The foundation in the balanced scorecard is missing in hotels

16 December 2021
Hotels need to rethink how they work with their human capital, information capital, and organizational capital to recover from the pandemic. The industry had started to question the old models before the pandemic, but the profits kept coming in, so there was no immediate need for action. Now, hotels have discovered that the old model has just stopped working.
A new problem has emerged when hotels are starting to recover from the effects of the pandemic. Hotels all of a sudden discover that it is challenging to find talents or even anyone to fill open positions. Many people left the industry and are not returning any time soon. As a result, some hotels cannot even open up their full capacity because they cannot find the employees they need. Gone are the good times when people competed for jobs, and the employer had the upper hand. Now people wanting to work in hospitality is a scarce resource. It will not be easy for hotels to solve this problem without changing the fundamentals of workforce management in hospitality.

The beauty of the balanced scorecard

An excellent tool for hotels is the balanced scorecard with its four perspectives. The name "balanced scorecard" comes from the idea of looking at strategic measures in addition to traditional financial measures to get a more "balanced" view of performance. There are four perspectives in the balanced scorecard to help develop objectives, measures, targets, and initiatives.

Financial

The hotel's financial performance and the use of financial resources

Customer

The hotel's performance from the perspective of the customer

Processes

The quality and efficiency of the hotel's performance related to products, services, and key processes

Organizational capacity

Human capital, culture, technology, data, and organization

Build a strong foundation

The foundation in the balanced scorecard is the organizational capacity or the learning and growth perspective. This perspective has three significant parts: Human capital, information capital, and organizational capital. Without a strong foundation based on these three parts, it will be tough to manage a hotel successfully.

Human capital

Hospitality is a people business. The hotel companies that attract the best people will be winners in guest satisfaction and profitability. To attract and keep the best people, hotels need to learn how to create a great company culture, provide training and education, the right working conditions and working hours, compensation and other benefits, and career paths. If all of these aspects have a high-quality level and comply with the highest standards of best practices, there would not be any problems attracting future employees. Unfortunately, the high staff turnover rate in the hotel industry indicates that hotels are not yet perfect in caring for their human capital.

Information capital

People cannot manage hotels without using systems as part of their workflows to provide guest experiences and to ensure that the hotel is well-managed and generates a healthy profit. Modern and appropriate systems are also helping employees to provide excellent guest service. Another aspect of systems is for hotels to become more data-driven in making decisions about commercial activities and operations to increase profits. The hotel industry is under-invested in technology and needs to catch up with consumer needs and modern business practices.

Organizational capital

The third building block is to establish the optimal organization. Hotels have for many decades had the same rigid functional organization, which effectively creates silos and suboptimization. All companies, including hotels, need to develop flexible and adaptable organizations that encourage teamwork. A more modern organization is probably working with a balanced scorecard for the whole company in combination with team-based OKRs (Objectives and Key Results) instead of KPIs for each separate department.

Logical conclusions

There is a misconception that it is only about recovering from the pandemic. The world outside the hotel industry has changed dramatically during the past two years. Some experts in e-commerce and digitalization talk about a ten-year acceleration of trends in only two years. Therefore, hotels need to rethink dealing with human capital, information capital, and organizational capital.