This post will tell you about financial leadership in the hospitality industry. It is a summation of information from her research thesis at the Hotel Management School of Maastricht in The Netherlands. The aim of this research is to provide hoteliers with tools to improve their hotel's financial performance with effective financial leadership.
This summary will tell you more about financial leadership in the hospitality industry. It is a summation of information from my research as part of my bachelor's degree at the Hotel Management School of Maastricht in The Netherlands. The aim of this research is to provide hoteliers with tools to improve their hotel's financial performance with effective financial leadership (FL). Also, it serves to make the concept of financial leadership more concrete and applicable. Several people have contributed to this research, including David Lund, a professional coach in hospitality financial leadership. We both hope you will enjoy reading my findings, and please feel free to request the full research for more information.
To offer the best advise to hoteliers about how to use FL, the following management question forms the basis for this research: "How can effective financial leadership improve a hotel's financial performance?".
This question was answered by a combination of literature research and interviews, which came together in three research questions. These focused on how accountants could become financial leaders, how financial leadership could be used, and what the challenges were.
Eventually, four important topics have come up concerning the effective application of financial leadership. First, what is financial leadership actually? Second, can financial leadership become more concrete by transferring other, more known, and more consciously practiced leadership styles to financial leadership? Third, after having it concrete, how can you then really use financial leadership? And lastly, what are the challenges for financial leaders?
The starting point of this research was the concept FL. Looking at FL, we see that generally, senior accountants who work closely with the CFO are expected to use this style of leadership. However, in the hospitality industry, this concept can be used by anyone in a hotel rather than only senior accountants. Most importantly, hotel financial leaders are people who increase the financial engagement across a hotel, which improves the capability of hotel employees to critically look at their numbers and improve them.
Based on the research focused on (strategic management) accounting and FL, we can describe FL in the hospitality industry as: "being strategically involved, communicating goals and responsibilities, establishing trust, creating financial engagement throughout the hotel and developing others in their financial knowledge."
Looking at the definition of FL for the hospitality industry, we see that it is not bound to someone's position. Often the large corporations that write about financial leadership consider it to be only a must for accountants, even though wide application not limited to hotel accountants is much more useful. Therefore, from my research I also conclude it is not only the hotel accountants, it is for everyone in the hotel who wants to take on more financial responsibilities and to increase their and others' financial understanding. It certainly does not sound like a good idea to limit these ideas only to accountants. That is why FL can and should also be used by, for example, a reception manager who wants to train and inspire receptionists in increasing the department's profitability. David's insights were very helpful in establishing a working definition of FL as well as defining who financial leadership is for.
Since at this point the true application of FL still remains rather unclear, the two widely used leadership styles of transformational and transactional leadership can be used to make the concept more comprehensible.
Transformational and transactional leadership are inherently different. The transformational style focuses on developing and implementing a vision and strategy and on inspiring others to deliver these, whereas transactional leadership improves and establishes procedures and improves employee productivity with a focus on rather short-term objectives. Transformational leadership is more often used by leaders at the top who create the vision and who delegate the implementation to subordinates who on their turn use transactional leadership. Specifically, a transformational financial leader is a senior accountant, department manager or head of department who coaches, motivates, communicates, and negotiates within the hotel. These aspects address the principles of FL that financial leaders educate the company, inspire others to buy into the vision and thus increase other leaders' financial contribution and understanding.
Transactional FL is a great opportunity for junior accountants, whose work is based on the work of the other departments. The junior accountants should educate and supervise employees from operating departments in their financial responsibilities and should communicate with them. By doing this, they also increase other people's financial understanding, for example from receptionists and restaurant supervisors. More specifically, accountants can help, educate and supervise them in financial procedures and financial tasks and use their skills to keep improving the execution of these procedures.
This is only a brief description of how and which roles transformational and transactional leaders can take on as financial leaders. You can read more about this in the full research.
Now that it has become more concrete what financial leadership is, let's have a look at how it can practically be used. This question was answered with examples found in the literature, online, and examples given by interviewees, including David.
One example of financial leadership is based on the tipping system in (hotel) restaurants. However, one establishment takes it a step further and also shares its profits with employees, which they state to increase financial ownership and engagement among their workers. It stimulates employees to increase the company's revenue while keeping in mind the service delivery. Another example is financial training by and for financial leaders, which has the ability to increase financial understanding across the hotel, to increase the effort in taking on financial responsibilities and to increase efforts in improving the hotel's ROI. Also, have a look at David's website to see his examples of how to reach this.
The interviewees provided plenty of more examples and effective practices of FL that can be divided into five categories: creating a sense of responsibility, organizing group meetings, organizing individual meetings, trainings, and incentives. Creating a sense of responsibility among hotel leaders for their financial results as the first and foremost practice is crucial. When they are held accountable for their own forecasting, budgets, results, and commentary, their sense of ownership increases which also leads to a higher level of financial engagement. The second effective practice is the organization of various group meetings. For example, meetings wherein department heads present their own results to the hotel's senior management, wherein payroll forecasts and budgets are reviewed, or the organization of regular meetings during which the P&L is discussed with all managers. The third effective practice is individual meetings. During those, an accountant can, for example, discuss with managers alone their forecast, budget, or P&L in order to increase their financial understanding and confidence. Training is the fourth practice, which can further increase other people's financial understanding, engagement, and leadership. The trainings can take different forms, such as cross-trainings in finance, P&L workshops for managers or specific task-related trainings for employees. The last main practice is based on incentives, which can stimulate financial engagement and financial performance, such as gratuities, service charge, or bonuses for reaching specific targets.
All in all, these practices improve others' financial understanding as well as financial engagement and capability to improve financial results. More extensive examples of these five practices can be found in the research report. Furthermore, I have used some examples based on pieces from David, therefore you could also take a look at his website, for example, to learn about his view on how trainings, meetings, and creating a sense of responsibility can lead to increased financial responsibility and engagement. I think these examples are also very clear and practical.
Lastly, you might not read this research summary if FL was already widely used by accountants or other financial leaders. Therefore, we will have a look at the practical challenges that restrict hoteliers, but especially accountants, in being financial leaders. These challenges can be divided into four sets of factors.
The first factor is the organization itself. In many organizations, accountants cope with a high level of hierarchy, a negative stigma around finance, a very traditional view on finance, disinterest from the management in accountants being strategically involved, and a lack of financial training in the hotel.
These all make it harder for accountants to take on more responsibilities and to be a financial leader. The second set of factors comes from the accountants. From the interviews, it seems not all accountants have the right skills to act as a financial leader or do not have the right knowledge and industry experience. Some may also not want to act as a financial leader unless they get a proper compensation from the company. Furthermore, not all accountants have the time or resources to be a financial leader since their department is understaffed, which makes it impossible for some accountants to grow and take on more responsibilities.
Finally, the accounting industry should recognize that the educational institutions do not teach enough in people and leadership skills, which makes accountants should be trained within the company in these skills, which is sometimes overseen by workplaces.
In conclusion, the hotel industry can improve their hotels' financial results with FL when they apply the practices mentioned above: organizing trainings, creating a sense of financial responsibility, organizing meetings, and offering incentives. These practices will increase financial understanding, responsibility, and engagement within a team that will contribute to the team's effort in increasing the hotel's financial performance.
Several people have helped me write this research by sharing their experiences, knowledge and expertise. I would like to thank these people, and especially David Lund for his great contributions. Also, his website might be interesting to you as a reader as well. If you are interested in a copy of my research about financial leadership in the hospitality industry, please feel free to contact me.
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David Lund is The Hotel Financial Coach, an international hospitality financial leadership expert. He has held positions as a Regional Financial Controller, Corporate Director and Hotel Manager with an international brand for over 30 years. He authored an award-winning workshop on hospitality financial leadership and has delivered it to hundreds of hotel managers. David coachs hospitality executives and delivers his Financial Leadership Training throughout the world, helping hotels increase profits and build financially engaged management teams. He speaks at hospitality company meetings, associations and he has had several articles published in hotel trade magazines and he is the author of three books on Financial Leadership. David is a Certified Hotel Accounting Executive through HFTP and a Certified Professional Coach.
The Hotel Financial Coach