By Steve DiGioia
In the world of business there are many components that make up a successful venture. All must work as a team with the one vision in mind, which is the health and prosperity of the company. But business is also a daily battle.
The procurement/purchasing department is obliviously involved in getting the necessary goods in house that are needed to manufacture a product. But they are bound with the task of not getting more than is needed or have available capital tied up in inventory. That makes sense. But what if they are tightening their belt a little too much and under-order based on business needs? This will of course affect the customer in some way.
The marketing department is responsible for spreading the word about the product(s) or service a business offers. Regardless of their methods; through print, television or internet advertisements, through social media and direct mailings, they promote the benefits of the business. Much is dependent of the successful marketing efforts. If they fail, any potential new customers, as well as existing customers, will not learn of the benefits of the business.
Let’s now focus on the two departments that are the front-line of the most businesses; Sales and Operations. This is where the predictable differences lay when it comes to which is more important.
No industry is better represented with this challenge than that of hospitality, hotels in fact.
There is always the friction between those responsible for “bringing the business in” versus those that “make it happen”. Each has a distinct, and conflicting, view on how it should be done.
Sales
Most hotel sales people are broken down into two categories; room sales and meeting space. Room sales will focus on “getting heads-in-beds” and booking as many rooms as possible, whether through individual guest bookings or group business. Those in charge of booking meeting space are further segmented into corporate business, social bookings (birthday parties, anniversary parties, etc.), weddings and maybe even golf events if applicable. There is even a SMERF category, which stands for Sports, Military, Entertainment, Religious and Fraternal.
The sales staff all have one thing in mind, to book as much business as possible. And why not, their compensation is based on a percentage of revenue generated from the events booked. If they don’t book, the hotel will not have any business and the sales person will not get paid. Seems cut and dry to most.
The restaurant manager usually doesn’t need to worry if sales don’t book because their job performance is not based on that. The housekeepers pay is not affected when sales are down. The front desk agent still gets paid even with a poor performing sales staff. Or do they?
When hotel sales are down this puts enormous pressure on all departments to cut hours and do more with less. If it gets too bad staff will be cut, laid–off or terminated based on the lack of business. Then the sales staff themselves may be let go if they can’t produce.
So the sales staff is under the constant demands of producing revenue. This revenue is not only actual but projected.
Projected revenue is used to make budgets, to plan the next marketing
campaign and for the large investment of capital improvements in the coming year. This gives the sales staff power, power to chart a course for the future of the company. But many times it gives them the power to sell events with no consideration of the cost of doing business. This is where the problems start. Now on to:
Operations
This is the backbone of any hotel. No matter what is booked, and at what price, the operational departments are responsible for making the guest’s experience as special as they hope for, and even to go above and beyond their expectations. But this comes at a cost, the highest in the business; labor.
Labor costs, or “payroll” is usually the largest of the “non-fixed” costs of a hotel. When an event is booked at a low rate it still must be serviced, and done so within the hotel standards and the same business costs, regardless of the revenue generated from that event.
For this example I will focus on the areas of the Food and Beverage Departments and how they respond to the demands of a corporate meeting event.
This department is divided into two sides; the “front-of-the-house” and the “back-of-the-house”. The Culinary Department and all their support staff are the back of the house. They usually do not have any direct interaction with the guests, hence the term back of the house. The Banquet Department consists of the wait staff, bartenders, housemen (who setup the rooms) as well as the managers, and is called the front of the house since they are in direct contact with the guest.
When a sales manager sells or ‘books” an event they are not responsible for what it takes to make the event happen. Whether it is a small event of 10 people or a large multiple day event, their primary focus is to book the event, get the information needed for the operational departments to make it happen. But is that really their only responsibility?
What good is booking a small event when the cost of servicing the event is more than the revenue generated from it? Yes, this small group can be the start of a long-term relationship with the customer and may lead to multiple future events as well, but what if it doesn’t?
The chef is still held accountable to the food cost and what it is as a percentage of revenue. He is tasked with keeping his labor costs down as well. But just because there may be a small event to service his quality, presentation and freshness of the food prepared must still be first-rate. Too many of these small-profit events do not allow the chef to efficiently run his department in the manner expected of him.
The banquet department then must get into the act. Setup staff as well as waiters/bartenders are next in line. Are we to think that the sales manager that booked this group realize that the waiter may be paid based on the revenue of the event? Low revenue = low pay. Does the sales manager know that the revenue generated from the bar for ten people during dinner is not enough to cover the cost of the bartender’s hourly rate or the cost of setting up the bar? Probably not. So they don’t worry about it.
Then there are the situations where “sales” will discount the price of the event in order to make the sale. “If I didn’t discount the price they would have booked somewhere else” is a common phrase from the sales staff. But “operations” can’t get a discount on the cost of food or lower the hourly rate of the staff needed to service the event. But we gave a discount to the event anyway.
When month’s end rolls around it is the chef and banquet manager that must sit in the boss’s office and justify why their costs are too high and not in line with budget. They are the ones that must explain to the customer why something was not done “as promised from the sales manager” when they may not have been provided with the information. And what if the compensation or yearly bonus for these positions is dependent upon them staying within their budget?
It is very easy for operations to downplay the value of these small groups because of the reasons already mentioned. “We’re not making any money on this group” someone may say, so their best staff is not scheduled to service it. “Just get the food out” is said in the kitchen, so the food presentation is not up to par. What is the ultimate outcome? A poor experience for the customer.
I will never fault a customer for asking for, or receiving, a low price. But we still must treat this as one of the bust customers we have in order to continue the relationships we value in the hopes of more business in the future.
This is where the battle begins. It takes a concerted effort for “sales” to understand what it takes in order to produce the expected results, and top customer service, for the events they book.
And the “operations” must realize that if no business is booked and revenue doesn’t walk in the door then positions may need to be eliminated and the business will suffer.
The challenge is for all parties involved to work as a team, understand the expectations and responsibilities of each, and find the best solutions for the health of the business.
Until that happens the battles will continue.
