Operational Change in InterContinental Hotels Group

Introduction

InterContinental Hotels Group is a company operating hotels in more than 100 countries of the world. The group has 688,517 rooms in 4,700 hotels. The company also operates nine hotel brands – InterContinental, HUALUXETM Hotels and Resorts, Candlewood Suites, Crowne Plaza, Hotel Indigo, Holiday Inn, Holiday Inn Express, EVENTM Hotels, and Staybridge Suits (IHG, 2014). The main goal of IHG is to grow through its brands by making them to become what the customers want. Its strategy is focused on effective marketing targeting big markets and segments with a large scale, and building strong operating system in the hotel industry. In a hotel or hospitality company, operations are important in enhancing strategy because customers want quality services on time. According to Johnson et al (2005) operations strategy is concerned with how a company transforms its inputs into valuable outputs that meet the needs of customers in order to enhance competitive advantage. Therefore, the operations strategy of developing a strong operating system is a great boost for the company’s goal of becoming the biggest hotel in the world.

IHG’s operating system consists of everything done by the company to add value to its services and drive demand for its brands. The operating system supports advertising and marketing campaigns. It consists of 11 global call centres, 13 websites written in local languages, global sales team made of 17,600 professional marketers, Global hotel distribution, and IHG® Rewards Club. The Rewards club has about 79 million members, and together with the global hotel distribution it enhances brand awareness for the company. The company’s focus on big markets boosts its scale so that the company can invest its resources in opportunities that yield the greatest returns.

IHG prioritizes its strategies in terms of: improving performance of its brands, generating good returns from its hotels, using market scale and knowledge appropriately, and strengthening its organisation through investments in people and ability to conduct business. IHG’s business model involves franchising, management, and owned and leased basis.

In terms of performance, its presence in 100 countries and operating nine successful brands alone are indications that the company is performing well. The company’s operating profit in 2013 was $668m which represents an increase of 10% from the previous while its total gross revenue was $21.6bn which showed an increase of 2% from the previous year. This is an indication of good performance since it expands while still increasing its revenue and profits. However, there are some operational changes that need to be made in the company in order to enhance further performance. The changes that can be made are based the two approaches of change and improvement suggested by Bauer et al (2010) – continuous improvement or incremental change, and radical or breakthrough change. The need for change in the company is because the company has some operational areas that do not meet the expectations of customers.

One of the operational areas that need change in IHG is the slow operations of its call centre. A call centre is important for the company because customers call through it to make enquiries, provide suggests and complains, and make hotel reservations. Being a company operating in large scale markets, IHG usually receives a lot of calls per day. The challenge of call centre operations is that customers spend a lot of time waiting on the call line before their calls are picked. The second challenge is that the services and responses received by customers through the call centre sometimes fail to achieve customer satisfaction. In this case, IHG needs to improve its call centre by enhancing technological advancement and hiring more employees to operate in the call centre.

Another area that needs change in the company is improvement of guest service and delivery operations in its hotels. This includes reception at the front office of the hotel, maintenance of clean and comfortable guest rooms, reservation processes. The quality of food, speed of serving customers, level of courtesy used to address guests, and flexibility of the hotel staff need to be improved in order to achieve the required standard of guest service delivery operations.

Lastly, the IHG’s marketing operations also need to be improved, especially in terms of online or internet marketing. The company uses social media marketing platform but it needs to develop more internet marketing approaches in order to improve its marketing strategy implementation and operations.

Methods and Criteria used to make the changes

Understanding Customer Needs

In order to enhance effective change implementation, it is necessary to understand customer needs first before changes are proposed. This is relevant to InterContinental Hotels Group because guests have specific needs that should be met in order to satisfy them. For instance, guests require comfortable guest rooms with good security and all the necessary conditions that enable a good stay in the hotel. Before the guests enter the hotel, the company should already have an idea about their expectations. IHG should first identify their customers and conduct market research to understand potential customers. Customer research should also be carried out in order to understand the company’s existing customers.

In terms of improving guest service and delivery operations, understanding the customer will enable the company to develop appropriate changes to improve guest services and delivery operations to meet the needs of the guests. Some of the things that the company should know about its customers include gender, age, occupation, disposable income and recreational activities of the customers. Other factors that the company needs to understand about the customer include the products or services demanded by customers, the reason why customers buy the products/services, influence of others on the purchasing decisions of the customer, and the place and time that the customer buys the product/service.

In terms of marketing operations improvement, value proposition analysis needs to be conducted. This involves analysis to determine the customer perspectives on the company. IHG should conduct a survey to gather information about the reasons why customers choose certain organisations, and what they actually buy from them. This value proposition analysis is necessary for IHG because it will inform them about the needs of customers; hence the company can develop appropriate changes in its marketing operations that will enable them to meet customer needs.

Understanding customer needs may also be appropriate in initiating changes related to the improvement of the company’s call centre. Understanding the customer will enable the company to understand the attitudes, expectations and interests of the customer. This knowledge will enable the company to be well prepared to answer customers faster and appropriately when they call to make enquiries or reservations.

8-Step Process for leading change

One of the criteria of change that may apply to the changes of Intercontinental Hotels is the 8-Step Process for Leading Change developed by John Kotter. This process involves eight steps that should be followed in the implementation of the changes required. The processes include: Creating Urgency, Creating a Guiding Coalition, Developing a Vision, Communicating the Vision, Empowering people and removing impediments, Generating short-term objectives, Building on the Change Initiative, and Incorporating Cultural Changes.

The 8-step criterion applies mainly to the change of improving guest service and delivery operations because the change involves a lot of improvements which need to be incorporated into the entire operating system of the organisation. Improving the entire customer service department of the organisation requires a lot of commitment and support from the entire organisation because it touches on many employees of the organisation. Therefore, the eight-step process should be applied because it starts with creation of urgency and development of a vision. These approaches enable the company to receive support from people within the organisation.

Quality Improvement

The changes in the company may also be enhanced through quality improvement. According to Prior and Toombs (2004), quality should be enhanced in order to promote the use of a product. Quality includes quality of design, abilities, service, and conformity. IHG should ensure that its products and services are fit for use by guests. This prevents over-specifications which may cause an increase in costs. Quality improvement is based on an analytical approach which involves the analysis of costs associated with the changes (Bauer et al, 2006). Such costs internal and external costs of failure, appraisal costs and prevention costs.

Quality improvement applies mainly to the improvement of guest service operations because guests are attracted by quality products and services. Quality improvement criterion is also appropriate in the improvement of guest service operations because it promotes the use of the company’s services by the customers. If the quality of services is improved, more guests will come to the hotels of the company. Improvement to quality also applies to the quality of customer services offered by the company’s front office staff. Quality improvement approach therefore enhances improved courtesy, respect, knowledge, speed, and reliability of customer service staff.

Planned Strategic Change

Lastly, the changes may be implemented based on the four approaches of change developed by Balogun and Hope-Hailey (2007). The four approaches are:  adaptation, evolution, reconstruction, and revolution. These approaches are summarised in the table below.

From the figure above, adaptation is an incremental (continuous) change which is operated within the current culture of the organisation (Balogun and Hope-Hailey, 2007). This may be appropriate in the improvement of marketing operations in IHG but it is not appropriate to the other two areas of proposed changes because improvement of customer service operations requires a change in culture including norms and behavior of the organisation.

Reconstruction applies to rapid changes but does not involve changes in the current culture of the organisation (Dess et al, 2010). This approach is inappropriate to all the proposed changes because improvement in marketing operations does not require radical changes while the other two changes require the change in the existing culture of the organisation.

Revolution involves both the change in culture and rapid changes (Balogun and Hope-Hailey, 2007). This is appropriate in the improvement of customer service operations because rapid changes are required in form of technological investment. Furthermore, a change in culture is also required in order to develop a lasting improvement of customer service operations. Lastly, evolution involves culture change in an incremental manner. This strategic change method is challenging

The chosen Change to be implemented – Improving Guest Service and Delivery Operations

The chosen type of change among the three changes identified above is improvement of the guest service and delivery operations. As mentioned earlier, the operational strategy of IHG is to develop a strong operating system that supports various operations including marketing, call centre, hotel distribution and reward activities. However, the company is not clear on the strategy used to enhance guest service and delivery operations which are the key operations needed to enhance effective implementation of operations strategy and achieve value for customers. The aim of initiating this change is to improve customer satisfaction by reducing the time used to serve guests and improving the quality of services offered to them.

Approach used to Manage/Implement the Chosen Change

Change is a crucial improvement process that needs to be undertaken carefully.  After the areas that need change have been identified, the next step is to determine the best approach needed to change or improve on the selected area. The change process can either be passive or proactive. Passive approach is also known as incremental or continuous approach. It involves the identification and implementation of improvements through activities such as suggestion schemes, and process and technology investments (Hill and Hill, 2010). On the other hand, proactive approach is also known as breakthrough or radical approach. It involves the development of an improvement culture and use of intensified approach. Passive approach takes the form of small but more frequent low-investment improvements while the active approach takes the form of radical improvements. InterContinental Hotels Groups should use a combination of the two improvement strategies to improve its guest service and delivery operations.

The most appropriate method for the improvement of Guest Service and Delivery Operations of IHG is the 8-step process for leading change by John Kotter. Kotter (1995) suggested an eight-step model used for effective change management. The fundamentals of the model can be used to improve the guest service and delivery operations of InterContinental Hotels Group. The company should follow the following eight steps of change management to make the change as suggested by John Kotter.

Step 1: Create Urgency

Change cannot be initiated if there is no sense of urgency to do so. IHG’s leaders should be the first to realize the need for change and communicate it to other members of the organisation. In order to communicate the need for change to other people effectively, the leaders should connect with the deep values of the workforce in order to win their trust and convince them to accept and implement the changes required. Leaders should also communicate the challenges that might be faced in the change management process.

Step 2: Create a Guiding Coalition

A successful change initiative needs to be undertaken in a team. Leaders should develop a coalition with other people in the organisation to form a change implementation team (Kotter, 1995). The team should be made up of individuals with relevant knowledge, skills and experience of guest service operations. They should also have power and authority to initiate the suggested changes in the organisation. Leadership skills are also important for the guiding coalition.

Step 3: Develop a Vision

Once the team required to implement the changes has been formed, it is necessary to create a vision that will direct the guiding coalition and enhance coordination of activities within the team. The vision should be imaginable in order to create a clear picture of where the change is taking the organisation. It should also be desirable, feasible, flexible, and focused.

Step 4: Communicate the vision

Kottler (1995) suggests that most organisations fail to communicate the vision of their organisations effectively. He says that using a memo to be read by the CEO is not enough to communicate the vision. Change is a continuous process, so leaders should constantly remind their people about it. Various channels should be used to communicate the changes, e.g. emails, coffee break conversations, presentations, etc. For the improvement of guest service and delivery operations of InterContinental Hotels, the leaders of change should use these various channels to constantly remind the company’s employees about the need to treat guests courteously and with respect. Everyone should be told about the importance of improving customer services in the InterContinental hotels. The vision should be simple and clear in order to enhance an effective communication to stakeholders.

Step 5: Empower people and remove impediments

Members of the organisation who buy in to the vision of improving guest service delivery operations should be empowered to deal with and tackle all barriers that may prevent the successful implementation of the change. Leaders should be empowered to deliver the change (Kotter, 1995). Members of the IHG should also be empowered through increase of remunerations and compensation. Rewarding people through that manner will motivate them to work towards the achievement of the vision of change. All barriers including individuals who resist change should be eliminated.

Step 6: Generate short-term objectives

One of the short term objectives that can be generated in InterContinental Hotels Group is to reduce the average time spent attending to one guest by 40% within the next 2 years. This and other objectives that may seem relevant to the vision of change should be identified by the coalition team. The purpose of these objectives is to create short-term improvement spirit in the coalition. These objectives should be SMART; Specific, Measurable, Attainable, Reliable and Time-bound.

Step 7: Build on the Change Initiative

In this step, momentum of change should be built on because as the change process progresses, it is likely to end in further resistance which may cause loss of momentum that had been developed since the change process started (Kotter, 1995). Change processes including fast handling of customer requests, use of courtesy in communication, use of technology in customer service and increased training programs should be aligned to the organisation’s culture in order to make them to become part of the organisation’s culture. In this step, the leaders of change should analyse the objectives of the change to determine which ones have been achieved and which areas still need improvements. New objectives should also be developed to build on momentum. At this point, the change management team should also focus on continuous improvement.

Step 8: Incorporate Cultural Changes

Culture refers to the shared values and behavioural norms of an organisation (Kotter, 1995). Since the improvement of guest service and delivery operations in IHG is a long term change, it should be planted into the culture of the organisation. Employees should develop the habit of attending to customers with courtesy and respect as part of the organisation’s culture. Furthermore, the use of and investment in advanced technology in customer service operations should also be part of the company’s culture. However, the company’s culture comes last when the change has gained momentum and has been accepted by most people in the company.

 

Conclusion

From this analysis, it is clear that InterContinental Hotels Group needs to implement changes in its operations. The change should be both incremental/continuous and rapid in order to achieve success in the long-run. The three changes suggested are: improving the call centre operations, increasing the guest service and delivery operations, and improving marketing operations. Using various criteria/methods of change, this report has identified the improvement of guest service and delivery operations. The criteria used to analyse these changes include the 8-step process of change by John Kotter, the quality improvement approach, planned strategic change approach, and understanding customer needs. Improvement of guest service operations has been considered appropriate because it entails both the improvement of organisational culture and enhancement of rapid changes in the organisation. In order to implement the new changes in guest service operations, the 8-step process of change should be applied in the company. This involves creating urgency, creating a guiding coalition, developing a vision, communicating the vision, empowering people and removing impediments, generating short-term objectives, building on the change initiative, and incorporating cultural changes.

 

References list

Balogun, J., & Hope Hailey, V. (2007). Exploring Corporate Strategy, 3rd ed. Prentice Hall.

Bauer, J.E., Duffy, G. L., & Westcott, R.T. (2006). The Quality Improvement Handbook. American Society of Quality.

Dess et al. (2010). Strategic Management: Creating Competitive Advantages. McGraw Hill.

Hill, A., & Hill, T. (2011) Essential Operations Management. Palgrave McMillan

IHG (2014). About Us. Accessed July 29, 2014 from http://www.ihgplc.com/index.asp?pageid=16

Johnson, G., Scholes, K. and Whittington, R. (2005) Exploring Corporate Strategy, 7th Edition. Harlow: Prentice Hall.

Kotter, J. (1995). Leading Change. Harlow: Prentice Hall.

Prior, M.G., & Toombs, L.A (2004). Management models and quality initiatives in small business. SBNAC University of Arkansas.

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