Fundamentals of Management, 8th ed

Exercise Overview

Diagnostic skills, which enable a manager to visualize

the most appropriate response to a situation, are espe-

cially important during periods of organizational

change.

Exercise Background

You’re the general manager of a hotel situated along a

beautiful stretch of beach on a tropical island. One of

the oldest of six large resorts in the immediate area,

your hotel is owned by a group of foreign investors.

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Part 3: Organizing

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For several years, it’s been operated as a franchise unit

of a large international hotel chain, as have all the other

hotels on the island.

For the past few years, the hotel’s franchisee-owners

have been taking most of the profits for themselves and

putting relatively little back into the hotel. They’ve also

let you know that their business is not in good financial

health and that the revenue from the hotel is being

used to offset losses incurred elsewhere. In contrast,

most of the other hotels on the island have recently

been refurbished, and plans for two brand-new hotels

have been announced for the near future.

A team of executives from franchise headquarters

has just visited your hotel. They’re quite disappointed

in the property, particularly because it’s failed to keep

pace with other resorts on the island. They’ve informed

you that if the property isn’t brought up to standards,

the franchise agreement, which is up for review in a

year, will be revoked. You realize that this move

would be a potential disaster because you can ill afford

to lose the franchisor’s brand name, access to its reser-

vation system, or any other benefits of the franchise

arrangement.

Sitting alone in your office, you’ve identified several

seemingly viable courses of action:

1.

Convince the franchisee-owners to remodel the

hotel. You estimate that it will take $10 million

to meet the franchisor’s minimum standards and

another $15 million to bring the hotel up to the

standards of the island’s top resort.