Case 7 THE REGENCY GRAND HOTEL

by Elizabeth Ho, Gucci Group, under the supervision of Steven L. McShane,

Curtin
University (Australia) and University of Victoria (Canada)
The Regency Grand Hotel is a five-star hotel in Bangkok, Thai land. The hotel was
established fifteen years ago by a local consortium of investors and has been
operated by a Thai general manager throughout this time. The hotel is one of
Bangkok's most prestigious hotels and its 700 employees enjoy the prestige of
being associated with the hotel. The hotel provides good employee benefits, above-
market rate salary, and job security. In addition, a good year-end bonus amounting
to four months' salary is rewarded to employees regardless of the hotel's overall
performance during the year.
Recently, the Regency was sold to a large American hotel chain that was very keen
to expand its operations into Thailand. When the acquisition was announced, the
general manager decided to take early retirement when the hotel changed
ownership. The American hotel chain kept all of the Regency employees, although
a few were transferred to other positions. John Becker, an American with I0 years
of management experience with the hotel chain, was appointed as the new general
manager of the Regency Grand Hotel. Becker was selected as the new general
manager because of his previous successes in integrating newly acquired hotels in
the United States. In most of the previous acquisitions, Becker took over
operations with poor profitability and low morale.
Becker is a strong believer in empowerment. He expects employees to go beyond
guidelines/standards to consider guest needs on a case-by-case basis. That is,
employees must be guest-oriented at all times so as to provide excellent customer
service. From his U.S. experience, Becker has found that empowerment increases
employee motivation, performance, and job satisfaction, all of which contribute to
the hotel's profitability and customer service ratings. Soon after becoming general
manager at the Regency Grand, Becker introduced the practice of empowerment so
as to replicate the successes that he had achieved back home.
The Regency Grand hotel has been very profitable since it opened. The employees
have always worked according to management's instructions. Their responsibility
was to ensure that the instructions from their managers were carried out diligently
and conscientiously. Innovation and creativity were discouraged under the
previous management. Indeed, employees were punished for their mistakes and
discouraged from trying out ideas that had not been approved by management. As
a result, employees were afraid to be innovative and to take risks.
Becker met with the Regency's managers and department heads to explain that
empowerment would be introduced in the hotel. He told them that employees must
be empowered with decision-making authority so that they can use their initiative,
creativity, and judgment to satisfy guest needs or handle problems
effectively and efficiently. However, he stressed that the more complex issues and
decisions were to be referred to superiors, who were to coach and assist rather than
provide direct orders. Furthermore, Becker stressed that while mistakes were
allowed, repetition of the same mistake more than twice
could not be tolerated. He advised his managers and department heads that they
should not discuss or
consult him on minor issues/problems and decisions. Nevertheless, he told them
that they are to discuss
important/major issues and decisions with him. He concluded the meeting by
asking for feedback.
Several managers and department heads told him that they liked the idea and
would support it, while
others simply nodded their heads. Becker was plea~ed with the response, and was
eager to have his plan
implemented.
In the past, the Regency had emphasized administrative control, resulting in many
bureaucratic
procedures throughout the organization. For example, the front counter employees
needed to seek
approval from their manager before they could upgrade guests to another category
of room. The front
counter manager would then have to write and submit a report to the general
manager justifying the
upgrade. Soon after his meeting with managers, Becker reduced the number of
bureaucratic rules at the
Regency and allocated more decision-making authority to front line employees.
This action upset those
who previously had decision-making power over these issues. As a result, several
of these employees
left the hotel.
Becker also began spending a large portion of his time observing and interacting
with the employees
at the front desk, lobby, restaurants, and various departments. This direct
interaction with Becker
helped many employees to understand what he wanted and expected of them.
However, the employees
had much difficulty trying to distinguish between a major and minor
issue/decision. More often than not, supervisors would reverse employee decisions
by stating that they were major issues requiring management approval. Employees
who displayed initiative and made good decisions in satisfying the needs of the
guests rarely received any positive feedback from their supervisors. Eventually,
most of these employees lost confidence in making decisions, and reverted back to
relying on their superiors for decision making. Not long after the implementation
of the practice of empowerment, Becker real ized that his subordinates were
consulting him more frequently than before. Most of them came to him to discuss
or consult on minor issues. He had to spend most of his time attending to his
subordinates. Soon he began to feel highly frustrated and exhausted, and very often
would tell his secretary that "unless the hotel is on fire, don't let anyone disturb
me."
Becker thought that the practice of empowerment would benefit the overall
performance of the hotel. However, contrary to his expectation, the business and
overall performance of the hotel began to deteriorate. There had been an increasing
number of guest complaints. In the past, the hotel had minimal guest complaints.
Now there were a significant number of formal written complaints every month.
Many other guests voiced their dissatisfaction verbally to hotel employees. The
number of mistakes made by employees had been on an increase. Becker was very
upset when he realized that two of the local newspapers and an overseas newspaper
had published negative feedback on the hotel in terms of service standards. He was
most distressed when an international travel magazine had voted the hotel as "one
of Asia's nightmare hotels".
The stress levels of the employees had been continuously mounting since the
introduction of the practice of empowerment. Absenteeism due to illness was
increasing at an alarming rate. In addition, the employee turnover rate had reached
an all-time high. The good working relationships that were established under the
old management had been severely strained. The employees were no longer united
and supportive of each other. They were quick to "point fingers" at or to "back
stab" one another when mistakes were made and when problems occurred.
Note: This c.a..:;e is based on true C\'ents. but the indusLry and names have
been changed.
John was appointed due to his previous success integrating newly acquired hotels in
the US. In most

previous acquisitions, Becker took over operation with poor profitability and low morale.
After he implemented changes the employees morale decline, absenteeism increased,
customer complaints increased, and poor ratings in the media.

1. Culture-The US based company failed to research or invested in any culture changes

that might affect employees when they acquired the Regency Hotel.

2. Change-John made sweeping changes that once worked in the past for fledging
acquired hotels.

Becker failed to plan and implement change. He did not involve any staff in the change
process nor did he have a change agent to help oversee the change process within the
newly acquired hotel. John based his decisions off what was successful in the past in
American style business. He failed to consider the Regency was already successful and
profitable with high employee morale.

3. Communication-John empowered employees to make minor decisions while only

elevating major decisions to management.

John failed to communicate expectations of what are minor decisions and what are
major decisions. He also encouraged employees to be innovative and creative.

* Problem Statement: There are several issues with this case, but the three main
problems in this case are Culture, Change, and Communication. The American based
company provided no culture training to John Becker or the staff at the Regency. John
Becker had no plan for changes he implemented. Lastly, but most important was the
poor communications within the entire company. Even with the best plan; if it is not
communicated properly then it will fail.

* Analysis and Evaluation: During his staff meeting with management John did not
communicate his expectations, nor did he ensure every manager understood the tool
empowerment. Using the MARS model under roles perception, if tasks such as John
expectations, standards, rules, and definitions such as the difference between major
and minor issues were properly communicated then managers would not over turn
employees decisions. Employees would have job satisfaction, high morale and a sense
of purpose.

Employee's decisions were over turn by management led to increases in absenteeism,

turnover, and customer complaints resulting in the decline of service in the media's eye.
Using the Expectancy Theory of Motivation, provide role clarity and increase reward
with desired outcomes. ABC of Behavior Modification can be use to set effective goals
use the Specific, Measurable Achievable Relevant Time frames Exciting Reviewed
(SMARTER)

Alternative actions to improve the performance are

1- Build a manager/employee guide to communicate the standards, rules,

expectations, and define what major/minor decisions are. Hire a SIGMA 6
facilitator to oversee the process. Provide comment boxes for suggestions of
improvement, feedback, and open communication. In addition to employees
Performance appraisals, provide a 360 scoring of managers/employees such as
online surveys.
2- 2- In addition to the first choice, open lines of communication within the
organization such as the open door policy. Get the whole team involved in the
decision making process through meetings gear to meeting
their needs both for management and the employees. Provide employees an avenue to
voice concerns (anonymous if needed), and address issues on an individual bases.

* Recommendation: The best of the alternatives listed above is 2. This alternative

provides open communication, training to the entire staff, and both
managers/employees handbooks that outlines expectations, rules, and standards. It
also provides an expert to oversee the process. This alternative also fights for feedback
both from management and employees. You must communicate the change to the
entire staff, listen to the concerns, and allow for anonymous feedback. After meeting
with management to explain the change, have a facilitator oversee this process. After
the management team is onboard. You should involve the employees with the same
concept as the management. Get the whole team involved in the development ideas for
the guide. Assign certain team both management and employees with the task of
creating the guides. This should be implementing immediately.