It is based on three well known premises:
Premise 1: People
make 95 percent of their total contribution to a position during their first three years in the position.
The thought process behind this premise is that people are the most enthusiastic
about a position during their early years on the job. Therefore they make
the majority of their contributions their first three years. After three
years they may be steady performers, but their contribution to your profits
has most likely peaked.
To maintain competitive profits, companies need to consider re-assigning
their management people between the third and fourth year. Or the companies
can re-engineer positions. Re-assignments or re-engineering can be as simple
as switching jobs among employees within the hotel or just re-assigning
employees within the same job to a different hotel (as long as the new hotel
isn't a carbon copy of the hotel the person left). The key? Make sure the
new assignment is enough different to rejuvenate the person so the three
year cycle starts over.
Premise 2: Plan your attrition.
It's well documented that companies that have been the most successful over
time have had planned attrition.
The ideal formula states that hotels (or management companies or chains) should plan to bring 20% of their management team from outside their company.
Remember, the key word here is "planned attrition."
The hotel industry, like many others, typically has plenty of management
turnover. Unfortunately most hotels experience most of their turnover in
just a few positions. The last study we saw on the hotel industry indicated
average management turnover of over 40% per year for hotels. Many times
Corporate Management initiates the turnover, but all too often it is reactive
turnover. Our industry loves to set very ambitious targets for our hotels.
Premise 3: When management turnover exceeds 20-30% per year, profit improvements will be minimal, or at best short lived.
Identifying expected profit targets from each position for the next year should be part of the budgeting planning process. It can identify the likelihood the projected profits will be hit.