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5-2010
J. Bruce Tracey
Cornell University, jbt6@cornell.edu
Recommended Citation
Hinkin, T. R., & Tracey, J. B. (2010). What makes it so great? An analysis of human resources practices among Fortunes best companies
to work for [Electronic version]. Cornell Hospitality Quarterly, 51(2), 158-170. Retrieved [insert date], from Cornell University, School
of Hospitality Administration site: http://scholarship.sha.cornell.edu/articles/215/
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What Makes It So Great? An Analysis of Human Resources Practices
among Fortunes Best Companies to Work for
Abstract
Although few hospitality organizations are listed in the annual survey of Fortune magazines one hundred best
companies to work for, an analysis of companies with similar operating challenges provides clear direction for
hospitality and service companies human resource practices. This study examined twenty-one companies,
including one food-service firm (Starbucks) and three hotel chains (Four Seasons, Kimpton, and Marriott).
The remainder of the companies analyzed were grocery and health care organizations, both of which share
human resources issues with the hospitality industry, such as long operating hours, relatively high turnover,
and relatively low pay. The innovative human resources practices isolated in this analysis were a culture that
emphasizes the value of people, scheduling flexibility, creative staffing practices, people-oriented training
programs, transparent and well-aligned performance management policies, and compensation policies that
reflect the organizations values and link pay to performance.
Keywords
human resources, service industry best practices, Starbucks, Four Season Hotel, Kimpton Hotels, Marriott
International
Disciplines
Hospitality Administration and Management | Human Resources Management
Comments
Required Publisher Statement
Cornell University. Reprinted with permission. All rights reserved.
What Makes
It So Great?
An Analysis of Human Resources
Practices among Fortunes
Best Companies to Work For
Although few hospitality organizations are listed in the well-aligned performance management policies, and
annual survey of Fortune magazines one hundred compensation policies that reflect the organizations
best companies to work for, an analysis of companies values and link pay to performance.
with similar operating challenges provides clear direc-
tion for hospitality and service companies human Keywords: human resources; service industry best
resource practices. This study examined twenty-one practices; Starbucks; Four Seasons Hotels;
companies, including one food-service firm (Starbucks) Kimpton Hotels; Marriott International
and three hotel chains (Four Seasons, Kimpton, and
E
Marriott). The remainder of the companies analyzed very year since 1998, Fortune magazine has
were grocery and health care organizations, both of
published a list of the one hundred best com-
which share human resources issues with the hospital-
ity industry, such as long operating hours, relatively high
panies in the United States to work for. For-
turnover, and relatively low pay. The innovative human tune researchers ask this question: What makes it
resources practices isolated in this analysis so great? They then try to answer that question by
were a culture that emphasizes the value of people, examining a wide range of corporate human resources
scheduling flexibility, creative staffing practices, policies and practices. The researchers examine the
people-oriented training programs, transparent and following:
job growth, voluntary turnover, and the benchmarking assessment for the purpose
number of job applicants; of seeing what we could learn from these
training provided for salaried and companies that might be applicable to the
hourly employees; hospitality industry. Yasin and Zimmerer
compensation and benefits for hourly (1995) propose three basic forms of bench-
and salaried positions, including health marking: internal, competitive, and generic.
care coverage;
Internal benchmarking comprises an exam-
work-life balance and job design; and
diversity initiatives, percentage of minor-
ination of work processes and products,
ities, and nondiscrimination policies. development of standards for those processes
and products, and measuring performance
Although names come and go from the over time with respect to attaining those
list, 80 percent of those recognized in 2009 standards. This is a key component in con-
were also on the list in 2008. Our review tinuous improvement efforts and total qual-
revealed that the list of top-ten companies ity management programs. Competitive
changes little from year to year. Seven of benchmarking is the comparison of prod-
the top-ten companies that appeared on the ucts and services offered by firms in the
list in 2009 were also in the top ten in 2008. same industry, often by a direct competitor.
In addition, the firms that were new to this STAR reports, produced by Smith Travel
elite group of organizations had moved up Research, are a good example of competi-
from positions eleven, twelve, and fourteen tive benchmarking in the lodging industry.1
on the previous years top-one-hundred list. In generic benchmarking, the processes,
Although firms in many industries are products, and services of companies across
represented on this list, we have also noticed a wide range of industries are studied to
a conspicuous absence of hospitality organi- identify best practices that might be useful
zations. The 2009 top ten includes a stock in a different context. Although our inquiry
brokerage, a consulting firm, an investment necessarily applies a generic benchmark-
bank, a hospital, four technology firms, ing approach, we wanted to come as close
and two grocery companies. Looking at the as possible to a competitive-type compari-
full list, only two hotel companies were son by focusing on companies having sim-
represented in 2008, Marriott Interna- ilarities to the hospitality industry. This
tional (ranked seventy-second) and Four approach was taken to ensure that our find-
Seasons (ranked eighty-eighth), and one ings would be more relevant for industry
food and beverage company, Starbucks practitioners.
(ranked seventh). In 2009, these companies Consequently, we examined businesses
were joined by Kimpton Hotels and Restau- that reflected key characteristics of the
rants (ranked ninety-fifth). Not only were hospitality industry. In choosing compa-
these companies recognized as great to work nies to analyze, we looked at industries
for, they are also industry leaders in finan- with heavy guest or customer interaction;
cial performance and have received a vari- extensive operating hours; and jobs char-
ety of other awards, as we discuss below. acterized by low complexity, repetition,
minimal training or education, and rela-
Benchmarking the Best tively low compensation and high turn-
To better understand what makes a com- over; as well as a workforce comprising a
pany great to work for, we conducted a significant proportion of minorities and
1. See www.strglobal.com.
employees for whom English is not their emphasize the shared values and assump-
first language. tions that are communicated extensively,
Examining the companies that appear both verbally and nonverbally (Tung 1995).
on Fortunes top-one-hundred list, we con- Culture is enacted principally by a com-
cluded that hospitals and grocery stores panys upper management, which in turn
were the most similar in nature to the hos- influences the behavior of managers and
pitality industry and shared most of the employees throughout the organization. It
characteristics noted above. This analysis is also reflected by the organizations arti-
gave us a sample of twenty-one companies facts, ceremonies, stories, and rituals.
that included five food service or grocery We found a wide array of formal efforts
companies, twelve hospitals, and four hos- to ensure that all employees have a clear
pitality organizations. A brief description of understanding of the firms culture. Stew
each company and their rank in the top one Leonards, a regional grocery chain, has a
hundred companies is given in Exhibit 1. Vice President of Culture and Communi-
After identifying the companies for cation whose primary role is keeper of
comparison, we conducted an in-depth the culture.2 Additionally, all of the orga-
examination of their HR policies, practices, nizations in our sample had a strong and
and systems using the Internet, the Fortune almost singular focus on their employees.
rankings for the past several years, Wikipe- They also made it very clearinternally and
dia, Fast Company, company websites, and externallythat being an employer of choice
related sources discussing the companies was an important strategic imperative and
included in our sample. The results pre- key to maintaining a competitive advantage.
sented below include research-based expla- In every case, it was clear that development
nations regarding the effectiveness of the and retention of employees was seen as
practices that were identified. The primary critical to the success of the organization.
points that we discovered were a culture Rochester, New Yorkbased supermar-
that emphasizes the value of people, sched- ket chain Wegmans (ranked fifth overall)
uling flexibility, innovative staffing prac- exemplifies this employee-driven philoso-
tices, people-oriented training programs, phy in several ways, starting with the most
transparent and well-aligned performance fundamental and defining element of the
management policies, and compensation companys identity, its philosophy: The
policies that reflect the organizations val- values at Wegmans are not just something
ues and link pay to performance. you see hanging on the wall. They are val-
ues our people live every day and help guide
Organizational Culture That the decisions we make.3 All policies, initia-
Emphasizes the Value of People tives, and decisions are linked to this phil-
osophy. For example, job tenure is viewed
One thing that each organization in the as a point of pride, so employee name tags
sample had in common was an extremely denote the number of years of service. In
strong culture of caring that places great addition, Wegmans promotes a positive,
emphasis on the importance of the people quality-focused work environment by
working there. While there are many def- providing employees with comprehensive
initions of organizational culture, most training and development opportunities;
2. See http://www.stewleonards.com/html/08leonardteam.cfm.
3. See http://www.wegmans.com/webapp/wcs/stores/servlet/CategoryDisplay?categoryId=256609&storeId=
10052&catalogId=10002&langId=-1.
Exhibit 1:
Best Companies to Work For in the Hospitality and Service Segments
Rank Company Overview
5 Wegmans A family-owned company founded in 1916, Wegmans
consists of 72 grocery stores located in the mid-Atlantic
region with its headquarters in Rochester, New York. It
has 38,000 employees and 2008 revenues of $4.8 billion.
8 Methodist This comprehensive teaching hospital located in Houston,
Hospital Texas, is affiliated with the Weill Medical College of
System Cornell University. It has 10,500 employees and 2008
revenues of $1.8 billion.
10 Nugget A small family-owned upscale supermarket chain founded
Market in 1926 located in Woodland, California, Nugget operates
12 stores in the Sacramento metropolitan area and
employs more than 1,200 people with 2008 revenues
approaching $300 million.
19 Ohio Health Ohio Health was founded in 1891 in Columbus and
operates 5 hospitals in central Ohio. It employs
approximately 12,000 people and had 2008 annual
revenues of almost $2 billion.
22 Whole Foods Founded in 1980, Whole Foods operates 276 stores in the
Market United States, Canada, and the United Kingdom. It
pioneered the offering of natural and organic products and
employs 41,000 people with 2008 revenues of $6.6 billion.
24 Starbucks A coffeehouse chain founded in 1971 in Seattle,
Washington, Starbucks has grown to more than 16,000
stores in 49 countries with more than 200,000 employees
and $10.4 billion in revenues in 2008.
45 Kings This 385-bed hospital, founded in 1899, is located in
Daughters Ashland, Kentucky. It employees more than 4,000 people
Medical and had 2008 revenues of approximately $450 million.
Center
53 Stew Stew Leonards is a family-owned regional grocery with 5
Leonards stores in Connecticut and New York. It was founded in
1969 in Norwalk, Connecticut, and today has 2,219
employees and 2008 revenues over $300 million.
62 Griffin An acute care community hospital with 160 beds, Griffin
Hospital was founded in Derby, Connecticut, in 1909. With a staff
of 300 doctors and 1,200 other employees, it had
revenues of over $110 million in 2008.
63 Mayo Clinic Located in Rochester, Minnesota, with 3 hospitals (also in
Arizona and Florida), this organization was founded in
1889 and today employs more than 42,000 people with
2008 revenues over $7 billion.
67 Childrens Founded in 1998 with the merger of two health care systems,
Healthcare Childrens Healthcare is a pediatric hospital with 5,850
of Atlanta employees and 2008 revenues of approximately $1.4 billion.
(continued)
Exhibit 1: (continued)
Rank Company Overview
68 Southern Based in Portsmouth, Ohio, this 222-bed hospital
Ohio provides emergency and surgical care, as well as a
Medical wide range of other health care services. It has about
Center 2,200 employees and 2008 revenues of approximately
$228 million.
75 Atlantic This New Jerseybased medical center includes 3
Health hospitals that offer a wide array of general and special
services, as well as 2 research institutes and a cancer
treatment center. It has a staff of almost 7,000 and
generated just over $1 billion in revenues in 2008.
76 Lehigh Valley With headquarters in Allentown, Pennsylvania, this
Hospital and organization operates 3 full-service hospitals and several
Health community health centers throughout the central-
Network eastern part of the state. It employs almost 9,000 staff
and had 2008 revenue of approximately $1.2 billion.
77 Northwest Founded in 1959, this 488-bed facility located in Arlington
Community Heights, Illinois, offers a full range of medical services. It
Hospital has 3,400 employees and had 2008 revenues of
approximately $410 million.
78 Marriott Opened as a root beer stand in 1927, this Washington,
International D.C.based lodging company operates more than 3,200
properties in the United States and 66 countries
around the globe. It employs more than 120,000 staff
and generated approximately $12.9 billion in revenues
in 2008.
79 Baptist Health This organization includes 6 hospitals and a research
South institute in Miami, Florida. It has almost 11,000 staff and
Florida had 2008 revenues of about $1.7 billion.
85 Arkansas Sited in Little Rock, this is the only Arkansas hospital
Childrens specializing in pediatric care (for children from birth to
Hospital 21 years old). It employs 3,527 staff and generated
approximately $450 million in revenue in 2008.
88 Publix Super With headquarters in Lakeland, Florida, this company
Markets operates 900 grocery stores in 5 states. It is also the
largest employee-owned company in the United States.
It had 2008 revenues in excess of $23 billion and has
more than 140,000 staff.
92 Four Season Launched in 1960, this Toronto-based company manages
Hotels more than 90 luxury hotels on every continent except
Antarctica. It employs 35,000 staff and generated
approximately $3.5 billion in revenues in 2008.
95 Kimpton This San Franciscobased hotel company owns and
Hotels and manages a diverse collection of 49 boutique properties
Restaurants throughout the United States and Canada. It has about
6,500 employees and generated approximately $620
million in revenues in 2008.
a long list of financial and family-oriented satisfaction with all services and shares the
benefits and perks; and regular feedback results with employees. These practices
regarding individual, store, and company- are critical for establishing and maintain-
wide performance. The results are clearly ing connectivity among the organizations
evident. In addition to the awards and key constituenciesemployees, customers,
accolades, Wegmans enjoys an amazingly and their communities. While the organi-
low employee turnover rate of 8 percent in zational culture is extremely important,
an industry that averages 50 percent. We the way in which it is operationalized to
also note that it employs some of the most reflect the companys values is most critical.
engaging employees we have ever encoun- We will now present the human resources
tered. Clearly, this culture of caring is not practices that reflect a culture of caring
only good for employees, but it is also good and are among the key drivers of employee
business. Employee retention is directly satisfaction and firm performance.
related to profitability (Simons and Hinkin
2001), and the costs associated with emp Flexibility in Scheduling
loyee turnover can be significant (Hinkin
and Tracey 2000; Tracey and Hinkin 2007). Since the forty-hour week was codified
These examples provide tangible remind- in U.S. labor law in 1938, many U.S. jobs
ers of the importance of a firms underly- have been designed for a forty-hour, five-
ing values and the impact on employee day workweek.4 However, hospitality orga-
attitudes, motivation, and behavior. nizations, hospitals, and grocery stores
Communication. Another dimension of typically cannot run that kind of schedule
organizational culture that was evident for all their employees, given their round-
among many of the top companies was the-clock operations. Combine that operat-
clear and consistent communication through- ing reality with changing demographics,
out the organization. We found many such as increasing number of single par-
examples of direct lines of communication ents, dual-career couples, parents with child
between the top and bottom of the organi- care issues, people working more than one
zation, as well as inside and outside the job, and young workers who are concerned
organization. Much of this exchange and about quality of life issues, and it is obvi-
connectivity is facilitated by electronic ous that organizations will need to be more
media, including email, message boards, flexible in their scheduling and design of
and social networking sites. For example, work to attract and maintain a quality work-
Marriott International recently launched a force. The proactive scheduling stance of
CEO blog in which Bill Marriott commu- many of the companies in our sample
nicates insights and views about a wide appears to be popular with employees.
array of issuesfrom recounting memories As we describe below, the three primary
about a property opening to expressing approaches to workplace flexibility are
concerns about world events. Northwest job sharing, a compressed work week, and
Community Hospital publishes an online flextime.
magazine, YOU, that offers practical advice Job sharing. Just as the name implies,
for a healthy living. Whole Foods Markets job sharing involves two or more employ-
goes so far as to share financial perfor- ees sharing a single position. The job can
mance and individual compensation fig- be divided in any way that suits both the
ures, while Griffin Hospital measures patient employer and employees, including split
4. Henry Ford is generally recognized as being the first U.S. industrialist to implement a forty-hour week, in 1926.
describes Four Seasonss history and the value of this approach, as formal testing has
four pillars of success that are instru- been shown to play a critical role in pre-
mental in helping the company achieve its dicting job performance (Tracey, Sturman,
business objectives (namely, quality, ser- and Tews 2007). Whole Foods utilizes team
vice, culture, and brand). interviews for management positions, fol-
Referral awards. Many of the companies lowed by a team vote on whether to make
in our sample use referral awards to attract the position permanent after a specific period
employees. The idea behind this practice is of time. Starbucks also employs both man-
simple. If competent employees are offered agers and peers in the selection process.
a financial incentive to attract others to the The rationale behind this is that if people
organization, they will usually only solicit are going to be working for or with a per-
those candidates who would be similar to son, they should have a voice in the hiring
themselves in terms of work ethic and abil- decision. They then also have the respon-
ity. Not only will they have to work with sibility to help that person be successful.
this new recruit, but their reputation would
be at risk if the new employee failed. There Training and Development
is usually a minimum time period that a
new employee must be employed before the The organizations in our sample recog-
award is granted. Kings Daughters Medi- nize the critical importance of the first few
cal Center offers referral awards ranging weeks on the job. This idea is supported by
from $250 to $5,000 depending on the research that has shown that poorly han-
position, which contributes to an annual dled organizational entry processes will
employee retention rate of 96 percent. Chil- result in higher levels of employee turnover
drens Healthcare of Atlanta was suffering within the first several months of employ-
from a shortage of nurses, so they offered ment (Allen and Meyer 1990). The initial
incentives such as one hundred tanks of stages are important not only for acquiring
gas for successful referrals. In addition to the knowledge and skills that are necessary
more job candidates, the program improved for effective job performance but, perhaps
employee retention and workforce morale. even more importantly, for becoming social-
Rigorous selection procedures. Some- ized and gaining a clear and comprehensive
times given short shrift, employee selection understanding of the firms culture. The
is an important tool to ensure that an orga- most admired companies are also aware that
nization is staffed with people with the ongoing development opportunities and
right attitude, knowledge, skill, and abili- clear career paths are important motivators
ties. In most companies, employees are for promoting retention and professional
interviewed by managers who then make growth.
the hiring decision. All of the companies Emphasis on organizational entry.
in our sample set high standards for selec- Socialization is the process by which a
tion and go beyond the manager interview new employee learns about the organiza-
by using comprehensive procedures for mak- tions culture. The formal process for this
ing hiring decisions. For example, Publix activity takes place during orientation,
Supermarkets requires all applicants for which in our sample ranged from several
store-level jobs to complete a twenty-five- days to several weeks, and then continues
minute online test that assesses several types for the first several months on the job. The
of knowledge and skill that are critical to greater the consistency between the mes-
job success. Research has reflected the sage delivered during this time and the
organizations mission and values. Similarly, compensation to nineteen times the average
Atlantic Health uses an online, portfolio- compensation of all full-time employees.
based evaluation process that accounts for This may still seem like a large ratio until
individual- and aggregate-level results and one compares it to the average compensa-
links the performance information directly tion of the CEOs at the twenty-four largest
to training opportunities and rewards. U.S. banks, who received more than four
Companies such as Wegmans, Nugget hundred times the compensation of the
Market, and Griffin Hospital use upward lowest-paid individual.5
feedback to generate ideas for improving Profit sharing and gain sharing. All of
performance and promoting innovation. On the organizations we examined had imple-
a more strategic level, Marriott has created mented reward and incentive programs
a Center for Excellence in Diversity Assess- that were consistent with the need to main-
ment, which conducts ongoing audits of tain logical, transparent reward programs
the companys diversity initiatives. that are meaningful to recipients and relate
In keeping with the need to make sure to the organizations goals. In particular,
that the data used for evaluative and devel- every firm maintained a clear connection
opmental purposes are accessible and avail- between performance results and incentives.
able for timely decision making, several of Performance bonuses were among the most
the health care organizations in our sample, common incentive practice. For example,
such as Southern Ohio Medical Center and Whole Foods offers a gain-sharing program
Northwest Community Hospital, have devel- that rewards employees on factors that they
oped publicly available performance dash- have the most control over, such as sched-
boards that report on a wide range of key uling and customer service, where a portion
performance areas, such as safety, quality, of savings is shared with employees. Nug-
and service. Providing wide access to this get Market offers both profit sharing and a
type of evaluative information demonstrates generous 401(k) retirement program. These
a commitment to open-book management programs and practices provide a strong
and encourages employees to share ideas foundation for creating and sustaining a high-
and concerns that may be instrumental for performance work culture and motivating
solving important problems and improving employees to go beyond expectations.
performance. Comprehensive, competitive benefits. In
addition to linking performance outcomes
Compensation and Benefits to valued incentives and rewards, all of the
organizations in our sample offered a wide
Given the importance of rewards and array of benefits to their employees, includ-
incentives in an organizations efforts to ing several options that further enhance
attract, retain, and motivate employee per- their distinctiveness. The extensive list of
formance (Fay and Thompson 2001), those benefits includes generous retirement sav-
incentives must reflect the values of an ings programs, 529 college savings plans,
organization. For example, the Mayo Clinic choice of health insurance plans (e.g., PPO,
pays physicians a salary rather than paying HMO, universal), disability insurance,
by the treatment or patient because it wants dental and vision insurance, life insurance,
to emphasize quality patient care, rather auto and home insurance, flexible spend-
than volume. To promote the importance ing accounts, healthy partners programs,
of the team, Whole Food limits top executive subsidized child and elder care, tuition
Exhibit 2:
Average Hours of Training per Year for Hourly/Salary Employees
Grocery 50 67
Hospitality 69 176
Hospital 43 53
Exhibit 3:
Average Voluntary Turnover Rate per Year
Exhibit 4:
Average Compensation per Year for Most Common Job, Hourly/Salary
Average Average
Segment Compensation: Hourly Compensation: Salaried
Finally, Exhibit 4 presents average com- substantial change in the way that people
pensation for the three industries. These are managed. Individual firms stand out,
figures are interesting because hospitals but too many firms accept industry real-
have a substantially higher average, while ities such as substantial turnover and
compensation for both hourly and salaried learn as you go training. Whether it is
workers is virtually the same for supermar- recognized by managers or not, people are
ket and hospitality organizations. We see the greatest asset of virtually every organi-
these two industries as being quite similar, zation. An uncompromising focus on this
based on the characteristics we examined. philosophy is arguably the most important
The hospitality industry has the reputa- factor that separates the top one hundred
tion, well or ill deserved, of being slow to from the thousands of companies that did
adopt innovations. In contrast to that argu- not make the list of best companies to
ment, we have seen considerable changes work for. It is worth noting that each of the
in the use of technology, lodging concepts, companies on this list is not only success-
healthy cuisine, and revenue management ful as an employer but also in both finan-
in recent years. What we have not seen is cial and competitive terms.
6. The Man behind the Marriott Empire: Bill Marriott, ABC News Nightline, June 21, 2007.