HRM 401 Y

Case to be discussed on December 9, 2017

Name: ID

Shalimar Hotels is a chain of 4 star hotels which has hotels in Rawalpindi, Lahore, and
Peshawar. This is a Pakistani, family owned business and is the leader in terms of market
share in the 4 star hotel segment in the country. Typically, the chain’s hotels have >90 %
occupancy in lean months and 100% occupancy in the holiday season with heavy advance
bookings.

Shalimar Hotels are appreciated by customers for their affordable room rates, excellent food
(recently won The Asian Hotel Food Award), good location in the center of the city in
cantonment areas, large lawns and green courtyards, buildings with traditional Mughal external
architecture, clean rooms and a warm, family type environment. Each hotel offers live South
Asian music and food 24 x 7 in its lobby which is full of customers enjoying good food, good
music and good company. The hotel lobbies are always packed by Pakistani politicians,
businessmen, army men, professionals and their families. With higher foreign remittances,
increasing per capita incomes and travel, there is a growing demand for economy priced hotel
rooms in the larger cities of Pakistan. Hotel room rates have increased each year by about
20%. Shalimar Hotels now also gets customers from the 5 star hotel segment from hotels like
Marriott, PC, Holiday Inn, Sheraton and Serena. A major problem facing the hotel industry in
Pakistan is the shortage of trained staff, maintenance of hotel equipment and increasing costs
of food and operation. There is also a lot of staff turnover which is currently estimated at 26%
per year.

Shalimar Hotels are owned by the Chaudhry family of Jhelum. The family has expanded and
most key positions in the organization are held by the Chaudhry family’s second generation
who now number 28 in the business. Several employees are also second generation. The first
generation Chaudhrys, who were mostly matriculates, had opened their first hotel immediately
after partition in Rawalpindi Cantt. This hotel catered primarily to businessmen traveling to
Rawalpindi from other towns of Punjab and NWFP. This first generation management has been
replaced by their children who are graduates. However, none of these graduates have a
degree or formal education in Business Administration or Hotel Management.

In 2010, Shalimar Hotels signed a joint venture agreement with a leading American hotel chain.
The American company acquired 49 percent of the company’s equity and is providing know-
how, its brand name and marketing support. Expansion and modernization of Shalimar Hotels
is being undertaken and the workforce is planned to be doubled by 2020. The average age of
the workforce is currently 49 years and 26 % of the employees are women. 12 % of the
workforce has a Bachelors or a Masters degree, 39% have done a Diploma or Intermediate or
Matriculation.

The American partner has instituted an elaborate in-house training program for enhancing the
competencies and skills of hotel staff through a scientific training needs analysis process. This
process helps develop a customized schedule of courses and on-the-job training for each

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worker. Although the American partner also provides extensive technology transfer, branding
and marketing know how to Shalimar Hotels, it does not participate in the day-to-day
operations, management and HR practices of Shalimar Hotels which are controlled by the four
Chaudhry brothers themselves.

Mr Latif Chaudhry, at 73 years is the eldest of the brothers and is the Chairman of the
company. Mr Raheel Chaudhry, an electrical engineer trained in Germany, is head of the hotel
operations. Mr Ismail Chaudhry, a chartered accountant from UK, handles Finance &
Administration, and Mr Shakeel Chaudhry, a B.Com from Islamia College, Karachi, is
responsible for Marketing. There is no HR department in the company. A Personnel Section
comprising of 5 people is part of the Administration Department which is headed by Major
(Retd) Khan Bahadur. This Personnel Section is responsible for timekeeping of staff, preparing
the payroll and disbursing salaries, appointing daily wage staff, preparing letters of
appointment and increments, issuing uniforms, etc.

During the past three years, Shalimar Hotels has seen a dramatic increase in employee
turnover that has risen to 23 % in 2016. It seems that people join Shalimar Hotels, get training,
and then leave to join five star hotels operating in Pakistan or get lucrative jobs in the Middle
East, some joining the American partner’s hotels and resorts in Riyadh, Dammam, Bahrain,
Tehran and Qatar. The departure of so many skilled staff from Shalimar Hotels has caused a
drop in customer service, lower employee productivity, an increase in costs, loss of market
share, and reduced profits. Employee relations in the company are tense and in September
2009, there was a labor strike and a shut down of the Shalimar Hotel chain for two weeks.

Shalimar Hotels barely managed to break even in the fiscal year 2015-16 and although it is
expanding, as mentioned above, to cater to the growth in the market, it would be difficult to
realize profits during the fiscal year 2016-17. In the board meeting held on December 4, 2016,
the American partner expressed serious concern at the rising employee turnover, deteriorating
organizational climate and dwindling profits of the company. An urgent employee survey by an
HR consultant was conducted. The consultant presented the findings of his survey to the board
of directors:

1 Nearly 45% of the hiring in the company has been done based on recommendations by
the friends and acquaintances of the Chaudhry brothers or by employees or by
government departments. Selections were not done on merit. No formal recruitment
process exists. The hiring interviews are conducted by any of the three brothers. Most
employees are unaware of the company’s history, values, mission and corporate
objectives. Job descriptions and job specifications have not been made. A wide variety of
appointment letters have been issued, depending on the terms negotiated with each
employee at the time of hiring.

2 No performance management system exists. Annual increments are decided by a

committee comprising of the Chaudhry brothers and Major Khan Bahadur. Increments are
awarded on the basis of company loyalty, quantity of work, obedience to superiors,
discipline and punctuality. Promotion depends on the length of service. A minimum of 5
years in a position is required for promotion to the next position. Documentation of the
performance appraisal is done on a salary sheet. The appraisal ratings are not shared
with the employees and they come to know of their increments through their salary slip.

3 83% of the employees are unhappy with their compensation and consider that their
salaries are at least 40% lower than other hotels in the country. Besides, other facilities
and benefits like medical, leave, and retirement or end-of-service benefits are at the

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 discretion of management and considered on a case to case basis. There are no HR
policies except for circulars that are issued from time to time. There is no compensation
structure, no salary grades exist and usually a lump sum amount is given as monthly
salary. Lately, the company has been delaying payment of salaries due to its cash flow
situation.

4 92 % of the hotel staff are dissatisfied with the management and blame the pocket union
that was formed after the September 2016 strike for siding with the management and
harming the interests of the workers. The workers get one uniform each year. No transport
is provided to workers. No loans are given for house building, motorcycle, children’s
education or marriage or even for meeting emergencies. Employees have no way of
communicating their grievances or suggestions.

Question 1
What are the major problems being faced by Shalimar Hotels
in each of the following areas of HR. Describe each problem in detail:

1. Recruitment
2. Performance Management
3. Compensation
4. Employee Relations

Question 2

For each of the above four areas, recommend an HRM strategy for the
company, including the measures the company should take to rectify each
problem. Elaborate the positive outcomes that the company would achieve as
a result of these measures.

Question 3

Make an HRM Action Plan for the company.

Important Note
Students are advised to write all assumptions, justifications and details while answering the questions. The
concepts taught in the course should be applied specifically to this case. Marks are also dependent on the
identification and analysis of the problems in the case, the solutions presented, and the depth, detail and quality of
explanations.

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