Ten Rules For Incentivising A General Manager To Look After The Hotel Owner's Best Interests
Every owner aspires to having a strong alignment between the performance of a General Manager and their business, organisational and people strategies at a property. What often develops is a misalignment in one or more areas. There are some simple but often overlooked "ground rules" that an Owner should insist upon with an Operator at the management contract development stage:
- Responsibility for designing and communicating the General Manager's pay and benefits should be the sole preserve of the General Manager's direct report, not Human Resources. You demand that accountability and accountability resides with the line management figure closest to the issues, skilled in effecting changes and cognisant of the local culture and your interests.
- All transactional aspects of the General Manager's pay, benefits and non-monetary rewards are outsourced by the Operator to skilled external parties, who are able to perform those tasks and activities more effectively and at less cost to both the Operator and Owner.
- You demand the "right" to throw out all vendors and approaches suggested by the Operator that don't provide measurable improvements in the General Manager's performance and productivity, and provide an impressive return on investment.
- Clear objectives are agreed with the Operator and the General Manager at the outset for improvements in the hotel's performance and the General Manager's contribution to them (e.g. increases in top line revenue growth, operating margins and reduction in business acquisition expenses).
- Measures of progress and success, whether objective or subjective are agreed in writing with the General Manager, and his direct report. Those measures create a strong alignment with your business goals, the organisational and people strategies at the hotel.
- Agreement is reached at the outset with the Operator, on your assessment of the "value" of the General Manager to the Hotel. That's important because when an Owner stipulates to tremendous value, the General Manager's remuneration is placed in the proper perspective and is seldom a point of contention. When conversations start from the perspective of the cost of a General Manager's reward package, not his/her value, they inevitably descend into arbitrary assessments over individual components (base pay, incentive compensation, cost of pension and medical benefits, allowances etc.).
- Make sure the General Manager's incentives are not contingent upon other results arising or not. Particularly those events he/she has little or no control over.
- An Owner should avoid throwing every incentive into their proposal to secure the services of the General Manager in an attempt to justify your reward package. Instead, "unbundle" what you are capable and willing to provide and add them back in, based on additional performance and productivity objectives being reached.
- There is never a better time than when you are face-to-face with the General Manager and/or the Operator, when he/she is excited with the opportunity, to affirm the agreement both of you have reached and dramatically eliminate the possibility of a "surprise" upsetting your agreement.
- Cash is rarely the best incentive for rectifying a performance failure. A potentially richer but unhappy General Manager is no better than a poorer but unhappy General Manager. Indeed there are many examples, where the fairness or equity of the cash award becomes a de-motivating factor.
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