Case study Organizational issue at Hyatt Hotels, poor employee

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Casestudy: Organizational issue at Hyatt Hotels, poor employeecompensation and motivational programs

Althoughorganizations have different types of resources, their significancein the organization varies. The human resource is the most criticaltype of resources because it is responsible for the functionality ofother types of resources. This implies that an organization shouldvalue employees by empowering them and compensating them fairly.Hyatt Hotels Corporation has a demonstrated its failure to respectemployees for many years. Hyatt Hotels is a U.S. based multinationalfirm that was established in 1957 (Hyatt Hotel 1). Its head officesare located in Chicago and its brands include extended stay lodging,timeshare, select service lodging, full service lodging, and allinclusive lodging. Currently, Hyatt Hotels have a total of about75,008 employees. Satisfying the large number of employees andcompensating them is fairly challenging, especially in an industrythat is characterized by stiff competition and low returns oninvestment (Magesh 93). This paper will address the aspect of poorstaff compensation at Hyatt Hotels Corporation and offer threesuggestions, including the development of a compensation policy,alternative methods of cost reduction, and a corporate culture.


Employeesare the most critical type of resources that a hotel cannot operatewithout. To this end, failure on the part of the organization tomanage and organize its labor force can affect its overallperformance as well as the going concern. In the case of HyattHotels, the management has outperformed in other areas (such as theintroduction of modern technology to the organization, constructionof modern infrastructure, and pursuing geographical diversity), butthe organization still has a significant moral challenge to overcomewith respect to the treatment of its employees (Kiley 1). Themulti-billion chain of hotels has received a lot of criticisms fromthe public and the labor unions for failing to value its members ofstaff. The organization cannot ignore the public and employee’soutcry because it will have a significant impact on its relationshipwith its customers and influence the customer buying behavior in thefuture.

Causesof employees discontent at Hyatt Hotels


Althoughorganizations are trying all possible means of reducing the cost ofoperation in order to enhance their profitability and competitiveadvantage, pay low wages to employees is a counterproductive measurethat should be avoided. Unfortunately, the management of Hyatt Hotelsbelieves that cheap labor is among the easiest ways to contain theescalating cost of doing a hotel and hospitality business in thecontemporary world. This is confirmed by the tendency of theorganization to recruit most of its junior members of staff on acontract basis (Kiley 1). Most of the junior staff, especially thefront desk agent working with Hyatt Hotel earns about $ 7.25, whichis below the required minimum wage rate in many states (Jamieson 1).Apart from compensating employees below the average rate for each jobposition, the management of Hyatt has been accused of delayingemployees’ payment. For example, the organization was sued in 2015for failing to pay gratuity and overtime wages to its employees(Sheller 1). Regular conflicts with employees for poor and delayedcompensation will continue damaging the image of Hyatt HotelsCorporation.

Thelack of job security as the hotel tries to reduce wage expenses

Jobsecurity is among the key factors that motivate employees andencourage them to give the best to their current employer. The lackof its (job security) reduces employee motivation and limits theircapacity to offer quality services to clients, which has a negativeimpact on the organization’s performance and the going concern.Hyatt Hotels has an established trend of firing employees for minormistakes and unexplained reasons. For example, Hyatt’s managementreplaced a total of 100 housekeepers in 2009 with contracthousekeepers, which was seen as an attempt to reduce the wage expenseof sacrificing the job security of the housekeepers (Landau 7).Firing 100 employees in one night raised tension among the remainingmembers of staff, since they may not know who is next in theretrenchment list. This is a sufficient justification for the ongoingdiscontent among employees working for Hyatt Hotels.

Faultyhealth insurance program

Healthinsurance is among the key components of the compensation packagethat motivate employees. Hyatt Hotels Corporation also has aninsurance package for its employees, but is has been discovered thatthe type of coverage that the organization gives to its employees isfaulty. The management of Hyatt issue false insurance policies andagreements showing that employees are covered together with theirfamily members, but the real insurance policies indicated that theinsurance plans include individual employees only. This wasdiscovered when one of the fired housekeepers took her son to apediatric facility only to be told that the health care bill of about$ 700 could not be paid by the insurance company since the child wasnot covered (Landau 8). After the revelation of the false insurancepolicy by the media, other employees investigated and discovered thatmost of them had also been tricked by the management and their familymembers were not covered. This indicated a poor corporate culturethat is inconsistent with the core values of honesty and integrity.

Recommendationsfor improvement

Acomprehensive compensation policy: Currently, Hyatt Hotel has beendisappointing its employees by paying them below the average industryrates, below the minimum wage rate, and delayed payment. Thesechallenges can be addressed by formulating a compensation policy thatwill have three key components. First, the policy will provideguidelines for reviewing employee wages and benefits annually andadjust them to ensure that they are market competitive (Rynes 11).Secondly, the policy will set the day and the date when salaries willbe sent to employees’ accounts each month. This will address theissue of delayed payment. The third component of the compensationpolicy will ensure that wages and salaries are aligned with theperformance and responsibilities given to each employee. This willhelp the management utilize its compensation policy to motivateemployees, enhance their performance, help the organization expandits market share, and reduce the need for replacing the permanentemployees with contract members of staff.

Alternativemethods of cost reduction: One of the key excuses given by themanagement of Hyatt Hotels for retrenching housekeepers andcompensating employees below the recommended minimum wage rate is theneed to contain the escalating cost of offering services in the hoteland hospitality sector (Kiley 1). This challenge can be addressed byidentifying alternative strategies for reducing the operatingexpenses. One of the most viable strategies that Hyatt Hotels can useis inventory control. For example, the reorder quantity and periodshould be adjusted to help the organization avoid the wastage ofperishables and a product with a short expiry date during the lowseason and avoid shortage during the peak season. In addition, themanagement can partner will the local firms in order to outsourcesome operations, such as washing excess sheets during the peakperiod, instead of expanding an internal laundry. With thesealternatives, Hyatt will avoid harassing employees throughretrenchment and under-compensation.

Definea corporate culture: The issuance of a false health insurance policyshowing that employees are covered together with their family membersindicates the lack of a clearly defined corporate culture (Landau 8).Corporate culture defines values, norms, and beliefs that should beobserved by each of the stakeholders, including employees and themanagement (Awadh 168). In the case of Hyatt Hotels, the corporateculture should contain the core values (such as integrity, respect,fairness, and honesty) that will help the management in respectingemployees and compensating them fairly. By developing such a cultureHyatt Hotels will be able to avoid confrontations between employeesand the management since decisions and practices of both themanagement and members of staff will be guided by the core values.


Poorcompensation of staff is the major aspect that is likely to affectthe performance and the going concern of Hyatt Hotels Corporation.Hyatt Hotels pay its junior staff less than the industry average rateand some of them receive less than the recommended minimum wagerates. In addition, the health insurance coverage, which is one ofthe employment benefits offered by the organization to employees, hasbeen found to be fraudulent. A combination of these types ofmistreatment against employees in terms of poor compensation hasresulted in their discontent, which will continue to affect hotels’performance. However, this aspect can be addressed by developing acompensation policy, alternative methods of cost reduction, and acorporate culture.


Awadh,A. and Saad, A. Impact of organizational culture on employeeperformance. InternationalReview of Management and Business Research,2.1 (2013): 168-175.

HyattHotel. Members save up to 15 %. HyattHotel.2015. Web. 6 December 2015.

Jamieson,D. Hotel workers stiffed millions in wages, lawsuit alleges. HuffPost.9 January. 2012. Web. 6 December 2015.

Kiley,C. Hyatthas a huge moral challenge to overcome in treatment of employees.Kansas City, MO: The National Catholic Publishing Company, 2012. Web.

Landau,J. Hyatt’s housekeeper debacle. TheCase Journal,9.2 (2013): 17-26. Print.

Magesh,R. and Kiruthiga, V. Exertion hindering the escalation of hotelindustry in India. InternationalJournal of Interdisciplinary Research and Innovation,3 (1), 90-94.

Rynes,L. and Gerhart, B. Compensation in organizations. Academyof Management Review,16, 586-612. Print.

Sheller,P. Unpaid wages lawsuit: Hyatt hotels sued by current and formeremployees for unpaid overcome wages and gratuity. PRNewswire Association LLC.1 October 2015. Web. 6 December 2015.

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