Hotel and Restaurant Business Management PDF

Topic 1: The elements of organizations 1. Understanding Companies 2. Organization theory 3. Fundamental dimensions in organizations 4. Creation of an organizational structure 5. Business Excellence HOTEL AND RESTAURANT BUSINESS MANAGEMENT 1.1.- Understan...

Topic 1: The elements of organizations 1. Understanding Companies 2. Organization theory 3. Fundamental dimensions in organizations 4. Creation of an organizational structure 5. Business Excellence HOTEL AND RESTAURANT BUSINESS MANAGEMENT 1.1.- Understanding Companies ✓The basis of our economic system. ✓They produce goods and services that we need. ✓They provide money to workers to buy goods and services. 1.1.- Understanding Companies Coordinate the allocation and distribution of scarce resources. What an economy produces Who produces an economy's goods and services How the goods and services are distributed. 1.1.- Understanding Companies What is an economic system? FINANCIAL SECTOR Government (Rules, taxes and, provides public goods and services)  Economic system Level public Planned Capitalism protection ▪ Social protection High Low (education, health and social benefits). ▪ Investment in active policies High Low for the reinsertion of the unemployed in the labor market. ▪ Public jobs. High Low ▪ Unions have important High Low decision-making power and affiliation of workers ▪ High taxation. High Low 1.1.- Understanding Companies CONCEPT They are organizations that integrate a set of elements that carry out a specific economic activity to satisfy individual and collective interests, and for this purpose, they have a set of organized and directed elements to achieve business and social goals. 1.1.- Understanding Companies CONCEPT “they have a set of organized and directed elements to achieve business and social goals”. What goals? Maximize profit - Growth - Satisfaction - Quality - Survival - Social 1.1.- Understanding Companies Do you agree with the following reasons that drive companies to accept and adopt social goals? Change in values: Employees and other stakeholders expect companies to act responsibly socially and environmentally. Corporate responsibility: Companies are increasingly taking responsibility for their actions and their impacts on society. Companies are expected to engage in social issues and contribute to the well-being of the communities they operate in. Creating shared value: thereby creating benefits for both society and their long-term success. Talent retention: Employees, especially the younger generations, seek to work for companies that have a mission and values aligned with achieving social objectives. Competitive advantage: Consumers may prefer to purchase products and services from socially responsible companies, which can result in increased customer loyalty and higher sales. 1.1.- Understanding Companies Work in groups: 1. Research the SDGs in the web of https://sdgs.un.org/goals 2. Each group thinking on managing a fictional hotel or restaurant must choose at least three SDGs that they consider relevant to their business and its impact on society and the environment. These goals must be achievable and measurable. 3. Each group should present their goals to the class, explaining how they are linked to the selected SDGs and how they will contribute to sustainable development in their business 1.1.- Understanding Companies What functions? Create value Social: salary, dividends, technological progress and innovation Companies promote technological advancement and innovation What elements? Humans: workers and businessman (organizing and taking risks) Materials: raw materials, equipment, infrastructure Intangibles: image, organizational structure, know-how How would you create value in a hotel or restaurant? 1.1.- Understanding Companies Combination of the elements HUMANS PRODUCTIVE MATERIALS PROCESS INMATERIALS Using technology Transformation of and organizational inputs into outputs task 1.1.- Understanding Companies Tecnología factor clave  1.1.- Understanding Companies What kind of technologies are being introduced in the tourism sector? New payment methods: cashless - mobile wallet - bizum) Software solutions: QR-based Access, evento registrations and acreditations, masive email comunication, virtual meettings) Virtual assistant: Greta tourist and cultural guide and other artificial inteligent system) Apps: booking system, security system Códigos QR para ver en los dispositivos móviles la carta, incluso antes de llegar al restaurante, así como pedidos delivery y take away. VIDEO https://esmeraldadiazaroca.com/2018/03/14/casos-de-innovacion-en-sector-turistico/ 1.1.- Understanding Companies Business environment The specific environment: customers, suppliers, competitors, intermediaries The general environment: Political-legal, Economic, Sociocultural and Technological (PEST factors). The company also influences the environment, it depends on its power in the market  1.1.- Understanding Companies How does the company influence its environment? COMPANY CULTURE Culture is understood as the values shared by workers, in addition to institutional practices and rules that must be assumed by all its members. Culture influences the day-to-day of the company and its organization, in aspects such as: Communication between workers and between them and managers, The degree of autonomy at work, The recruitment of new workers In the type of treatment with customers. 1.1.- Understanding Companies COMPANY CULTURE Business culture there is three elements key: Mission. Ultimate purpose that moves the company, its reason for being. For instance, the mission of a company like Mercedes Benz can be to manufacture vehicles of the highest quality that satisfy the needs of most demanding customers. Values. Qualities that are present in the company and that in -they flow in the behavior of all its members. For example, ethics. Policies. Lines of action through which the company defines his identity. For example, the equal opportunity policy for employees practicing many companies is part of your culture.  1.1.- Understanding Companies How does the company influence its environment? CORPORATE IMAGE Set of impressions that arouses in the public. It is the way the company is perceived. Culture and corporate image is related to the degree of corporate social responsibility The SOCIAL BALANCE serves as a management tool to assess and evaluate corporate social responsibility 1.1.- Understanding Companies SOCIAL BALANCE SOCIAL BENEFITS SOCIAL COST Pollution Creation of jobs Destruction of non-renewable Wealth creation natural resources Donations to social projects Occupational diseases (stress) Business activities that reduce Difficulty reconciling work and social costs (recycling) family life The social balance is a voluntary document for the company, encouraged by the AAPP, to improve its social image. 1.1.- Understanding Companies ACTIVITY 6 Culture is understood as the values shared by workers, in addition to institutional practices and rules that must be assumed by all its members. This system of beliefs and organizational principles are used by the organization to achieve the objectives for which it has been created, influencing the management of internal resources and relations with the environment. The corporate image is a set of impressions that arouses in the public. It is the way the company is perceived. From the culture of the company a corporate image is generated, the brand image. The reference used by consumers to value the company.  1.2.- Organization theory 1.2.1.- Organization concept March y Simon (1981) → The concept of organization is not easy, and it is much simpler to cite examples of organizations than to give an exact definition. Herbert Alexander Simón (1916 – 2001). Economist, Political scientist and social James Gary March sciences theorist. (1928-2018). Sociologist, economist, professor, and writer.  1.2.- Organization theory 1.2.1.- Organization concept Ramió (2002) →They are social units with specific objectives. This means: A group of associated individuals Working towards a common goal Establishing formalized relationships among themselves With the intention of continuity over time Legitimized by the external social system Capable of replacing their members without jeopardizing their survival.  1.2.- Organization theory 1.2.1.- Organization concept Organizations are more than just a set of “socio-technical” elements Sociotechnical: Political-cultural: administrative structure, power and conflict, HR, processes and organizational culture services Control, change and improvement to new realities: information and control, organizational change, organizational improvement To gain a better understanding of how an organization operates, you must study these dimensions  1.2.- Organization theory 1.2.1.- Organization concept Clássic → perspectives that predominate during the 1st half of the 20th century. Neoclássic→ They modernize the classical theories, with a more global and integral vision of the organizational phenomena, interrelating their different dimensions (50-70 decades). Contemporary → They modernize the classical theories, with a more global and integral vision of the organizational phenomena, interrelating their different dimensions (50-70 decades). *Ramio (2002). Enfoques de la Teoría de la Organización (Organization Theory Approaches)  1.2.- Organization theory 1.2.2.- Most relevant approaches Most important classical paradigms of the Organization Theory Scientific and Scientific management (Taylor) administrative Administrative magagement (Fayol, Gulick y Urwick) management Bureaucracy (M. Weber, 1922) Structuralism School, weberiana Foundations of the theory of organization (P. Selznick, 1948) or bureaucratic Theory and social structure (R.K. Merton, 1968) The human problems of an industrial civilization (E. Mayo, 1933) An Improvement Cycle for Human Resources Development School of human (R. Likert, 1978) relations The Human Side of Enterprise (D.A.McGregor, 1960) Personality and organization; the conflict between system and the individual (C. Argyris, 1957) 1.2.- Organization theory 1.2.2.- Most relevant approaches Scientific Management approach Autor: TAYLOR, F Contribution: Advocates a new style of leadership and organization Based on: The systematic analysis and the hierarchical-personal control for the improvement of the PRODUCTIVITY The relationship between the amount of products obtained by a productive system and the resources used 1.2.- Organization theory 1.2.2.- Most relevant approaches Scientific Management approach Author: TAYLOR, F Features and principles (1911): Rationalization and standardization of work are achieved by applying the scientific method to improve efficiency. Responsibilities are delegated to managers. The best person is selected for each specific job. Workers are instructed to enhance efficiency. Worker output is monitored, assessing if they follow procedures and meet goals. Salaries are linked to productivity. Labor is divided into execution activities and administration activities. 1.2.- Organization theory 1.2.2.- Most relevant approaches Administrative Management approach Autor: FAYOL, H. GULICK, L. Y URWICK, L. Contribution: It lays the foundations of the Management by Objectives system, planning, programming, and budgeting. It introduces a new idea: management is a process that includes tasks such as planning, organizing, commanding, coordinating, and controlling. 1.2.- Organization theory 1.2.2.- Most relevant approaches Administrative Management approach Autor: FAYOL, H. GULICK, L. Y URWICK, L. Features and principles (1916): They consider the following management principles as fundamental: The division of labor, Authority and responsibility, Discipline, The unity of command, The unity of management, The subordination of individual interest to the general interest, The remuneration of personnel, Centralization, The line of authority and order, Equality, Job stability, Initiative, and Corporate spirit. 1.2.- Organization theory 1.2.2.- Most relevant approaches STRUCTURALISM AUTHORS CONTRIBUTION FEATURES APPROACH ◼As an organizational system, it is based on a set of formal rules established by legal, rational, written, and exhaustive rules. CONCEPT OF THE ◼The power of each individual is impersonal and BUREAUCRACY WEBER, BUREAUCRATIC THEORY M. ORGANIZATION derived from the norms that create the position. ◼The positions must be arranged hierarchically, ◼Workers are selected based on the objective principle of merit. ◼ Bureaucratic model becomes problematic due to the abrupt clash between structures and people, between SHOWS THE PERVERSE what "should be" and what actually "is“. When such SOCIAL THEORY AND MERTON EFFECTS OF THE clashes occur within organizations, they give rise to STRUCTURE R.K. BUREAUCRATIC MODEL dysfunctions driven by social processes, cultural norms, and instruments of social control originating in that particular context.. 1.2.- Organization theory 1.2.2.- Most relevant approaches HUMANS RELATIONSHIP AUTHORS CONTRIBUTION FEATURES APPROACH The behavior of individuals is influenced by the work group to which they belong. Moreover, individuals have social INFLUENCE OF motivations, including aspects such as BUREAUCRACY ATTITUDES AND SOCIAL participation, breadth and depth of the MAYO, E. RELATIONSHIPS OF THEORY job, and the social climate. WORK GROUPS ON JOB PERFORMANCE There exists a coexistence, alongside the formal organization, of an informal organization. Leadership also plays a significant role.  1.2.- Organization theory 1.2.2.- Most relevant approaches APPROACHES AUTHORS CONTRIBUTION FEATURES ◼It rejects the simplistic vision of the rational decision maker who seeks the optimal alternative. ◼ Considers that the decision-making process in organizations is more complicated, fragmented, ITS CENTRAL POINT IS THE and incomplete than previously believed. NEORRATION SIMON, ANALYSIS OF THE ELECTION ◼ Individuals do not possess complete rationality ALISM H.A. (DECISIONS) IN THE as it is constrained by their ability to know, ORGANIZATIONS calculate, and anticipate alternatives in the decision-making process. ◼ Decisions will never be optimal, and individuals often have to settle for the most satisfactory option available.. ORGANIZATIONS SHOULD TAKE INTO CONSIDERATION BOTH THE ❑ Bureaucratization hinders the rationalization FORMAL AND INFORMAL process, resulting in slowness, inefficiency, ASPECTS OF THE decisional blocks, behavioral rigidity, and limited ORGANIZATIONAL STRUCTURE, adaptation to changes in the environment. NEOSTRUCTU SUCH AS ISSUES OF ❑ The relationship between organizational RALIST OR CROZLER COLLABORATION, THOSE OF structure and individual behavior is the key INSTITUTIONA , M. POWER, MATERIAL AND SOCIAL factor that characterizes this trend. L REWARDS, AS WELL AS THE ❑ Conducting a political analysis of organizations RELATIONSHIPS BETWEEN aims to study the power relations between ORGANIZATION AND INDIVIDUAL intra-organizational actors and the conflicts AND BETWEEN ORGANIZATION that arise. AND ENVIRONMENT 1.2.- Organization theory 1.2.2.- Most relevant approaches APPROACHES AUTHORS CONTRIBUTION FEATURES Huber, G. FOCUSES HIS INTEREST ON THE ◼ Organizational development is associated with LONGITUDINAL organizational change. y Van de STUDY OF ORGANIZATIONS ANALYSIS Ven, A. THROUGH TIME. ❑ What is exchanged between organizations becomes the central concept for understanding BASED ON THE IDEA THAT EVERY the nature of interorganizational relationships. Cook y INTER- ORGANIZATION EXISTS WITHIN ❑ It is useful to understand these relationships Wievel y ORGANIZATION AN ENVIRONMENT, IT because they are the ones that condition and Hunter AL ANALYSIS CONSTANTLY INTERACTS WITH configure the structural designs and IT. behaviors of the organizations themselves. ❑ Through its transactions and its costs, of all exchange relationships, minimizing transaction ORGANIZATION Williamso A NEW WAY OF UNDERSTANDING costs (R&D costs, information, communication, AL ECONOMY n, Ouchi ORGANIZATIONS negotiation and resolution of transactions). ❑ The organizational culture is deeply embedded in the organization, since it is the Selznick, IT IS BASED ON ANALYZING THE CULTURE AND product of a learning process and organizational Gouldner, INFLUENCE OF THE SOCIETAL ORGANIZATION socialization. Blau y CULTURE AND THE SPECIFIC AL LEARNING ❑ Observed behaviors, accepted dominant values, Crozier ORGANIZATIONAL CULTURE. rules of the game to move and progress in the organization.. 1.2.- Organization theory 1.2.2.- Most relevant approaches APPROACHES AUTHORS CONTRIBUTION FEATURES ❑ En las organizaciones convergen una pluralidad de racionalidades administrativas generadas Lindblom, ESTE MODELO RECHAZA LA por diferentes ambientes, procesos y actores. DECISIONES Y Cohen, IDEA UNITARIA DE ❑ Los resultados no constituyen una AMBIGÜEDAD March, RACIONALIDAD consecuencia directa del proceso Olsen SE CONSIDERA QUE EN LAS ❑ En las organizaciones hay una diversidad de Perrow, ORGANIZACIONES HAY UNA fuentes de poder, PODER Y Pfeffer, SERIE DE ELEMENTOS Y ❑ Una pluralidad de actores con capacidad de CONFLICTO EN Bedeian, ACCIONES QUE EJERCEN ejercer influencia en los procesos decisionales. LAS Daft, INFLUENCIA SOBRE LAS ❑ Una pluralidad de intereses colectivos y ORGANIZACIO Daudi, ESTRATEGIAS Y ACCIONES objetivos que generan coaliciones, actos, NES Morgan, GLOBALES DE LA consensos, enfrentamientos y conflictos. Mintzberg ORGANIZACIÓN EL CAMBIO EN LAS Se considera el cambio organizativo como ORGANIZACIONES PASA A SER respuesta a: EL OBJETO PRINCIPAL DE ❑ Los impulsos del entorno. CAMBIO Beckhard, ANÁLISIS DE LA TEORÍA ❑ El cambio de los patrones culturales. ORGANIZATIV Bennis ORGANIZATIVA (cómo cambian y ❑ El cambio vinculado al ciclo vital de los entes O por qué; fuerzas de rechazo al organizativos. cambio y por qué; qué actores dinamizan y conducen el cambio)  1.2.- Organization theory 1.2.2.- Most relevant approaches Figure 1 Elements of Social Life Causal Influence Culture Social Structure Deep Values Power Intermediate Norms Skill Repertoires Class Structure (Cultural Capital) Visible (Individuals) Roles Status Hierarchies Visible (Collective) Institutions Organizations (Source: Portes 2010: 54). 1.2.- Organization theory 1.2.2.- Most relevant approaches Tipo de Dimensiones de la calidad de las condiciones instituciones Meritocracia en el reclutamiento y la promoción Condiciones Inmunidad respecto a la corrupción y internas dominación por intereses particulares Ausencia de “islas de poder” susceptibles de subvertir las reglas institucionales hacia el cumplimiento de sus propios fines Proactividad o capacidad para realizar actividades o relacionarse con actores, ALEJANDRO PORTES con el objetivo de mejorar sus servicios Condiciones Flexibilidad tecnológica y apertura a la PREMIO PRINCESA DE ASTURIAS externas innovación externa DE CIENCIAS SOCIALES 2019 Alianzas dentro de la organización o con Sociólogo de gran prestigio aliados externos, que previene en el control internacional. por intereses particularistas o ajenos a la Ámbitos de investigación: las organización migraciones internacionales, la sociología económica, el desarrollo Resultados Adecuación institucional: correspondencia entre objetivos comparativo, la urbanización de los formales y desempeño real países en vías de desarrollo y la Contribuciones al desarrollo: grado en marginalidad social. que se contribuye al progreso económico, social o político en el ámbito propio de J. Antonio Pedraza actividad.  1.2.- Organization theory In summary, from the concept of organization, the following stand out: Goal → To satisfy the interests of the customers or users to whom they direct their economic activity. Not forgetting→ Organizations are polyhedral phenomena that possess multiple dimensions. https://www.entrepreneur.com/article/383988 1.3.- Fundamental dimensions in organizations Environment Goals Administrative structure Human resources Technological, financial, and material resources Administrative process  1.3.- Fundamental dimensions in organizations GOALS AND VALUES TECHNICAL SUBSYSTEM SUBSYSTEM INPUT: FLOW OF OUTPUT: FLOW OF RESOURCES (HUMANS, MANAGERIAL GOODS AND SERVICES, MATERIALS, SUBSYSTEM INFORMATION, AND TECHNOLOGICAL) INFLUENCE INFORMAL ORGANIZATIONAL STRUCTURAL STRUCTURAL SUBSYSTEM SUBSYSTEM COMPANY SYSTEM BOUNDARY 1.3.- Fundamental dimensions in organizations Environment Set of actors and external forces, partially or totally uncontrollable, which can potentially impact the organization's exchange process with its markets 1.3.- Fundamental dimensions in organizations Environment GENERAL COMPETITIVE COMPANY IN A OPEN SYSTEM 1.3.- Fundamental dimensions in organizations GENERAL ENVIRONMENT ECOLOGICAL POLITICAL TECHNOLOGICAL CONTEXT CONTEXT CONTEXT ECONOMIC SOCIOCULTURAL CONTEXT COMPETITIVE CONTEXT ENVIRONMENT LEGAL CONTEXT SUPPLIERS COMPETITORS CUSTOMERS FIRM 1.3.- Fundamental dimensions in organizations Environment Open economic system The way in which a society organizes itself to meet its needs with scarce resources under certain forms of production and distribution of goods and services 1.3.- Fundamental dimensions in organizations Environment Uncertainty Changing Problem for Environmental external the uncertainty conditions management 1.3.- Fundamental dimensions in organizations Environment: FEATURES UNCERTAINTY STABILITY STABLE DINAMIC SIMPLE COMPLEX COMPLEXITY INTEGRATED DIVERSE DIVERSITY HOSTILITY FAVOURABLE HOSTILE 1.3.- Fundamental dimensions in organizations Environment 1.3.- Fundamental dimensions in organizations Environment PESTEL analysis is a tool used to analyze and monitor the macro-environmental (external marketing environment) factors that have an impact on an organization, company, or industry. It examines factors in the external environment. It used to identify threats and weaknesses which are used in a SWOT analysis. 1.3.- Fundamental dimensions in organizations Environment Activity 8: PESTEL analysis  1.3.- Fundamental dimensions in organizations Environment Competitor analysis explores the behavior of a firm's direct rivals. To identify the strategy they are following. To define the most appropriate way of tackling them. To predict their reactions to our own firm's movements. KEY ACTIVITIES: 1. Gathering data on competitors: public information available on competitors, competitive Intelligence Systems, and possible unethical behavior: industrial espionage 2. Predicting their behavior: identification of competitors' current strategy, identification of competitor's objectives, competitors' assumptions about the industry ("industry recipes"), and identification of competitors' resources and capabilities.  1.3.- Fundamental dimensions in organizations Environment Porter's Five Forces is a model that identifies and analyzes five competitive forces that shape every industry and helps determine an industry's weaknesses and strengths. KEY ACTIVITIES: 1. Gathering data on competitors: public information available on competitors, competitive Intelligence Systems, and possible unethical behavior: industrial espionage 2. Predicting their behavior: identification of competitors' current strategy, identification of competitor's objectives, competitors' assumptions about the industry ("industry recipes"), and identification of competitors' resources and capabilities. 1.3.- Fundamental dimensions in organizations Environment Activity 9.1 Activity 9.2 1.3.- Fundamental dimensions in organizations GOALS ECONOMICS GROWTH SOCIALS 1.3.- Fundamental dimensions in organizations Goals Económics Profitability: Relationship between profits and sales, assets, or investment. Productivity: Relationship between output and the material and human resources used in production. Cost reduction. Financial: Solvency, liquidity, indebtedness, return on investments... Survival (key objective in times of crisis). 1.3.- Fundamental dimensions in organizations GOALS GROWTH Increase in production volume, sales, market share... Participation in new business ventures, markets, acquisition of other companies, mergers... Stability. Innovation. 1.3.- Fundamental dimensions in organizations GOALS Social Creation of jobs. Community development. Increase in residents' income. Rise in exports, guarantee of national self-sufficiency. Promotion of education and training. 1.3.- Fundamental dimensions in organizations Administrative structure A formal scheme that represents the relationships, communications, decision-making processes, and procedures that articulate a set of people, material factors, and functions that are oriented towards the achievement of specific objectives (Ramió, 2002). The structure, graphically, is materialized in an organizational chart, which arranges the elements that make up the organization. 1.3.- Fundamental dimensions in organizations Administrative structure The essence of a structure lies in the divisionalization of activities (division of labor), whose main purpose is to configure a system that, through specialization, optimizes the resources used in it. (Ramió, 2002). This must be corrected by a force in the opposite direction: coordination and control to achieve organizational objectives. 1.3.- Fundamental dimensions in organizations Administrative structure Basic components or elements The hierarchy (vertical and horizontal). Coordination and control systems. Job positions. Units, areas, departments, or divisions. 1.3.- Fundamental dimensions in organizations Administrative structure Hierarchy and divissionalization (basic element) Vertical (height): number of levels of management or command that configure the organization's height. Height is related to communication between units and the speed of processes. Horizontal (division): groups the different sectoral or departmental units, determining the breadth or divissionalization of the organization. It is related to work specialization. GESTIÓN HOTEL Height: Hierarchy 59 Breadth: divissionalization. 1.3.- Fundamental dimensions in organizations Administrative structure Hierarchy and Horizontal Division. Characteristics: Related to work specialization. Most commonly used grouping criterion (teams). The production of a tourist service is carried out through the collaboration of several specialized units: economic management, personnel management, commercial management,... Favors centralization in a higher unit that makes decisions about the subordinates. 1.3.- Fundamental dimensions in organizations Administrative structure Models of divissionalization Functional Products or services Type of demand or users Territories or markets Matrix 1.3.- Fundamental dimensions in organizations Administrative structure DIVISSIONALIZATION OF AN ADMINISTRATIVE STRUCTURE Question 1. Place each of the advantages and disadvantages indicated below in the different models of organizational divissionalization, considering the definition of each one of them. Question 2. Provide an example of the different horizontal organizational structures in the tourism sector. Question 3. What divisionalization model would you propose for the administrative structure of the indicated hotel example? 1.3.- Fundamental dimensions in organizations Human Resources Activities in the human resources department: Monitoring, continuous training, and personnel control. Personnel training. Establishing communication channels, as well as creating and maintaining a positive work environment. Managing motivation within the organization and facilitating communication among all employees, whether they share functions or not. Payroll and labor agreements management. Performance evaluation and career development. Managing sanctions. 1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles A. What professional and personal skills does the organization need? B. What type of relationship is more convenient to establish between the company and its employees? C. How much will it cost the company to have these individuals? D. Where can the company find these individuals? E. How to select the candidates? 1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles A. What professional and personal skills does the organization need? 1º First, define the personal skills and abilities needed before thinking about specific individuals. 2º It is advisable to consider the profile of other individuals who assist in business management: lawyers, accountants, financiers, etc.. 1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles There are 3 factors that determine the type of profile: 1. The type of tourist service to be offered. 2. The type of market in which the company operates. 3. The general and personal philosophy of the managers or entrepreneurs. 1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles Levels when defining the profile 1. Previous experience. 2. Technical competence. 3. Personal characteristics that fit with the organizational culture and the rest of the employees. 1.3.- Fundamental dimensions in organizations Human Resources INAPPROPRIATE JOB OFFER Required: Experience in the position of more than two years Training relevant to the position Languages (minimum English) Good attitude at work (towards customers and colleagues) Responsibilities: Check-in/ out Answer phone calls and emails Attend to customers for any inquiries or issues Invoicing Administrative tasks, etc. 1.3.- Fundamental dimensions in organizations Human Resources APPROPRIATE JOB OFFER Main job functions and responsibilities: Welcome and greet guests Answer and direct incoming calls Inform guests about hotel rates and services Make and confirm reservations for guests,... Education, skills, and experience: Degree or Diploma in tourism or equivalent Experience in guest/customer relations, preferably in hotel companies Solid practical knowledge of relevant computer software, including MS Office and reservation and payment systems. Numerical and administrative skills. Key competencies and qualities: Customer service orientation Planning and management Ability to multitask and prioritize Professional appearance and attitude Effective verbal and written communication skills,... 1.3.- Fundamental dimensions in organizations Human Resources SUGGESTION Job description: Clearly detail the job title and provide a comprehensive description of the responsibilities and tasks the candidate will perform at the hotel. Minimum requirements: Specify the educational requirements and work experience necessary for the position. Indicate if any specialized skills, certifications, or licenses are required. Location: Mention the exact location of the hotel or the city where it is located. Employment conditions: Include details about the type of contract (temporary, permanent, full-time, part-time), working hours, salary or salary range, and additional benefits (health insurance, bonuses, vacation, etc.). Hotel culture and values: Share information about the company's culture and values so that candidates can evaluate if they fit into the work environment. Application instructions: Indicate how interested candidates can submit their resumes or apply for the position. Application deadline: Set a clear deadline for candidates to know how much time they have to submit their applications. Equal opportunities: Ensure that the job offer does not contain discrimination based on gender, age, race, religion, disability, or other characteristics protected by law. Privacy and data protection policy: Inform candidates how their personal data will be used and how their privacy will be maintained during the selection process. Contact information: Provide a name and contact details (email address or phone number) so that candidates can ask questions or seek clarifications about the job offer.  1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles B. What type of relationship is more convenient to establish between the company and its employees? It is not necessary for all individuals to maintain full- time and indefinite employment contracts. Determining the type of contract that suits us best: commission-based, labor contract, commercial contract,... We need to inform ourselves about the regulatory changes in employment matters, Social Security bonuses.".  1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles C. How much will it cost the company to have these individuals? Quantify the number of people required and foresee their potential remuneration. Take into account the non-economic consequences of certain forms of employment that save costs but demotivate. Furthermore, it is necessary to perform a cost-benefit analysis of the most appealing hiring modality, the number of people to be hired, and the remuneration intended to be established for each worker.  1.3.- Fundamental dimensions in organizations Human Resources C. How much will it cost the company to have these individuals? Quantifying how many people are necessary and forecasting their potential remuneration will depend on factors such as: The capacity and type of services provided by the establishment. The duration of the client's stay (season). The type of clientele: group, individual. The occupancy rate. The type and location of the company: vacation, urban. The hotel category: the higher, the more employees. The degree of computerization. 1.3.- Fundamental dimensions in organizations Human Resources C. How much will it cost the company to have these individuals? Example Staff Requirements How to calculate the staff requirements for the hotel reception? 1. Consider the number of people needed daily, in 8- hour shifts. 2. The most commonly used ratio is 1.5 employees per shift and per 100 rooms, and for housekeeping, an average of 18 rooms per housekeeper (both are indicative and depend on the factors mentioned above). 1.3.- Fundamental dimensions in organizations Human Resources C. How much will it cost the company to have these individuals? Example Staff Requirements How to calculate the staff requirements for the hotel reception? 3. Multiply the number of people needed daily by 365 days. 2 employees per day x 365 days = 730 shifts per year. 4. Since a worker works 225 effective working days or shifts per year (45 weeks per year x 40 hours per week), the result would be: 730 annual shifts / 225 shifts per employee = 3.24 employees (rounded to 4 employees).  1.3.- Fundamental dimensions in organizations Human Resources C. How much will it cost the company to have these individuals? Example Staff Requirements Once the number of essential personnel required to cover the shifts is calculated, the work schedule is prepared. Reception schedule for Week 1. Monday Tuesday Wednesday Thursday Friday Saturday Sunday Recepcionist 1 Recepcionist 2 Recepcionist 3 Recepcionist 4 Recepcionist 5 Recepcionist 6 Total Morning Afternoon Night Vacation Break Subtotal leftover  1.3.- Fundamental dimensions in organizations Human Resources C. How much will it cost the company to have these individuals? Example Staff Requirements Reception schedule for Week 1. Premises: Monday Tuesday Wednesday Thursday Friday Saturday Sunday Recepcionist 1 Break Break Morning Morning Morning Morning Night Maximum duration of Recepcionist 2 Break Break Morning Morning Afternoon Afternoon Afternoon the workday is 8 Recepcionist 3 Morning Morning Break Break Night Night Afternoon hours. Recepcionist 4 Afternoon Afternoon Afternoon Afternoon Break Break Morning Weekly rest period of Recepcionist 5 Night Night Night Night Break Break Morning 2 consecutive days. Recepcionist 6 Vacation Vacation Vacation Vacation Vacation Vacation Vacation Minimum interval of 12 hours between Total shifts. Morning 1 1 2 2 1 1 2 Distribution of Afternoon 1 1 1 1 1 1 2 vacations. Night 1 1 1 1 1 1 1 Vacation 1 1 1 1 1 1 1 Break 2 2 1 1 2 2 0 Subtotal 3 5 4 4 3 3 5 ¿vacation? leftover -1 -1 0 0 -1 -1 1 ACTIVITY 1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles A. What professional and personal skills does the organization need? B. What type of relationship is more convenient to establish between the company and its employees? C. How much will it cost the company to have these individuals? D. Where can the company find these individuals? E. How to select the candidates?  1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles D. Where can the company find these individuals? To know the main reference job markets. To know institutions or companies to approach for recruiting individuals, which may vary according to the profiles. For example, Vocational Training Schools, Employment Services (SEPE), Adecco, www.infojobs.net, www.infoempleo.com, www.jobandtalent.com, or the social network www.linkedin.com. Define the strategy  1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles E. How to select the candidates? Even if the selection is made by an external company, we must have certain clear criteria: a) Distrust a selection company that does not inquire about the entrepreneur's business, their profile, and the company's objectives. b) It is essential that they not only offer a single candidate. c) If the company excessively relies on its "objective" selection methods, it is a negative indicator. d) Analyze the way the company seeks candidates, e.g., the wording of the job advertisement.  1.3.- Fundamental dimensions in organizations Human Resources Required professional and human profiles E. How to select the candidates? In any case, e) It is essential to ensure that the candidate fits the profile of skills defined as necessary. f) Hiring relatives or friends who do not match the profiles is risky. g) Ensure a critical minimum fit between the ultimately hired person and the required skill.  1.3.- Fundamental dimensions in organizations Human Resources ACTIVITY 11 1. How does assessing personnel needs lead to a more efficiently managed front office? 2. How would you prepare to interview a front office job candidate? develop a list of questions to use in interviewing an applicant for the position of front desk clerk.  1.3.- Fundamental dimensions in organizations Technological, financial, and material resources Information and Communication Technologies: Information Systems for Business Management. Management Systems: SAP, CRM (e.g., ACI Hotel, Admintour, Astro Hotel, Avalon, Avirato, Masteryield...). Distribution Systems: AMADEUS, GALILEO, SABRE, and WORLDSPAN... Financial resources: own and external. Material resources: furniture, equipment, machinery,...  1.3.- Fundamental dimensions in organizations Administrative process ✓Plan ✓Organize Basic ✓Control management functions ✓Integrate ✓Lead  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions Plan To determine an action plan, defining what will be done  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions: PLAN 1. Define the purpose or reason for the existence of the organization or the project, specify the purpose into missions, and formulate policies with priorities. 2. Anticipate the most probable future events that affect the organization. 3. Define operational goals: results desired, specifying what, when, how much, and at what cost. 4. Design strategies: the way in which the objectives will be achieved. 5. Schedule: define the activities to be carried out, their sequence, required resources, stages, dates... 6. Budgeting: allocate necessary resources to the programs.  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions Organize Structure and integrate activities and resources to achieve objectives effectively and efficiently  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions: ORGANIZE 1. Design procedures: the sequences of activities that make up the functions. 2. Design the structure: an organizational chart, establishing the division of work and its coordination within the organization. 3. Design coordination mechanisms: between the units of the organization. 4. Define the functions of the positions: Assign a portion of the total work to each unit, defining their role and responsibilities. 5. Define the qualifications for the positions: the ones that people occupying each position must have.  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions Integrate Select competent individuals to fill the positions within the organization  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions: INTEGRATE 1. Select: Choose and assign qualified individuals for each position. 2. Train and orient: Place new personnel in their positions within the organization. 3. Educate: Ensure the competence of the staff through professional practice and training plans. 4. Develop: Improve the skills and attitudes of individuals according to the organization's needs.  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions Lead Guide the actions of the organization towards the set goals  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions: LEAD 1. Coordinate: Combine the organization's activities in the most effective and efficient manner. 2. Delegate: Assign responsibilities at lower levels and define expected outcomes. 3. Motivate: Persuade people to perform activities with greater effectiveness and efficiency. 4. Resolve conflicts: Solve problems that disrupt the organization's functioning. Manage different idiosyncrasies of individuals. 5. Lead changes: Stimulate creativity to facilitate the achievement of the organization's objectives.  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions Control Ensure progression towards the objectives according to the established action plan  1.3.- Fundamental dimensions in organizations Administrative process Basic management functions: CONTROL 1. Implement an information system: Define what information is necessary, in what form, when, and for whom. 2. Foster best practices: Determine the conditions that occur when activities are performed optimally and promote these conditions. 3. Measure and evaluate results: Check deviations from objectives and standards. 4. Take corrective actions: Review action plans and/or resource allocation to achieve the objectives. 5. Recognize success: Reward economically, materially, or morally the effective performance of individuals.  1.3.- Fundamental dimensions in organizations Administrative process ✓ Plan ✓ Organize ✓ Control Basic management functions ✓ Integrate ✓ Lead Concept of competence 1.4.- Creation of an organizational structure What should be the ideal process for designing an organizational structure? FOUR STAGES NECESSARY Las organizaciones del futuro, hoy https://www.youtube.com/watch?v=RiheJn qoKcY 1.4.- Creation of an organizational structure STAGE 1: DEFINITION OF GOALS Strategic goals (L/P) Operational goals (C/P) Definition of Functions Activities Tasks 1.4.- Creation of an organizational structure STAGE 2: CONSIDERATION OF CONTINGENCY FACTORS DETERMINING: Internal contingency factors (age of workers, organization's size, and history). External contingency factors (forecasting environmental pressure, its level of stability, or complexity). This includes the influence of dimension, technology, environment, and power relations on the design of the organizational structure 1.4.- Creation of an organizational structure STAGE 3: DESIGN OF THE STRUCTURE Design of job positions, assigning tasks beforehand. Assessing the specialization needs of the positions (breadth) and the level of control over the work performed (depth) in different positions. Grouping job positions into lower units or departments, and these into higher units using hierarchy and divisional criteria. 1.4.- Creation of an organizational structure STAGE 4: IMPLEMENTATION OF SYSTEMS Definition of information systems. Definition of planning and control systems to manage the organization. 1.4.- Creation of an organizational structure STAGE 2 STAGE 1 Definition of goals HUMAN RESOURCES, ECONOMICS AND CONTINGENCY FACTORS MATERIALS Internal (age, size, External STRATEGIC and history of the (forecasting GOALS organization) environmental SUPERIOR pressure, its level DEPARTMENTAL of stability, or UNIT OPERATIONAL complexity) GOALS INTERMEDIATE STAGE 4 UNIT IMPLEMENTATION OF SYSTEMS FUNCTIONS Linkage and Regulation SUBORDINATE Information ACTIVITIES UNIT Planning and Control TASKS STAGE 3 DESING JOB STRUCTURE POSITIONS Fuente: Ramió (2002) 1.4.- Creation of an organizational structure The creation or reform of an administrative structure is conditioned by: a)Subjective criteria: the motivations and expectations of the workers in the case of existing organizations or of the managers in the case of new ones. b)Objective criteria: the formal design process considering the technical needs of the administrative structure (job requirements, employee competencies, etc.). In the reform of the administrative structure, subjective elements prevail over goals. This generate dysfunctions that hinder effectiveness and efficiency in management. 1.4.- Creation of an organizational structure COMMON DYSFUNCTIONS Excessive Length of Structures: The distance between strategic and operational units, with many intermediate levels of management, causes slowness and rigidity in management. Excessive Horizontal Fragmentation: An excess of divisions or areas, each pursuing specific objectives, hinders the definition and implementation of integrated programs to achieve overall objectives. 1.4.- Creation of an organizational structure COMMON DYSFUNCTIONS Organic Inflation: The high number of hierarchies generates management problems. Excessive Bureaucratization: in the management of human, legal, financial, control, and inspection resources creates tensions, conflicts, and loss of decision-making capacity and autonomy in task performance to achieve objectives. 1.4.- Creation of an organizational structure ACTIVITY 12 Administrative structure reform 1.4 Creation of an organizational structure ACTIVITY 12 Board of Directors are more concerned about the negative consequences it may have on employees: Employee dissatisfaction and commitment. Workers' difficulty in adapting to the new structure. Loss of motivation among employees. Inability to retain talented employees. Adverse effects on the culture of open communication. Reduced active participation in decision-making. These negative consequences may affect the understanding of the organization's needs and challenges. 1.4.- Creation of an organizational structure ACTIVITY 12 Manager is more concerned about the positive consequences it: Improving resource management efficiency. Better defining responsibilities and roles of organization members. Designing a structure that facilitates communication and collaboration between different departments. Creating a flexible structure to adapt to internal or external changes. Establishing an authority hierarchy to facilitate decision-making. What to do? 1.5.- Business excellence CONCEPT Business excellence is the highest level of performance and achievement within an organization, achieved through continuous improvement, innovation, and a commitment to quality and customer satisfaction. It involves optimizing all aspects of the business for long-term success and competitive advantage. How to achieve business excellence? Managing Fundamental Dimensions → Strategic Management and Organizational Culture. Strategic management involves the set of decisions and actions used to formulate and implement specific strategies to adapt to the environment and achieve the organization's objectives. Organizational culture, on the other hand, comprises the set of beliefs, values, norms, and rules that define the behavior of an organization. 1.5.- Business excellence Fundamental of Strategic Management 1.5.- Business excellence Fundamental of Strategic Management Excecutives: Board of director, CEO and top Environment (internal external context) management (operation, comercial, administrative) Strategic goals Rest human resources STRATEGIC PERSONAL FIT FIT ORGANIZATIONAL CULTURE VALUES SYSTEM ORGANIZATIONAL FIT FIT Ethical rules and norms: legal, economic, organizational, social Administrative structure and process Leadership and professionalism Technological, financial and material resources 1.5.- Business excellence Fundamental of Strategic Management Values to promote innovation and creativity. Values to support teamwork, collaboration, and foster communication. Values to support customer orientation. Values to support employees' personal and professional growth. Values to foster work-life balance.  1.5.- Business Excellence The organizational culture has a positive influence on the level of business excellence The implementation of these values gives solidity to the organization ---- They are awareness elements used by managers. --- The work ethic is at the core de la excellence 1.5.- Business Excellence CULTURE OF BUSINESS EXCELLENCE QUALITY INNOVATION PRODUCTIVITY ATTENTION TO PEOPLE AND THEIR WORKING CONDITIONS INTEGRATION OF ESSENTIAL VALUES The values and four pillars impact the excellence and sustainability of the organization Fuente: INSHT, 2017 Topic 1: The elements of organizations 1. Understanding Companies 2. Organization theory 3. Fundamental dimensions in organizations 4. Developing management skills 5. Business Excellence HOTEL AND RESTAURANT BUSINESS MANAGEMENT  Topic 2: Developing management skills 1. Competency approach 2. Motivation strategies 3. Role of the business manager 4. Leadership styles HOTEL AND RESTAURANT BUSINESS MANAGEMENT  2.1.- Competency approach CONCEPT The term competency is the combination of underlying attributes, skills, traits, knowledge and motivation of a person which correlates with performance on the job (McClelland (1973); Levy- Leboyer, 1997). Skills, personality traits, and knowledge can be measured against well-accepted standards, and that can be improved via training and development. What is the meaning of the underlying term? 2.1.- Competency approach 2.1.- Competency approach UNDERLYING PERSONAL ASPECTS 2.1.- Competency approach DETERMINING COMPONENTS OF BEHAVIOR 2.1.- Competency approach ACTIVITY 1  2.1.- Competency approach COMPETENCE It is the integrated and harmonious combination of all these aspects in the performance of a work activity. See the template in Moodle. 2.1.- Competency approach Activity 2 George, the boss 2.1.- Competency approach Performance evaluation theoretically enables: 2.1.- Competency approach General indicators 2.1.- Competency approach Growth indicators 2.1.- Competency approach Absenteeism indicators 2.1.- Competency approach Selection, mobility, and promotion indicators 2.1.- Competency approach Compensation and performance evaluation indicators 2.1.- Competency approach Training indicators 2.1.- Competency approach EFFECTIVE PERSONNEL POLICY Keys to success Observe Right visible and evaluation invisible systems Robust competencies indicator system Useful to understand employee needs, their level of satisfaction, and to formulate motivation strategies 2.2.- Motivation strategies The behavior of workers is influenced by the hierarchical structure, processes, and resources of the organization, but primarily by their conduct. How can managers change employee behavior to have satisfied workers? Managers should understand that there are two types of variables that influence employee behavior: Independent variables (influencing them is very difficult or impossible). Dependent variables (influencing them is possible). 2.2.- Motivation strategies Independent variables It’s difficult change: Perceptual system: How we perceive the world through our senses Past experiences. Subjective interests: Expectations and the level of ambition of each person. Individual power. 2.2.- Motivation strategies Dependent variables It’s easier change: Work situation and content: The quantity and type of job tasks, workload, level of responsibility, and the worker's control over the tasks and activities they perform. Leadership style: The way in which the manager carries out their leadership functions, including the distribution of information and management of human resources. Motivation: Investigating and understanding the work motivations that satisfy the employee. Rewards: Economic and material rewards, as well as emotional and job appraisal rewards. Training or retraining policy to enhance knowledge. Organizational climate: The psychological atmosphere within the organization, which is the synergistic result of the other variables.  2.2.- Motivation strategies Business CUSTOMER SATISFACTION goal Ensuring that workers have sufficient material Premises Acting on employee and financial resources, behavior as well as efficient processes Subjective Political Socio-organizational Ergonomic variables variables variables variables Perceptual Individual and group Organization's moment Temperature system goals Job content Illumination" Past Degree of power Mental workload Furniture,… experience Informal Stress interrelationships Promotion system Training Reward policy Ramio (2002) Leadership Status CATEGORIES OF PSYCHOSOCIAL VARIABLES THAT IMPACT EMPLOYEE MOTIVATION AND SATISFACTION LEVEL 2.2.- Motivation strategies Socio-organizational variables 1. The organization's moment: the evolutionary stage at which the organization is. 2. Job content: workload resulting from the number of tasks or functions in the job (breadth) and the level of responsibility and control over the tasks (depth). 3. Mental workload: the degree of intellectual strain caused by the job content. 4. Stress: the level of mental tension due to the job content. 2.2.- Motivation strategies Socio-organizational variables 5. The training process: necessary to expand workers' knowledge and skills and reduce stress and mental workload. 6. Promotion: the lack of promotion increases stress and mental workload. 7. Inter-group and interpersonal relationships: influence the work environment and affect stress and mental workload. 8. Leadership style: a highly influential variable in changing employee behavior.  2.1.- Competency approach Remember the activity 2 about George, the Activity 2 boss. After seeing section 2.2 on Motivation strategies, George, the boss What type of strategies will you implement? Activity 3 Solecito Hotel 2.3.- Role of the business manager Mintzberg proposes ten roles to explain how the manager's function can manifest itself. Interpersonal roles Informational roles Decision-making roles Specific categories of managerial behavior 2.3.- Role of the business manager Interpersonal roles Visible Head: as the organization's representative, responsible for receiving visitors and signing legal documents. Leader: a guide, influencer of others and their behaviors, motivator, team builder, and definer of the company's climate, culture, and policies. Liaison or Coordinator: their role is based on establishing relationships with individuals at their same level within the company and connecting the organization with the external environment. 2.3.- Role of the business manager Informational roles Monitoring Role: that manager who continuously seeks information to detect threats and explore opportunities by reading publications and reports, and maintaining personal contacts with all organization personnel. Disseminator Role: their role is based on communicating external information to the organization from their position as an expert. To do this, they hold informative meetings, send emails, and make phone calls to convey information. Spokesperson Role: the transmitter of information to the outside world about plans, policies, actions, results, etc., through board meetings and informing the media 2.3.- Role of the business manager Decision-making roles Entrepreneur Role: focuses on seeking opportunities, initiating changes, and improvements. To do this, they often hold strategy sessions to develop new programs. Anomaly Manager Role: has a high capacity to deal with unforeseen situations. Resource Allocator Role: is concerned with developing action plans, budgets, managing incentives, and task planning. Negotiator Role: believes it is necessary to represent the organization externally, including with unions, associations, and public entities 2.3.- Role of the business manager Interpersonal PROVIDES roles INFORMATION FEEDBACK Informational PROCESSES INFORMATION roles Decision-making USES INFORMATION roles  2.4. Leadership styles TIPOS Tres grandes estilos: a) Liderazgo autocrático: utiliza el método tradicional de “ordeno y mando”. No genera motivación. b) Liderazgo laissez faire: se deja que la organización se autodirija, tomando decisiones sólo en los momentos críticos. Genera incertidumbre y tampoco motiva. b) Liderazgo participativo: tiene en cuenta la opinión de los empleados, explicando y argumentando sus decisiones. Favorece la motivación.  2.4. Leadership styles Effective management versus effective leadership Recent research has shown that to be effective managers, individuals must be competent in: Clan skills or a focus on collaboration Adhocracy skills, or a focus on creation Market skills, or a focus on competition Hierarchy skills, or a focus on control  2.4. Leadership styles Leadership and Management Skills Organized by the Competing Values Framework Leadership (Doing the right things in conditions of change) Management (Doing things right inconditions of stability) Whetten, D. A., & Cameron, K. S. (2005) 2.4. Leadership styles Effective management and leadership are inseparable Managing Personal Stress Managing Time Maintaining Self-Awareness Hierachy Analytical Problem Solving Communicating Supportively Building Teams and Clan TeamworkEmpowering Empowering Leadership and management Solving Problems Creatively Adhocracy Leading Positive Change Fostering Innovation Motivating Others Market Gaining Power and Influence Managing Conflict Skill cluster to be an effective manager Topic 3: Managing the financials 1. Economic and financial dimension 2. Balance sheet 3. Earning statement 4. Woking capital 5. Key Analysis Ratios HOTEL AND RESTAURANT BUSINESS MANAGEMENT  3.1. Economic and financial dimension DIMENSIONS OF ANALYSIS Economic and finance: balance sheet, income statement, investments, financing. Marketing: prices, products, distribution, communication. Human resources: hiring, salaries, schedules, time management, productivity. Suppliers: prices, product quality, payment methods. Environmental information: economic, political- legal, sociocultural, technological factors, as well as competitors, customers, strategic partners.  3.1. Economic and financial dimension Economic and financial 1. Financial statement 2. Earning statement 3. Advisory 4. Financial investments 5. Financing Fundamentally, accounting is information used to analyze and control economic and financial variables  3.1. Economic and financial dimension Accounting serves us to: 1. Know the value of my company. 2. Know how much I own in it and what degree of liquidity I have. 3. Know how much I owe, to whom, and when. 4. Determine whether I am making a profit or incurring losses.  3.1. Economic and financial dimension Therefore, accounting is informational about: THE VALUE OF THE COMPANY It serves to determine the value of companies. The value of tangible and intangible assets of the company is known through inventories and balance sheets.  3.1. Economic and financial dimension FINANCIAL STATEMENT OF FINANCIAL POSITION A ASSET LIABILITY Car….… 30.000€ Share capital …130.000€ Bank..… 100.000€ B ASSET LIABILITY Car….… 15.000€ Share capital … 5.500€ Bank...... 500€ Loan (short-term)…… 10.000€ Due in 15 days Company B is facing a financial issue, a delicate financial situation, as they have a liquidity of only €500.  3.1. Economic and financial dimension FINANCIAL The financial information is used to determine how much money I have available for investment and the solvency to meet payment obligations. Financial information is useful to know how much I debited, to whom, and when I need to pay. Where to find this accounting information? In the balance sheet.  3.1. Economic and financial dimension ECONOMIC The economic information is used to determine if I am making a profit or incurring losses with the invested money. Where to find this information? In the income statement (the difference between expenses and income). Financial and economic information provides insights into the health of the company.  3.1. Economic and financial dimension FINANCIAL STATEMENT OF EARNING A Revenues Expenses Accommodation… 20.000€ Maintenance… 20.000€ Personnel……….. 30.000€ Losses… 30.000€ B Revenues Expenses Maintenance….…… 8.000€ Accommodation… 30.000€ Personnel………….. 15.000€ Financial expenses.. 2.000€ Gains… 5.000€  3.1. Economic and financial dimension RESULT OF THE ANALYSIS B is today in a delicate financial situation, but it can be resolved by refinancing the short-term loan with a long-term one. The profits generated by economic activity make financial stability possible (it will be able to meet its payment obligations) and will achieve an equity of €30,500 (share capital + 5x5,000 annual profits). A Will have problems in the future. Economic activity does not generate profits, and it loses financial stability within 5 years. The equity will be negative, - €20,000 (share capital - 5 x €30,000 losses). It will not be able to meet its payment obligations and will go bankrupt.  3.1. Economic and financial dimension RESULT OF THE ANALYSIS COROLLARY: A good economic situation can eventually solve a delicate financial situation (as in the case of B), as long as the expenses resulting from the financial imbalance are lower than the benefits of that economic situation.  3.1. Economic and financial dimension ❑ The success or failure of businesses is precisely measured by the ability to manage these variables: Obtaining the funds to start and 1º FINANCING develop the business. 2º INVESTMENT Efficiently using the funds. 3º PROFITABILITY Recovering the invested money by achieving an acceptable return on investment.  3.1. Economic and financial dimension INCREASE THE EQUITY VALUE OF THE COMPANY GOALS OF THE FINANCIAL FUNCTION IN A COMPANY INCREASE THE OWNERS' EQUITY  3.1. Economic and financial dimension The financial function is responsible for managing and controlling financial resources and involves decision-making regarding: 1. The investment of resources or funds in assets. 2. The acquisition of funds or financial means. 3.1. Economic and financial dimension Financial Goal Increase the company's equity value Increase the owners' equity SEARCH FOR AND SELECT SOURCES OF FINANCING (Search for financial resources)  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 1. What should be the size of the company and what should be its growth rate? 2. What types of assets should the company acquire, and how much resources does it need? 3. How to allocate these resources (long-term or short-term, through loans, credit, etc.)? 4. As a result of the previous decisions, what will be the implications for costs and profitability?  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 1. What should be the size of the company and what should be its growth rate?  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 1. What should be the size of the company and what should be its growth rate? High High Large High level of turnover, growth profitability sizes margin, and leverage rates rates A large amount of funds to purchase a large number of tangible assets that must generate enough cash flow or capital gains to ensure payment obligations to lenders, reward investors, and at the same time, achieve profits to reinvest in the company.  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 2. What types of assets should the company acquire, and how much resources does it need?  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 2. What types of assets should the company acquire, and how much resources does it need? It is advisable to invest in the assets that the company needs, without excess, and to invest the money in suitable assets. Invest the money in suitable assets that generate capital gains to meet payment obligations, compensate shareholders, and provide profits for reinvestment in new or additional assets.  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 3. How to allocate these resources (long-term or short-term, through loans, credit, etc.)?  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 3. How to allocate these resources (long-term or short-term, through loans, credit, etc.)? Maintain cash funds to pay short-term debts (within a year). Decide the portion of current assets financed with permanent capital (share capital and long-term loans). In economics, this concept is referred to as working capital.  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 4. As a result of the previous decisions, what will be the implications for costs and profitability?  3.1. Economic and financial dimension QUESTIONS TO CONSIDER 4. As a result of the previous decisions, what will be the implications for costs and profitability? High High Repay the credit Large High level of RISK growth EXTERNAL Higher financial sizes rates FINANCING costs High Increase the profitability I am certain of achieving High LEVERAGE of shareholders' EXTERNAL contributions more than high profits FINANCING proportionally  3.2. Balance sheet ECONOMIC STRUCTURE FINANCIAL STRUCTURE (referring to the allocation of (referring to the origin of financial investments or resource applications) resources) A S S E T EQUITY + L I A B I L I T Y -Buildings -Shareholder contributions -Machinery -Retained earnings -Goods -Bank loans -Accounts receivable -Debts with suppliers, etc. -Cash, etc. In accounting terminology: INVESTEMENT FINANCIAL ASSET LIABILITY  3.3. Statement of earning The profit and loss statement is the accounting representation of a company's activity during a specific period of time (typically a tax year), which allows the calculation of the surplus (profit or loss) for that period.  3.3. Statement of earning MODEL Revenues 2022 2021 €4,267 €4,384 Rooms, food, beverage, spa, other income. - Sales of services - Other income 1,434 1,212 Include gross sales - discounts Total revenues 86,342 84,548 Costs and expenses - Cost of services sold 4,112 4,225 + Net revenues (gross sales - discounts) - Cost of Gross operating profit 82,230 80,323 services sold = Gross operating profit + Other revenues - Fixed or structural expenses 4,112 4,225 Fixed or structural expenses or undistributed operating - Other structural expenses 1,000 1.200 expenses: administration, marketing, operation and - Provisions 500 500 maintenance, utilities: salaries and wages, social - Amortizations 250 200 charges, supplies, professional services, maintenance, leases, office supplies, advertising, taxes and fees... Earnings Before Interest and Taxes (EBIT) 76,368 74,198 - Interest and financial charges 175 750 Ordinary profit 76,193 73,448 - Insurance losses & annuity benefits 10 10 More o les extraordinary results Earnings Before and Taxes 76,183 73,438 - Taxes 100 120 Earnings net 76,083 73,318  3.4. Working capital It reports on the equilibrium between the resources I have in LIABILITIES and their use in ASSETS. It is a ratio that provides information about the company’s capacity to meet short-term payment obligations. To avoid defaults, it is advisable that part of the current assets be financed with long-term capital (i.e., the company's equity plus long-term liabilities) Size of working capital High capacity to quickly convert asset The risk of insolvency is reduced investments into cash Reverse The risk of insolvency must be covered with larger amounts of working capital  3.4. Working capital The WC is measured by the liquidity of the assets: the ability of their components to be converted into cash to meet the company's debts. The working capital (WC) can be defined in two ways: WC = ACurrent – Lcurrent (short-term) FM = EC(Equity +Loan l/t) – ANo current This equivalence is determined by the accounting equality: Ano current + ACurrent = EC(Equity +Loan l/t) – Lshort-term To ensure the economic and financial stability of the company, it is essential to have an adequate working capital  3.4. Working capital NO CURRENT ACTIVE NET EQUITY -Intangible Assets (Software) -Shareholder Contributions -Tangible Assets (Buildings, -Undistributed Profits Machinery) -Real Estate Investments NO CURRENT LIABILITIES -Financial Investments -Long-term Bank Loans CURRENT ACTIVE -Inventory CURRENT LIABILITIES -Receivables (Accounts Short-term Bank Loans Receivable) -Debts with Suppliers, etc. -Non-current Assets for Sale -Cash (Cash, Bank)  3.4. Working capital Ano current EC(Equity+ L l/t) Inventory Acurrent Lshort-term Conserative position: EC – (Ano current + Inventory) > 0 Classic position: EC – Ano current > 0 Unstable balance position: EC – Ano current = 0 Insufficient position: EC – Ano current < 0  3.5. Key Analysis Ratios To measure value creation, the PROFITABILITY INDEX is often used. Profitability analysis relates: GENERATION OF RESULTS (Profit) with ASSET AND OWNERS' EQUITY NEEDS The relationships that can be established for the analysis will depend on these four variables: – assets, – equity, – sales, and, – profit.  3.5. Key Analysis Ratios When these variables are related to each other, they give rise to the following profitability indicators: 1. ROA - Return on Assets (profit divided by assets). 2. ROE - Return on Equity (relationship between profit and equity). 3. Margin (can be measured by dividing profit by sales). 4. Leverage (compares assets with equity). 5. Turnover (compares sales with assets).  3.5. Key Analysis Ratios Financial position Statement of earning Turnover ASSET SALES Leverage Return on Assets Margin CAPITAL PROFIT Return on Equity Financial Economic analysis analysis Relationships between Assets, Equity, Sales, and Profit  3.5. Key Analysis Ratios Earnings before interest and taxes (EBIT) Approximate value: ROA = as high as possible. Total asset EBIT Sales Sales EBIT ROA = = Total asset Sales Total asset Sales Turnover Margin Economic profitability is calculated by ROA. Economic This indicator is explained to us by ASSET analysis TURNOVER and by the MARGIN contributed by sales.  3.5. Key Analysis Ratios NO CURRENT ACTIVE -Intangible Assets (Software) -Tangible Assets (Buildings, Machinery) Earnings before interest and taxes (EBIT) -Real Estate Investments ROA = -Financial Investments Total asset CURRENT ACTIVE -Inventory -Receivables (Accounts Receivable) The profit that the company -Non-current Assets for Sale obtains for every euro -Cash (Cash, Bank) invested in the asset. Capability to generate profits because it directly impacts the efficiency and productivity of the company using their assets  3.5. Key Analysis Ratios BALANCE STATEMENT OF SHEET EARNING Turnover ASSET SALES Efficiency and productivity using assets Margin CAPITAL PROFIT  3.5. Key Analysis Ratios Sales EBIT ROA = Comment on the Total asset Sales following ratios: Year 1 0.25 2.50 0.10  3.5. Key Analysis Ratios Sales EBIT ROA = Comment on the Total asset Sales following ratios: Year 1 0.25 2.50 0.10 ROA (Return on Assets): For every 100 euros invested in assets, it has generated 25 euros in profit before interest and taxes (EBIT). Turnover: For every 100 euros invested in assets, it has generated 250 euros in sales. A high ratio suggests efficient using its assets to generate income. However, it can also mean a lack of investment in assets that limits the company's long- term growth. Margin: For every 100 euros in sales revenue achieved, it generates 10 euros in profit before interest and taxes (EBIT). A high margin ratio value means efficient in converting its sales into profits, derived from a good control over its operating costs, and its marketing activities.  3.5. Key Analysis Ratios Increasing economic profitability requires increasing the value of both ratios: Increasing turnover, HOW? Increase sales revenue, reduce assets, or both simultaneously. Increasing margin, HOW? Increase operating profit, reduce sales, or both simultaneously Asset turnover: increasing the efficiency with which a company utilizes its assets to generate sales or revenue. Enhancing the frequency at which total assets (such as room sales in a hotel or dish sales in a restaurant) convert into sales or revenue. It reflects a company's ability to turn its asset investments into cash Margin assesses a company's efficiency in converting its revenues into profits. It measures how much of the income translates into profits after deducting all expenses directly related to the business's operations (operating expenses). A low indicator may indicate issues in controlling expenses  3.5. Key Analysis Ratios Let's assume that these are the turnover and margin ratios on ROA for a company. Sales EBIT ROA = Total asset Sales Year 2022 2.25 2.50 0.90 2023 0.30 1.01 0.30 The data for return of assets decline from year 1 to year 2. The values of the turnover and margin ratios are also lower. What measures do you suggest to improve the evolution of the ratios?  3.5. Key Analysis Ratios Activity 1 ROA analysis Sales EBIT ROA = Total asset Sales Year 2022 2.25 2.50 0.90 2023 0.30 1.01 0.30 TURNOVER It seems that the company has invested in inadequate assets that generate few sales or is using its assets improperly to generate sales due to a deficient production process. It may also be that the marketing strategy is inadequate, or possibly, both strategies are problematic simultaneously. What is recommended is as follows: To increase turnover, the strategy should involve selling more, reducing assets, To improve the production process or a mix of these strategies simultaneously.  3.5. Key Analysis Ratios Activity 1 ROA analysis Sales EBIT ROA = Total asset Sales Year 2022 2.25 2.50 0.90 2023 0.30 1.01 0.30 MARGIN What could be the cause of this problem? On the cost side: it has increased input costs, salaries, maintenance, and repairs. On the marketing policy: customer losses, decreased sales, a damaged reputation, a lack of differentiation in the market, missed opportunities, a lack of innovation in marketing, employee demotivation, investment in inappropriate marketing campaigns, or has been affected by unfair competition practices. Or a combination of these problems at the same time.  3.5. Key Analysis Ratios Key Analysis Ratios Earnings net Approximate value: ROE - Return on Equity = as high as possible. Net Equity Earnings net Sales Asset ROE - Return on Equity = = Net