Download DOM 511: Reading Exercise Too busy to devise an operations

DOM 511: Reading Exercise
Too busy to devise an operations strategy?
By Bob Lillis, Mike Sweeney
Ask most hotel operations managers to spend time devising an operations strategy and a likely response
would be that many would consider themselves too busy for an academic exercise. Yet, the nature of their
job requires the operations management team to continually make decisions which, when viewed
cumulatively, actually comprise the operations strategy for that facility. Bob Lillis and Mike Sweeney reflect on
this irony and offer a four-step procedure for improving the operations strategy of a facility and ultimately of
the hotel.
What is your hotel’s operations strategy? What benefit is there in devising an operations strategy
given that many hotel managers are so busy already without trying to find additional time for an
academic exercise? Besides which, will it actually improve the performance of the hotel? And
ultimately, isn’t operations strategy the same thing as a set of operational targets or performance
objectives?
Well, even if unaware of it, your hotel will already possess an operations strategy or, more probably,
several operations strategies depending on the hotel’s size and facilities and the number of different
service products offered within it. Put simply, whatever is being implemented is your strategy for
that facility. Yet, ask most hotel managers to describe their operations strategy and you will either
get an uncertain look or, alternatively, a generalised mission or policy statement such as ‘we seek to
offer a quality product’, ‘we put people first’, ‘our ambition is to delight our customers’, or the
slightly more sophisticated and topical aim of ‘we strive to be more customer focused’.
These statements whilst laudable do not constitute an operations strategy. They are statements of
intent. The problem is that operations strategy is often neither visible nor obvious (1). A leading
academic in the operations strategy field has recently suggested that an operations strategy is an
iterative process that continually revisits three features, best practices, strategic choices and
competing on operational capabilities (2). Whilst this is certainly true, it may also explain why
managers have difficulty in articulating their operations strategy and are uncertain about the skills
and knowledge needed to proactively devise one.
So is it worth the effort to proactively devise an operations strategy and, if so, how is one put
together?
The benefit of devising an operations strategy
There is some empirical evidence to show that there is value in deliberately formulating an
operations strategy albeit this evidence has largely been gained from manufacturing environments. A
positive relationship has been shown to exist between the performance of the firm in terms of
growth and the higher the role assumed by production managers in the firm’s strategic decisionmaking processes (3).
Indeed, the development of an operations strategy within the firm has been traditionally viewed as
the missing link between operational activities and the fulfilment of the firm’s business strategy (4). In
many other business sectors, an operations strategy has now become commonly used to answer the
key question, ‘how can operations contribute to the competitive advantage of the business?’ Its
purpose is to use the particular strengths that have been developed or plan to be developed within
operations as competitive weapons for the achievement of the overall aspirations of the business. It
is about creating the operating capabilities the business may need now and in the future (5). This is
more than merely determining performance targets which, for example, by common consent
appears to have plagued public services, notably the NHS.
30 years ago, an American academic proposed the idea that strategy, any type of strategy is
represented as a pattern of behaviour (6) and that this behaviour is reflective of a pattern of tactical
decisions that are taken on an on-going basis. Operational strengths are developed and sustained or
lost by a pattern of tactical decisions made in key decision-making categories.
Herein lays the irony. Every hotel will therefore possess an operations strategy (maybe many
operations strategies if it contains several facilities) because its management will have taken and
continue to take many tactical decisions on a daily basis. It is the essence of the manager’s job. It is
just that usually the management will be unaware that these individual decisions when viewed
cumulatively comprise the operations strategy for that facility and that particular service product.
That is why it is so difficult to articulate, and often ends up as a simplistic statement of intent.
Furthermore, when analysed in a cumulative way and over a period of time, individual decisions
taken may often conflict with, or adversely affect, other decisions made previously. This can lead to
the common complaint voiced by hotel managers that they often get frustrated, compelled seemingly
to always be assuming a reactive role. So if the hotel has got an operations strategy anyway, then it
makes sense to try to ensure it is a good one!
Putting an operations strategy together
This may be accomplished by four steps.
Step 1: Know the facility’s competitive priorities.
To be able to create a strategy to improve operational competitiveness for a particular outlet or
facility, the operations management team must know the relative value that targeted customers
attribute to a range of goods or services and benefits that they could receive. This bundle of goods
or services and benefits constitutes the competitive offering inherent within the service product
concept. A useful approach to interpret the needs of customers and enable a choice of competitive
priorities to be made is to determine the distinction between order winning criteria (or motivating
factors) and order qualifiers (hygiene factors) (7). Order winners are those customer benefits that
differentiate the products and services of one business (or facility) from another and significantly
influence the selection of the most competitive offer.
For example, reliability of service might be an order winner for room service breakfast provision in a
large hotel. The delivery of the breakfast to the room might be offered and delivered within a 20
minute customer selected time slot. Continual operational improvement which permits a 10 minute
time slot to be offered and fulfilled might well win more business for room service breakfast
provision (and may take pressure off the hotel restaurant at peak breakfast times).
Order qualifiers are those customer benefits that are expected. Any efforts to improve these
benefits will not win additional business but any perceived reduction of those benefits will lose
business. For example, the speed of service in the dinner provision of room service would likely be
an order qualifier. If the dinner is perceived by the customer to take too long to get to the room,
business ultimately will be lost. But if the time taken from order to delivery is quick and consistently
quickened, this improvement will not necessarily win more business.
Knowing the distinction between order winners and qualifiers encapsulated within the service
product concept(s) is a vital first step to devising an operations strategy for that facility and for the
further development of its current operations strategy.
Step 2: Translate these competitive priorities into specific operational performance objectives and
recognise the trade-offs involved.
The objectives of the operations strategy now need to be set. These will inform the decisions that
will build the appropriate operational capabilities. Five basic performance objectives exist. These are
cost, speed, quality, flexibility and dependability. Each objective has both external and internal effects,
but all of them affect cost. So one important way to improve cost performance is to improve the
performance of the other operations objectives (8). For example, dependable room service
breakfast provision does not spring any unwelcome surprises on guests. It can be relied on to deliver
exactly as requested. This prevents costly disruption to the operation and helps efficiency. Its
external effect is the opportunity cost of the lost time the customer experiences if the breakfast is
delivered later than promised and the impact of that on the brand of the business.
Service is not a specific performance objective because it is encompassed within four of the other
objectives. For example, the customer’s perception of good service from room service breakfast
provision might be that it arrived at the time promised (dependable). It might have been delivered
soon after being ordered (speed). Perhaps, the eggs were prepared to a specific customer’s
personalised requirement (flexibility). It might have been delivered precisely as specified with no
errors, in presentation or preparation (quality).
The problem is that some objectives and capability development can only be improved at the
expense of others, for example, flexibility (cooking the breakfast to customers’ personalised
specifications) and speed (delivering other guests’ breakfasts immediately after they order them) or
dependability (keeping to 10 minute time slots). This realisation brings into stark relief the necessity
to be able to distinguish between those benefits that are highly valued by customers from those that
are of less significance so that the best return on investment for performance improvement can be
achieved.
Step 3: Design the structure and infrastructure of the operation to bring about the achievement of
the operation performance objectives specified.
The next step in the process of devising the operations strategy is to take decisions that design the
structure and infrastructure of the operation of that facility (9) which enable the achievement of the
operational performance objectives. The decisions that configure the ‘hardware’ of the operation are
structural. These decisions focus on the design of the processes that deliver the features of the
service product and the physical layout of those processes, capacity decisions in terms of the
numbers of resources allotted given the volume of transactions handled, the extent of the use of
technology, and the role of that particular facility in the network of facilities within the hotel. These
types of decisions are usually the first to be made because they determine how the service product
is to be delivered.
Infrastructural decisions may then be made. These types of key decision-making categories are
concerned with the ‘software’ of the operation and include such factors as the approach taken to
the management of the staff, decisions relating to inventory, the decisions taken to build quality into
systems, how knowledge and skills will be created, acquired and transferred, the use of suppliers,
and decisions relating to safety, health, environment and fire prevention (SHEF). All these structural
and infrastructural decision-areas cumulatively comprise the operations strategy.
For example, the identification of a reliable provision of breakfast to guest rooms within a 20 minute
customer selected time slot might constitute an order winner in a particular hotel. The performance
objectives required are for dependable delivery coupled with quality and with cost as an order
qualifier. The decisions taken for their achievement will be interdependent. So the processes
designed to permit dependable delivery of all the breakfast requirements should take into account
the volume of customers requiring this service, the resources required for dependable delivery given
that volume, the technology that would be useful to aid dependable delivery of a quality product, and
the strategic role of room service breakfast provision in the network of breakfast provision available
within the hotel.
These decisions would then be supported by how the room service staff are motivated, empowered
and incentivised, the extent to which breakfasts need to be made to stock, made to order or
assembled to order, the skills the staff need to possess to enable delivery of a dependable, error free
prepared and presented breakfast, cognisant of SHEF.
Step 4: Review actual performance against the performance objectives.
The method of measuring performance of the achievement of the competitive priorities identified in
step 1 is to use key performance indicators. A key performance indicator should be agreed for each
of the competitive priorities. For example, if delivery of the breakfast to the room in the customer
designated time slot is a competitive priority then a key performance indicator to be used would be
on-time delivery performance against the targeted customer delivery lead time.
The performance measurement system seeks either to confirm the achievement of predetermined
competitive priorities or determine deficiencies in operational decision-making. Thus, performance
measures are just one component of a good operations strategy for a facility. Changes to decisions
should be sanctioned only when there is substantive evidence that the competitive priorities are not
being met or that the values that targeted customers attribute to the range of goods or services and
benefits have altered.
Conclusions
Most hotel operations managers will recognise the decisions they make everyday will fall within the
types of categories identified here. Yet, what often happens in practice is that decisions taken over
time become independent of other decisions. Thus, processes designed for successful delivery of the
breakfast within the designated time slot are no longer fully supported by the resources allotted for
dependable delivery. Perhaps, quality of the presented breakfast is compromised by a decision to
introduce a limit to the range of breakfast items available, or a decision is taken to extend the range
or presentation of the breakfast which compromises dependability. Maybe a change is made to the
way the staff are organised or motivated which affects the achievement of the competitive priorities.
Alternatively, perhaps the focus of decision-making becomes cost with an overwhelming drive for
productivity which slowly erodes dependable and quality room service breakfast provision. Decisions
are made intended to focus on cost even though cost is an order qualifier. If improvements in
productivity as a result of those decisions are passed onto the customer in the form of a lower price,
it is unlikely to win business for room service breakfast provision. If the productivity gains accrued
are absorbed in improved margins, then the gains may well have been made to the detriment of
dependability and quality. Business will ultimately be lost.
By way of further illustration, we would argue that a contributory factor to the recent, highly
publicised difficulties that have steadily accumulated within BAA’s operations at Heathrow (and some
other airports) may well be a consequence of this failure to recognise the interplay between
structural and infrastructural decisions that have been taken over a period of time. Indeed, solutions
that are being advocated actually entail re-establishing links between decisions. For example, a
reduction in the amount of space given to retailers (capacity decisions) would permit an expansion in
space (another capacity decision) given to passport control. This would allow changes to customer
processing to take place (process design decisions with volume considerations) that helps alleviate
bottlenecks so that passengers have an improved queuing experience. Vital security and safety
decisions (SHEF decisions) would also be aided by this change in capacity usage, to be further
supported by the introduction of technologies such as sensors and sophisticated scanning equipment
(technology decisions) which negates the need for passengers to remove belts and other items of
clothing at points within the queuing process. This would also improve the customer experience and
speed up throughput time.
Using this simple four-step procedure, by examining the extent to which every decision made within
the key decision-making categories has supported the achievement of competitive priorities for that
facility, is a good way to analyse the effectiveness of its operations strategy. It will clarify the
operational performance objectives of the business and pinpoint incorrect decisions made. It is
recognition of the interdependency between decisions made and ensuring the operations
management team never lose sight of the difference between order winners and order qualifiers that
is the key to implementing an effective operations strategy. If this is done for all the facilities and
service products offered within the property, then the operations management of a hotel, leisure or
any tourism facility can make a significant contribution to the competitiveness of its customer service
and its profitability.
This article was published in ‘Hospitality Review’ in October 2007.