Investing in human capital
July 12, 2017
UD's Poorani, Sullivan introduce new metrics that apply human capital analytics to hospitality
University of Delaware hospitality professor Ali Poorani and Bill Sullivan, managing director of the Marriott Courtyard Newark at UD, have partnered to introduce new metrics for evaluating human capital performance in the lodging industry.
“The current metrics, such as average daily rates, occupancy percentages, revenue per available room, and various labor costs that hotels use to measure performance, though well-established, do not adequately quantify return on human capital investment,” Sullivan said.
Nearly 90 percent of organizations report that leveraging large swaths of critical data, otherwise known as “big data,” is critical to being competitive in their industries, Poorani added, but, “Hotels earn relatively low scores in utilizing big data and competitive intelligence. This is surprising.”
Poorani said that he has been trying to apply the concept of human capital analytics to the lodging industry, but he had doubts that he would have access to the data, until he approached Sullivan.
Poorani and Sullivan then launched an investigation into the hotel industry. As a case study, they applied the Vienna Human Capital Performance Index, which uses various algorithms to calculate an organization’s:
• Entire investment in human capital: Employee costs, costs in support of employees and costs in lieu of employees.
• Human capital productivity: The amount of revenue generated for each dollar invested in human capital after adjusting for the costs of material.
• Profit sensitivity: The ratio between profit driven incentives and profit goals determined by the organization.
The case study analyzed detailed financial data for the UD Marriott over a period of the past three years.
“This case study made it abundantly clear that managers can incorporate key performance and profitability data to improve human capital and organizational performance,” Sullivan said. “The process further established that the business intelligence tools used in this case study were relatively easy to use and the management did not have to go through IT to perform such analytics.”
Poorani and Sullivan presented this case study at the recent Drexel University LeBow College of Business’ Bridging Practice and Theory Summit, an event that fosters collaborative dialogue between industry and academia with a focus on the alignment of business strategies and analytics
In the future, the team plans to share these analytics and methods across similar properties to replicate and accumulate enough data for comparison across the board. This will help them to expand the understanding of the role and importance of human capital for the hospitality industry.
“Obviously, a strategy of maintaining a culture of employee engagement and retention requires investment in human capital,” Poorani said, discussing the positive impacts of businesses like Marriott International employing a “employee-centric focus” and “people-first culture.”
Sullivan added that the study “provides evidence for the ties between financial returns and human capital performance at strategic levels.”
Quoting Marriott International chairman Bill Marriott, Sullivan said: “Take care of associates and they will take care of the customers.”