Managing people and organisations in hospitality

Organisational management and human resources management outsourcing non-core activities

 

Executive summary

This report analyses two fundamental issues relating to organisational and human resources management concepts. Outsourcing of the non-core activities is an important concept which have gained ascendancy in the past several decades and the NHS hospital at Charing Cross have outsourced its catering service to the specialised facility management organisation ISS. But due to the improper definition of the scope and level of service, there are quality related issues and conflict between the employees of the hospital and the employees working for the ISS. There is a perceived lack of control from the part of the hospital and in order to reduce these potential disadvantages of outsourcing, recommendations are provided to make an agreement between the two organisations by introducing definitions of scope and level of service, quality and the involvement of a manager to supervise the activities of the facility management which will be under the managerial control of ISS. The second issue which have been analysed is the lack of motivation and commitment levels of the employees of ISS due to the constant rotation of the employees between the different facilities of the management company in different hospital locations and also the lack of career opportunities. It is necessary for the organisation to provide for the higher level needs of the employees in line with the theory of hierarchy of needs and the recommendation is to provide for sufficient levels of training, improve the opportunities of promotions and reduce the shuffling of employees between the different facilities.

Introduction to the organisation

The organisation chosen for the study of the management of people and organisational behaviour is the specialised facility management company ISS  (http://www.uk.issworld.com) which have been given the outsourcing contract of managing the non-core activities of the hospital such as scattering, cleaning, Property Management, maintenance and other hospitality related facilities. ISS is a global organisation managing the facilities of different types of organisations such as hospitals, supermarkets, shopping malls etc. mainly in the European continent. The role of ISS is to manage the non-core activities of an organisation by directly employing their own staff at these facilities. ISS managers several non-core facilities for the NHS hospitals in London and other areas by directly employing staff in the catering, cleaning and Property Management departments. Due to the centralised management structure, the employees of ISS may be posted in different locations where they have the outsourcing contract and the management of these employees are conducted through a centralised management system with their offices in London. Hence the employees located at one facility riposte to the supervisor who in turn reports to the manager who oversees a number of such facilities. Due to the centrality of management and the concentration of specific and specialised activities, ISS is able to bring focus and specialisation to its operations. Efficiencies are gained in managing the facilities and the main organisation, in this example the NHS hospital at Charring Cross in London, even if it did because it is not required to directly employ individuals in their facilities and constitute a management structure to oversee the operations. The NHS hospital at Charring Cross is able to concentrate on those core activities of providing care to the patients of the hospital which is the core function of the hospital. Due to the significant levels of efficiencies gained in facility management because of the experience from managing such functions in different organisations, ISS is able to reduce the cost of these operations which is passed on to the hospital.

Issue one

While it cannot be denied that outsourcing of the non-core activities of an organisation to a specialised supplier is able to bring in efficiencies, reduction in cost, enhancement of functions (Schniederjans, et. al., 2005) there are downsides such as the loss of managerial control, the extra effort to be put in the monitoring of the suppliers (Renner and Palmer, 1999), to security and confidentiality, quality related issues, and the emergence of hidden cost (Verhoef and Wijers, 2009). From the perspective of organisational management, the parent organisation, which in this case is the hospital, is not able to directly control the employees who are managing their facilities and this could pose a source of conflict between the employees of the hospital and the facility management company. The employees of the facility management company are accountable and report to their own supervisors who in turn reports to the managers of the facility management company and there could be vested interest from the part of the facility management company to reduce their cost which can give rise to quality related problems (Hunter, 2006). In the present scenario, the facility management services are provided in the hospital and all the services provided by the facility management company such as catering and cleaning is also directly affecting the patience of the hospital and quality is an important issue. According to Verhoef and Wijers, (2009), even though an organisation is able to outsource its non-core activities at significantly lower cost, there could be hidden cost such as monitoring the activities of the supplier, measuring the performance and the costs arising from poor performance and quality related issues.

From the author’s experience in working in the facility management company (ISS) in the catering division, it has been noticed that there are cases when conflicts and tensions arise between the employees of the hospital and the employees of the catering service. Since the supervisor of the catering division has a responsibility to control the cost, which is mainly the employee cost, the facility management company tries to create efficiencies by employing less number of individuals which creates problems related to quality. When an optimum number of employees are not present to cater to the services, and in times of high demand conditions, there have been issues of the layout services to the patients.

Issue two

The above issue of quality related problems arising from the lack of sufficient number of employees can be considered from the angle of organisational problems, there are also human resources management issues specifically relating to the facility management organisation. Since the facility management company is trying to reduce the cost, it mainly employs part-time workers with significantly less training to do their jobs in the catering service. Most of my co-workers are students who are doing part-time work for the facility management company and there is also a rotation of the employees in order to manage the absenteeism and employee turnover. Due to the lack of sufficient growth opportunities, full-time employees are not attracted to work for the organisation for a long period of time. Hence it can be said that there is a problem of reduced motivation and commitment to the facility management company from the lower levels of the employees. This lack of motivation is mainly because of the inability of the organisation to provide for the higher level needs of the employees (Maslow, 1975). Moreover some of the employees are rotated between different facilities and different organisations and since new employees are coming to work in order to manage the absenteeism, constant on-the-job training is necessary which also creates problems for the employees to work in teams. Since new employees are coming to work for the facility, who require some time to adapt to the conditions and working style of different locations and also because they require some time to adjust to the new colleagues, issues related to working in a team has given rise to problems in management of the employees.

Analysis of problems

Two specific issues related to the outsourcing of the catering service at Charing Cross Hospital in London was provided in the above two examples. One is it related to the conflict arising between employees of the supplier and the purchaser of services and the issues relating to that these advantages of outsourcing for the purchaser. The second issue is with the organisational problems of managing human resources of the facility management company (ISS) who tries to develop efficiencies and reduce the cost which affect the quality and the morale, motivation and commitment levels of the employees. These issues need to be sufficiently analysed in light of the theories and concepts of organisational behaviour and human resources and in order to provide recommendations to improve the situation.

Problem analysis issue one – Outsourcing

The first issue of problems arising because of the outsourcing of the facilities of the Charing Cross Hospital in London to the facility management company (ISS) can be analysed by evaluating the theories and concepts relating to outsourcing. The below figure provides for the various advantages and organisation can proceed by outsourcing of its activities.

 

Figure 1 – Advantages of outsourcing

(Source – Adapted from Verhoef and Wijers, (2009), page 193)

While the above figure is not providing all the advantages of outsourcing, according to Zokaei and Simons, (2006) the main considerations of an organisation in going for outsourcing is to gain efficiencies by reducing the cost, gaining outside expertise and the ability to concentrate on its core activities. Although according to Schniederjans, et. al., (2005), gaining of efficiencies and flexibility are some of the reasons for going in for outsourcing of the non-core activities, according to Hunter, (2006), the potential problems are a dependence on an outside party, the incidence of bureaucracy and the lack of knowledge of the outsider in properly managing the services. It can be seen that the potential problems which are created due to outsourcing of the catering service to the facility management company is mainly because of the incidence of bureaucracy and the hospital’s dependence upon the facility management company to provide for the services. As mentioned before the employees working at the catering department of the facility management company are on a part-time basis and are not provided adequate training in the areas of hospitality, and the employees are left to their own devices to improvise based on their experience and expertise. This creates problems in the delivery of services and potential quality issues which are a source of contention and conflict between the provider and the purchase of services. Since ultimately the hospital is responsible to its customers who are the patients of the hospital, it becomes essential that the hospital monitor the activities of the supplier and also needs to have a level of managerial control.

Although there are more fundamental theories which can be relied upon in order to analyse the problems arising from the outsourcing of the catering facilities of the hospital, Porter’s value chain model can be used in the analysis of the decision-making related to outsourcing.

 

Figure 2 – Porter’s value chain model

(Source – Adpated from Porter, (1998), pages 137)

Porter’s value chain model differentiates the activities between primary and secondary and several researchers who analysed the concept of the value chain model have stressed the importance of the concentration and focus of the organisation upon the primary activities. The facility management of any organisation comes under the secondary activities and according to Porter’s value chain model, the decision relating to outsourcing of the facility management is correct but as mentioned before there are these advantages to outsourcing and without a properly designed scope and level of the services to be provided, that could arise problematic situations such as mentioned above.

Problem analysis issue two – Motivation and commitment

The second issue which was analysed was the problem of motivation and commitment levels of employees of management to the organisation. This lack of motivation of the employees can be analysed by evaluating Maslow’s hierarchy of needs theory which postulates that individuals have different types of needs at different levels and once a particular may be satisfied, there is an increased level of aspiration from the part of the individual to obtain the higher level need.

 

Figure 3 – Maslow’s hierarchy of needs theory

(Source – Adapted from Maslow, (1987), page 211)

It can be seen from the above figure that individuals have different levels of need such as physiological, safety, belonging, esteem and self-actualisation. When an individual is able to satisfy a certain level of need, the motivation to attain the next level increases (Maslow, 1989). In the present scenario most of the employees working for ISS are part-time workers who are mostly students and are working for the organisation in order to satisfy their physiological and safety level such as security, employment etc. Once the safety and security level needs are satisfied, the motivation for the employees to attain the social level needs such as an acceptance based on employment and social status and identification with a successful team increases. There are less number of scope and opportunities for the employees working in the lower levels of the company to advance within the company itself. Moreover it has been seen that employees are constantly rotated between different facilities which reduces their ability to work in a team for a long period of time and develop identification with their co-workers. There are managerial problems arising due to this lack of motivation and the working of the individuals in teams is disrupted when employees are constantly shuffled around. But in order to maintain the efficiency by reducing the cost of employee, facility management company is forced to adopt the practices of employee shuffling. But as a consequence of these lower level human resources management concepts, the motivation of the employees is suffering which increases the absenteeism and turnover.

Recommendations

According to Verhoef and Wijers, (2009), the source of conflict between the service provider and the purchase of is because of the poorly designed scope of services and ill-defined service levels which can encourage inflexible responses. The perception of the loss of control (Hunter, 2006) of employees and the supervisors of the hospital on the catering facility is also a source of conflict. The author feels that the management of quality related issues has not been properly addressed between the service provider and the purchaser. In order to and out the differences between the employees of the hospital and the employees of the facility management company it is necessary to design the scope and services and to provide a level of supervisory control over the facilities which are outsourced by the hospital and develop a managerial structure where the supervisor is able to report to an individual manager of the hospital so that there is a nodal officer who can manage the facilities from the part of the hospital. The scope of the service and the service levels based on quality management has to be properly discussed and evaluated between the outsourcing service provider and the purchase of services (Hunter, 2006). While these elements could have been already negotiated and agreed based on a contract, the development of potential problems indicate that further work needs to be done in order to smooth out the differences. This can be done by developing a dialogue between the facility management company and the hospital. It is recommended that both the facility management company and the hospital agreed to the involvement of a nodal officer from the hospital with supervisory control over the facility management so that the perceptions of lack of control and the quality related issues can be sorted out by the manager who is responsible for the facility management services and the supervisor from the ISS. The hospital can initiate the dialogue and come to an agreement with the facility management company about the various quality related issues without going into the discussions with the higher levels of the management at ISS. Hence any quality related issues and potential conflicts between the employees of the hospital and the ISS can be resolved within the confines of the agreement without the involvement of the senior managerial positions both of the hospital and the ISS.

The next aspect of problem was with related to the management of human resources and a lack of motivation and commitment felt by a ground level staff of the facility management company. In order to increase the motivation level of the employees working for the company, it is necessary to provide them with opportunities of career advancement within the organisation and provide them with training in order to function in an efficient manner. It is to be noted that the organisation should consider the higher level needs of the employees consistent with the theory of hierarchy of needs (Dye, Mills and Weatherbee, 2005) which provides that the needs of the employees relating to social belonging and esteem also should be adequately addressed by the organisation. Although there are several different theories related to motivation, in the present scenario it is felt that since the employees are not able to come into the organisation because of the lack of career opportunities, the recommendation here is to provide for sufficient career advancement opportunities within the organisation. Moreover the shuffling of the employees between the various facilities managed by the ISS should be controlled in an adequate manner and reduced so that the employees are able to work at a single facility for long periods and develop an association with their co-workers which can instil in them, their need for social belonging. This can significantly reduce the demotivation of the employees and improve the team working within the organisation which also has the potential to improve the quality of the services provided by the organisation.

 

 

Conclusions

The report evaluated the organisational problems relating to outsourcing of the non-core activities of the NHS hospital charring Cross in London mainly the catering service to the facility management company ISS. The issues relating to outsourcing have been because of the improper definition of the scope and levels of service and the perceived lack of control from the part of the hospital employees. In order to mitigate this the recommendation was to create an agreement with proper definitions of scope and levels of service and have the quality to be maintained and the involvement of a nodal manager from the part of the hospital to have supervisory control over the employees of the catering department which will be managed by the facility management company ISS. The second issue was relating to the lack of motivation and commitment levels of the employees to the organisation mainly because of the lack of higher level needs arising from the lack of opportunities for career enhancement and inefficient training systems. In order to mitigate this recommendation was to provide for sufficient lack of opportunities for the employees in advancing their career such as promotions and to manage the employees in such a manner that they are able to work in teams for a longer period of time.

References

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  2. Hunter, I., (2006), “HR business partners”, Gower Publishing, Ltd
  3. Maslow. A. H., (1975), “The Farther Reaches of Human Nature”, Maurice Bassett publications
  4. Maslow. A. H., (1987), “Motivation and personality”, Harper and Row publications
  5. Maslow. A. H., (1989), “On Dominance, Self-Esteem, and Self-Actualization”, Maurice Bassett publications
  6. Porter, M. E., (1998), “Competitive advantage: creating and sustaining superior performance: with a new introduction”, Simon and Schuster publications
  7. Renner, C. and Palmer, E., (1999) “Outsourcing to increase service capacity in a New Zealand hospital”, Journal of Management in Medicine, Vol. 13 Iss: 5, pp.325 – 338
  8. Schniederjans, M. J., Schniederjans, A. M. and Schniederjans, D. J., (2005), “Outsourcing and insourcing in an international context”, M.E. Sharpe publications
  9. Verhoef, D. and Wijers, G., (2009), “It Outsourcing: Contracting the Partner”, Van Haren Publishing.
  10. Zokaei, A. K. and Simons, D. W., (2006) “Value chain analysis in consumer focus improvement: A case study of the UK red meat industry”, International Journal of Logistics Management, The, Vol. 17 Iss: 2, pp.141 – 162

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