Employee Free Choice ActThe Employee Free Choice Act (EFCA) proposes that the employees have free choice and a fair chance to form a union without fear of dismissal. However, the passage of this act could have severe impact in the hospitality industry. Research shows that because of the current economic crisis the act could have negative consequences. The purpose of this paper is to propose a method to address the EFCA, should it become law, in the current economic environment. Also give recommendation regarding to how the topic could affect the management and operation of the organization, alternatives to address the problems without impacting employees’ and employer’s moral, values and believes.
How to Succeed in the Hospitality Field during Economic Crisis without Impacting the Company’s Moral and Value.
The current global economic crisis which, most likely, started sometime between 2006 and 2007 has impacted many industries in the world; however, it has had a profound affect in the hospitality industry. As is the case with many other industries, hotels are struggling during the global economic crisis. “The hotel performance indicators say that global hotel prices dropped 12% last year” (Griffiths & Couper, 2009). Hotels are not only reducing prices to remain competitive, but the industry also has to deal with the Employee Free Choice Act which if approved by the congress will give opportunities to employees to form strong union workforce where higher wages, better benefits and living standards will be seek to everyone. (AFL-CIO , 2009) If the Employee Free Choice Act becomes law, can the hospitality industry succeed during these economic crisis by absorbing the increased cost of higher wages, maintaining quality services for guests and continuing to pay dividends to stockholders without impacting the company’s moral and value? The purpose of this paper is to analyze the affect of the EFCA in addition to the global economic crisis to management and hotel’s operation, also give some recommendation regarding the issue. Accordingly, this paper will address the following topics: What is the EFCA and how it will benefits employees, present data regarding the hotel industry’s current economic situation, and the impact of the act on the quality service, and the implication of the EFCA on hotel operations during the current economy.
The Employee Free Choice Act
The Employee Free Choice Act (EFCA) is a proposed legislation that would ensure workers to have a free choice and a fair chance to form a union without the fear of being fired (American Rights at Work, 2009). The three points proposed by the EFCA are the card check also known as majority sign-up, mandatory arbitration and the increased penalties for employee unfair labor practices.
Human Resources Kit For Dummies
The card check allows the employee instead of employer to decide if they want to be part of a union. The National Labor Relations Board (NLRB) would manage the employees’ decision through elections or according to number of sign-up. Each employee can decide if they want to sign-up which means to be part of a union or not and the NLRB agency would certify the workers as a union. The main difference between an election and sign-up is that when they sing they have an easy and direct path to form a union instead of suffering employer’s persuasion when choosing election.
Mandatory arbitration proposes that a first contract mediation and arbitration is needed because current law does not provide effective remedies against management’s refusal to bargain. Management understands that it can get away with suppressing employees’ collective bargaining rights through bad faith or surface bargaining because there is virtually no legal restriction. The possibility of mediation and arbitration rules will encourage management and employees’ unions to bargain productively on their own. (American Rights at Work. (n.d.).
The third and final proposition of the EFCA is to increase penalties for unfair labor practice. According to an influential article written by Fanelli (2008) at the Employee Relation Law Journal explain that penalties under the bill would include back pay plus “2 times that amount as liquidated damages.” In addition, employers found to have willfully or repeatedly violated the statute would be liable for a civil penalty of up to $20,000 for each separate violation. (p. 15)
Industries in the twenty-first century have become massive and the shareholders interest prevails over fragile employees. Since the era of industrialization till actual era of globalization the interest of individual employees has been keep aside. The interest for power and the selfishness of the capitalist world sometimes take away the well-being of small individuals. The main purpose of the EFCA is, in theory, to fight for the employee’s right and by doing so “The EFCA would benefit employees by allowing them to bargain for better benefits, improving living standards, wages and working conditions by restoring workers’ freedom to choose for them whether to join a union. (Employee Free Choice Act, 2009).
Introduction to the Hospitality Industry
Hotel Industry’s Current Economic Situation
On the other hand, in the era of technology and globalization, where all continents are connected by the same platform, jobs have been sent oversees and outsourcing has become part of companies’ everyday activity. The chemical industry increased its profit by almost twelve times in the past five year just by adhering to the strategy of internationalization and acquiring overseas businesses (ReyJianxin, p. H2, 2009) This also led to a worldwide economic recession, where difficulties and tougher challenges have taken place. Some companies have declared bankruptcy; others are struggling to break even. The unemployment rate has risen to 9.5% in the past two years. Some analysts are forecasting double-digit unemployment in 2010. The hospitality industry has been heavily affected by the economic crisis. Michael Vessel from Job market outlook for 2009, explains that with the current economic situation many firms in the hospitality industry have indicated that they may be facing some tough choices in the year ahead. Now that most consumers are left with less discretionary spending money, the landscape in the hospitality sector is likely to undergo both short-term and long-term shifts. He also indicates that the, the overall rate of planned 2009 hiring in the hospitality industry has dwindled to a mere 5%, ranking at the very bottom of all of the industries listed in a recent USA Today survey. In other words, hospitality industry jobs are going to be harder to come by in the year ahead (Vessel, 2009).
It’s important to understand that some products and services such as food, transportation, and health care are crucial to human society. The population cannot survive without it; however, people can survive without leisure trips and corporations can use online conference system to conduct business in this difficult times; therefore the demand for hospitality service, when the economy is not doing well, can be considered one of most affected. Therefore, hotels in this current economic situation are struggling and facing many challenges in other to keep their business running. An article written by Pristin in the New York Times shows that Manhattan’s discounted rates are proving a great deal for visitors but are taking a huge bite out of hotel revenue. Revenue per available room, the standard industry measure, has fallen by one-third, Smith Travel and PKF data show. Industry specialists say that a decline in room rates results in a correspondingly larger drop in profits because hotels have so many fixed costs. As they cope with lower revenue, hotel operators are trying different strategies for holding down costs. Hersha Hospitality Group, which owns or manages 10 hotels in New York under the brands of Hampton Inn and Candlewood Suites, no longer places newspapers outside the door and now offers breakfast from 7 a.m. to 9:30 a.m., instead of 6 a.m. to 10:30 a.m., said Neil Shah, the president. “We’re doing things on the margin to keep down costs,” he said. (2009, August 19). Hotel owners have to find ways to trim expenses without alienating customers, said Ms.Brown, whose company also owns or manages hotels in Manhattan. Quality of service has, already, been reduced in order to pay for fixed costs in the hospitality industry. It is clear that not only services, but also employee’s hours has been reduced. This research indicates that in the current economic situation, that if the Employee Free Choice Act becomes law, most likely that the hospitality industry won’t be able to absorb the increased cost of higher wages maintains quality services for guests and continues to pay the same amount of dividends to stockholders. Another article retrieved from Pho CusWright market research and industry intelligence informs that the travel industry is reeling from the economic recession, but few segments are as challenged as corporate travel. Amid double-digit declines in traveler demand and revenue, the corporate travel landscape is undergoing a major realignment. Corporations are pulling back across the board and all players – from airlines to hotels to travel management companies – are under pressure. (2009, July 31)
To reduce loss and survive further, hotels are trying new strategies to keep operating during this recession. In the article “Pricing levers for the hotel industry in the current downturn” The author present some important information about the current economy and relevant point about what to do in order to avoid RevPar decrease. A strategy offered by the author is to be found through a better use of pricing, as untapped opportunities remain in rate optimization, customer loyalty schemes and bundling. As the economic crisis worsens, the hotel industry is in for hard times, as occupancy and investment drop. So, is hotel industry able to keep operating, generating profitability if the EFCA is approved? Or remain running the business without impact their moral and values? Is outsourcing of services such as housekeeping an option to be considered? Will outsourcing impact the company’s value?
Mandelbaum, R. (2009, August 21) the author offers some statistic data about operation cost and revenue in the hospitality industry. He also deals with the intensity and extent of the continuing economic downturn, further expense cuts will not be enough to offset the anticipated declines in revenue in 2009. Forecasts of a double-digit decline in room’s revenue per available room (RevPAR) during 2009 are troubling enough. However, for the lenders, owners, and managers of U.S. hotels, the real concern is the impact on profitability. While the fall-off in lodging performance was not as great last year as it will be in 2009, an analysis of the 2008 data could prove instructive as a guide to how U.S. hotel managers will react this year as business levels continue to deteriorate.
Implication of the EFCA on Hotel Operations during the Current Economy.
Even thought all employees has the right to fight for better wages and for their well being it is important to be aware of the consequences that this act can have during this global financial crisis. The act, if approved, can impact employees and companies in a negative way, because employees can loss jobs, chances of outsource jobs can be higher in order to reduce cost, and part time may be preferable instead of full time jobs. According to Epstein, RichardA.Epstein in his book The Case Against the Employee Free Choice Act, he explains that:
“The likely consequence of EFCA will be to retard the formation of small businesses, as fledgling entrepreneurs will reassess their prospects of success to take into account the danger of derailment at an early stage in the process. In the long‐term the EFCA will reduce the rate of firm formation, and thus deprive the economy of a central driver of new job creation and technology growth. Large firms face a different set of difficulties. Like their smaller compatriots, they will face the heavy costs of meeting simultaneous multiple threats of unionization. Since they operate through far‐flung, geographically dispersed divisions, they face the risk of inconsistent arbitral decrees that will impede the development of firm wide practices. Given the uncertain scope of these decrees, it is quite possible that restrictions designed to preserve job security within a unit will limit the ability of the firm to reorganize no unit employees who are closely connected with them. In addition, the prospect of multiple union arbitrations covering different locations could result in inconsistent first contracts under a system that offers no clear avenues for appeal or clarification” (p.10-11, 2009).
Dropping of room prices is one financial implication that hotel operations are dealing with. Research shows that dropping in prices can have negative impact in the hotel standard, Moral and Values. Price reduction in the long run can lead luxury and business class market hotel to a downhill spiral causing an industry wide demand for lower room rates. According to NadjaBrandt “The average daily room rates at the most luxurious hotels around the world dropped 16 percent to $245.13, the Tennessee- based hotel-data company estimates. Prices for mid-range hotels fell about 13 percent to $87.12. Also “Some luxury hotels have to be subsidized for part of the year to meet all the expenses associated with a high star rating, according to Harry Nobles, the founder of Nobles Hospitality Consulting “A vast amount of these hotels don’t generate all the money they would need to operate on a five-star level,” This lead us to believe that in order to keep their business running some hotel is going over their values and high standard rate and most likely are not ethically keeping their standard.
In another article that White, M wrote to The New York Times says that “As the recession unfolds, a growing number of budget-minded business travelers are shifting to lower-price hotels, whether by choice or because their bosses are telling them to. He said companies were taking a varied approach to the switch. Some are requiring it, others strongly encouraging it and others trying to set an example by having even top executives book more modest accommodations.
The main difference from full service hotel where customers were the checking in was welcoming and efficient. “There was never a line. They’d be expecting you, greet you by name.” Hop scotching to different hotels in search of low rates now means staying at places where his information is not already in the computer system. They also have to process your credit card and clients have to fill out all those forms. Processes that use to take 10 minutes now can be up to half an hour. This changes are not only unfavorable to customers but also to five star hotels that has to reduce their price to keep attracting their customers which has been shifting to low rate one. When company value is to deliver the best service and they worked hard to get to this level, is dropping of price and dropping of standard a good strategy to remain competitive? When the company’s mission is to delivery to their customers the best service, but they are not being profitable enough to deliver it, How to maintain their value, keep their moral and stay in the market?
Peter C. Yesawich, chairman and chief executive at Ypartnership, a travel marketing and research company, a quarter of the nearly 800 business travelers surveyed this year indicated that they were booking less expensive hotels. If companies are booking less expensive hotels, that induce luxury hotel to do the same. As we can see in this research with the high standard comes higher fixed cost. This down price can affect hotels that will have to reduce cost and lower their standard.
In addition, White, M. says that the trading down has been occurring on all levels: top executives who may have previously stayed at luxury hotels are staying at full-service hotels, while middle managers who used to stay at those properties are now switching to limited-service hotels. Data from Smith Travel Research shows that hotel room rates dropped by an average of 8.1 percent in the first four months of the year, compared with the same period in 2008, with rates at luxury hotels falling by 13.9 percent and rates at select-service hotels declining 8.3 percent. Select-service hotels are also holding their own in occupancy. Occupancy rates are expected to fall across all hotel levels in 2009 because of the recession’s impact on business and leisure travel. However, RobertMandelbaum, director of research information services at the consulting firm PKF Hospitality Research, said select-service hotels would end the year with less of a drop than most other brands. While overall occupancy is expected to drop by 5.6 percent and luxury hotel occupancy by 8.3 percent, select-service occupancy is projected to end the year with a much smaller 3.7 percent decline. This relative robustness could prove to be a double-edged sword in the coming months, though. Hotel investors and developers are increasingly flocking to these types of properties because the select-service hotels are viewed as a relatively safe haven during a time of overall distress for the industry. “The impact of all of this new supply is a really bloody market-share war,” he said. “The operators of these hotels are trying really hard to achieve or keep market share, and they’re doing that by lowering prices.” While this is bad news for hotel operators, it is a silver lining for road warriors and corporate travel managers trying to hold the line on lodging expenses in a tough economy. (White, 2009)
Although shareholders, in most of the cases, are looking to increase their profit margin and they want to reduce cost to remain competitive. If the Employee Free Choice Act becomes law, the hospitality industry, which is already struggling to survive in this economic crisis, will not be able to absorb the increased cost of higher wages, maintaining quality services for guests and continuing to pay dividends to stockholders without impacting the company’s moral and values. The management and hotel’s operation has a lot of work to do to maintain the quality service and trying to reduce the consequences of these changes in the companies’ moral and value. In addition to that, management has to deal with the financial and social implication of this crisis without impacting their standard and believe. Nonetheless, there are other alternatives and better restructuring opportunities that companies can use in order to maintain employee’s satisfaction and give them better living, work condition and succeed in the hospitality field during economic crisis. Also, after all this research, a good recommendation to solve the problem is to reduce stockholders’ dividend until the market rebounds. Then a good planning strategy should be developed and implemented by involving the right people on it. A committee of specialist consultants should be hired in order to minimize the consequences of the EFCA, and the dropped prices; while keeping companies’ standard value and believes. The goals and objectives need to be specific and the hotel needs to be able to achieve it. The management needs to think the ideas through to make sure that the goal can be achieved. A time frame for the project needs to be set up in order to see the progress of the company and to see it is been effective. All the management and employees should be rewarded once the goal is achieved so employees will contribute to an effort in such a way that they look forward to be rewarded for the effort.
One of the most important actions is the due diligence process. The hotel business during this economic downturn need to: investigate and evaluate a business opportunity. Investigation though all relevant aspects of the past, present, and predictable future of the business. A lot of homework needs to be done in order to find the ideal solution to all these events (EFCA, economic crisis, hotel low rates). The hotels need to “thinking things through” in order to find an effective solution. Before lowering the rates of luxury hotels room hospitality industry needs to identify potential “deal killer” defects in the target and avoid a bad business transaction that can affect the hotel business for decades to come. If the economy rise and hotels drop their prices, customers most likely will be adapted to saving money with luxury hotels and will bargain in order to keep reducing cost for the companies. Management of hotel need to combine information such as: financial statements, business plans and other documents and review them. In addition, interviews and site visits are conducted in order to find out what can be changed without effect the hotel value and the company’s moral. Research should be conducted with external sources — including customers, suppliers, industry experts, trade organizations, market research firms, and others. It is impossible to learn everything about a business and the time frame for an economic crisis but it is important to learn enough such that the hotel can lower your risks to the appropriate level and make good, informed business decisions. We know that the market operate as an invisible hand and even a well-run due diligence program cannot guarantee that a business transaction will be successful. It can only improve the odds. Risk cannot be totally eliminated through due diligence and success can never be guaranteed; however, it a good way to analyze some of the hotel current situation. (Due Diligence, 2009).
Communication between management and employee are the secret for run a good business. Develop an action plan to improve employee’s satisfaction, motivate employees, treat them fairly, recognize their work and give some good benefits, use some strategic program to built employee recognition and so on. The same way companies do survey to see customer’s satisfaction the companies should also do some surveys to identify employee’s satisfaction. Productivity surveys and case studies indicate that increased worker motivation and satisfaction can increase worker output. Progressive, innovative managers now achieve productivity gains with human resource management techniques that go beyond pay incentives. The essence of employee motivation and effectiveness is the manner in which they are managed. A direct relationship exists between effective management and modern human resource management. If the company provide a work environment where employees can work as a team and they recognize how important there are for the company that will simultaneously achieve achieves company goals and employees’ satisfaction
The management success is judged by their skill, knowledge in recognizing, assessing issues that concern employees and by their ability to resolve these concerns with employee’s help. Employees are always happy and get high quality job performance if management gives them opportunity. A flexible benefit is two-fold. Not only does the benefit satisfy some employee’s specific need but it also communicates your concern to meet these needs, creating the kind of work environment that contributes to increased employee productivity. (Zeromilion, n.d)
You must recognize the productivity problem and the needs of your employees so that you can tailor the benefit to meet the situation. For many, if not most, companies’ adoption of quality of work life and flexible benefits management techniques can dramatically change how things are done. It is difficult and risky to make these changes; however, such changes may be not only necessary but also the difference between companies that are competitive and companies that aren’t. Experience shows that with proper consultation, planning, training, and implementation the innovative human resource management concept is becoming the standard for effective management. (Zero Million, n.d.) That is a good strategy to eliminate unionization of employees that most likely will increase cost to the company.
One of the main concerns of luxury hotels when dropping prices is the effect that it will have in the future when the economy start to improve. When will the hotels be able to raise prices to a pre-recession level? In a long term how would this short term action impact the hotel industry? To answers those question a good recommendation is to do a feasibility analysis. It is important to verify the enterprise is viable before you spend the time into doing a full-blown business plan. The information gathered and the time spent on the Feasibility Analysis will be directly useful in the future, because some plan and action can be doable in a short term but the consequences on the long run may not be the one expected.
In difficult times people and companies learn to readapt their lives and start doing things in a different way. Is time for the hospitality industry to start doing thing different, team work is one of the best ways to solve problems and to find solutions; therefore I recommend that management involve employees within the company. The ADKAR which is a goal-oriented change management model that allows change management teams to focus their activities on specific business results (ChangeManagementLearningCenter, 2009) is a good strategy to get employees involved and to let them understand the impact of the current economic crisis in addition to the EFCA. For instance, is important to let employees aware of the need for change in the company. Explain to them the implications of the EFCA in their jobs and the risk of job losses because of the low RevPar and the high cost to keep the hotel. Explain the action taken such as reducing room prices and if the EFCA becomes law this may direct hotels to cut jobs and most likely will retard development by the company. most Probably employees would have the desire to participate and support the change, however management need to give employees the knowledge of how to change (and how will the change looks like), then employees will have the ability to implement the change on a day-to-day basis. The action plan which not only deals with improving the hotel revpar will also focus on employee satisfaction in order to eliminate the unionization. This action plan need to be reinforcement in regular basis to make sure the change is in place. Then management needs to inform employees about the current economic situation and explain the action plan that the hotel will be using to deal with the issue. Employee needs to be aware of the challenges and be negative consequences that the act can have on their jobs. In addition, some luxury services can be cut down in order to reduce operational cost, as example sited above in the article “Manhattan’s discounted rates.” However, those action plans will not prevent unionization and the best way to deal with it according to Pepperman on his article “What can we do to combat unionization” is to develop an action plan is to improve employees satisfaction and avoid unionization some recommendation that Pepperman propose in his action plans that I consider valid are:
Gauge employee attitudes through surveys and feedback sessions so that unions cannot take advantage of employee discontent. Employee surveys should become a “pattern and practice” at the company and should be done on an annual basis. Employee surveys will let management know how employees feels about a host of important factors, such as pay, benefits, supervisors, general work environment issues, fair treatment (or lack thereof), appreciation levels, and even whether the bathrooms are clean.
Create and implement a strategic program to build employee recognition and identification with management, this can be as simple as company jackets, t-shirts, hats, or even a company softball or bowling team. Camaraderie and high morale are extremely important in any workplace and will serve to obviate employee desires to have their expectations met by a union. In addition, employee “work-teams” that good-naturedly compete with each other at the workplace to achieve prescribed goals to be highly effective in creating a loyal team/company identity.
In a capitalist world where the global unification becomes more relevant to the business world it’s important to consider the necessities of human-being as an individual. Employees as a group are also chasing good work conditions, opportunities, and a better life. Because employees are not strong enough, they have to be tough to fight for their rights against corporations. Team work and government laws, and union together can make the difference. Employees are right for looking in their behalf and work as a team to find solution. On the other hand, corporation style has changed, society has demanded more and the way people use to do business in the past is not the same in today world. To remain competitive and to survive in this economy, shareholders need to take higher risk, be ahead of the market which demands investment in technology, development, safety competitiveness, cost reduction and many other challenges that shareholders need to be responsible for. Corporation has also to think about their most valuable asset which is the employee. Nevertheless, with the current economic crisis if the Employee Free Choice Act becomes law, hospitality industry, which is already in downturn, will not be able to absorb the increased cost of higher wages, maintain quality services for guests and continue to pay dividends to stockholders. Not only that but also the effect of lowering room rates and the RevPar decline needs to be deeply considered and analyzed in order to find the answer for a long term bases. When company value is to deliver the best service and they worked hard to get to this level, dropping of price and dropping of standard is not the right strategy to remain competitive, it can solve the problem in a short term but at the same time it will be generating a long term negative impact. When the company’s mission is to delivery to their customers the best service, but they are not being profitable enough to deliver it, the best way to maintain their value, keep their moral and stay in the market is to work with employees as a team, keeping employees motivated and with positive thought and attitudes in order to deliver good services and find the best solution to the problem. That would be the right approach to succeed in the hospitality field during this economic crisis without impacting the company’s moral and value and keep employees satisfaction at the same time.