A case study on

Presented by Kulsoom Samina Lata Sarkara Namita Sanwal = 140 = 158 = 157

Prashant Katarkar = 146

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Abstract:

Oberoi Hotels acquires a small Bangalore based chain of hotels. They Plan to retain half of the acquired hotels & rebrand them. Whereas rest half will be sold to increase liquidity & support further expansion plans. The company is planning the transformation of the acquisition in budget hotel segment where guest would stay for short duration. The hotels are situated in downtown location which is frequented by transit guests & tourists who come to see popular destination. The organisation feels that re-deployment of existing Mumbai based employees to lead in Bangalore would be an effective decision after they re-open. The Oberoi group envisions the ownership of 150 more hotels in 5 years & 300 hotels in 10 years. If the Bangalore plans succeed, It will set a tone of further expansion across country & internationally as well. The company never recruited anyone to work outside Mumbai & has trouble deciding the compensation. As per information on Internet, they understand : Existing salary of managers in Mumbai is Rs 55000 + bonuses Average salary of managers in Bangalore is Rs 60000 without bonus. The directors want to hire internal Managers to operate in Bangalore & they should be enticed to relocate to Bangalore.

Problem Identification:
A) The management wants to review wether, I) Managers to be hires only locally? II) Managers to be hired from all over India?

III) Managers team should be mix of local as well as non-locals?

B) How should the compensations to be decided to lure the internal key staff to Bangalore hotel operation?

C) How should the training plans are to be designed considering the hotel opens in One Month?

Boundaries:

1.

The companies limited knowledge on recruitment & compensation design outside Mumbai.

2.

Preference of Existing staff over Local staff due to fear of unknown.

3.

Very short duration to design a comprehensive training program as hotel opens in 1 month.

Fast Facts:
1) It is mentioned in the case that company would prefer to station existing employees in the Bangalore but that doesnt mean the ONLY want existing Mumbai based employees : It Means Local staff can also be employed 2) The case says that if the Bangalore plans are successful then company would follow the same trend for future domestic & international expansions. 3) The internet information says average salary of Hotel Managers in Bangalore is Rs 60000 without scope for Bonus. Internet information is not a standard to be followed, it helps only in decision making. That mean the managers in Bangalore can be offered Bonuses. 4) As we know, a small hotel chain has been acquired, there must be some staff working for it. The same staff can be useful during recruitment process.

Recommended solutions:
Staff

Selection

Short period for hotel to be re-opened

Relocate key Managerial positions: Manager: Front Office Services Executive Chef Manager: Food & Beverages Manager: Housekeeping Retention of existing staff of acquired hotel chain at Midle management and Junior level The company can retain all non-management positions available from the acquired chain of hotels to save recruitment costs.

Recommended solutions:
Compensation Structuring Bonus in the form of Performance Incentive
Hike in salary structure dramatically Motivate to increase productivity Inculcate team spirit
Targets for Bonus: 100% Occupancy ratios ie minimum amount of occupancy rates to achieve desired profit levels. Eg:hotels having 100 rooms may decide to have Average Daily Rate (ADR) for each room of Rs 10,000 at 100% occupancy. That means hotels potential sale was 100 X 10,000 = Rs 1,000,000. However if the occupancy forecast falls to 75% then the room rate goes to , 1,000,000/75 = Rs 13,333 Loss to company as the clients will prefer other hotels for best price.

Recommended solutions:
CTC (Cost To Company) is vastly different from Take Home Pay - Taxes. Efficient structuring of salary to save taxes: I. Allowances: Paid irrespective of the employee actually incurring them, fully taxable.

II. Reimbursements: Expenses actually incurred, bills provided, not taxable up to a specified limit under each head.

Components which can be used to reduce the tax liability on salary income: Conveyance: Rs.800 per month exemption i.e Rs.9,600 per annum Medical Reimbursement: Rs.15,000 per annum, can be claimed for self, spouse, children, parents and siblings who are dependent on the assessee

Recommended solutions:
Leave and Travel Allowance: Up to one months basic salary allowed tax free for 2 trips in a block of 4 years for travel within India only. Education Allowance: Up to Rs.2,400 per annum is exempt Training Allowance: Up to Rs.14,000 per annum is exempt on production of relevant bills. Telephone Allowance: Up to Rs.12,000 per annum is tax free if the phone is used for official purposes and bills submitted. Qualification Allowance: Up to Rs. 24,000 per annum tax free if qualification being acquired in line with current job performance

Recommended solutions:
House Rent Allowance: Tax rebate available u/s 10 if one lives in rented premises and the rent exceeds 10% of the salary. Actual HRA exempted from tax is least of the following:
The actual amount of HRA received. 40% of salary. This increases to 50% if you are renting out the house in Metropolitan City Rent paid minus 10% of salary (basic component + dearness allowance)

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Compensation structure for existing managers can be designed in the following way to lure them to relocate

BONUS ON TARGET COMPLETION

*** Apart from the above structure, the existing managers can be assured that theyll be given preference for promotions when expanding the company in future.

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 Training
As the hotel is supposed to re-open in 1 month, there is short period to experiment with Training design. The training can be carried at the property itself & divided in 4 stages # Stage 1 (For 3 days) Training about the Hotel culture In this, the relocated managers can be trainers as they know the company very well. The training can have modules like History & Information of the company, Reporting relations & Key people, Company expectations from the employees. # Stage 2 (For 4 days) Training about Bangalore Oprations In this, the local managers can be trainers to give information about the city & local market scene, ways to retain the clients of acquired hotel chain and overall operation plan for the hotel. #Stage 3 (For 3 days) Team building activities Team building activities like games , simulations & employee excursions can be organised so that the newly formed Team understands each other & gives full output. +Stage 4 (for 20 days) Soft Opening In this stage, internal people like, Owners , Head office Managers & Trainers can come to hotel as Guest to see effectiveness of Training & experience progress of the development. # denotes Off job training & + denotes On the job training
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Advantages
1. Acceptance of Local Managers & non-management staff will gain loyalty & sympathy of the Locals. Besides, It will cut down recruitment costs drastically. 2. Offering Bonus, to Managers will not only boost their morale but also increase productivity levels. Moreover, Existing Mumbai based managers will readily agree to relocate if a tax savvy handsome salary is being offered with preference for promotion in future when expanding. 3. Employing both local managers & existing managers for Training will reduce training costs and also act as refreshers for managers before opening.

Disadvantages
1. It may be difficult for the Oberoi to offer the standards for which they are known for in budget segment as most people coming to the hotel will build high expectation after seeing the brand name. The company will need to carefully convey the message of budget hotels. 2. The existing managers who are transferred to Bangalore may find it difficult to manage as the lifestyle, culture & climate differs in new locality. 3. Clash between Local Managers & Transferred Managers may happen if the Transferred managers dont behave diplomatically.
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8. Conclusion:
To conclude, We suggest that the right mix of employees to be considered during recruitment. The pre-opening team can be trained carefully & given same responsibilities & benefits so that everybody feels equal. Focus on showing a big picture of career to existing employees to relocate. The relocating employees to be supported initially after relocation until they are settled properly. And finally, To be very careful while testing the new waters in every possible way.

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