By Demian Hodari, Michael Turner and Michael Sturman
In the final article in a three-part series on the evolving relationship between hotel owners and operators, EHL professor Demian Hodari and his co-researchers explore how general managers can help bridge the divide between owners and operators.
In our previous articles in this series, we provided evidence from our research that owners are actively involved in property-level decisions, even when these are governed by hotel management agreements that formally prevent or limit their involvement. Furthermore, we demonstrated that such hotels achieve greater performance when their owners and operators are aligned with respect to the vision and goals for the property. We did not, however, discuss one role that is critical in implementing these goals and achieving superior performance: the hotel general manager (GM).
Most hotel property-level decisions are ultimately the responsibility of the hotel’s GM.
Independent hotels provide a relatively simple decision-making context for general managers as they report to only one principal – the hotel owner (or its representative). Hotels operating under a management agreement, however, involve a complex, tripartite relationship between the hotel owner, the management company, and the general manager. The GMs are often confronted with a difficult situation as they receive conflicting directives from the owner and management company representatives since their visions and goals for the property are often quite different. It stands to reason, therefore, that when there is greater goal alignment between the owners and the operators, a hotel’s general manager will be less conflicted about what objectives to pursue, especially as the aligned parties are more likely to send one clear management message rather than incompatible demands.
In addition, there would be less need for each party to seek to influence the GM, since they would be advocating the same decisions and objectives. Together, this greater autonomy and goal alignment should, in our view, produce a more consistent, cohesive and effective set of decisions by the general manager with regard to the hotel’s management.
We set out to find out if our hypotheses were accurate. Based on our survey, where we were able to get both owners and management company representatives from 64 hotels to answer questions about their objectives for their properties, the hotels’ performance and the GM’s decision-making autonomy, we were able to draw some interesting conclusions.
We found that owner-management company goal alignment was positively related with GM decision-making autonomy.
That is, the greater the alignment between owners and operators, the greater the GM’s autonomy. GMs therefore had less autonomy when owners and operators did not share as many of the same property-level objectives.
We also found that greater GM autonomy is positively related to performance.
In other words, the greater the autonomy, the better the hotel’s performance. This suggests that general managers who receive unified directives with a minimum of conflicting objectives, should be better able to pursue a cohesive plan for achieving superior operating performance.
Interestingly, we also found that as GM autonomy increased, so did the positive impact of goal-alignment on performance.
In other words, the more autonomy a GM had, the greater the positive impact that the owner-management company alignment had on performance. This suggests that such alignment proves particularly beneficial to a hotel when the GM is given as much free reign as possible.
Together, our findings demonstrate that GM autonomy is important to implement the goals of hotel owners and operators successfully. Such autonomy reinforces the notion that owners and management companies must agree upon a clear set of strategic and operational objectives for the hotel’s general manager, and then both parties need to let this person get on with the task of realizing them. Superior performance seems to be linked not only to goal alignment between the two sides, but to the autonomy given to the GM to pursue these objectives. Agreement between the management company and owners on strategic objectives is not enough to obtain a better performance if the GM does not have the authority to implement those objectives. While goal alignment is important, its true value may only be realized when it occurs simultaneously with greater GM autonomy.
Our study makes a strong case for providing GMs not only with a clear set of unified objectives, but also with more autonomy. GMs are thus recommended to, as far as possible, flag any misaligned goals between owners and operators, so as to reduce role ambiguity and/or conflict, as well as decrease the likelihood of leaving one or both sides dissatisfied.Similarly – though challenging as it may be, given our previous findings that owners and management companies both tend to get involved in property-level decisions – owners and management companies who have aligned goals should strive to remove themselves as much as possible from the day-to-day operations, allowing GMs to fulfill their positive role in achieving superior performance in such hotels.
Note. This article is based on the following research paper: Hodari, D., Turner, M. and Sturman, M. (2017). How Hotel Owner-operator Goal Congruence and GM Autonomy Influence Hotel Performance. International Journal of Hospitality Management, 61 (2), 119-128.