THE HOTEL PARIS CASE The New Compensation Plan Like several other HR systems at the Hotel Paris, the The Hotel Paris's competitive strategy is "To use superior guest compensation program was unplanned and unsophisticated. service to differentiate the Hotel Paris properties, and to The company has a narrow target range for what it will pay thereby increase the length of stay and return vate of guests, and employees in each job category (front desk clerk, security thus boost revenues and profitability" HR manager Lisa Cruz guard, and so forth). Each hotel manager decides where must now formulate functional policies and activities that to start a new employee within that narrow pay range. The support this competitive strategy by eliciting the required company has given little thought to tying general pay levels or employee behaviors and competencies. individual employees' pay to the company's strategic goals. For example, the firm's policy is simply to pay its employees a actually was dysfunctional It was not channeling employees' "competitive salary," by which it means about average for behaviors toward those required to achieve the company's what other hotels in the city are paying for similar jobs. Lisa goals. In some ways, it was doing the opposite. knows that pay policies like these may actually run counter Lisa and the CFO knew they had to institute a new, to what the company wants to achieve strategically, in terms strategic compensation plan. They wanted a plan that of creating an extraordinarily service-oriented workforce. improved employee morale, contributed to employee com- How can you hire and retain a top workforce, and channel mitment, reduced employee turnover, and rewarded (and their behaviors toward high-quality guest services, if you thus encouraged) the sorts of service-oriented behaviors don't somehow link performance and pay? She and her team that boosted guest satisfaction. After meeting with the com- therefore turn to the task of assessing and redesigning the pany's CEO and the board, the CFO gave Lisa the go-ahead company's compensation plan. to redesign the company's compensation plan, with the Even a casual review by Lisa Cruz and the CFO made it overall aim of creating a new plan that would support the clear that the company's compensation plan wasn't designed company's strategic aims. to support the firm's new strategic goals. For one thing, they knew that they should pay somewhat more, on average, than did their competitors if they expected employees to consis- Questions tently exceed expectations when it came to serving guests. 1. Draw a diagram showing with arrows how compensa- Yet their review of a variety of metrics (including the Hotel tion at Hotel Paris should influence employee perform Paris's salary/competitive salary ratios, the total compensa ance, which should in turn influence Hotel Paris tion expense per employee, and the target percentile for total performance. Include at each level examples of relevant compensation) suggested that in virtually all job categories compensation policies, employee behavior, and Hotel the Hotel Paris paid no more than average, and, occasionally, Paris outcomes. paid somewhat less 2. Would you suggest that Hotel Paris implement a The current compensation policies had also bred what competency based pay plan for its nonmanagerial staff? one hotel manager called an "I don't care" attitude on the Why or why not? part of most employees. What she meant was that most 3. Devise a ranking job evaluation system for the Hotel Hotel Paris employees quickly learned that regardless of Paris's nonmanagerial employees (housekeepers, valets, what their performance was, they always ended up being front desk clerks, phone operators, waitstaff, groundskeep paid about the same as employees who performed better ers, and security guards) and use it to show the worth and worse than they did. So, the firm's compensation plan of these jobs relative to one another