The Regency Grand Ho t e l By Lisa Ho, University of Western Australia, under the supervision of Steven L. McShane

The Regency Grand Hotel is a five-star hotel in Bangkok. The hotel was established 15 years ago by a local consortium of investors and has been operated by a Thai general manager throughout this time. The Regency is one of Bangkok’s most prestigious hotels and its 700 employees enjoy the status of being associated with the hotel. The hotel provides good employee benefits, above-market rate salaries 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 once the hotel changed ownership. The American hotel chain kept all the Re g e n c y’s employees, although a few we re transferred to other positions. John Becker, an American with 10 years management experience with the hotel chain, was appointed as the new general manager of the Regency. 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 American 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, Becker introduced the practice of empowerment so as to replicate the successes that he had achieved back home. The Regency has been very profitable since it opened 15 years ago. The employees have always worked according to management’s instructions. Their responsibility was to ensure that management’s instructions were carried out diligently and conscientiously. Innovation and creativity were discouraged under the previous management. Indeed, e m p l oyees we re 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 Re g e n c y’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. Fu rt h e r m o re, Becker stressed that mistakes we re allowed, but the hotel could not tolerate the same mistake being made more than twice. He advised his managers and department heads not to discuss minor issues/problems with him and not to consult him on minor decisions. Howe ve r, he told them that they we re to discuss i m p o rtant/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 pleased with the response, and was eager to have his plan implemented. In the past, the Regency had emphasised administrative c o n t rol, resulting in many bureaucratic pro c e d u re s t h roughout the organisation. For example, fro n t - d e s k employees had to seek approval from their manager before they could upgrade guests to another category of room. The front-desk 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 2 PA RT 2: I nd i v id ua l b e ha v io ur an d pro ce s s e s distinguish between a major and a 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 s u p e rvisors. Eve n t u a l l y, 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 realised that his subordinates were consulting him more frequently than before. The majority of them came to him with minor issues and consulted him on minor decisions. 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: ‘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 expectations, the business and overall performance of the hotel began to deteriorate. There were an increasing number of guest complaints. In the past, the hotel had minimal guest complaints. Now t h e re we re 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 was on the increase. Becker was very upset when two local newspapers and an overseas newspaper published negative feedback on the hotel in terms of service standards. And he was most distressed when an international travel magazine voted the Regency ‘one of Asia’s nightmare hotels’. The stress levels of the employees were continuously mounting since the introduction of the practice of empowerment. Absenteeism due to illness was increasing at an alarming rate. In addition, employee turnover 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.

1. Identify the symptoms indicating that problems exist at the Regency.

2. Diagnose the problems using organizational behavior concepts.

3. Recommend solutions that overcome or minimize the problems and symptoms in this case.