Applying European Foundation for Quality Management (EFQM) Excellence Model to generate the Highest Values to Squire Hotel Group’s Stakeholders

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Executive Summary

This report demonstrates the benefits attributable to EFQM Excellence model. It presents Squire Hotel Group (SHG) with an internationally recognized strategy for developing values and actions plans that will guide the stakeholders towards accomplishing long-term success. Experiences by award winning  corporations such as  BMW and Tifco Hotel Group show that Adopting EFQM will allow SHG to introduce more successful ways of  motivating employees, gaining the customers’ loyalty and launching ambitious visions and values to all its other stakeholders.  Since hotels that have the awards do not publish their financial reports to the public, the paper uses BMW a leading car manufacturing company to demonstrate  the financial gains and other values that comes with adopting EFQM. It found that the excellent performance translated to a persistent growth in sales revenue, stock values and cost control.  SHG should benchmark its services against these award winning companies.  It should initiate strategies such as conducting regular quality audits, launching guest comment cards and updating its workflow manuals to keep pace with the fluctuations in the economic environments.

Introduction

            The stiff competition in the hotel industry and the ever changing customer needs requires the players in the sector to deliver excellent and sustainable services to all their stakeholders. EFQM Excellence model presents a managerial tool that Squire Hotel Group can employ to create superior products and services to its clients.  Empirical evidence indicates that hotels and restaurants using EFQM not only enjoy competitive edges in their markets but have also maintained beneficial relationships with a large customer base as well as the best suppliers in the industry (Bouranta, Psomas, and Pantouvakis, 2017) The approach allows businesses to achieve the optimum balance of satisfying the stakeholders’ needs and meeting the long-term strategic objectives. It also adds value to the quality management initiatives by linking a firm’s processes to the actual outcomes. Therefore, adopting EFQM model will enable Squire Hotel Group (SHG) to achieve efficient business processes, excellent management styles, and superior service levels.

Background of EFQM

European Foundation for quality management developed the model in 1988 (EFQM, 2017). A group of 14 chief executive officers worked together to creating the framework. The CEOS borrowed some ideas from the previous quality awards such as the Japanese Deming Prize and the American Malcolm Baldrige.  Jankal and Jankalova (2016) cite that the foundation first employed the model in 1992 to improve the European firms’ competitive position in the global market.  The founders partnered with more leading international organizations to update the model in 1999 and 2003. The tool enabled the companies to gain a holistic view of their strengths and potential gaps in providing the industry’s best products (Brotherton, 2012).

Many firms across the globe are using EFQM making it one of the most popular assessment tools.  Alfirevic, Peronja and Plazibat (2013) found that award-winning hotels such as Ritz Carlton owe their success to this concept of total quality management.  It evaluates the correlation between variables such as employees, products, business processes and a company’s performance. The approach uses the total quality management philosophy to focus all business functions to meeting customers’ needs and objectives. EFQM involves nine criteria that are divided into two parts, enablers and results. Enablers concentrate on the management strategies while results measure the success’ levels (Özgen and Kader, 2016).  Like other EFQM users, SHG can first rank its services based on how best it meet the criteria. The hotel can then develop an action plan for converting strengths into sources of sustainable values and weaknesses into competitive edges.

Methodology

The report first compares and contrast the performance trends of three firms in the service industry that have adopted EFQM excellence model.  It employs accounting data such as market share, sales revenues, and operating income and costs to track the changes in the selected companies’ performance trends. The paper further uses EFQM criteria to assess SHG’s strategies policies and then recommend changes that would enable the hotel to maintain outstanding performance.

A Ward Winning Corporations that have adopted EFQM Excellence Models

EFQM has allowed thousands of organizations from different sectors and sizes to excel in their markets. World class hotels such as Tifco Hotel Group and accommodation providers like Wakefield and District Housing Limited (WDH) and global corporations such as BMW continue to gain international presence and financial growth as a result of the model (Tarí, Molina-Azorín, Pereira-Moliner,  López-Gamero, and Pertusa-Ortega, 2014.). Tifco Hotel Group is Ireland’s second largest hospitality firm after Dalata Hotel.  It owns a chain of 5, 4 and 3-star hotels across the country as well as international markets such as Germany. Center for competitiveness, the official partner of EFQM, crowned Tifco among other five hotels with 4 Star Excellence Award in 2015 (McAree, 2015). The award increased the Hotel’s popularity that is translating to high occupancy rates.

EFQM judging panel concluded that BMW was among the best European businesses in 2013 and 2015 (EFQM, 2017). The company scored the highest points in areas such as customer service, innovation, and high quality and environmentally sustainable services. Since then the company serves as a benchmark for other multinational corporations. The excellent performance translated to a significant increase in revenue growth, operating income, and cost control.  BMW attracted significantly better financial health than the rivals such as Daimler AG after the EFQM awards as reflected in the table and graph below (Also see Appendix).

(Morningstar, 2017)

(Morningstar, 2017)

(Yahoo, 2017)

The accounting ratios show that BMW’s % increase in earnings per share before it won the EFQM award was 4%.  The EPS rose to 9.2%, 9.8%, and 7.7% respectively.  On the other hand, Daimler’s % change in EPS fell from 13% in 2012 to 6.3% and further to 1.7% in 2014 and 1.2% in 2016. Overall, while BMW’s EPS rose by an average of 4% of the 2012’s award, Daimler’s recorded a significant decrease in the EPS growth (BMW 5). The same trend applied for the share prices.  The percentage change in the stock prices for BMW after the award was 59% while Daimler shares fluctuated by 80%. This is because EFQM increased the investors’ confidence in BMW’s ability to create wealth for its stakeholders (Kanji, 2012).

EFQM also enabled BMW to utilize its assets more efficiently than Daimler. The graph below shows that BMW assets turnover improved slightly from- 6.9% before the award to % 5.56% after the award while Daimler’s asset utilization rate deteriorated from 0% to -2.86%.

(Morningstar, 2017)

Overall, EFQM gave BMW profound insights of its operations that enabled it to increase its profits and rewards its employees as well as create more high returns for its shareholders. This confirms that Squire Group Hotel will also improve its performance by adopting EFQM Excellence Model.

Using EFQM to Access SHG’s Strengths and Weaknesses

Leadership

This aspect allows firms to recruit exceptional leaders and trains them further on how to inspire others and initiate projects that result in continuous improvement. The managers demonstrate their commitment to excellence by launching innovative operational techniques and motivating their subordinates to create excellent commodities to the customers.  According to EFQM, leadership involves developing values and actions plans that guide the stakeholders towards accomplishing long-term excellence (Kozak and Nazmi, 2016). However, SHG leadership has not introduced adequate ways for encouraging the employees to put more efforts towards achieving its goals. It uses negative motivational strategies such as firing the managers who do not meet the profit targets.

Policy and Strategy

 This enabler shows the connection between an entity’s values, visions, objectives and total quality. Sadeh, Arumugam and Malarvizhi (2013) explain that this EFQM principle states that the top performers must embed clear-cut quality goals in their strategic policies. SHG scores high points in this aspect, as it set ambitious targets and assist the managers to achieve such goals. The hotel uses four criteria, occupancy rates, profits, staff and food costs to monitor performance. It expects the managers to maintain100% occupancy rate; operate within the budget and maximize profits. However, SHG needs new incentives for addressing the challenges characterizing its business operations.  The risks such as fluctuations in the exchange rates between the euro and dollar and decrease in demand mean the managers do not always meet the financial targets (Kimes and Wirtz, 2015).   Charles Harper, Oxford’s branch manager, complained that the occupancy rates often drop below 90% during inflations and to as low as 60% during the off-seasons. Therefore, the hotel should launch new operational styles to attract high revenues all year round.

People

 Leading companies implement strategies for harnessing their workers’ potential to improve their performance.  Calvo-Mora, Domínguez, and Criado (2017) cite that the enablers comprise several tasks such as planning and improvement, talent management, employee empowerment, and many others.  SHG’s head office sets staff levels and wages while the division managers supervise the employees. For example, Harper has created a working environment that enhances the staff productivity.  He has 40 full-time employees, ten work at the bar, 20 in the kitchen and 10 in the apartments. The hotel’s staff turnover is significantly lower than the industry’s average. SHG’s staff turnover rate is 70% while the sector rate sometimes rises to over 300%.  Such an impressive performance meets EFQM’s people criteria that state that organizations should create mutually beneficial relationships to all its partners in order to achieve excellence. SHG human resource practices promote fairness and equality thereby it attracts and retains skilled workers.

Partnerships and Resources

    Efficient resource utilization plays a critical role in creating sustainable values to an organization’s external and internal members. According to EFQM, the management should prioritize areas such capital funds, short-term finances, information resources, supplier relationships, buildings, and technology equipment. Hemsworth (2016) explains that the excellent firms foster strategic partnerships with leading industry players so as to support their strategy and policies. SHG ranks among such top performers. Alliances with the local firms allow the hotel to attract new guests. It then offers courteous services and high-quality meals to entice such new clients to visit the hotel regularly.

On the other hand, SHG’s financial management practices are below EFQM standards.  Each branch chooses its own operational techniques provided it meet the budgets’ goals as specified by the head office. As much as such strategies help the company to achieve its financial targets, it hinders managers from trying new cost-cutting measures that may yield high returns to the hotel. In most cases, the leaders prefer regular operational styles over innovative ideas because of the risks of not meeting the target. For example, the fixed budget makes it difficult for the managers to replace old equipment with energy efficient gadgets that will reduce the electricity consumption in the long run.

Processes, Products and Services

EFQM model requires firms to review and improve their processes consistently. It emphasizes the roles of innovation and creativity in achieving excellence. According to Hakes (2007), top performers create efficient processes and excellent quality products and services to generate increasing values to their customers, employees, investors, suppliers and other stakeholders. In contrast, Squire Hotel Group’s current workflow processes adversely affect its abilities to keep pace with the changes in the external environmental factors. The branch managers must comply with the decisions made by the head office.

Although the branch heads’ contributes in the formulating the companywide strategy, they have limited authority over such strategic goals.  However, the managers are more knowledgeable on the unique factors affecting their branches’ operations. Elizabeth Dickens, SHG’s restaurant manager, explains that the budget indicates the food, accommodation and staff costs for individual breakfast, lunch, and dinner.  The meals vary with the requirements of the local community.  The hotel serves four meals, three traditional dishes, and one vegetarian package. However, Mrs. Dickens complains that the budget constraint prevents her from launching innovative menus and ways of attending to the customers’ needs.

Customers Results

Business determines their progress by reviewing clients and external members’ level of satisfaction. EFQM aims at improving organizations’ ability to provide goods and services that exceed the stakeholders’ expectations. The leading players’ actual performance exceeds the targeted goals (Wang, 2012). Performance indicators include customer loyalty, positive feedback. For example, the majority of SHG’s customers have positive perception about the group’s products and services. Charles Harper believes that the hotel record repeated bookings because of such a reputation. Nevertheless, SHG lacks adequate performance indicators to monitor the clients’ satisfaction levels.  The head office only conducts quality audits twice a year.  The managers also interview the clients occasionally. Consequently, there is a high risk of making repeated mistakes.

People Results

The stakeholders’ views show whether a company’s performance is in line with its strategic goals and policies. The excellent organizations consistently exceed their stakeholders’ expectations (Porter and Tanner, 2012). However, this is not always the case at SHG. For example, managers such as Harper are bothered by the traditional counter arrangement, restricted access to computers, and grandfather clock. Elizabeth Dickens also complained about the bureaucratic procedures involved in making important decisions such as the menu items. Nevertheless, SHG has not established adequate performance indicators to enable the top managers to respond to such concerns. Dickens further argues that the top management is not aware of the challenges they are facing in meeting the changing needs of the customer. Therefore, the hotel requires new measures to ensure efficient flow of information across all its business segments.

Societal Results

EFQM encourages corporate social responsibilities activities that improve the wellbeing of the not only the local communities but also the other stakeholders (Habisch, Jonker, Wegner, and Schmidpeter, 2005). For example, SHG sources most of its production inputs from the local markets. The employees’ enjoy the working environment while the customers appreciate the nutritious meals. However, SHG is losing a significant number of clients to the rival hotels due to inadequate performance indicators. The managers do not have enough tools to predict the fluctuations in the stakeholders’ demands.

Business Results

    The industry leaders maintain outstanding results in terms of financial health and market share. Like other players in the hospitality industry, SHG performance is characterized by high revenues during the peak seasons and low profits in other periods. However, the company remains among the most profitable hotels in Oxford, Warwick, and Southport markets.  This is because it has installed internal measures such as budgets to motivate the managers towards attaining the financial goals.

Findings

Embracing EFQM leadership concept presents opportunities for Squire Hotel Group to perfect its strategic decision-making processes. By targeting to maintain outstanding performance, the hotel will create a culture of creativity in formulating and executing its plans. It will stay ahead of its competitors in generating new ideas for attracting the largest customer base.  For example, SHG can establish policies to encourage the workers and local associates to move beyond providing nutritious meals and high-quality accommodation facilities. The management will commit to deepening their knowledge of the market thereby creating new customer segments and identifying opportunities to strengthen the existing clients’ loyalty (Peris-Ortiz et al. 80). It will not narrow its focus on the local market but instead create omnipresent operations to target international customers.

    However, SHG have outdated in-house facilities that may affect the clients’ perception about its other products such as meals, and drinks. According to EFQM excellence occurs whenever all levels of service meet the customer expectations or exceed the predetermined standards. On the other hand,   SHG manager admitted that the hotel still uses the old furniture.   The company has not also implemented comprehensive tools for measuring the customers’ satisfaction levels. As the Oxford Branch manager reveals, the hotel is reluctant to use complaints forms since the management believes that such an incentive will create opportunities for the clients to raise concern over petty issues.

On the other hand, experts have demonstrated that any entity cannot measure its progress in delivering promised values without formal structures for obtaining feedbacks from the targeted stakeholders.  For example, Mihaela (2014) found that hospitality firms often struggle to satisfy majority of their customers’ needs due to three gaps in their communication processes. Miscommunication may occur whenever the management misinterprets the clients’ expectation. Similarly, the management may correctly perceive the customers’ wants but may implement an inappropriate measure to satisfy the need. The firm may also launch the best strategy for meeting the customer demand. However, the personnel may lack the necessary skills and competency to apply the procedures. The analysis shows that SHG does not have a secure method for identifying these gaps.

Recommendations

The hotel should combine the EFQM and other international hotel industry standards to create instruments for acquiring real-time information about its services. The self-assessment tool will help the hotel to focus on excellence attributes such as reliability, quality, financial stability, employee productivity and customer loyalty.

Employee Satisfaction

SHG can develop an online survey to engage the customers in evaluating periodic performance. The questionnaire will allow the visitors as well as the customers to rate the firm’s ability to provide consistent services as stated in its strategic missions in a scale of 1 to 5. The feedback will also indicate the clients’ confidence levels with other critical factors such as the staff promptness in attending to the customers, meals’ qualities, hotel’s ambiance, and in-house facilities. As a result,  will not only meet the clients’ priorities but also be proactive in addressing the changes in their taste and preferences.

Boosting Performance during the Low Seasons

    EFQM will be instrumental in overcoming the financial constraints in the midst of low demand periods. It will allow SHG to launch lucrative deals and attract more customers than the rivals. For example, the firm can introduce flexible pricing policies to allow the managers to respond to create special packages at affordable prices. The incentives should also encourage the marketing team to create customized campaigns to inform the target customers about the new deals. EFQM advocates for ideas that will portray SHG as an exceptional performer to its stakeholders (Swarbrooke and Page, 2012). The hotel can achieve such goals by diversifying its revenue sources and finding new markets for its product. It can partner with leading event organizers, create different buyer profiles or venture into new product lines.  With EFQM SHG will gain a reputation that will, in turn, give it an advantage in earning the new partners’ trust.  For example, surveys indicate that many tourists love to explore new ideas and destinations during the off-season as it is always cheaper and less crowded than the other periods. SHG can schedule most of its adventurous activities such as sightseeing, cultural parties, spiritual retreats.  The hotel should also accompany the events with special offers which will differentiate it from the competitors. As a result, the hotel will acquire new business associates.

Employee Productivity

SHG group can reduce its staff turnover further by leveraging talent management programs to create sustainable human resources growth. It can provide internship opportunities to the talented students from both the local and international colleges and offer permanent positions once they finish their studies. The hotel can develop an on-job training structure that links the new recruits to experienced mentors and blueprint for ensuring all its employees are knowledgeable on the emerging issues such as omnichannel merchandising. Jankal and Jankalova (2016) found that such a talent pool management strategy enables the fresh graduates to acquire experience and pursue higher qualifications. SHG would get new ideas that will go a long way in adding value to its human resources practices. For example, contracting high-tech companies such as Cisco and Google to train the staff on the applications of digital tools, Big Data Analytics, and related merchandise optimization applications will provide the employees with opportunities for making decisions that will maximize the company’s revenues.   At the same time, SHG should offer scholarships to its current workforce to enable them to pursue to post-graduate programs and prepare them for higher managerial positions.  This will, in turn, strengthen the employees’ loyalty towards SHG.

Conclusion

The self-assessment reveals the action points that should pursue in order to strengthen all its divisions’ financial and competitive position.  It shows that hotel’s leadership techniques should focus on understanding the customers’ needs and establishing products and services that delight all the members. For example, the hotel expects its managers to form strategic alliances with the local stakeholders. It sets itself apart from the competitors by creating a reputation of being the customer-friendly and the highest quality service providers in its markets. The manager reported that has been recording repeated bookings due to such strategic alliances. In other words, EFQM will influence SHG’s managers to monitor the latest trends in the industry and initiate changes to enable the hotel to excel in all its activities.

Appendices

Appendix 1: Selected Accounting Ratios

(Daimler in $ 000,000)

Accounting Ratio 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sales Revenues 98,469   97,761 106,540 114,297 117,982 129,872 149,967 153,261
Operating Income 2,730 (1,513) 7,274 8,449 8,116 10,139 10,173 12,744 12,574
Earnings per share 1.40 (2.63) 4.28 5.31 6.02 6.40 6.51 7.87 7.97
Dividends 2.04 0.60 0 1.85 2.20 2.20 2.25 2.45 3.25

BMW

(in Million Euros)

Accounting Ratio 2008 2009 2010 2011 2012 2013 2014 2015 2016
Sales Revenues 53,197 50,681 60,477 68,821 76,848 76,059 80,401 92,175 94,163
Operating Income 921 289 5,111 8,018 8,275 7,978 9,118 9,593 9,386
Earnings per share 0.49 0.31 4.93 7.45 7.75 8.08 8.83 9.70 10.45
Dividends 1.06 0.30 0.30 1.30 2.30 2.50 2.60 2.90 3.20

Appendix 2: BMW and Daimler’s Share Prices Before and After 2012 Excellence Award

BMW

60 -13 months 48 -13 months 36 – 13 months 48-13 months 24 -13 months
Before Implementation
Highest share Price 73 73 73 73 73
Lowest Share Price 19 29 41 51 56.93
284.2105263 151.7241379 78.04878049 43.1372549 28.22765
After Implementation
Highest share Price 123 123 123 92
Lowest Share Price 63 69 77 77
95.23809524 78.26086957 59.74025974 19.48052
   

 

Daimler

 

60 -13 months

48 -13 months 36 – 13 months 48-13 months 24 -13 months
  Before Implementation
  Highest share Price 79 79 79 79 79
  Lowest Share Price 21 23 38 37 42
  276.1904762 243.4782609 107.8947368 113.5135135 88.09524
  After Implementation
  Highest share Price 101 101 98 89
  Lowest Share Price 56 58 56 72
  80.35714286 74.13793103 75 23.61111

Appendix 3: Selected Accounting Ratios for BMW and Daimler Before and After EFQM award

2012 BMW 2013 BMW 2014BMW 2012 DAIMLER 2013 DAIMLERBMW 2014DAIMLER
Sales 76,848 76,058 80,401 114,297 117,982 129,872
Sales/Assets 131,850 138,368 154,803 162,978 168,518 189,635
Cost of Sales -61354 -60,784 -63,396 -88,784 -92,457 -101,688
Capital Expenditure -5433 -6,981 -6,116 -8,864 -6,829 -2,709

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