Two-step approach to breaking down the silo-based thinking and operation within hotel companies to deliver better results

By Pace Dimensions’ Tim Davis, leading management consultant for the hospitality, travel and leisure sector

Today, there is a disease in the travel and hospitality industry: most companies operate in functional silos and fail to effectively work across business functions in order to deliver better company performance.

There are benefits to having a centre of excellence and concentration of resources with high expertise and experience to execute well. However, unless companies bring those resources together in cross-functional, hybrid teams and focus on higher-order company goals, the danger is that all they achieve is function success, but the company doesn’t necessarily realise that in its overall results.

Whether we’re talking about marketing, revenue management, distribution, sales, finance, or even hotel operations, such as food and beverage, concierge, front desk, etc., they will each be operating to their individual department’s measure of success. And this is counterproductive to bettering business results.

For example, revenue management is working to improve RevPAR, while the marketing department’s success is measured on direct demand and bookings, and the sales team is focused on delivering on corporate customers, groups, meetings and events. In this setup, any one function can demonstrate its success, whether or not the hotel’s profit and loss figures improve.

Operation successful; patient dead

Every department head claims a triumph, but the chief executive and chief financial officer don’t necessarily see the aggregate benefit on the bottom line. What is also often the case is that the siloed departments don’t have a good understanding of each other’s functions. They tend to operate within what they can control because it’s difficult to think more broadly and to motivate the other departments to work with you to achieve your goal while they are all focused on hitting their own KPIs.

Individual functional measures are relevant and important; we’re not suggesting they are thrown away. However, if that is the only way the business is managed, then it encourages teams not to collaborate and work across functions but only within their ‘box’ to ensure they deliver their departmental performance metrics.

This means everyone can raise their hands and declare victory, having marketed better, distributed better and sold better, but the hotel hasn’t made any more money.

So, how can hotel businesses shake off this silo-based operating model?

Step one: setting higher-order objectives

The focus needs to shift in order to operate better and improve the business performance of the company as a whole rather than the business performance of individual functions. Companies need to adapt to be better focused on higher-order company objectives and measures:

  1. From the very top, there needs to be defined company-wide projects that will make a difference to company-wide value, performance and results.
  2. In delivery and execution, the company must create hybrid, multi-functional teams to execute against those higher-order objectives.

So, for example, if an objective is to improve guest satisfaction through product innovation, brand delivery and marketing, then all the functional experts are working together in one hybrid team and are focused on one higher-order goal.

With hybrid teams, the company then has all of the combined resources and expertise to deliver business outcomes or improved customer service and ultimately really make a difference in business performance.

Overall, this means ensuring that the company has both centres of excellence with a functional focus but also that they orchestrate them into multi-function, hybrid teams that execute against the higher-order company objectives, priorities and plans. What’s important also is that measurements and incentives recognise and reward the relative importance of those higher-order company objectives over and above functional measures.

Step two: addressing culture and trust

Leaders need to think tangibly about creating a culture of trust between functions. Without this key critical success factor, there is a danger of creating more politics in the company. Teams and individuals will be busy but pushing in different directions.

Crucially, this isn’t about chief executives and management boards delegating their objectives to leaders of the functions to ascertain their plan of action to influence the outcome. That leads to a siloed mentality. As McKinsey puts it:

“Our research shows unequivocally that it pays to be a one-firm firm… The data shows, unsurprisingly, that not every successful firm operates as one firm. It also shows, however, that those that do are far more likely to be successful. Firms that have adopted a one-firm operating model are 2.3 times more likely to be in the top quartile of healthy and high-performing organisations… Put a purposefully interdependent organisational structure in place. It is hard to break down organisational silos if the organisation is designed around them.”

The individuals need a blend of performance measures that prioritise the company’s objectives over their functional objectives. While functional objectives remain important, they absolutely must be achieved alongside the company objectives. Above a functional level, companies need to focus on several different higher-order objectives; these could include improving competitive edge, improving operational efficiency and productivity, and positively impacting the customer. The results, then, are a business-wide improvement and clear to see on the bottom line.

PACE Dimensions is expert in opportunity identification and prioritisation, business architecture and design, operating model design, transformation delivery and change management. Find out more about how PACE Dimensions can help your business excel at

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