Maverick Lodging is a hotel management company that manages the day-to-day operations of third party franchisees of the Marriott Corporation. The company has recently implemented a balanced scorecard in an effort to align company strategy, structure, performance measurements, and incentives. The organization strategy involves growth in revenue and customer base with the use of differentiation. Issues with the current scorecard and its measures have been identified. Alternative solutions have been researched. A recommended course of action is presented that will allow Maverick Lodging to achieve its strategic goals and objectives.
Many hotel companies, such as the Marriott Corporation, are in the business of selling hotel franchises. Owners that purchase franchise rights enter into a contract with the Marriott Corporation and have actual ownership of a hotel. Franchisees can either manage the day-to-day operations of the hotel on their own or outsource these responsibilities to hotel management companies for a fee. Maverick Lodging is a hotel management company that operates Marriott franchise hotels on behalf of third party owners. The company receives a base management fee and an incentive management fee based on a percentage of the hotel’s net profit. Cindy Baum, Vice President of Asset Management, was hired by Maverick Lodging to construct and implement a balanced scorecard as both a management system and measurement system. A balanced scorecard is defined as an integrated set of performance measures that are derived from and support a company’s overall strategy throughout the organization (Garrison, Noreen, & Brewer, 2008). The primary objectives of the balanced scorecard created by Baum were to align the company’s strategy, structure, measurements, and incentives. In1999, the balanced scorecard was implemented and represented the first full year of results.
The balanced scorecard was implemented at the hotel general manager level. It included the five following measures: 1. Financial-top-line yield
2. Financial-controllable profit relative to flexible budget 3. Customer-guest-satisfaction survey
4. Internal business-process audit
5. Learning and growth-turnover of associates
Hotel general managers’ bonuses would be based on a complex color and point system. Each measure was weighted 20 percent in this calculation. Issues/Problems
The following general issues and problems have been identified with the current balanced scorecard used by Maverick Lodging: 1. It does not completely align with the company’s overall strategic goals 2. Measurements are complex and not easily understood
3. The criteria for measurements are incomplete
4. Implementation occurred at the incorrect level of management A strategic analysis of the company is needed to further assess the cause and impact of these issues. Strategic Analysis
As stated in the case, the objectives of the balance scorecard were to align the company’s strategy, structure, measurements, and incentives. According to Gamble & Thompson (2011), a strategic plan, “maps out where a company is headed, establishes strategic and financial targets, and outlines the competitive moves and approaches to be used in achieving the desired business results” (p. 17). Maverick Lodging’s overall strategic goal involves growth within the industry while meeting the contractual objectives of both the Marriott Corporation and third party owners. At the end of 1999, Maverick Lodging managed 38 hotels and revenues of $140 million. The organization’s target for growth was to manage 65 properties with $225 million in sales by 2001. This represents a 71% growth in managed properties and a 61% growth in revenues in just two years. Hotel industries can be very complex and highly competitive. A monopolistic competition is a market structure that lacks barriers to entry and has multiple...