It’s budget season and for any financial leader in an organization that means juggling numbers to find the perfect balance for the upcoming fiscal year. Perhaps you even have your meticulously crafted budget in hand. So, now what?
If you’re entering the homestretch of a successful year, you might be tempted to coast through the fourth quarter or take a breather before diving back into the operational improvements that ensure you meet or beat that budget. If your year has not met expectations, you might be considering a reactive, impulsive or even emotional effort to turn things around.
Resist these temptations.
The final quarter is a prime opportunity to gear up for the year ahead. It’s a crucial time for businesses to gain a competitive edge by initiating continuous improvement efforts that seamlessly integrate operational practices with management performance systems—efforts that lead directly to cost savings and revenue growth. To truly thrive, hoteliers must go beyond setting financial targets; they need to actively observe their teams, assess the tools at their disposal and consistently refine their strategies to close variance gaps or stay ahead of the curve.
First Step: Observation
We often talk about how observations are the most useful tool that are not used. Managers may set targets and implement systems, but without a clear view of how employees are engaging with those processes, gaps in efficiency can persist. Observing is crucial for managers to step back and objectively see how their teams are operating—identifying inefficiencies, communication breakdowns and areas where training may be needed.
By observing behaviors, managers can gain insights into:
- Workflow challenges: Identify service or production bottlenecks that slow down operations.
- Staff engagement: Analyze how employees interact with each other, their leaders and guests to reveal areas of improvement and opportunities for additional training.
- Real-time problem solving: Recognize patterns in recurring issues to allow managers to address problems before they escalate, saving time and resources.
These observations can provide insights in planning for the year ahead, influencing decisions about whether to allocate the budget differently from the previous year due to identified inefficiencies or opportunities.
Emphasis: Continuous improvement
The final quarter of the year is often a period of reflection for many businesses, but the principles used in Q4 planning should be applied year-round. Continuous improvement should be the core focus of every business, driven by a commitment to streamline processes, train staff and enhance guest experiences.
Key strategies for continuous improvement include:
- Frequent reviews and check-ins: Regular check-ins with team members keep communication lines open and allow for adjustments based on real-time feedback, ensuring accountability and allowing managers to stay on top of changes in labor needs, guest preferences and operational challenges.
This can also create the opportunity to interact with staff on a regular cadence, providing managers a time to celebrate small wins, which can create camaraderie and teamwork by showing that managers truly care about their employees’ development and overall well-being, boosting morale and employee retention.
Leadership behavior sets the tone for operational efficiency. Engaged, proactive managers can significantly influence performance through consistent involvement and a commitment to improvement.
- Management Performance Systems (MPS): Rather than letting budgets sit passively, effective managers use performance systems to track key performance indicators (KPIs), to create forecasts, adjust schedules and ensure budgeted figures align with actual performance.
For example, one of our clients who operated a ski resort worked with us to create a forecasting tool by analyzing historical data about occupancy, temperature and snowfall. This allowed the client to tie scheduling decisions to the predicted occupancy forecast.
Using an MPS allows hoteliers to have a better understanding of the strategies needed to enhance the performance of their properties. For example, if occupancy rates are high, but the average daily rate (ADR) is low, then a manager should look at implementing tactics to increase room rates without compromising customer demand.
- Ensuring budgets reflect impact: For many frontline managers, specific budgets, such as a $12-million-labor-cost budget for the year, may feel disconnected from day-to-day operations. To translate these big-picture numbers into actionable insights, managers need to break them down into manageable components. Rather than viewing a $12-million budget as a looming total, managers should break it down into monthly or weekly targets. More importantly, they should understand the specific metrics that drive these numbers, such as:
- Labor hours per room: If it takes a housekeeper X number of minutes to clean a room, it is important to calculate how many hours it takes for a housekeeper to clean the number of rooms forecasted for that week or month. Managers can then better understand the labor cost implications of scheduling decisions.
- Number of managers as percentage of leadership: In this case, hoteliers can evaluate the proportion of managerial or leadership positions relative to total staff. This is used to assess the management-to-staff ratio, ensuring there is adequate leadership to maintain service quality and staff support without being top-heavy.
The Path to Operational Excellence
The final quarter is neither a homestretch nor a fresh starting line. It is an important stage in the continuous improvement cycle, one that offers opportunities for both reflection and preparation. By observing behaviors, leveraging strategies for continuous improvement and integrating performance management systems, hospitality leaders can better set the business up for the year ahead. The key is to remain agile, stay engaged and continually seek ways to refine the organization, ensuring that every quarter, not just Q4, is a step toward operational excellence.
This perspective piece was contributed by Ryan Zarb, VP, partner and head of the hospitality division at Carpedia International.