The Regency Grand Hotel

By Lisa Ho, University of Western Australia, under the

supervision of Steven L. McShane

The Regency Grand Hotel is a five-star hotel in Bangkok. The

hotel was established 15 years ago by a local consortium of
investors and has been operated by a Thai general manager
throughout this time. The Regency is one of Bangkok’s most
prestigious hotels and its 700 employees enjoy the status of
being associated with the hotel. The hotel provides good
employee benefits, above-market rate salaries and job security.
In addition, a good year-end bonus amounting to four months
salary is rewarded to employees regardless of the hotel’s overall
performance during the year. Recently, the Regency was sold to
a large American hotel chain that was very keen to expand its
operations into Thailand. When the acquisition was announced,
the general manager decided to take early retirement once the
hotel changed ownership. The American hotel chain kept all the
Regency’s employees, although a few we re transferred to other positions. John
Becker, an American with 10 years management experience with the
hotel chain, was appointed as the new general manager of the
Regency. Becker was selected as the new general manager
because of his previous successes in integrating newly acquired
hotels in the United States. In most of the previous acquisitions,
Becker took over operations with poor profitability and low
morale. Becker is a strong believer in empowerment. He expects
employees to go beyond guidelines/standards to consider guest
needs on a case-by-case basis. That is, employees must be
guest-oriented at all times so as to provide excellent customer
service. From his American experience, Becker has found that
empowerment increases employee motivation, performance and
job satisfaction, all of which contribute to the hotel’s profitability
and customer service ratings. Soon after becoming general
manager at the Regency, Becker introduced the practice of
empowerment so as to replicate the successes that he had
achieved back home. The Regency has been very profitable since
it opened 15 years ago. The employees have always worked
according to management’s instructions. Their responsibility was
to ensure that management’s instructions were carried out
diligently and conscientiously. Innovation and creativity were
discouraged under the previous management. Indeed, employees
we re punished for their mistakes and discouraged from trying
out ideas that had not been approved by management. As a
result, employees were afraid to be innovative and to take risks.
Becker met with the Regency’s managers and department heads
to explain that empowerment would be introduced in the hotel.
He told them that employees must be empowered with decision-
making authority so that they can use their initiative, creativity
and judgment to satisfy guest needs or handle problems
effectively and efficiently. However, he stressed that the more
complex issues and decisions were to be referred to superiors,
who were to coach and assist rather than provide direct orders.
Furthermore, Becker stressed that mistakes we re allowed, but
the hotel could not tolerate the same mistake being made more
than twice. He advised his managers and department heads not
to discuss minor issues/problems with him and not to consult him
on minor decisions. Howe ve r, he told them that they we re to
discuss important/major issues and decisions with him. He
concluded the meeting by asking for feedback. Several managers
and department heads told him that they liked the idea and
would support it, while others simply nodded their heads. Becker
was pleased with the response, and was eager to have his plan
implemented. In the past, the Regency had emphasized
administrative control, resulting in many bureaucratic procedure
s throughout the organization. For example, front - desk
employees had to seek approval from their manager before they
could upgrade guests to another category of room. The front-
desk manager would then have to write and submit a report to
the general manager justifying the upgrade. Soon after his
meeting with managers, Becker reduced the number of
bureaucratic rules at the Regency and allocated more decision-
making authority to front-line employees. This action upset those
who previously had decision-making power over these issues. As
a result, several of these employees left the hotel. Becker also
began spending a large portion of his time observing and
interacting with the employees at the front desk, lobby,
restaurants and various departments. This direct interaction with
Becker helped many employees to understand what he wanted
and expected of them. However, the employees had much
difficulty trying to adjust. Individual behaviour an d processes
distinguish between a major and a minor issue/decision. More
often than not, supervisors would reverse employee decisions by
stating that they were major issues requiring management
approval. Employees who displayed initiative and made good
decisions in satisfying the needs of the guests rarely received
any positive feedback from their supervisors. Eve n t u a l l y,
most of these employees lost confidence in making decisions,
and reverted back to relying on their superiors for decision
making. Not long after the implementation of the practice of
empowerment, Becker realized that his subordinates were
consulting him more frequently than before. The majority of them
came to him with minor issues and consulted him on minor
decisions. He had to spend most of his time attending to his
subordinates. Soon he began to feel highly frustrated and
exhausted, and very often would tell his secretary: ‘Unless the
hotel is on fire, don’t let anyone disturb me.’ Becker thought that
the practice of empowerment would benefit the overall
performance of the hotel. However, contrary to his expectations,
the business and overall performance of the hotel began to
deteriorate. There were an increasing number of guest
complaints. In the past, the hotel had minimal guest complaints.
Now t h e re we re a significant number of formal written
complaints every month. Many other guests voiced their
dissatisfaction verbally to hotel employees. The number of
mistakes made by employees was on the increase. Becker was
very upset when two local newspapers and an overseas
newspaper published negative feedback on the hotel in terms of
service standards. And he was most distressed when an
international travel magazine voted the Regency ‘one of Asia’s
nightmare hotels’. The stress levels of the employees were
continuously mounting since the introduction of the practice of
empowerment. Absenteeism due to illness was increasing at an
alarming rate. In addition, employee turnover had reached an all-
time high. The good working relationships that were established
under the old management had been severely strained. The
employees were no longer united and supportive of each other.
They were quick to ‘point fingers’ at or to ‘back stab’ one another
when mistakes were made and when problems occurred.

Discussion Questions:
1. Identify the symptoms indicating that problems exist at the
Regency.
2. Diagnose the problems using organizational behavior
concepts.
3. Recommend solutions that overcome or minimize the
problems and symptoms in this case.