Hotels can make a business case for embracing sustainable Human Resource Management (HRM) as an alternative people management approach.
BI RESEARCH: Sustainable HRM
Hotels in the hospitality sector compete not only with other hotels but also with other accommodation actors with different business models such as Airbnb, HomeToGo, and HomeAway. This competition on current and future guests compels hotels to innovate in order to respond to a more conscious pool of customers who often know exactly what they seek (e.g., wellness themes and programs, culinary experiences, cutting-edge digital integration, sport adventures, entertainment, organic-, Fairtrade- and/or locally produced products, etc.).
Four categories of innovation
Based on Oslo Manual - a publication by the Organization for Economic Co-operation and Development (OECD) – an innovation can be classified into four categories:
- Product innovation: Introducing new or significantly improved goods or service offering,
- Process innovation: Implementing new or significantly improved methods for how the organization produces goods or services or how it delivers them,
- Organizational innovation: Introducing new work organization with strategic orientation involving business practices, workplace organization, and external relations, and
- Marketing innovation: Introducing marketing strategy or concept that departs from previously used marketing method in the firm to approach, attract and address customer needs.
Besides intra-industry competition, hotels as business enterprises are under pressure from stakeholders (communities, customers, interest groups, employees, etc.) to act responsibly.
In their efforts to respond, many hotels tend to focus on the concept of sustainability. When present, however, most – if not all – efforts are directed towards economic sustainability and/or environmental sustainability (e.g., waste management and energy savings).
The third cornerstone of sustainability, namely social sustainability, is often – intentionally or unintentionally – neglected. To address this gap, researchers started to discuss the impact of businesses on the communities where they operate (external stakeholders). More recently, the discussions expanded to include also organization’s own employees (internal stakeholders), leading to the emergence of ‘sustainable human resource management’.
Unlike strategic human resource management that focuses primarily on organizational performance, the sustainable HRM signifies a broader purpose for human resource management. It denotes HR strategies and practices that position the long-term development of employees as a core outcome of HRM processes. It also places equal importance on organization’s financial, social and ecological goals.
Strategies and policies targeting employee development, employability, employee health and wellbeing, employee participation, equal opportunities and justice are just a few examples.
The significance of innovation
In recent years we have seen hotel enterprises with new business concepts ranging from the simple Treehotel in Sweden and The Whitepod in Switzerland to the more luxurious Qasr al Sarab Desert Resort in the UAE.
Realizing the significance of innovation, some hotels started to organize their innovation activities in what resembles customary research and development (R&D) operations. Hilton launched its ‘Innovation Gallery’ – an incubator for invited Hilton members, guests and partners to develop Hilton’s future hospitality offerings and improve existing ones. Marriott introduced its ‘M Beta’ – a hotel innovation lab where guests experience hotel innovations and instantly provide feedback about their future potential. Four Seasons opened a research and discovery studio – a workspace where employees gather to experiment, simulate and test ideas. These developments show that – similar to other actors in the service sector – the hospitality industry experiences the ‘innovate or perish’ reality.
We should bear in mind, however, that the hospitality sector in general, and the hotel industry in particular, is labor intensive. Research indicates that human resource management policies and practices have an impact on customer satisfaction, service quality perception and hotel performance because human interaction in service delivery is critical for customer experience.
This suggests that although the survival and growth of the hospitality sector relies on innovative services, labor-intensive industries are equally dependent on the performance of the employees.
Relationship between innovation and customer satisfaction
In this study, I used data collected from hotel managers in Sweden (via a survey) and from hotel guests (via an online platform) to investigate 1) the relationship between innovation and customer satisfaction, and 2) if this relationship is dependent on hotels’ implementation of employee competence development as well as employee relations practices (two aspects described in the literature as examples of sustainable HRM).
I expected to see strong and positive relationship between innovation variety (anchoring from introducing or implementing 0 innovation forms to producing or implementing 4 innovation forms) and customer satisfaction.
I also expected this relationship to be stronger in hotels engaging in employee competence development and employee relations (and vice versa in hotels with less emphasis on these two practices).
To perform the analysis, I profiled participating hotels based on their involvement in the two sustainable HR practices into four categories: high competence development – high employee relations, high competence development – low employee relations, low competence development – high employee relations, and low competence development – low employee relations.
Business case for sustainable HRM
Findings and conclusions:
- Innovation is positively related to customer satisfaction
- Sustainable HR practice of employee competence development is important for customer satisfaction in hotels.
- Sustainable HR practice of employee competence development is key for introducing innovations in hotels.
- Hotels with less innovation variety but with a high competence development profile have more satisfied customers than their counterparts with low competence development profiles. This suggests that implementation of competence development initiatives may “compensate for” narrower innovation portfolio.
Hotel managers may wonder why they should invest substantial financial resources in various types of innovations if their organizations can obtain superior customer satisfaction by focusing on employees’ competence development.
Well, this is because innovation is crucial for economic sustainability (customer satisfaction is a non-financial performance indicator). So, investing in employee competence development does not only contribute to more satisfied customers but also to producing and implementing innovations. This is important because hotels today are no longer viewed as merely places offering “a bed to sleep”. Hospitality and tourism research shows that customers constantly seek (and pay for) new and/or unique experiences and services, including accommodation related ones.
The study shows that hotels can make a business case for embracing sustainable HRM as an alternative people management approach.
Wikhamn, W. (2019). Innovation, sustainable HRM and customer satisfaction. International Journal of Hospitality Management, 76 (1), 102-110.
This article was first published in BI Leadership Magazine 2019. BI Leadership Magazine is a Science Communication Magazine published by the Department of Leadership and Organizational Behaviour at BI Norwegian Business School.
Text: Associate Professor Wajda Wikhamn, Department of Leadership and Organizational Behaviour at BI Norwegian Business School.