Ethics, Decision-making and the Hospitality Industry
Category : Business Strategies
Ethics, Decision-making and the Hospitality Industry
The hospitality industry is considered one of the largest industries worldwide. As its covers the fields of travel, tourism and leisure, the industry is indeed one of the important economic contributors to most countries around the world. In order to maintain the strong status of the industry, it is essential that its operators and managers employ the appropriate business tactics. In terms of decision-making, this process in tourism-oriented companies is important as it determines the success or failure of developed business strategies. Conventionally, decisions are based on objective and technical matters; however, over time, certain qualitative factors have already been integrated to make the decision-making process more adaptable to the dynamic nature of the industry. In addition, the concept of ethics had been stressed not only in the hospitality industry but to all forms of businesses. This paper will then try to evaluate how ethics is relevant to the decision-making processes involved in tourism businesses. Furthermore, the evaluation will concentrate on the role of ethics on the two basic forms of decision-making systems used in the industry.
Hospitality Industry and Business Ethics
Hospitality industry is among the fastest growing economic sectors worldwide. The industry by itself is recognized as multi-billion dollar and still progressing industry (1998). It basically involves hotels and other forms of accommodations, fast food outlets, bars, retail stores, restaurants. These diverse segments of the hospitality industry made the business grow and eventually into a highly competitive global business (2003). While this industry enables the provision of vast services for the clients, work opportunities are also diverse. Indeed, the provisions of the industry for the customers are as unlimited as its opportunities for employees. People are able to work is different areas of interest while still be in a job within the industry. At present, more workers are employed in service provision than in manufacturing, indicating the continuous growth of the hospitality industry. In fact, about eight out of ten workers in the United States are in various sectors of the service industry including education, entertainment, retail, transportation and health care.
In the United States, seventy percent of the country’s gross national product is covered by service industries. By 2012, it is expected that this percentage will increase to ninety percent (2004). Likewise, hospitality industry is among the major economic forces in the UK as its enables growth and creation of job opportunities. According to the (2002), the business has employed over 1.8 million workers who were distributed within 300,000 hospitality establishments, totaling to revenue generation of more than £64 billion. From these records, hospitality has indeed become one of the most competitive businesses in the world.
Business ethics on the other hand is defined as the study that deals with evaluating businesses’ decision-making processes based on moral principles. This concept basically aims to promote the business practice that operators should maintain balance between honest or fair operations and profitability. The application of this concept in business had eventually become complex as companies expand their operations to foreign countries; ethics-related issues appear to vary depending on the business site or location (2006). Nonetheless, ethics had been recognized as an important element of successful business operations. This had been emphasized further by scandalous business cases due to lack of business ethics. A concrete example was the Enron scandal. The company started out successfully; however, due to insufficient practice of ethical business operation, the company eventually failed and went bankrupt. Furthermore, the management’s poor decisions due to inadequate critical thinking skills also led the organization to become financially unstable ( 2001).
Business ethics is essential in the hospitality industry for a number of reasons. One of which is the issues typically encountered in this type of business. Accessibility, health and safety issues including fairness, equal treatment, contingency planning, individual and institutional responsibilities, emergency response mechanisms and informed consent are some industry matters related to business ethics ( 1999). Furthermore, the factors and operations surrounding tourism-oriented businesses require ethical actions and practices. For instance, considering that it main objective is to serve people or tourists, a service that is morally acceptable should be delivered. This form of business also makes use of natural or environmental resources for its operation; the protection and conservation of these resources on the other hand require ethical protocols.
These then stresses the strong relation of the hospitality industry with business ethics. However, it is yet to be determined whether ethical consideration is relevant to the decision-making processes conducted by operators and managers. The decision-making system in the industry actually has two types: the hard and soft systems.
The hard system (Hard OR) of decision-making is also known as the functionalist system approach. This decision-making process takes on the objective approach and is useful for problematic situations that are complex or technical in nature. Methodologies applied in this system include system dynamics, systems engineering and RAND type systems analysis. These methodologies are similar in terms on how they view a problem or issue. Specifically, these methodologies see a problem as technical and devoid of subjective or human aspects. The development of a solution for this problem would typically involve computations, spreadsheets, variable and statistical analysis, mathematical models and other quantitative techniques (2002).
In general, hard decision-making system involves the use well-defined data, scientific approach and rigid procedures in order to solve a problem. It is considered the traditional method of analyzing and solving problematic situation and is focused more on computer-based implementations. Though this type of decision-making approach had been successful in dealing with highly complex and technical issues, this approach is now less relevant in handling current human activities.
The soft decision-making system (Soft OR) on the other hand, is centered on applying the subjective approach. Also referred to as the interpretative system approach, this system solves problematic situations by applying a more holistic view. The holistic view involves concepts such as experience, cultural background, social aspects, education and personal values. A decision-maker that uses this approach develops a personal conceptualization of the problem and identifies relevant behaviors and relationships affecting it (2002). The focus of the conceptualization is mainly on people and the diversity of their interest. Thus, the soft system approach is useful for handling issues that have a certain level of human complexity. However, such approach may be ineffective for technical matters.
Problems addressed by the soft decision-making approach are insufficiently defined and disorganized. In most cases, these problems also involved human conflicts brought about by differences in personality, culture and interest. When solving problems with this approach, users usually aim to facilitate communication between parties involved in the problem; this in turn, can help establish a common ground among them. Interactive management, hypergame analysis, robustness analysis, soft systems methodology, operational gaming and metagame analysis are some of the methodologies used for this approach (2002). In general, soft decision-making solves messy problems that mainly involve differing human factors. Solving this type of issues through this approach uses creative problem-solving techniques. Instead of coming up with a concrete solution to the problem at hand, the outcome of soft system application usually include learning as well as a better understanding of the problem.
Role of ethics
From the description above, the types of decision-making used in the hospitality industry are clearly two different approaches. Technical matters in tourism businesses are handled through the hard system whereas those involving human factors are managed through the soft approach. If ethical consideration will be integrated into these two approaches, the effect will perhaps be different as well. In order to evaluate this, the different factors that require decision-making in the hospitality sector were taken into account. How ethics will affect the soft and hard decisions will be considered.
- Business Operations
The business operation sector of the hospitality industry basically involves the different aspects that bring development, progress and profitability to the companies. If the hard system approach will be applied, information systems or technologies that would help increase sales, manage customer records, improve resource management practices or enhance marketing efforts are the main focus. Applying ethics or moral principles in this case, are not necessary. Deciding on which system or technology will help develop the operations of the tourism businesses does not really prioritize human factors. In most cases, the type, efficiency and cost of the system are the ones highlighted.
On the contrary, ethics has an important role in soft decision-making for the business operation sector. In particular, how the companies will operate in such a way that they will benefit and meet the needs of the people are hospitality issues that require ethical considerations. A relevant ethical concept for this is corporate responsibility. According to (1996), corporate responsibility is supported by the concepts of multidimensional definitions and social marketing. In the multidimensional definitions concept, the focus is on the major responsibilities expected from companies. These major responsibilities include economic, legal, ethical and philanthropic dimensions (1991). These responsibilities must be performed in order to benefit not only the company operators but also their employees, customers, the community and the general public. (1991) notes that the social marketing concept of corporate responsibility stresses that companies should operate in a way that maintains or enhances the well-being of its customers as well as its society.
(1992) supported this concept further by stating that CSR is the avoidance of harm and the provision of good services. The definition given by the authors on corporate social responsibility may vary to a certain degree. However, the meanings of these definitions emphasize on one matter, and that is, a socially responsible organization must have priorities other that short-term profitability (1996). Operating for the benefit and safety of people surrounding hospitality-based businesses require the soft decision-making approach as it is centered on differing human factors and issues; in order to direct businesses towards corporate responsibility, ethical considerations should be considered. For example, businesses could take on the utilitarian perspective, an ethical principle where the act is considered morally correct if the effect will be for the good of most people.
The people sector of the hospitality industry includes the employees, customers/tourist and other shareholders of the businesses. In terms of hiring and recruitment, hard system approach is applied in order to ensure that objective selection of the employees is observed. Rather than focus on ethical aspects, objective standards including the potential, capabilities, knowledge and skills of the applicants are used for deciding. The progress and promotion of the employees on the other hand are also based on similar standards, specifically their contributions and overall performance. Improving the services given to the tourists on the other hand can also be managed through hard decisions. The application of technology-based that will help improve the companies’ relations with the tourists for example can be utilized. A common system used for this purpose is customer relationship management, an IT-based system that enables companies to get a hold of essential customer data, which they could use to improve their services.
Soft decisions in the hospitality sector are also observed; in this case, the role of ethics becomes more significant. Among employees, the soft decision-making approach is often employed when handling internal conflicts. In order to negotiate and reach a settlement effectively, understanding complex human behaviors is important. The same also applies when the conflict occurs between company management and the customers. In order to handle conflicting matters ethically, it is important that just decisions are developed. Aside from managing conflicts, ethics in soft decision-making is also applied in meeting the needs of the customers or tourists. Hotel chains operating in foreign locations for instance, would have to consider the preferences and standards of both local and common foreign tourists in the site. Through this, the hotel management will be able to attract more visitors and achieve better business outcomes.
In the hospitality industry, understanding the differences among customers is essential for success. This then makes ethical considerations important. In particular, identifying human differences and attempting to bridge the gap or establish a common ground is an ethical act that requires the soft decision-making approach. According to (2003), gaining the support of foreign market would require the reconsideration of marketing strategies. In order to succeed, they must first develop a mass-marketing mindset and consider various human factors. With this, the businesses should pay particular attention to local aspects such as consumer needs and price competitiveness. Through this, international hospitality-oriented businesses will be able to reach out to these multicultural markets. This is actually the application of the local responsiveness theory which suggests that the differences of countries in various aspects should be taken seriously. Businesses should then tailor their approaches in accordance to their local markets’ needs.
The environmental sector of the industry has been considered an important decision-requiring factor since the operations of most tourism businesses involved the environment, natural resources and vacation spots. Decision in the industry’s environmental sector that involves the hard system would probably on the initial development of the business. Identifying good tourist locations or determining a good site for a hotel or restaurant would typically require feasibility studies. Commercial establishments within the area, specific types or classes of people or car count are some essentials variables necessary to make hard decisions. Statistical analysis, computations and similar quantitative procedures would have to be done to ensure the success of the business prospect. For this, ethical considerations are less prioritized.
The soft decisions in the environmental sector of the industry are concentrated on the aim of most businesses to implement a sustainable environment. Such concept is mainly focused on preserving and protecting natural resources. This aspect of the industry emphasizes the role of ethical considerations. Specifically, reduction of various types of pollution, prevention of environmental damages and the provision of support to environment-oriented agencies are part of this movement. Sustainable tourism promotes the ethical principle that future generation should be able to enjoy and utilize both historic and current tourist locations (1997).
Based from the evaluation of the different sectors of the hospitality industry, the influence of ethical considerations in the decision-making process appears to be strongest in the soft system. Considering that the soft system is more concerned on values, attitudes and people, ethical principles are then more related to this decision-making approach. Although ethics is an important aspect of the industry, it should be noted that the hard approach is also essential; quantitative measures should also be considered in order to support operational efficacy of tourism-oriented businesses. In conclusion, business ethics should be integrated in the hospitality industry as this field of business is centered is centered on providing efficient and satisfactory services to the customers. However, other measures that would ensure the success of the business should be given equal value.