Who are Shareholders? Whether a company is privately or publicly held, the shareholders are the owners of the enterprise.

They have invested their money in the venture with the expectation of receiving a return on their investment. Without shareholders and their willingness to assume risks, you and your team would not have a job.

Often a company's shareholders are removed from the operation. They allow professional managers to run the day-to-day business of the company. But even if they are seldom or never on the premises, this does not mean that they do not have needs to be met.

While you may have little opportunity to directly serve shareholders, everything you do to serve the company's customers and everything you do to better organize and operate the enterprise does have a direct bearing on satisfying your shareholders.

Shareholders' Needs
Shareholders have a number of expectations for the performance of their business. If you do a good job taking care of your employees and customers, it will be easier to satisfy the needs of your shareholders. These needs fall into several broad categories:

Pride of ownership. Shareholders derive prestige and satisfaction from the success of their company and that success is directly attributable to the quality and efficiency of operations. Your leadership has a direct bearing on this quality and efficiency.

Return on Investment. Capital is the dynamo that drives a business. It takes money to renovate a restaurant, to launch a new product line or service, to purchase inventories, to hire new employees, and to expand operations. Shareholders expect a return on their investment of capital.

Asset protection. Shareholders expect that the leaders of the company will safeguard their assets. This includes cash, invested funds, change and petty cash funds, inventories, furniture, fixtures, equipment, facilities, vehicles, and the name, goodwill, and reputation of the company. Leaders cannot fully safeguard a company's assets without the willing assistance and commitment of their employees.

Professionally-operated "going concern." A primary responsibility to shareholders is to operate the business responsibly and professionally as a "going concern," that is, as a business that intends to stay in business.

Ensuring Shareholders' Return on Investment
Having invested their money in an enterprise, shareholders expect a return on their investment. This means that the capital invested grows in value and is either returned in shareholder dividends or increases the value of the business – in either case, shareholders see the value of their investment increasing.

Meeting Budget
Every business has a budget, which is its financial plan for the coming period – usually a year. As a supervisor you are responsible for meeting your portion of the budget. The two major components of your budget are meeting or exceeding revenue expectations and controlling your costs.

As a leader you should be involved in the budgeting process and monitor actual performance versus the budget. Ongoing failure to meet budget must be corrected by bold intervention. Your job depends on it.

Meeting or Exceeding Revenue Expectations
Your service team can have a direct impact on your company's sales. Beyond the obvious correlation between outstanding service and repeat customers, your staff has daily opportunities to upsell products and services. You, as their leader, must train and motivate them to do so.

Part of the training and motivation is the need to share your goals with them. This is easily done by breaking down your budgeted sales into daily goals.

In one of the restaurants I was responsible for, the floor manager used a chalkboard in the service pantry to set daily goals for the number of meals served, the average check, alcoholic beverage sales, bottles of wine sold, and other daily revenue challenges. He also posted the month-to-date actual results compared to the budgeted numbers.

It was incredible to see how this simple technique galvanized the servers into action. Every day they checked their progress and there was a continual hum of interest and excitement about their efforts to beat "the numbers."

Next, the floor manager tied some simple awards into the process as further incentive. Not only did we continually exceed our revenue projections, but there was also a noticeable improvement in employees' attitudes and enthusiasm for the job.

Controlling Costs
Payroll cost is the single largest expense in most service organizations. Be aware of your payroll hours on a daily basis. Keep close control of overtime. Staff schedules must reflect forecasted levels of business.

There is a natural tendency to overstaff for the expected peaks of business. Because payroll is such a large part of your expense structure, plan to fill in during busy times, thereby maintaining service while controlling payroll costs.

In order to do this you must analyze the flow of your business to determine when you should be available to step in. By routinely checking your operations during traditionally busy periods, you can readily determine if your help is needed. When you are both willing and able to step in, you build camaraderie, morale, and loyalty among your employees; help control labor costs; and ensure consistent service to customers.

Another major cost that must be controlled is consumable items. This can be done by tracking usage rates for key items (high cost or high volume). Before you can do this, you have to identify items, organize storage areas, and specify stocking levels.
A high cost of goods sold may indicate a number of problems, but unless you validate your pricing periodically, there is a good chance that it is directly related to inappropriate pricing. Because of the volatility of ingredients, menu prices, and portion sizes should be reviewed on an ongoing basis to assure the profit margin on each sale.

While menu items must be pre-costed and periodically verified, buffets and receptions should be post-costed on a periodic basis to ensure profitability. Sales mixes must be tracked and operating statistics benchmarked. Be familiar with your costs and look for ways to reduce them. Familiarity with these numbers must be routine and ongoing.

Review in detail a different area of expenditure every month so that you constantly update and review your cost structure. Make large expense categories your priority. Shop around for less expensive alternatives to high cost items.

Finally, manage your inventory levels closely. Large inventories may ensure that you never run out of stock, but they also lead to spoilage and pilferage while tying up capital that could be put to better use.

Financial and Statistical Analysis
Learn to read financial statements. Budgets should be based upon well-defined assumptions. Compare actual performance each month to the budget and analyze all significant variances.

Benchmark your operation. Benchmarking is the act of establishing a standard of performance based upon existing operating conditions.

I always make a point of benchmarking any new operation for which I assume responsibility. I do this with the understanding that I can only show my progress by benchmarking existing conditions. Then any improvements I make are evident to all. Consider the major league baseball player coming up for contract renegotiations. What does he use to make his case for a big-bucks increase in compensation?

Benchmarks are derived from measuring and tracking various operating statistics. Operating statistics can include anything you can measure – revenues, expenses, production processes, etc. Examples might be:

· Revenue statistics – measures of the volume of business such as meals served, rounds of golf, number of sales transactions. Also, the average customer expenditure such as average meal check, green fees per round, and average sale.

· Expense statistics – measures of labor cost such as payroll hours and average hourly wage. Also, measures of consumable supplies usage such as napkins used per meal served or laundry chemicals used per occupied guestroom.

· Production processes – measures of the speed, efficiency, or quality of procedures such as guest rooms cleaned per housekeeping payroll hour, inspection scores measuring the cleanliness of guest rooms, etc.

Benchmarks are significant in that they allow you to compare all future operations against the baseline standard. It also allows you to measure one operation against other similar operations or against the industry as a whole. Further, benchmarking allows you to spot emerging trends so you can make timely interventions.
Be meticulous and consistent in tracking operating statistics and be up-to-date and conversant with your numbers at all times. The time you spend tracking and analyzing your numbers of even incidental items will make you more knowledgeable about your operation.

While serving as Director of Operations for a small hotel chain, I was continually looking for ways to improve our operating efficiency. One of our hotel managers suggested that we establish a central warehouse for our seven properties. This warehouse allowed us to purchase in bulk, thereby saving money. The downside to the set-up, though, was the constant need to arrange delivery from the warehouse to the various properties in a three-state area.

The same manager recognized this drawback and established a procedure within her property to conduct monthly inventories of key items of guest supply. Each month she would send me a report showing the usage of approximately 20 items from her hotel.

By comparing the usage rates of bath soap and toilet paper with room-nights occupied at her property we were able to establish benchmark usage rates for these items which we used as a company-wide standard. For instance, her statistics showed that every room-night occupied consumed 1.21 bars of soap. This information was helpful in several ways.

Each year when we prepared the budgets, revenue projections were based upon our expectation of room-nights occupied at each hotel. With this information we were able to determine our soap needs month by month. It was then easy to negotiate with vendors to purchase a year's supply of soap for all hotels, but to have them "drop shipped" directly from the vendor's warehouse to our hotels on a quarterly basis. Not only were we able to negotiate a great price on the soap based on quantity, but we also didn't take up warehouse space with soap, nor did we have to deliver it to our hotels.

A further benefit occurred when I noticed that one of the hotels had a usage rate nearly double the other properties. Upon investigation, we found that their housekeepers were placing twice as much soap in each room than was specified in our standards. Quite expectedly, the guests were helping themselves to this "extra."

As you can see from this example, operating statistics can be significantly useful in monitoring and improving your operation. While there are as many statistics to track as your ingenuity and initiative allow, you should focus on key items and consider how easy or difficult it is to collect and track the numbers. Finally, the key to meaningful operating statistics is consistency in the methods of collection. Inconsistent statistics are useless for comparison purposes.


How Best to Serve Shareholders
While all of the skills and initiatives in this chapter are the responsibility of supervisors, they can also belong to your service team. To the extent that you make your employees a part of your efforts, teach them, and share your goals and challenges with them, they will become willing helpers in your quest for quality and service.

Imagine the benefit of ten people trying to meet goals and budgets instead of one. Think of the natural enthusiasm that can be mustered when your benchmarks become theirs. Recognize the pride of accomplishment they will feel when the team not only meets, but exceeds expectations. This is truly a formula for success.

In simplest terms, when you serve your employees, they will serve your customers, who by their continued enthusiastic patronage will serve the needs of your shareholders.

The Pyramid of Successful Service depicts these relationships.




























Note:
Ed Rehkopf is the President of Professional Business Communications, a company providing written documentation to the hospitality industry. He is the author of Leadership on the Line, A Guide for Hospitality and Service Sector Supervisors and is currently working on a book on hospitality benchmarking. He can be reached at REHKOPF6@aol.com.