Employee Free Choice Act
The 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)
Recommendation
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.
Conclusion:
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.
