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Examining HR Scorecards in the hotel sector

As mentioned earlier, hotels have mainly relied on traditional performance measurement (Atkinson & Brander Brown, 2001; Phillips, 1999). Even though, most of hotels investment is in tangible assets such as land, building, furniture, fixtures and equipment, the hotels revenue is dependent on intangibles such as quality of staff, location, and customer acceptance. Hence, a single traditional measure such as financial can not capture the overall performance and the potential of the operations (Teare et al., 2001). Besides financial, the use of Hr scorecard can also capture the other aspects of performance such as customer, internal business process, and learning and growth (Kaplan & Norton, 1996).

In addition, according to Brander Brown and McDonnell (1995), the use of Hr scorecard in hotel industry may reduce some weaknesses in the current hotel performance. These weaknesses include: (1) hotels information systems are deficient in their ability to measure and monitor multiple dimensions of performance, and (2) current performance systems are unable to deal with human resource issues. In fact, Hr scorecard has multiple dimensions and it can be used as a strategic management system because it: (1) translates the vision of an organization, (2) communicates and links the vision among top management and lower level employees, (3) facilitates business planning, and (4) provides feedback and learning (Kaplan & Norton, 1996) .The use of Hr scorecard in hotels has been reported by few authors such as Denton and White (2000), Frigo (2002), and Evan (2005). Specifically, these authors have investigated the application of Hr scorecard in the hotel industry and found evidence of the usage of the tool by the hotels. Denton and White (2000) have investigated the application of Hr scorecard in a parent company known as White Lodging Services. They uses many indicators to assess financial performance, customer satisfaction score to assess customer performance, process audit score to assess internal business performance, and employee retention to assess learning and growth performance of a hotel in their study. They have also found that Hr scorecard helps the hotel to achieve: (1) a greater alignment of hotel’s objectives between managers and owners, (2) a higher level of understanding of property manager regarding owner’s long term expectation, and (3) valuable feedback regarding resources and processes needed to achieve hotel objectives. In concordance with this finding, Frigo (2002) also highlighted that the use of Hr scorecard has enabled Hilton Hotels to achieve 5% increase in customer loyalty, and 1.1% increase in hotel annual revenues.

Meanwhile, recently Evan (2005) has studied the application of Hr scorecard in hotels in the United Kingdom. In order to measure financial performance, Evan (2005) uses indictors such as total operating revenues, RevPAR, and costs. These measures were used actively by hotels. In measuring customer performance, indicators such as customer satisfaction, number of customer complaints, mystery guest, market share, and returning guests were used. He also found that hotels actively used customer satisfaction and number of customer complaints compared to other indicators. In terms of internal business process, measures such as service errors, response to complaints, and, employee turnover were actively assessed by hotels. The final dimension, innovation and learning, were assessed through number of new markets, staff appraisals and target, courses completed, and new improvement.

The application of Hr scorecard in hotels is appropriate since hotels consist of many different activities such as food (restaurant), maintenance (housekeeping), point-of sales (front office), and receiver (storeroom) (Paraskevas, 2001), which have different cost structures. These diverse activities make the use of financial measure alone is inadequate. In line with Kaplan and Norton’s (1992; 2006) suggestion regarding the application of BSC, this study uses the dimensions of the Hr scorecard provided by Evan (2005). The main reason is that similar to Evan (2005), this study is also carried out in the hotel industry.

Therefore, following Kaplan and Norton (1992) and Evan (2005), the organizational performance in this study is defined as “the level of hotel performance (increase/decrease) in terms of financial, customer, internal business, and learning and growth perspectives”. Financial perspective is the economic consequences of actions taken by the hotel, while customer perspective is the consequences of actions taken by the hotel to customer and market segments. Internal business is the consequences of action taken to the level of business process of the hotel, and learning and growth is the level of change and improvement that has been implemented by the hotel .There are at least two ways to measure financial or non-financial performance –objective measures and subjective measures. The objective measures use the real figures from the organizations while the subjective measures use perception of the respondent to assess performance (Johannessen et al., 1999; Pizam & Ellis, 1999). The present study decided to use perceptual or subjective measures to assess organizational performance because: (1) they are more consistent measure of performance and they do not vary broadly in accuracy from the objective measures (2) and asking respondents for specific financial measures may generate respondent anxiety over confidentiality (Ackelsberg & Arlow, 1985). In addition, the subjective measure may offer greater opportunities for organizational effectiveness in the longer terms (Pizam & Ellis, 1999). Therefore, in this study, the organizational performance of hotels has four dimensions namely financial, customer, internal business, and learning and growth perspectives. Furthermore, these four dimensions would be assessed by perception of the respondents.

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