each of us to have 50 in our home."

Yannarella used her $1,200 bonus to pay for a cruise.

Although it differs in structure, the El Rey Inn on Cerrillos Road also offers employee profit-sharing. Owner Terrell White launched the program in 1981 by investing a percentage of the payroll in a long-term growth fund. To date, the hotel has paid out $1.5 million to its employees when they retire or leave the company.

"Some years, we have no turnover at all," he said. "Overall, it makes the company more profitable because it creates a much higher level of service."

Vander Wolk wants to set up a foundation to teach other companies how to follow his example. In the meantime, he recently purchased the Sage Inn, located at Cerrillos Road and Guadalupe Street. He plans to establish a similar business model there.

Front desk clerk Michael Lane worked at four hotels before landing at the Inn of the Governors a year and a half ago.

"It's more of a family-type atmosphere," he said. "We have our manager's respect. It's probably the best group of people I've ever worked with."

Lane spends his bonuses on vacations to Las Vegas, Nev. He's also used them to pay off credit card bills.

"I think I will stay here for a while," he said. "I've been here longer than any other hotel I've ever worked at."

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To see more of the Albuquerque Journal, or to subscribe to the newspaper, go to http://www.abqjournal.com.

Copyright (c) 2005, Albuquerque Journal, N.M.

Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail [email protected]. YHOO, TM, 7203,

 
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