The Seven Secrets to Creating a Financially Engaged Leadership Team in Your Hotel
January 10, 2017 12:38pm
By David Lund
You have the ability to increase the profits in your hotel fast by creating an environment that has your managers working together on the "business" of running your hotel.
I invite you to read my 7 secrets to grow your hotel profits fast and open up to the opportunity you have to improve the financial communication in your hotel and brand. If you do this, you will have a more engaged leadership team, your hotels will make more money, your leaders will love you, and everyone will have more fun.
1) Start with the End in Mind – Your Hotel Needs a Financial Communication System
The picture you want is that of a leadership team that knows what is happening financially; one that is plugged into the financial well-being of the hotel. The appropriate leaders all participate in the financial management, and forecasts and budgets are completed with detailed input from all areas of the hotel.
1. When forecast and budget changes need to be made to achieve overriding goals, leaders on the ground make these changes on line items, and they know what items are included in their final budgets and forecasts and which ones are not. There are no executive level changes to forecast numbers at the 11th hour.
2. Each leader knows and agrees to financially managing his or her piece of the operation and they happily take responsibility for what happens in their area. There are no expectations, only agreements.
3. Schedules and timelines for forecasts, budgets and month-end close are adhered to.
4. Regular communication on the numbers is thoughtful, complete and informative.
5. Department managers and leaders all know their revenue, payroll and expense lines. They monitor the progress for their
area daily throughout the month, and make adjustments to schedules and purchases to reflect the realized and adjusted business volumes.
6. New leaders are selected, trained and properly supported to evolve financially, as well as providing service and colleague engagement.
7. Leaders evolve financially in this environment because the hotel has created great bench strength.
8. Leaders from this hotel get promotions because of their many capabilities, especially their ability to lead financially.
2) The Third Pillar – We're Missing the Boat
It's the three pillars of our business—guests, colleagues and owner.
We manage guest interaction with an understanding and belief that we're all invested in good guest service. Even the departments that don't have direct guest contact help to support colleagues who do. We are all responsible.
With colleague engagement it's the same: We're all involved and implicated in managing departments and hotels that have high-colleague engagement.
No department or individual is separated from the mission of service and engagement.
So why is the owner different?
Well, not so long ago it was considered taboo to discuss the finances. So naturally, many leaders and managers didn't know what was going on financially.
Now we find ourselves in a different world—one in which we want managers and leaders to get in the game.
We bounce around this third pillar and we don't have the same level of expertise as we do with the other two pillars.
The issue, as I see it: We have not evolved financially as quickly as we have with the other pillars.
Brands sell expertise to owners, the three pillars of expertise. Brands need to realize the key to mastering the third pillar starts with investing in financial leadership.
We have a myriad of guest service checklists: audits, training, standards…you name it.
With colleagues we have the same, and sophisticated surveys telling us everything under the sun about our people and how they are thinking.
So what do we do financially to check ourselves out, to see how we're doing, to check out our standards?
Nothing substantial or effective.
Sure we have audits for the accounting function, but we have nothing for a standard or a way of measuring how we lead financially.
I talked to a GM of a big brand not long ago, and he proudly told me, "I have only four people managing the numbers."
I asked him if he thought he would get better results if he had 40 people working on it. He is still thinking about that.
My point is that we have a long way to go to evolve financially.
The irony in this is that brands largely don't own hotels anymore. Brands sell expertise. The brand with the best financial leadership model would be very attractive to owners. Brands mandate standards and owners pay to have these in place. In the case of financial leadership like service and colleagues, owners pay the way for the brands. What are brands waiting for?
3) The Paper Can't Talk – Give the Money a Voice
Why is financial leadership in hotels so un-evolved?
The answer is somewhat hidden. When we look at what we charge our leaders in hotels with doing, it's three things: Looking after 1) the guests, 2) the colleagues and 3) the owner.
The simple fact is this: The guests and the colleagues can talk. They can speak their mind, ask for help, and demand our attention in ever-increasing cultural and socially responsible ways.
The paper, the reports, the forecast, the budget…all of these instruments don't have a voice.
We need to give them a voice that everyone can hear.
That's financially evolved leadership: Make the financial piece as important as the other two pillars in how we communicate. We know it's easy to ignore the financial piece, and we also know it's a costly error.
4) Talk about Agreements, Not Expectations
Expectations. I hear this word from almost all GMs, controllers and hotel executives.
It's the wrong word and it's not an effective way to manage.
So here is the thing with expectations. Human beings don't like having expectations placed on them. We actually really don't like it and most of the time we revolt against others' expectations at work and in our personal lives.
Just imagine someone expecting you to do something.
How does that sit with you? Not well, I bet.
So why do we place expectations on people at work? Why do we place expectations on them as it relates to being responsible for numbers? Do we think it's because it's their job and they should just do it?
Probably. But it's not effective, not only is it ineffective, it can be destructive to workplace relationships. There is a much better way to manage.
It's called agreements. Make agreements with the people who work with you.
In the case of the numbers, ask your managers to take this on and tell them you will support them and give them resources to master this. You will be there when they have challenges; you will be there to help celebrate the successes; and you will lead the hotel through agreements with your team.
Humans love to honor agreements and they push back on expectations.
Check out your language. What do you communicate?
Agreements are creative and a lot more fun than expectations. They are also a lot more effective. Especially when it comes to managing the numbers.
5) The How To vs. The Want To?
The business of managing the hotel finances is not terribly technical or complicated.
What makes it challenging is that it's usually a large job involving many people.
The communication system in the hotel is the key to both smooth management and predictive financial results. This is the how to.
So if the hotel finances are not a complicated matter, why is it such a challenge in so many hotels? The answer lies in the want to.
Most leaders in the hotel don't want to be managing numbers. They typically didn't get into the hotel business with the idea that they would be business people with forecasts and budgets.
They're "people people"; artists and creators. They now find themselves in roles with responsibilities to get the numbers done and they don't like it.
They don't like it for a few reasons:
1) They are often responsible for numbers that are created by someone else; someone who expects that leader to own the numbers. This rarely happens.
2) They don't have a good financial communication system to use when dealing with the numbers.
3) They don't take the time necessary to properly manage the numbers.
The want to do this in all of these areas is low. Let's be realistic for a moment and ask ourselves: "If they really wanted to manage their expenses and know how much they spent" they could figure it out.
So how do we increase the want to?
We show them what is possible with good financial communication by investing in financial leadership in our hotel.
Leaders realize very quickly that it's not so complicated, and mastering the numbers part is the express elevator to career advancement.
One last thought on the want to. If you're controller really wanted to bring this type of financial leadership model into your hotel he or she would already be doing just that. Controllers in large don't want to lead financially; they're just not comfortable doing this. If they were they would already be doing it. When I created the first financial leadership workshop over 8 years ago, I did so kicking and screaming. I was kicking and screaming because I didn't want to get up in front of a group of leaders and talk about the finances. I was scared, I was pretty sure people would laugh at me and my workshop. But you know something magical happened that day. I realized this financial leadership workshop solved my biggest challenge. The challenge of getting department managers and leaders to give me what I needed to do the; forecast, month end, the budget, you name it. The financial leadership training gave the leaders much needed information; they needed to know what all this information was for. They were pretty sure I was just making their lives miserable by asking for so much from them on a schedule every month! Once the leaders realized it's all connected, not so complicated, they got in the game. Overnight my biggest challenge was gone. That's the power of the want to. Once your leadership embraces the want to, the how to is everywhere.
6) It's A Circle – Create The Monthly Financial Circle
The financial window in a hotel opens and closes every month.
It's both a curse and a blessing.
It's a curse because it seems like we just finished with one month and another is upon us; it's relentless, and like the tide, it never stops.
The blessing can be hard to see but it's there—it is the blessing of practice of mastery.
We get to start all over again and practice every month. Every month is an opportunity to re-set; to start over; to learn from what worked last month; to improve what didn't, and get better and better at this game.
The month is a circle that we move through. We can use the circle to organize, practice and master this process:
* The circle starts with the forecast, and each person prepares his or her individual part. The forecast is zero-based in all areas and is consolidated. Changes are made to the zero-based numbers and each area has a plan to execute to achieve the desired result.
* The circle continues into the month and each area monitors the revenues, payroll, and expenses daily.
* The hotel uses a system of distant early warning to ensure that revenues are materializing as planned, or if not, that adjustments in spending and payroll are made. They do not wait until the middle of the month to see how things are shaping up; this is done daily.
* The circle continues into the month-end closing process in which each area receives and reviews the general ledger listing and financial statement for the areas they forecasted and monitored.
* Errors are found before the books are closed. Then, in turn, each person who forecasted, monitored and reviewed his or her section writes the commentary for their part and the commentary is consolidated and edited.
* The process starts over again and the circle is back where it started with the forecast preparation.
7) Many Hands – Lift Your Business Up
One of my mother's favorite sayings was "many hands make light work."
With financial leadership, we want as many people involved in the "monthly financial circle" process as we have involved in preparing work schedules or preparing purchase orders, "consuming the hotel's resources," plus the people who forecast its revenues.
The hotel must adopt a culture that stands for "every line needs an owner."
In the past in many hotels, the financial information was not shared with many leaders. It was considered to be secret and private.
Most hotels today share financial performance information with leaders. What financial leadership hotels do is match the resources, consumers and revenue producers with the appropriate lines in the profit-and-loss statement, and literally every line has an owner.
The owners forecast, track and report on their lines every day and every month.
With a system that encompasses the entire statement, we ensure that all facets of our business are being managed.
This promotes more communication and better decision-making because someone is actually taking active responsibility for every line.
From a monitoring and review point, we can clearly see what areas are working and which ones are not, and we can then take the appropriate action with the right individual.
If we attempt to manage the numbers by area or department, we are missing a huge opportunity to really hold the business up with many hands.
So there you have it, & secrets to follow to grow your hotel's profits quickly. This financial leadership is my passion and my mission in my professional life.
Tags: david lund
David Lund is The Hotel Financial Coach, an international hospitality financial leadership expert. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with an international brand for over 30 years.
He authored an award-winning workshop on hospitality financial leadership and has delivered it to hundreds of hotel managers. David coachs hospitality executives and delivers his Financial Leadership Training throughout the world, helping hotels increase profits and build financially engaged management teams.
He speaks at hospitality company meetings, associations and he has had several articles published in hotel trade magazines and he is the author of three books on Financial Leadership. David is a Certified Hotel Accounting Executive through HFTP and a Certified Professional Coach.
Contact: David Lund
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