The impacts of the Global Financial Crisis on the industry are identified and presented in this report. Research for the report includes the review of literature such as management and hospitality books, electronic journals, newspapers, information sourced from government and professional bodies such as the Australian Bureau of Statistics, Fair Work Australia, The Australian Tourism Export Council and Australian Institute of Management. Good!
The key findings indicate that there is a major shift from the traditional leadership practice with hierarchical organizational structure towards a more organic structure which promotes participative and democratic leadership style. This report demonstrates the importance of strategic leadership and highlights the role of information and communication in a new era. In order for the hospitality leaders to be effective, this report recommends that the emphasis should be placed on continuous change, development, and innovation.
In the Information Age a constantly changing environment forces businesses to focus on people and invest in human resources. Introduction and Background information Outline of the Report In an article entitled, “The Changing Context of Leadership”, James Claws (2003) discussed the major forces that drive the paradigm shift in management thinking ND modes of leaderships. The objective of this report is to provide a review of how the recent Global Financial Crisis has affected the paradigm shift and how this crisis has posed challenges for leaders and organizations in both the short and long term (i. . Over the next 5 years). The information gathered can be used as inputs to assist leaders and organizations in their continuous development and strategic decision-making processes, in order to cope or plan for the challenges ahead. Good! Background History of the Industry Electronic journals, books and industry reports (Walker, 2007; Roister, 2010; Claws 2003; Bruce, 2004) have illustrated how closely leadership challenges and barriers to the hospitality industry in Australia are related to the paradigm shift that Claws have conferred.
This necessitates organizations and leaders to take into consideration of the prevailing and imminent challenges as they make any strategic business decisions. Scope This report investigates on both the domestic and world-wide challenges that leaders and organizations face. Methodology Information was gathered through database researches, Google scholar, government websites, books and reports. This information forms the basis on which our team concludes a comprehensive review of both current and future challenges.
Limitation Although this report identifies the challenges and shifts in leadership roles, the intrinsic and extrinsic facts of the hospitality industry might not be suffice to edify the challenges, due to the broad scope and in-depth knowledge that different industries bring on board to challenge their leaders and organizations. Hence, every important challenge is yielded to its very best in both current terms and future value. Outline of the Report In this report, section A defines the major forces driving the paradigm shift, which Claws (2003) has identified.
This is further illustrated through the leadership process and analysis made within the hospitality industry. Section B of the report looks to further exemplify the leadership process in the context of the global financial crisis and the future challenges ahead. To conclude the report, we have included a comprehensive list of recommendations to handle these leadership challenges. Part A The major forces driving the paradigm shift that Claws (2003) refers to are the shifts in management thinking, and modes of leadership that impel through the entities of human revolution and industrialization.
This dynamic and yet turbulent transitional period between the Industrial Age and the continuing to emerge Information Age, moulds effective leaders to adapt and change constantly to keep up with the developments and changes of the world. Claws (2003) and other observers have identified the three major worldwide paradigm shifts in management: 1. The Prehistoric shift from hunting and gathering to farming 2. The Industrial Revolution 3. The Information Revolution 1. 1. Prehistoric Shift From Hunting to Farming About 11,000 years B. C. E. An had transited from the hunting era to a farming era (Claws, 2003). In the hunting era, man depended solely on their audacity and hunting skills in acquiring their food source. However, they had no control over their food source, which posed high risks of running into food shortages or famines. The food race and increasing need to gain control over their food source were the key driving forces to divert from hunting activities to cultivating their own food, which allowed them to have more spare time for pursuit of cultural developments (e. . Writing, religion, tool making). This new Agrarian Society allowed them to escape from the dependence on food sources which they previously had no control over and manage their own business. Those with horticulture skills and knowledge had then replaced those with great hunting experience and skills as leaders in the tribes. The society was increasingly organized around stability and responsibility than audacity. Survival, sustainability and stability were the main forces that drove the shift from hunting to farming.
Organizational theorists have also defined this to be the prehistoric roots of modern management thought, which relates to an important feature f land ownership of new agrarian society, giving rise to aristocracy (Claws, 2003). 1. 2. Aristocracy Society Aristocracy society according to Claws (2003), took place during 1 1 ,OHO B. C. E. Until the end of 19th Century, where societal and organizational standing, power to influence and wealth were determined by one’s family lineage or financial background (i. E. Ownership of land).
Families had sought alliance through political, military or arranged marriage to combine their wealth and improve their stability in the society (Claws, 2003). Structurally, the characteristics of the aristocratic model meant that families had dominant influences over social and political landscape. Claws (2003) identified this top down approach to have great influence on the society to accept the noble families as the rightful rulers and their central assumption in the aristocratic paradigm that, “Father knows best” (Claws, 2003, PA). Good!
Although this aristocratic model brought positive stability into society because of birth and social right, there were a number of underprivileged classes who felt disenfranchised and continuously fought for the demise of such unfair, confining and anachronistic aristocratic yester. Education and job opportunities were limited and wealth was unfairly distributed to this underprivileged group who were not born in noble families. This system resulted in great inefficiency. Inefficient individuals were tolerated because of their societal standing and while potential talents were left untapped. . 3. Bureaucratic Society The limitations of the Aristocratic society led to the political upheavals in the late 18th century (Claws, 2003). In the second half of the 18th Century and early 19th Century, the Industrial Revolution made a wider host of durable goods and rated a new and more powerful merchant class. This phenomenal change caused a major shift in the nature of leadership. Aristocrats were unable to keep up with the changes and could no longer be counted on to provide good leadership.
The speed of changes and inability of the aristocrats to keep up with the pace constituted the major push factors that forced a paradigm shift to a new model of management for society, where authority and power were given by virtue of one’s abilities and skills (Claws, 2003). A Bureaucratic Society ensured that every individual in the society has an equal and fair opportunity to sight for what they want for themselves. On the other hand, bureaucracy has the propensity to discourage creativity and innovation or entrepreneurship while in favor of low risks and stability. 1 . 4.
Information Age In the 20th Century, the pace of change represented by the breakthrough of technology and innovations has accelerated tremendously. With the accelerated rate of change, in almost all fields, one has to be constant learners, to be aware of the new tools, technology, knowledge, theories, techniques, substitutes and way of organizing things to ensure that he/she can keep up to the pace and not e obsolete. Life-long learning is now a top critical success factor. Very True! A true and effective leader must be an active learner, to gain an advantage by learning faster and manage influence on others (Claws, 2003).
Leaders with specific capabilities and skill sets are no longer sufficient in this era. The most effective leader would be one who constantly learns, upgrades, and is receptive to changes, adapting fast enough to take advantage of business opportunities while minimizing risks (Claws, 2003). Information has become the key competitive and managerial advantage as market and customer needs ND demands changes more rapidly than before. A good information system is a competitive advantage, as one is empowered with the most up-to-date information for relevant decision making (Claws, 2003). . 0. The Impact of the Claws Paradigm Shift on the Hospitality Industry 2. 1 . The Introduction to Hospitality Industry and Existing Leadership Issues and Practices There are many definitions of the term “hospitality’ available however it is rarely clearly defined (Walker, 2007). “It is equally unclear as to where the boundaries of hospitality are drawn in relation to near neighbors such as ours and leisure, or the structural and behavioral characteristics of other service industries” (Wood, Brothers, 2008).
As suggested by Walker (2007), travel, lodging, restaurants, recreation, assembly and event management are united under the scope of the hospitality industry. Good! The essential difference between hospitality business and other business sectors is that the hospitality industry produces guest satisfaction which is strongly linked to the quality management and total quality concept (Walker, 2007). Industry is characterized by high levels of empowerment, teamwork, diversity of talents and grounds, where open communication and trust are vital.
The increasingly open and competitive marketplace is exerting pressure on service industries to deliver superior service. Hence, the effective leadership becomes one of the most important factors to determine the success of an organization. The hospitality industry relies upon inspired leaders to continuously challenge and create conditions for success (Roister, 2010). Currently, hospitality businesses strive to achieve the leadership style identified as a participative system, which is considered to be the most effective (Overload, 2005).
The participative system is based upon both internal and external motivation, high level of empowerment, extensive communication and a substantial amount of cooperative teamwork. The conductive system with substantial trust and limited empowerment also can be present. Other practices included in the leadership style in hospitality industry today are continuous improvement and innovation, responsiveness to change, valuing diversity (Browned, 2005). Greater empathetic in companies is being placed on ethics. Despite this, there are some barriers for the delivery of effective leadership.
Teamwork is vital in the hospitality industry however building a committed team and a collective vision can be critical. According to the Roister (2010), another issue the industry currently faces is the lack of attention to Continuous Professional Development, which means that the opportunities for learning and growth are very limited. This fact is also supported by the relatively low adherence to professional bodies such as Australian Tourism Export Council, Australian Institute of Management and others (Roister, 2010). 2. 2.
The Impact of Claws Paradigm Shift on the Industry The hospitality industry can be considered as a one of the oldest businesses in history (Walker, 2007). Paradigm shift to the Informational Age, mentioned by Claws (2003), had changed the way leadership is performed. The new Informational Age requires the businesses to be receptive to changes, adaptive and flexible (Claws, 2003). Compared with the Aristocracy Society with homogeneous followers, limited information, education, and technological advances, there are great opportunities for the development and growth.
The classical management system provides little room for individual freedom, reiterative, and innovation. Decision making is slow, especially for the situation not covered by rules and regulations and has to make all the action up and down the hierarchy before the action can be taken (Bruce, 2001). In competitive, constantly changing environment with unstable and unpredictable customer demands the hospitality industry would not survive under the bureaucratic approach. It is unacceptable in today’s business environment and a demanding customer base and is most likely to result in the loss of customers (Stone, 2009).
The shift to the Information Age means that a greater emphasis should be placed pony the HRS, employee training and development. To keep up with a constantly changing world employees have to be marketable and leaders able to provide opportunities for growth (Stone, 2009). Hospitality businesses operating in the fast paced, constantly changing environment with high competition requires an innovative way on doing business. Continuous development supported by the total quality concept also must be essential. Good! The present paradigm is beneficial for all stakeholders.
It recognizes people as one of the main assets of the company and focuses upon the building of relationships and networking. The hospitality industry, especially restaurant businesses in particular, has a greater likelihood of being influenced by employee actions than other industries, because of its labor-intensive nature and the high level of interaction between the employees and customers (Davidson, 2003; Sideman, 2001). The levels of motivation and as following job satisfaction are higher in empowered organizations compared to those where employees are under constant control.
Hospitality businesses demonstrate different forms of employee empowerment including suggesting schemes (McDonald’s Restaurants), customer care aerogramme (Coot’s Hotels), involvement in devising departmental standards (Hilton Hotels) (Leashes, 2001). Part B 3. 0. The Challenges and Issues that Leaders and Organizations Could Face over the next Five Years 3. 1. The Existing Context, Environment, Shape, and Conditions of Leadership and Organizations Currently, leaders and organizations around the world face unprecedented challenges and relentless issues of changing management practice, partly because of the Global Financial Crisis.
Putting all these contexts into today’s business world, the lack of sustainability, the increasing inequality, and the mutinous decline in societal trust are part of the issues that business leaders face in their day-to-day management in a Bureaucratic society (Prison, 2009). In tackling these issues, leaders and organizations domestically and globally adopt a common practice of Transactional Leadership, which enables them to harness the right synergy of exchange to curb with these day to day issues (Rennin, 2010).
In addition, this transactional leadership enables the eradication of any organizational behavior in effects of employees’ morale, bad times, and standards of performance, that neuron psychological empowerment (Pitters, 009). Transactional leadership is based upon an exchange relationship in which the leader makes clear of what is expected of the follower (Pitters, 2009). As part of the transactional leadership role the leader’s “Emotional Intelligence” (El) skills play an instrumental part in predicating a justifiable and equitable work performance exchange.
Good! As identified by Harms (2010) Emotional Intelligence skills account for 90 per cent of what distinguishes outstanding leaders from those judged as average. Hence, one of the leadership challenges remains the skill of being able to identify and reflect needs of employees. The transactional leadership approach is being transcended through to Australia’s leaders and organizations. The legislation also can contribute to reflecting the needs of employees hence promoting better Relationship with the organization.
For example, the Australian Labor Party’s newly implemented industrial relation scheme – Fair Work Australia plays a vital role in enforcing the new National Employment Standards (NEST) on its organizations (i. E. Leaders) and employees (i. E. Followers). Fair Work Australia recently came with the creation of certain minimum conditions of exchange (Fair Work Online, 2010). This set of minimum employee entitlements establishes the baseline or standards for the leaders, which reduces the reliance on El skilled leaders to decide on an adequate exchange.
Exchange conditions will be set upon this minimum exchange relationship that is justifiable between the two parties. The following are the 10 challenges that NEST has imposed on today’s organization and leaders (Fair Work Online, 2010): Maximum weekly hours of work; Requests for flexible working arrangements; Parental leave and related entitlements; Annual leave; Personal / career’s leave and compassionate leave; Community service leave; Long service leave; Public holidays; Notice of termination and redundancy pay; Provision of a Fair Work Information Statement (Fair Work Australia, 2010). 3. . Challenges and Issues that Leaders and Organizations Could Face over the Next Five Years As leaders and organizations are domestically and globally poised towards a more transactional leadership style, the incursion of the global recession (or the sub-prime market crisis) took the world of transaction leadership into a further turmoil. Adding to the already sophisticated uphill task of transactional adhering, the sub-prime mayhem to-date calls on policy-makers (or leaders) to provide a higher level of transparency for effective exchange of information or trades that would enhance monetary trust and viability (O’Hara, 2009).
In the recent decade, society has witnessed ethical lapses and arrogance among senior executives or leaders of certain companies of disturbing unprecedented magnitude (Hiving, 2007). The case of Astray Computer Services where its accounts were falsified is one of the most recent examples (Blanchard, 2009). Leaders or organizations have lost their legitimacy over time in the face of a wave f such corporate scandals and misconducts which led to the collapse of corporate giants like Enron and World (Blanchard, 2009).
Such events accelerated and deepened a growing sentiment among many that interrelationships among leadership, character, and values ought to be made more salient. Leaders or organizations now face the imminent challenge of having to regain public (in particular investors) trust and confidence through assurance of ethical behavior. A strong corporate governance structure in the organization and higher level of corporate transparency would be essential or investors, shareholders and employees.
Leaders are challenged to lead by example, set the right tone at the top for all employees, and inculcate an ethical culture in the organization and effective communication of code of ethics. These are congruent to Herein-Brome (1999)g’s notes that transformational leadership is only authentic when it is grounded on the leaders moral character, concern for others, and congruence of ethical values with action.
Another identified challenge in the next five years would be the decline in employment, as Urn (2009) discussed in his economic correspondence, “it took here years for Australia’s unemployment to rise from its 6 per cent level in 1990 to reach a peak of just above 10 per cent. It then took 11 years to get back to 6 per cent. ” This upshot of unemployment figures that Urn has discussed are part of most organization’s survival package where organizations resort to. The challenge now resides with the colonization of staff and outsourcing feasibility that draws major concerns for leaders and organization in the future years (Morocco, 2009).
Very true! With the decline in employment within the organization, leaders or managers within the organization have to be re- plopped or trained (i. E. Via on-the-job training) to take up additional roles and responsibilities to accomplish existing or newly identified tasks. In part this becomes a push factor for organizations and leaders to shift towards a more organic leadership style, where without rank or title an organic process or genetic code of which can and must be learned and developed by almost everyone in the organization (The Futurist, 2005).
The reduction of headcounts in the organization may also impose issues, such as ids-satisfied employees and compromises in quality of product or services. Therefore, the responsibility lies n the leaders to tackle such issues to ensure that brand equity or company’s reputation is not being put at stake. With globalization and advancement of technology, the business context has also grown to be more complex and competitive than it used to be before.
Sticking to the core business processes and traditional methods will no longer be sufficient to preserve and create value for the organization (Hiving, 2007). Especially in today’s rapidly changing business environment, it is increasingly important for any organization to be able to achieve a competitive advantage over its competing peers in the same industry. Because employees think of and implement innovative endeavourers (Harms, 2010), identifying how management can affect the innovative behaviors of these employees holds the promise of gaining a competitive edge.
Therefore, the challenge to organizations and leaders in the Information Age is to inculcate an environment that supports or stimulates employees to think out of the box to come up with new ideas or innovations that creates value for the organization. Many studies have uncovered transformational leadership as an important determinant of following innovative behavior such as? (Pitters, 2009). Leadership helps adopt a soft approach, where the leaders transform followers to rise above their self-interest by altering their morale, ideals, interests and values, motivating them to perform better than expected.
The challenge to leaders and organizations is how it is to strike a balance between giving the space and flexibility to employees and develop their creativity, innovate and at the same time still be able to maintain oversight and supervision of these employees. 4. 0. Leadership challenges in hospitality industry industry in next five years Planning for the future and making predictions comes more and more difficult in the current marketplace due to continuous change in the environment. The Global Financial Crisis 2008 was a challenge for the hospitality industry.
According to DEAL Piper 2010 European Hospitality Outlook Report launched on 8 March 2010 there are still mixed prospects for new build activity, which stalled dramatically in the recession – 36 per cent of all respondents expect a rise in new developments, however, 32 per cent still expect a fall. Aha largest chains will continue to gain share through greater opportunities to convert smaller chains and the advantages that their operational efficiencies and marketing budgets give them,” said Karen Freebie, global co-chair of DEAL Piper’s Hospitality and Leisure Practice. But, while there are signs that occupancy levels have stabilized, there is growing concern throughout the industry that room rates will remain low for years to come. ” Currently the industry is still undergoing a recovery process however in five to ten years hospitality is expected to grow as worldwide travel will continue to increase. Therefore leaders will experience an increased pressure due to being responsible for motivation of employees and increased performance. As empathetic by Roister (2010, p. ), “if the growth potential of organizations is to be exploited fully, the post-recession environment will require the stronger focus on talent development to enable managers to become more self-reliant and innovative. Leaders will also need to motivate and engage the staff left bruised by the often demoralizing experience of recession. In this context, trained managers and leaders can have a positive impact on organizational performance. ” As stated by Benefactors (2009), there is also a direct correlation between the quality of life and traveling patterns.
Once standards of living are improved, the demand for hospitality is more likely to increase and stabilize. Therefore, according to DEAL Piper 2010 European Hospitality Outlook Report, the most attractive opportunity for investors will be the budget sector, considered to become most profitable in the next five years. 4. 2. The impact of the global context on the hospitality industry for the next five years Globalization has changed the dynamics of the hospitality industry and it is expected that in the next five years businesses will demonstrate more global awareness.
As empathetic by Wang (2009), “The industry must reflect the acquirement of the global village in many aspects of its operations, including food, services, amenities, staffing policies and training”. According to Munson (2005), the understanding of the implications of globalization while planning for strategic approaches becomes significant for hospitality leaders. Environmental forces are difficult to predict however there are a number of issues that will have an impact on industry in the near future.
Economy is one of the significant factors affecting the industry; nevertheless there are other opportunities and threats to be considered. Today, hospitality leaders and managers more often look at sustainable solutions. By taking three elements into account which are people profits and planet- a sustainable green hospitality development program becomes economically viable (Wang, 2009). The concept of green hospitality is most likely to be introduced to most organizations in the next five years.
This change will become cost-efficient as well as beneficial to the community and environment. The newest trend surrounding hospitality research is the management of multicultural talent and the political landscape affecting the hospitality industry Wang, 2009). The internalizing of the hospitality industry has already resulted in franchisees which have created numerous hotel chains, restaurants, etc. The importance of franchising will continue to grow. Diversity will become essential (Walker, 2007).
Very short statement! People with different backgrounds and talents contribute to the competitive advantage of the company. A diverse workforce can make organizations more successful by facilitating innovation, challenging existing behavior and work practices, and promoting better understanding of particular markets (Stone, 2009). For example, Hyatt hotels ND resorts emphasizes the role of women in leadership providing opportunities for promotion and career development (Hyatt Diversity Newsletter, 2008).
It is expected that in the next few years significant attention will be paid to the cultural and behavioral diversity at the workplace (Walker, 2007). Technology already has had a great impact on how hospitality is operating and will continue to affect the industry due to a constantly changing environment. Training employees to use new technology can be costly; however for the hospitality businesses in order to stay competitive, change and continuous improvement are essential. Changing demographics also have an impact on the industry.
According to the Australian Bureau of Statistics, the seniors market segment of the Australian population is expected to grow from 4 million to 5 million by 2012, and more than 7 million by 2051, by which year it will represent approximately 32% of the population. The advancing ageing of society will result in changes, particularly on the demand side. Many retirees have money to travel and utilities hospitality services. Very true particularly of Baby Boomers! Supporting references?
