THE HOTEL PARIS CASE
CHAPTER-12
THE NEW INCENTIVE PLAN
The Hotel Paris’s competitive strategy is “To use superior guest service to differentiate the Hotel
Paris properties, and to thereby increase the length of stay and return rate of guests, and thus
boost revenues and profitability.” HR manager Lisa Cruz must now formulate functional policies
and activities that support this competitive strategy by eliciting the required employee behaviors
and competencies. One of Lisa Cruz’s biggest pay-related concerns is that the Hotel Paris
compensation plan does not link pay to performance in any effective way. Because salaries were
historically barely competitive, supervisors tended to award merit raises across the board. So,
employees who performed well got only about the same raises as did those who performed
poorly. Similarly, there was no bonus or incentive plan of any kind aimed at linking employee
performance to 3 strategically relevant employee capabilities and behaviors such as greeting
guests in a friendly manner or providing expeditious check-ins and check-outs. The bottom line
for Lisa and the CFO was that the company’s financial rewards system— potentially, the single-
biggest tool they had for channeling employee performance toward accomplishing the Hotel
Paris’s goals—was totally inadequate. She and her team thus turned to the job of deciding what
sort of incentive-based reward systems to install. Based on their analysis, Lisa Cruz and the CFO
concluded that, by any metric, their company’s incentive plan had to be changed. The percentage
of the workforce whose merit increase or incentive pay was tied to performance was effectively
