The MT Essays: Managing through a recession, by IHG

Laura Frith of IHG explains how the hotel group had to act quickly to protect its business once the recession hit. By centralising and rationalising support functions it achieved savings of more than £20m.

by Laura Frith
Last Updated: 09 Oct 2013

The hospitality industry was hard hit by the recession and by October 2008 it was clear to the UK leadership team at the InterContinental Hotels Group (IHG), the world's largest hotel group, that they would need to make significant changes to how the business was run in order to reduce UK payroll costs by £5m to £10m.

The team agreed a set of principles that would make IHG stronger and fitter for the future. The principles formed the basis for Project Sustain: making decisions and delivering sustainable savings through improved organisation design in a way which would enable the company to grow quickly when the market improved. Other principles included protecting employee engagement, guest satisfaction and market share by managing the change in a thoughtful and effective manner.

Before the recession the managed hotels in the UK and Ireland estate all had different operational structures, with varying amounts of management staffing and very different operating models, job titles etc, as they had previously been run as separate entities. This created difficulties in benchmarking hotel departments against each other in terms of operating efficiency and effectiveness. Also best practice and functional expertise were not being shared as well as they could be.

The leadership team identified the main challenges as maintaining good morale among employees in order to protect guest satisfaction and - ultimately - revenue; acting quickly to cut costs in line with falling revenue; changing how human resources supported the business at the same time as leading the change process; and making sure hotel general managers received the same level of support and quality of service from their functional support colleagues (HR, finance and sales) during the change process.

Fast workers

To begin, IHG brought 130 senior leaders together, produced briefing packs and ran workshops with the general managers to explain how the changes would work and involved them in shaping the new ways of working.

In line with company values, IHG involved all 7,000 employees affected as quickly as possible. During the collective and individual consultation process a number of changes were made to the proposals which gave employees confidence their concerns were being heard.

Between December 2008 and January 2009 collective and individual consultations were held with staff. In February 2009, the up-skilling and handovers necessary for the transition to the new organisation took place.

Throughout the consultation process, employee forums were held twice weekly in every hotel and in March, the new organisation went live.

Under Project Sustain, 64 hotel operating structures were consolidated into four standard ones (small hotel, standard hotel, large hotel and extra large hotel). Project Sustain also meant changing functional support from a hotel level to multi-site, area-based support and, in some cases, centralised support. Consolidating hotel operating structures and moving hotel HR support to one central location enabled IHG to benchmark the efficiency and effectiveness of its operation within the four standard hotel structures and improve the quality of functional support across properties, and share best practices quickly.

The benefits

Savings of over £20m - against a target of £5m to £10m - and improved employee engagement, guest satisfaction and market share followed. Employee engagement in IHG uk&I hotels increased by 4.2% between November 2008 and November 2009. Guest satisfaction scores increased from 80.4% in Q4 2008 to 81.4% in Q1 2009. Revenue relative to competitors (as measured by the revenue generation index) grew from 103.4% in September 2008 to 107.3% in March 2009.

And, finally, IHG was voted as one of the Sunday Times top 25 'Best Big Companies to Work For'.

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