Starwood Hotels & Resorts Worldwide, Inc. owns, manages and franchises some of the most well-known brands in the hotel industry. With over 1,000 properties and approximately 145,000 associates, Starwood is one of the world's largest hotel companies and one of the most respected in the industry.
Service-profit chain research that links leadership and culture to business outcomes extends back for nearly a decade at Starwood. However, as measures of leadership and the guest experience evolved in 2011, they needed to once again explore the linkages between leadership and business drivers. The objectives for the project follow:
- Validate the leadership competency model and its effects on business outcomes,
- Identify the most impactful leader behaviors on guest loyalty, and
- Quantify the impact of these leadership behaviors on the guest experience and financial performance.
Starwood had been working with viaPeople for over a year and several steps had already taken place in preparation for this project.
Step 1: Starwood created a leadership competency model that had global reach and could be used across the enterprise.
Step 2: viaPeople Industrial Organizational Psychologists refined this model to ensure all critical leadership competencies were captured and each behavior was unidimensional (only measuring one skill area) to the extent possible.
Step 3: Using the viaPeople 360 degree feedback software solution, with the finalized Starwood leadership competency model, a large database of behavioral performance was aggregated by property and merged with other data sources at the property level.
The following business metrics were chosen for analysis with the 360 feedback behavioral data:
- Associate Engagement - as measured by the annual engagement survey
- Guest Loyalty - based on guest feedback from the post-stay survey
- Rev Par Index - an industry measure of revenue per available room
Starwood had approximately 2,700 leaders participate in the 360 degree feedback process in April 2011. The business metrics mentioned above were collected using a forward lag design, rather than using purely concurrent data, to assess the predictive nature of the variables. For instance, the Engagement survey was captured in August/September of 2011 and Guest Loyalty was measured in Q1 of 2012. After conducting extensive statistical analysis, Starwood created a Top Leadership Team profile using the properties with the highest-rated leaders (the top 25%), based on average 360 degree feedback scores by property.
The project team found a number of interesting relationships and the most significant are listed below:
Leadership behavior directly relates to both Associate Engagement and Guest Loyalty; in turn, Guest Loyalty drives business results (Rev Par Index).
Compared to the lowest 25% of leadership teams, top 25% leadership teams, or those with the highest 360 feedback scores by property, have:
- Properties with Associate Engagement scores that are 8 percentage points higher
- Guest Loyalty scores that are 40 basis points higher
A 40 basis point increase in Guest Loyalty is a meaningful difference that relates to business outcomes. If you compare the Rev Par Index score of properties that are 40 basis points higher they average scores that are over 4% higher.
The conclusion that can be drawn is that properties with high-performing leaders have more engaged associates. Ostensibly associates translate that engagement into enhanced guest service, which directly affects Guest Loyalty. Guest Loyalty drives Starwood revenue as loyal guests are more likely to stay at their favorite Starwood property even if a comparable hotel chain is offering a lower-priced room. In sum, even though the effect is indirect, leadership is an important indicator of business results.
Once establishing the relationship between leadership behavior and business results, Starwood identified the specific leadership competencies and behaviors that had the greatest impact on Guest Loyalty. Consistently the four same competencies emerged as being the top predictors of loyalty; these competencies include:
- Customer Focus
- Alignment & Action
- Motivation & Inspiration
- Global Perspective
These findings have many implications for the ongoing strategy of the Human Resources department. Starwood can now ensure that all HR programs place special emphasis on the leadership competencies and behaviors that impact bottom line business results. Continuing to strengthen the leadership team in the specific behaviors mentioned above is key to financial success. Therefore one of the first initiatives in integrating these results will be to revise the behavioral interview guides that align with the leadership competency model. Starwood can then ensure that all leaders coming into the organization already have strengths in the specific areas that drive business results. In addition to other integration work, Starwood will also revise the engagement survey to align more closely with the behaviors that had the greatest impact in this project.
This case study is an excellent example of how HR teams can clearly demonstrate the strategic impact of HR initiatives by combining behavioral data (360 feedback, performance evaluation or other data) with business drivers and translating the results into meaningful information. New information that reveals the effect of leader performance with bottom line results is of real strategic value to the enterprise. This study defines workforce analytics and validates the strategic role of Human Resources.
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