Securemploy Cost/Benefit Ratio

Most hotels and most management people fail to do cost / benefit trade-offs.

The purpose of the cost / benefit trade-off is to determine the best economic return from each of our employees.

There are only 24 hours in a day. Management teams only have so many hours to do their jobs. Every time we give them a new responsibility or special project we are either forcing them to work more hours or to quit doing something they are currently doing. Most people substitute a new activity for an old activity, rather than increase their work day. Unless we as management do a cost-benefit tradeoff before we assign the new responsibility or project we may be shooting ourselves in the foot.

We all know people are the most effective and provide the best return on our investment in them, when they do the things they know best and do frequently. Let's take recruiting to fill a new position as an example. Sure, anyone can do recruiting. But at what cost? When your people spend time trying to find management people there are two types of cost. The actual direct out of pocket costs, and the lost opportunity costs.

Very few hotels or companies measure the lost opportunity costs when it comes to filling positions. Finding good management people is not easy (if it were, the search and placement industry would not be a multi-billion dollar industry that is growing at the rate of about a billion a year).

When your people spend time recruiting it means they are not spending time on something they would normally be doing. Do you routinely measure the cost benefit trade-off on the activities of your management people?

The cost / benefit ratio can be simply stated as: The revenues or cost savings each management person actually produces from each activity in their job description, divided by the hours per month they spend on the activity. It is something we all should routinely do every year, both for our own positions and for each of the management people working under us. Cost / benefit ratio analysis often can improve The Contribution Factor for your Department, Hotel, or Company. The Contribution Factor states that each management person should improve profits by five times their compensations package the first year they are in a position, 3x the second year, and 1.5 times every year thereafter. All sales people must make a profit contribute of at least 10x their compensation annually. Cost / benefit ratio analysis helps each of us identify how to direct our management team to optimize their time and maximize profitability (and your and their bonus).

Cost / Benefit Ratio and The Contribution Factor will help you determine whether your own staff should do the recruiting or whether you need other alternatives, how long you can afford to have the position open, and how much to spend to find a person for a position. It is simply, intelligent analysis to identify how to allocate your limited resources.

Every hotel should do the same Cost / Benefit Ratio Analysis when it comes time to hire a management person as they do when they are developing a new hotel promotion, identifying a new market niche, etc.

Your bottom line is our bottom line.