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5-2010

W hat Makes It So Great? An Analysis of Human Resources Practices among Fortune’s Best Companies to Work for Timothy R . Hinkin Cornell University, [email protected]

J. Bruce Tracey Cornell University, [email protected]

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Recommended Citation Hinkin, T. R ., & Tracey, J. B. (2010). What makes it so great? An analysis of human resources practices among Fortune’s 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/

W hat Makes It So Great? An Analysis of Human Resources Practices among Fortune’s Best Companies to Work for

Abstract Although few hospitality organizations are listed in the annual survey of Fortune magazine’s 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 organization’s 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.

Finalist for Best Paper Award.

This article or chapter is available at The Scholarly Commons: https://scholarship.sha.cornell.edu/articles/215

158    Cornell Hospitality Quarterly  MAY 2010

What Makes It So Great?

An Analysis of Human Resources Practices among Fortune’s

Best Companies to Work For

by TIMOTHY R. HINKIN and J. BRUCE TRACEY

 2010 CORNELL UNIVERSITY DOI: 10.1177/1938965510362487

Volume 51, Issue 2    158-170

Although few hospitality organizations are listed in the annual survey of Fortune magazine’s one hundred best companies to work for, an analysis of companies with similar operating challenges provides clear direc- tion 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 hospital- ity 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 organization’s values and link pay to performance.

Keywords: human resources; service industry best practices; Starbucks; Four Seasons Hotels; Kimpton Hotels; Marriott International

E very year since 1998, Fortune magazine has published a list of the one hundred best com- panies in the United States to work for. For-

tune researchers ask this question: “What makes it so great?” They then try to answer that question by examining a wide range of corporate human resources policies and practices. The researchers examine the following:

MAY 2010  Cornell Hospitality Quarterly    159

WHAT MAKES IT SO GREAT?  HUMAN RESOURCES 

· job growth, voluntary turnover, and the number of job applicants;

· training provided for salaried and hourly employees;

· compensation and benefits for hourly and salaried positions, including health care coverage;

· work-life balance and job design; and · diversity initiatives, percentage of minor-

ities, and nondiscrimination policies.

Although names come and go from the list, 80 percent of those recognized in 2009 were also on the list in 2008. Our review revealed that the list of top-ten companies changes little from year to year. Seven of the top-ten companies that appeared on the list in 2009 were also in the top ten in 2008. In addition, the firms that were new to this elite group of organizations had moved up from positions eleven, twelve, and fourteen on the previous year’s top-one-hundred list.

Although firms in many industries are represented on this list, we have also noticed a conspicuous absence of hospitality organi- zations. The 2009 top ten includes a stock brokerage, a consulting firm, an investment bank, a hospital, four technology firms, and two grocery companies. Looking at the full list, only two hotel companies were represented in 2008, Marriott Interna- tional (ranked seventy-second) and Four Seasons (ranked eighty-eighth), and one food and beverage company, Starbucks (ranked seventh). In 2009, these companies were joined by Kimpton Hotels and Restau- rants (ranked ninety-fifth). Not only were these companies recognized as great to work for, they are also industry leaders in finan- cial performance and have received a vari- ety of other awards, as we discuss below.

Benchmarking the Best To better understand what makes a com-

pany great to work for, we conducted a

benchmarking assessment for the purpose of seeing what we could learn from these companies that might be applicable to the hospitality industry. Yasin and Zimmerer (1995) propose three basic forms of bench- marking: internal, competitive, and generic. Internal benchmarking comprises an exam- ination of work processes and products, development of standards for those processes and products, and measuring performance over time with respect to attaining those standards. This is a key component in con- tinuous improvement efforts and total qual- ity management programs. Competitive benchmarking is the comparison of prod- ucts and services offered by firms in the same industry, often by a direct competitor. STAR reports, produced by Smith Travel Research, are a good example of competi- tive benchmarking in the lodging industry.1 In generic benchmarking, the processes, products, and services of companies across a wide range of industries are studied to identify best practices that might be useful in a different context. Although our inquiry necessarily applies a generic benchmark- ing approach, we wanted to come as close as possible to a competitive-type compari- son by focusing on companies having sim- ilarities to the hospitality industry. This approach was taken to ensure that our find- ings would be more relevant for industry practitioners.

Consequently, we examined businesses that reflected key characteristics of the hospitality industry. In choosing compa- nies to analyze, we looked at industries with heavy guest or customer interaction; extensive operating hours; and jobs char- acterized by low complexity, repetition, minimal training or education, and rela- tively low compensation and high turn- over; as well as a workforce comprising a significant proportion of minorities and

1. See www.strglobal.com.

HUMAN RESOURCES    WHAT MAKES IT SO GREAT?

160    Cornell Hospitality Quarterly  MAY 2010

employees for whom English is not their first language.

Examining the companies that appear on Fortune’s top-one-hundred list, we con- cluded that hospitals and grocery stores were the most similar in nature to the hos- pitality industry and shared most of the characteristics noted above. This analysis gave us a sample of twenty-one companies that included five food service or grocery companies, twelve hospitals, and four hos- pitality organizations. A brief description of each company and their rank in the top one hundred companies is given in Exhibit 1.

After identifying the companies for comparison, we conducted an in-depth examination of their HR policies, practices, and systems using the Internet, the Fortune rankings for the past several years, Wikipe- dia, Fast Company, company websites, and related sources discussing the companies included in our sample. The results pre- sented below include research-based expla- nations regarding the effectiveness of the practices that were identified. The primary points that we discovered were a culture that emphasizes the value of people, sched- uling flexibility, innovative staffing prac- tices, people-oriented training programs, transparent and well-aligned performance management policies, and compensation policies that reflect the organization’s val- ues and link pay to performance.

Organizational Culture That Emphasizes the Value of People

One thing that each organization in the sample had in common was an extremely strong culture of caring that places great emphasis on the importance of the people working there. While there are many def- initions of organizational culture, most

emphasize the shared values and assump- tions that are communicated extensively, both verbally and nonverbally (Tung 1995). Culture is enacted principally by a com- pany’s upper management, which in turn influences the behavior of managers and employees throughout the organization. It is also reflected by the organization’s arti- facts, ceremonies, stories, and rituals.

We found a wide array of formal efforts to ensure that all employees have a clear understanding of the firm’s culture. Stew Leonard’s, a regional grocery chain, has a Vice President of Culture and Communi- cation whose primary role is “keeper of the culture.”2 Additionally, all of the orga- nizations in our sample had a strong and almost singular focus on their employees. They also made it very clear—internally and externally—that being an employer of choice was an important strategic imperative and key to maintaining a competitive advantage. In every case, it was clear that development and retention of employees was seen as critical to the success of the organization.

Rochester, New York–based supermar- ket chain Wegmans (ranked fifth overall) exemplifies this employee-driven philoso- phy in several ways, starting with the most fundamental and defining element of the company’s identity, its philosophy: “The values at Wegmans are not just something you see hanging on the wall. They are val- ues our people live every day and help guide the decisions we make.”3 All policies, initia- tives, and decisions are linked to this phil- osophy. For example, job tenure is viewed as a point of pride, so employee name tags denote the number of years of service. In addition, Wegmans promotes a positive, quality-focused work environment by providing employees with comprehensive 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.

MAY 2010  Cornell Hospitality Quarterly    161

WHAT MAKES IT SO GREAT?  HUMAN RESOURCES 

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  Hospital  System

This comprehensive teaching hospital located in Houston,  Texas, is affiliated with the Weill Medical College of  Cornell University. It has 10,500 employees and 2008  revenues of $1.8 billion.

10 Nugget  Market

A small family-owned upscale supermarket chain founded  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  Market

Founded in 1980, Whole Foods operates 276 stores in the  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 King’s  Daughters  Medical  Center

This 385-bed hospital, founded in 1899, is located in  Ashland, Kentucky. It employees more than 4,000 people  and had 2008 revenues of approximately $450 million.

53 Stew  Leonard’s

Stew Leonard’s is a family-owned regional grocery with 5  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  Hospital

An acute care community hospital with 160 beds, Griffin  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 Children’s  Healthcare  of Atlanta

Founded in 1998 with the merger of two health care systems,  Children’s Healthcare is a pediatric hospital with 5,850  employees and 2008 revenues of approximately $1.4 billion.

(continued)

HUMAN RESOURCES    WHAT MAKES IT SO GREAT?

162    Cornell Hospitality Quarterly  MAY 2010

Exhibit 1: (continued)

Rank Company Overview

68 Southern  Ohio  Medical  Center

Based in Portsmouth, Ohio, this 222-bed hospital  provides emergency and surgical care, as well as a  wide range of other health care services. It has about  2,200 employees and 2008 revenues of approximately  $228 million.

75 Atlantic  Health

This New Jersey–based medical center includes 3  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  Hospital and  Health  Network

With headquarters in Allentown, Pennsylvania, this  organization operates 3 full-service hospitals and several  community health centers throughout the central- eastern part of the state. It employs almost 9,000 staff  and had 2008 revenue of approximately $1.2 billion.

77 Northwest  Community  Hospital

Founded in 1959, this 488-bed facility located in Arlington  Heights, Illinois, offers a full range of medical services. It  has 3,400 employees and had 2008 revenues of  approximately $410 million.

78 Marriott  International

Opened as a root beer stand in 1927, this Washington,  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  South  Florida

This organization includes 6 hospitals and a research  institute in Miami, Florida. It has almost 11,000 staff and  had 2008 revenues of about $1.7 billion.

85 Arkansas  Children’s  Hospital

Sited in Little Rock, this is the only Arkansas hospital  specializing in pediatric care (for children from birth to  21 years old). It employs 3,527 staff and generated  approximately $450 million in revenue in 2008.

88 Publix Super  Markets

With headquarters in Lakeland, Florida, this company  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  Hotels

Launched in 1960, this Toronto-based company manages  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  Hotels and  Restaurants

This San Francisco–based hotel company owns and  manages a diverse collection of 49 boutique properties  throughout the United States and Canada. It has about  6,500 employees and generated approximately $620  million in revenues in 2008.

MAY 2010  Cornell Hospitality Quarterly    163

WHAT MAKES IT SO GREAT?  HUMAN RESOURCES 

a long list of financial and family-oriented benefits and perks; and regular feedback regarding individual, store, and company- wide performance. The results are clearly evident. In addition to the awards and accolades, Wegmans enjoys an amazingly low employee turnover rate of 8 percent in an industry that averages 50 percent. We also note that it employs some of the most engaging employees we have ever encoun- tered. Clearly, this culture of caring is not only good for employees, but it is also good business. Employee retention is directly related to profitability (Simons and Hinkin 2001), and the costs associated with emp- loyee turnover can be significant (Hinkin and Tracey 2000; Tracey and Hinkin 2007). These examples provide tangible remind- ers of the importance of a firm’s underly- ing values and the impact on employee attitudes, motivation, and behavior.

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