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by Mark Heymann
(this article appeared
originally in a national hospitality
publication)
Costs. You can control them now or cut
them later. “That statement rings
all too true for the hospitality operator
in today’s highly competitive marketplace.
Unfortunately, the terms “control”
and “cutting” are often used
interchangeably, as if they involved the
same actions and decisions. They don’t.
An
operator’s objective should be to
establish a systematic approach to managing
resources that are used in meeting market
strategy. Only by using such an approach
can the ever-present control issue be
addressed effectively. A system based
on timely planning and effective evaluation
procedures can reduce the occurrence of
those memos telling you to cut costs because
profit margins are unacceptable.
Most
of us have seen or implemented cost-cutting
measures at some point in our careers.
Layoffs, schedule cutbacks, purchasing
adjustments-such steps cut costs, all
right. But where does that leave quality?
When does that vital issue come into play?
Sadly,
not often enough - or worse, at too late
a date. Furthermore, it is difficult to
determine the impact that cost-cutting
measures will have on future business.
What
is needed is a consistent, ongoing policy
that focuses on maximizing profits through
the use of cost control.
The
trick is to achieve cost-minimization
while maintaining consistent service levels,
regardless of fluctuations to volumes
or revenue. To accomplish it, an operation
must be evaluated in terms of “real
productivity,” as opposed to cost
percentages or expenses compared to the
budget.
When
we say “productivity,” we
mean it in the classical sense, i.e.,
“output” as it relates to
“input.” In the hospitality
industry, outputs include customers served,
rooms cleaned and guests checked in. Inputs
would be labor and supplies.
Cost
Versus Income Misleading
We
must refrain from using cost and-income
relationships in the initial evaluation-they
can give contradictory signals. An occupied
room must be cleaned whether it generates
a $35 or an $85 rate; a restaurant guest
deserves quality service whether he orders
a full meal or just a cup of coffee.
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addition, average hourly rates or changes
in the prices of goods do not affect resource
needs, unless management decides to change
standards in response to these variations.
Such changes can have an impact on market
position and competitive strategy, which
is often not the objective of the action.
By
measuring cost-control performance without
dollar and percentage signs, you can evaluate
your managers against factors they have
control over-specifically, the resources
required to give quality service according
to the standards you’ve set for
your property.
First
Step Toward Control
This
“real productivity assessment”
is the first step in controlling and improving
costs. It is with this approach that one
can ensure that cost changes are no longer
the primary guide for planning action.
If,
for example, your standards require performance
of 16 rooms per maid/per day, then this
should be what management is held accountable
for. Moreover, this approach allows one
to evaluate procedures that are property-or
operation-specific, rather than using
industry norms. If productivity ratios
are correct, but final profit relationships
are not what you require, the problem
is either in the revenue portion of the
profit equation or in your service strategy-not
with the cost component. A different plan
is needed to correct the problem; cutting
costs isn’t the answer.
It
has been our experience in working with
hotels and restaurants that utilizing
the classical view of productivity will
have a positive effect on both profits
and service quality. Assess your real
productivity as described above-leave
the percentages to the accountants.
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