Proposal
“The influence of Management by Values on Service quality in Russian subsidiaries of
International Hotel Chains”
Malina (Sirotovskaya) A.E.
Postgraduate student
Higher School of Economics, Faculty of Management
Background of the study
Key words: Management by Values, Human Resource Management, Service Quality, Hotel
Industry.
Within the present rapid changing global environment, companies need to respond
immediately to the changes and at the same time preserve their uniqueness in order to survive
and remain competitive. This applies to hotel sector more especially in which hotel companies
try to find ways to retain clients by increasing intangible service which also means that how a
service is delivered is a critical factor in any evaluation of quality (Morisson, 1996; Schneider &
Bowen, 1993; Lin & Tsaur, 2004). In other words, service quality depends on employees’
performance and efforts to promote it must therefore be based on Human Resource Management
(HRM) (Schneider & Bowen, 1985). Predictably previous management approaches such as
Management by Instructions (MBI) and Management by Objectives (MBO) which require a high
level of formalization and control in the middle of the 20th century are logically replaced by more
flexible model - Management by Values (MBV), focused on service quality, professionalism and
autonomy of employees (Magun, 2001; Dolan, 2002).
The emergence of MBV approach in Russia is confirmed by Russian research study, which
established that about 80% of organizations including international hotel companies have
officially declared corporate values on their Web-sites (Kabalina & Kokorina, 2012). At the
same time the recent impressive growth of hotel sector in Russia was clearly accelerated by
arrival of international hotel chains in 1990-s at first in Moscow with their global strategy and
corporate values as investment in this region due to attractive government programs (Burnatseva,
2010). However one of the problem fields for further studies is the question about the effect of
the translation of corporate values. How these values reflect in employees’ behavior and how it
reflects on service quality?
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Problem statement
Predictably there
are
many publications
dealing
with
issues
of
hotel
chains
internationalization and entry success strategies (Chathoth & Olsen 2003; Chen & Dimou, 2005;
Leo & Philippe, 2011). At the same time only few publications on the international hotel chains
activities in Russia were found (Balaeva, 2012; Burnatseva, 2010; Katkalo and Shemrakova,
2008; Stene, 2007).
Moreover, despite the sufficient amount of studies that confirm the relationship between the
existence of MBV and the performance results such as reputation and finance indicators
(Donker, 2008; Loe, 2000; Pava & Krausz, 1996; Van, 2005), there are quite few studies that
investigate the relationship between management by values through human resource practices
and quality of service in hotel industry in particular (Donker, 2008, Stackman, 2000).
Taking into account huge hotel market capacity in Russia further research based on particular
cases is needed.
The purpose of this study is to empirically explore the relationships between MBV practices
through Human Resource Management practices and employees’ performance dealing with the
delivering service to the clients in Moscow units of international hotel chains, to establish the
causes and conditions of their emergence.
Theoretical frameworks
Corporate Values and Management by Values Approach
Particular relevance of the studies which explore Management by Values approach is
confirmed by the variety of existing studies. There are some papers that are devoted to
peculiarities of corporate values translation to the employees (Sussman, 1989; Klemm, 1991;
Begley, 2000; Grof, 2001); to reflection of corporate values in the employees’ and leaders’
behavior (Somers, 2001; Klenke, 2005; Baker, 2005). Moreover there are empirical studies about
the influence of corporate values on the satisfaction and commitment (Hunt, 1989; Weaver,
2012); also about the revealing the connection about individual values and corporate values,
about value congruence (Berrin, 2004; Suar, 2010; Siegal, 2002; Pozner, 1985). Logically there
are a lot of studies about the influence of corporate values on financial results of the companies
(Donker, 2008; Keller, 2006; Loe, 2000; Pava & Krausz, 1996; Van, 2005).
Kenneth Kernaghan (2003) defines values as “enduring beliefs that influence the choices
we make among available means or ends” (p. 711). Values are desirable states, goals or
behaviors on which individuals place a high worth (Elizur, Borg, Hunt, & Beck, 1991) that allow
them to choose from among available options. The concept of “corporate (organizational)
values” refers to the source of values—personal, societal, or organizational (Elizur et al., 1991;
Van Wart, 1998).
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“Corporate value,” refers to the important principles that guide the behavior of the
organization (Liedtka, 1989) and are communicated and rewarded within the organization
(Elizur et al., 1991; Van Wart,1998; Weiner, 1988). Similar approach is to identify corporate
values as the criteria by which employees make decisions about priorities (Christensen, 2001).
Within an organization, a strong value system is said to exist when organization members share
key values related to acceptable behavior within the organization and the organization’s strategic
direction (Weiner, 1988) and, more important, that they share the espoused values of
organizational leaders (Deal & Kennedy, 1982). That is why they are often defined as the shared
values of all employees. These shared values are relatively stable, enduring and interact with
employees and organizational structure to produce patterns of behavior (Chatman, 1991).
Corporate (organizational) values can be categorized as functional or instrumental—
focusing on desired modes of conduct—or end state—describing desired outcomes such as
organizational prestige or financial condition (Liedkta, 1991; Osborne, 1996; Weiner, 1988).
Functional values provide cues to acceptable workplace behavior and generally include such
priorities as honesty, diversity, and hard work. In contrast, instrumental values are strategic
values that “provide the rationale” for the activities of the organization and link the organization
to the environment and its stakeholders.
Management by values approach means new way of Company’s Management, which has a triple
purpose: a) Simplifying the organisational complexity created by the ever-increasing need to
adapt to change at all levels in the company; b) Guiding strategic vision towards the future
destination of the company; and c) Securing commitment of every employee to deliver a high
quality performance in the day-to-day work (Dolan, Garcia, 2002). In practical business terms,
the aim of MBV is to create conditions under which all employees can perform independently
and effectively toward a single objective (O’Toole, 1996).
Traditionally the corporate values are established by the founders and compounded
further by the personalities and transforming activities of their inheritors (Anthony, 1994; Collins
and Porras, 1997). However Britting (2000) offered another approach to identify the roots of
corporate values in the organization – when managers and employees create general base of
values and then rely on it in their behavior (Britting,2000).
One of the most significant problems in empirical research devoted to Management by
Values is to identify the criteria of the existence of MBV in the company. Scwarts suggests to
consider three elements of MBV system – politics (documents, codes of ethics, nonfinancial
reports), processes and practices (Scwarts, 2005). Moreover researchers emphasize that Human
Resource Management elements (recruiting, adaptation, training and development, compensation
and benefits) are the way to broadcast corporate values to employees (Trevinio, 2001).
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In response to this shift, some organizations now devote significant energy to integrating
values and beliefs into their business practices. Hotel companies are facing increasing
competition from other lodging units. This increased competition has forced traditional tourist
hotels to find ways to retain current clients and attract competitors’ clients (Tsaur,2002).
Increased service quality through increased employee performance, by which corporate values
are delivered, is a viable way for hotels to remain competitive (Tsaur, 2002).
Studies devoted to Management by values through Human Resource Management
practices in the connection with service quality in the hotel industry in Russia and other
emerging markets even in developed countries are extremely poorly illuminated in literature.
Accordingly to this fact it seems necessary to reveal the connection between service quality and
Hyman Resource Management in the hotel companies in the existing empirical studies.
Service quality in the connection with Human Resource Management in the Hotel
Companies
Services are typically intangible and non-standardized. The intangibility of services also
means that how a service is delivered is a critical factor in any evaluation of quality (Morrison,
1996; Schneider &Bowen, 1993). In other words, service quality depends heavily on the
effectiveness with which front-line employees deal with customers and clients. Efforts to
promote service quality must therefore be based on managing employee behavior (Schneider &
Bowen, 1985).
Morrison (1996) suggested that a firm’s human resource management practices can create
an environment that elicit more customer-oriented behavior from employees. In turn, the
behavior that employees display will positively impact on service quality. The author discussed
this issue conceptually, but no systematic empirical investigation was published identifying
which dimensions of HRM practices and specific forms of service behavior lead to higher
service quality in hotels.
Although the connection between HRM practices and service quality may be intuitively
relative, the underlying logic is that there must be mediating variables between HRM practices
and customers’ perceptions of service quality. More specifically, it stands to reason that a
customer will, in part, evaluate service quality on the basis of employees’ behavior rather than
HRM practices, though organizational HRM practices and employees’ service behavior may be
related.
Further research in Taiwan was conducted between 68 hotels in 2004. The study showed
evidence of the positive relationship between training and higher levels of employee service
behavior in tourist hotel. Fey (2000) suggested that salary level was revealed to be significantly
4
associated with the firm’s performance for both managers and non-managers. The empirical
results indicate that the employee perceptions of HRM practices of ‘‘compensation/benefits’’,
are like ‘‘training/ development’’, linked to employee service behavior in tourist hotel.
Employees
who
experience
positive
HRM
practices
on
the
three
dimensions
‘‘recruitment/selection’’, ‘‘training/ development’’ and ‘‘compensation/benefits’’ may thus be
more positive, courteous and helpful toward customers.
It has been argued that the better employee service behavior is perceived, the better is
service quality perceived by customers in tourist hotels (Williams,1999; Hartline & Jones, 1996).
Tsaur (2004) reported findings to indicate that there was a positive relationship between service
behavior and service quality in the tourist hotel. It indicated when employees demonstrated
excellent service behavior, the customers perception of service quality were increased.
Consistent with the study of Parasuraman et al. (1985), customers specially appreciate the
service encounter while measuring service quality. Bowen and Schneider (1985) demonstrated
that customer-oriented service behavior influenced the perceived service quality of customers
from the customers’ viewpoint. The results of Tsaur study proved this.
The empirical relationship between service behavior and service quality revealed that
‘‘extra-role’’ service behavior positively affect the reliability, responsiveness, assurance and
empathy dimensions of service quality.
On the other hand role-prescribed behavior and service quality affected only the empathy
dimension. This might be because routine and duty jobs are difficult to leave a deep impression
on customers. However, the tourist hotels that were sampled specially emphasize job
requirements and employees are strictly required to show ‘‘enthusiasm’’ while serving customers
and this may have impacted on the findings (Tsaur, 2004).
Previous studies have reported that there was a positive relationship between HRM
practices and service quality (Morrison, 1996; Schneider et al., 1985). Bettencourt et al. (1997)
suggested that research should explore why some employees are more eager than others to offer
suggestions to help the firm improve its service? What HRM practices factors lead contact
employees to become enthusiastic advocates of the firm’s services? The empirical result of Tsaur
study demonstrated that HRM practices do affect service quality directly, and indirectly, through
service behavior. Specifically, through the positive service behavior delivered by HRM
practices, the perceived service quality of customers could be promoted.
Theoretical model
For most service industries, quality is occurred in service encounter (Parasuraman et al.,
1988). Service encounters involve interaction between customers and employees (Bettencourt et
al., 1997; Winsted, 2000) so employees will have an important role to play in influencing
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customers’ perceptions ofservice encounters (Bitner, 1990; King & Garey, 1997). Hereupon
service capability means the degrees of required knowledge, skills and concepts required for the
line employee to offer excellent service (Jaworski & Kohli, 1993; Berry, Conant, &
Parasuraman, 1991). Hallowell, Schlesinger, and Zornitsky (1996) indicated that service
capability is defined as an employee’s perception of this or her ability to serve the customer and
that it is a direct antecedent of customer satisfaction. In summary, besides the requirements of
positive service behavior, the frontline employees must possess appropriate service capability to
provide a good service for customers.
The probable framework could be illustrated in the following way (figure 1).
Management by Values
Declared values
Politics
Processes
Practices
HRM practices
Recruitment/ selection,
training/ development,
compensation/ benefits.
Performance appraisal
Service quality
The reflection of declared
corporate values
Service behavior
Extra-Role service
Role prescribed service
Figure 1. Model of relationship among MBV through HRM practices, service behavior
and service quality
Research questions and hypotheses
The purpose of this study is to empirically explore the relationships between MBV practices
through Human Resource Management practices and employees’ performance dealing with the
delivering service to the clients in Moscow units of international hotel chains, to establish the
causes and conditions of their emergence.
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In more concrete terms, questions were formulated in the following way:

What managers in the hotel sector mean by Management by values? What are the indicators
of this system? What are the levels of the development of this system?

How this approach is implemented in Russian subsidiaries of the international hotel chains?
How corporate values are translated from parents’ companies and why?

Do any of HRM practices reflect corporate values in Russian subsidiaries and if yes, through
what HRM practices are corporate values translated first of all and why?

What problems do managers anticipate when a management by values philosophy is intended
to be implemented in Russia?

Is there any correlation between dominant HRM practices for translating corporate values
and the type of hotel (number of stars, e.g.)?

What are the differences for translating corporate values through HRM practices for
managerial and non – managerial employees in the hotels?

Is there a relationship between HRM practices for translating corporate values to the
employees and employees’ performance (in the terms of employees’ and customers’
perception) according to experts’ view (General Managers, HR Managers, Heads of the
Departments?
To be more specific in accordance with literature review hypotheses were formulated in
the following way.
H0: There is a connection between Management by Values through HRM practices, employees’
behavior and service quality.
Under this assumption I rely on the results of number of studies in HRM that reveal positive
connection between HRM practices, employees’ behavior and service quality (Schneider and
Bowen, 1985, Zerbe, Dobni, and Harel, 1998, Tsaur, 2004).
Further development of the original hypothesis on the basis on the results of these studies led me
to formulation consequential hypotheses.
Relating MBV through HRM practices to employee service behavior
Behavioral patterns have many important implications, both theoretical and practical, for
virtually all kinds of human resource practices including job analysis, recruitment, selection,
training, development, performance appraisal, compensation, and even labor and employee
relations (Werner, 2000). How an organization manages its human resources establishes the tone
and conditions of the employee–employer relationship. And in turn that impacts on employee
behavior. For example, Schneider and Bowen (1985) found that, when employees perceive their
organization as one that facilitates performance, enhances career opportunities, provides positive
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supervision, and so on, they are then free to do the organization’s main work of serving
customers. Zerbe, Dobni, and Harel (1998) reported that employee perceptions of HRM practices
had a direct effect on self-reported service behavior. So that these premises lead to the first
hypothesis in the connection with Management by Values approach.
H1. MBV practices through HRM will be positively related to employee service behavior
(reflecting corporate values in employees’ behavior) (Tsaur, 2004).
Relating service behavior to service quality
Employee service behaviors could be ‘‘extra-role’’ and ‘‘role-prescribed’’. This
definition is
consistent with that prosocial service behavior in the organizational behavior or marketing
literatures (Bettencourt & Brown, 1997; Brief& Motoeidlo, 1986; Organ, 1988).
‘‘Extra-role’’ service behavior refers to the discretionary behavior of contact employees
in serving customers that extends beyond formal role requirements.
Recent marketing literature highlights the importance of contact employees ‘‘delighting’’
the customer by providing ‘‘little extras’’, and ‘‘extra attention’’ exceptional service during the
service encounter (Bettencourt & Brown, 1997; Bitner et al., 1990; Kelley & Hoffman, 1997).
‘‘Role-prescribed’’ service behavior refers to expected employees behavior that may
derive from implicit norms in the workplace or from explicit obligations as specified in
organizational documents such as job descriptions (Brief& Motoeidlo, 1986; Puffer, 1987). For
example, hotels monitor role-prescribed service behavior such as greeting the customer by name,
answering the phone within three rings, and making a personal pledge to a customer that a
request will be handled. Marketing studies reinforce the importance of similar behaviors for
customer service quality perceptions (Bitner et al., 1990; Keaveney, 1995; Parasuraman et al.,
1988). Based on this discussion, employee service behavior will be positively related to service
quality.
H2. Employee service behavior will be positively related to service quality (Tsaur, 2004).
Relating HRM practices to service quality
It has been argued that in service organizations quality improvement must be focused on
the selection, training, and compensation ofemploy ees. (Lovelock, 1985; Schlesinger & Heskett,
1991; Schneider et al., 1985, 1995). Fey et al. (2000) found that salary level was significantly
associated with firm performance for both managers and non-managers. Schneider et al. (1985)
also found that employee perceptions of HRM practices were significantly related to customer
perceptions of service quality.
Hartline and Jones (1996) indicated that in the hotel, contact employees should receive
the necessary training in order to deliver high quality service. Previous HRM research has
8
addressed that in the service industry, finding a positive relationship between employee
perceptions of organizational practices and customer ratings of organizational effectiveness
(Tornw & Wiley, 1991; Gilbert, 1991). These finding lead to the next hypothesis regarding the
relationship between employee perceptions of HRM practices for translating corporate values
and customer perceptions of service quality.
H3. HRM practices for translating corporate values will be positively related to service quality.
The role of service behavior between HRM practices for translation corporate values and
service quality
Ulrich, Halbrook, Meder, Stuchlik, and Thorpe (1991) argued that selection, hiring,
appraisal, promotions, and reward administration practices can be used to ‘‘increase the shared
mindset among employees and customers’’, which leads to the organization attracting customers
and being competitive. In other words, when employees feel well treated by management’s
human resource practices, they can devote their energies and resources to effectively treating
clients. Researches on the dimensions of service quality also support the hypothesized
relationship between customer-oriented behavior and service quality assessments. Key
dimensions of service quality such as empathy, assurance and responsiveness (Parasuraman et
al., 1988) are all potentially enhanced through the performance of customer- oriented behavior
resulting in more favorable evaluations of overall service quality. Kelley and Hoffman (1997)
reported that employees who help customers by performing customer-oriented behavior during
the service delivery process are more likely to feel better about the service quality than those
who do not act prosocially toward the customer.
Morrison (1996) identifies HRM practices that can be used to elicit service behavior and
hence service quality. In these models employee service behaviors are shown to mediate the
relationship between the hypothesized antecedents and consequences. Thus, the following
hypothesis will be tested.
H4. The relationship between HRM practices for translating corporate values and service quality
would be mediated by service behavior in hotels.
Human Resource Management differentiation for translating corporate values
The literature on human resource practices system differentiation (HRPSD; Lepak &
Snell, 1999; Lepak, Taylor, Tekleab, Marrone, & Cohen, 2007; Tsui et al., 1997) suggests that
poor or low investment HR practices exist in many industries, but are more evident in the hotel
industry because of the sector’s reliance on low skilled employees such as cleaners, luggage
porters, waiters and kitchen helpers (Kelliher & Johnson, 1997). While the previous literature
examining the hotel industry has criticized this as poor HR practices, the HRPSD concept
9
suggests that hotels may not in fact be using poor HR practices, but rather, they have matched
their HR practices system with employees’ strategic value.
HRPSD is a management process where different HR practices are applied to groups of
employees based on their perceived ‘strategic value’ to the organisation (Lepak & Snell, 1999).
HR practices system is the integrated composite of HR functions such as selecting,
recruiting, training and development, performance management, compensation management,
employment security, functional flexibility, empowerment and employee involvement (Pare &
Tremblay, 2007). Having more than one HR practices system, it is suggested, helps ensure
human capital investment efficiency because investment is higher in the HR practices system for
jobs that are perceived to have high strategic value and lower for the opposite (Lepak & Snell,
1999, 2002; Lepak, Takeuchi, & Snell, 2003; Lepak et al., 2007).
Regardless of the economic circumstances, HRPSD is an important topic because of the
direct links between employee perceptions of the workplace practices and organizational
performance. It is well established in the ‘service climate’ literature that employee perceptions
about the workplace are linked to important organizational outcomes such as customer
satisfaction, loyalty and profitability (Schneider, Parkington, & Buxton, 1980; Schneider &
White, 2004; Schneider, White, & Paul, 1998; Solnet & Paulsen, 2005).
Despite clear financial benefits to such practice, firms must also consider how HRPSD
affects employees’ attitude and behaviour as this may mediate the relation between
organisation’s strategy and firm’s long-term performance (Lepak et al., 2007).
Although studies of the hotel industry have previously acknowledged that the HR
practices for managerial employees may differ from non-managerial employees (Hales & Klidas,
1998; Hoque, 2000; Kelliher & Johnson, 1997; McGunnigle & Jameson, 2000), extant HR
management studies have yet to investigate and provide an in-depth explanation of how HRPSD
is applied in the industry (Hoque, 2000; Kelliher & Johnson, 1997).
There is very limited number of studies focusing on SHRM in developing countries.
Moreover HRMSD in the aspect of translating values and in the connection with service quality
hasn’t investigated in Russia yet.
Hotels tend to employ more innovative HR practices among managerial employees than
on other employees because managers are perceived to be more responsible and capable of
handling extra responsibility (Hales, 1987). So this leads to the final hypothesis of this paper.
H5. The differentiation of HRM practices for translating corporate values will be positively
related to service quality (Rozial Ahmad, 2005)
10
Methodology description
The research aim is very huge and therefore in the methodological aspect I am going to
separate several stages of the research and use a combination of qualitative and quantitative
methods.
Sample of study (Moscow units) was selected due to researcher’s ability to access
information in this country.
Predictably on the first stage of my research I have already made the qualitative case
study in one hotel company in order to understand the philosophy of MBV system and indicators
of this system with the help of interviews with experts.
Having decided to draw a comparison among MBV systems through HRM practices in
organizations on the second stage of the research, I am in process of taking part in conducting
CRANET (Cranfield Network on Comparative Human Resource Management) SURVEY as it is
regarded as the most complete and representative independent survey of the practices and
techniques of HRM in the world. Any research group that wishes to conduct a similar study in a
new country may receive the data set from the research center. This is a study conducted in the
form of biennial surveys of HR managers’ opinions in organizations, implemented in 1989 and
currently taking place in 32 countries - participants. The third wave of the survey in Russia is in
process now. It is expected to receive at least 100 completed questionnaires.
The next stage of the survey is going to be the case-study in Moscow unit of international
hotel chain. In order to measure employees’ performance in connection with reflecting corporate
values using the scale, developed by Bettencourt et al. (1997), for assessment of two aspects by a
5-point scale: Extra-Role service behavior and Role-Prescribed Service behavior. In addition,
one more instrument will be used for measuring employees’ service capability, it is called
SERVQUAL scale (Parasuraman et al., 1988) with ranging service in connection with reflection
of corporate values using five- point scale ranging from ‘much worse than I expected’ to “much
better than I expected” with the help of clients. Also clients’ reviews will be analyzed with the
help of content analysis on the web-sites of customer reviews.
The data will be analyzed in special statistical program SPSS, version 17.0Statistical Package for the Social Sciences in order to test hypotheses.
The limitations of the study
The study findings may be limited by the limitations of CRANET survey which is going
to be used in this research. Also the sample limitations are quite a substantial. The results
anticipated in this study may not be generalized to hotel companies outside of Russia to different
emerging markets because of their individual peculiarities and different external environment.
11
Implications for practice and further research
The results anticipated are going to be unique for Russia and also hold several
implications for hotel industry in Russia.
The research study will be of primary significance to Hotel Chief Operational Managers,
HR-managers, marketing managers and middle managers in hospitality industry. Moreover, this
work might be also useful for other countries and researchers in HRM sphere and MBV in
hospital industry; undergraduate and graduate students of hospitality management. Managers
may use the findings to explore and to improve methods of translating corporate value in Russia
and to compare the results in different countries as the methodology used in this research will
allow to do it. At the same time researchers may enhance understanding of the relationship
between HRM practices for translating corporate values and its effect regarding to the delivery
of service. The results of the proposed study may help students in exploring MBV and HRM
practices.
This study suggests several avenues for further research. First, this paper begins to
explore the question ofcausality. However, causality can only really be tested with data collected
at different point in time. In future, researchers might consider a longitudinal investigation to
demonstrate the causal relationship.
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