Situational Analysis

Structure and Culture:

The Roaring Dragon Hotel(RDH) is a state owned enterprise(SOE) and one

of the original three-star hotels in south-west China with a long and
colourful history
Employees were usually staffed by transferring from other SOEs and
government departments based on the strength of their Guanxi or
connections
In 2000, the then-Chinese general manager Tian Wen, followed
management practices of the planned economic era with minimal concern
for development
The employees jobs and salaries were secure and their working conditions
and benefits were better and respectable when compared to other jobs. It
was combined with easy work, neat uniforms, complimentary meals,
health cover, accommodation and fringe benefits
The organizational culture was relaxed and the employees found time for
leisure activities and leaving premises during working hours

Need for change:

With the slow market economy, RDH did not want to embrace new work
practices and was unconcerned about the hotels decline in popularity and
income
RDHs planned economy management processes were not changing and
there was minimal concern for generating profit or delivering quality
standards of service
Entrenched Guanxi practices were to be removed
Ordinary quality of customer service and the occasional annual loss had to
be converted into accountable, quality service practices provided by
dynamic, motivated employees
Employees employed for as long as 30 years were limited in their work
professionalism, efficiency or the ability to communicate in English

Change proposition:

The provincial government decided that RDH needs modernization in 2001

It was then decided by late 2001 that Hotel International(HI), with its
reputation, credentials and brand name, would take over management
control of RDH in 2002 with Wen acting as a conduit through which the HI
communicated with RDHs board
Due to HIs take over, the Chinese board of management expanded from 4
to 20 with 11 new representatives from the co-owners of RDH, the local
tobacco producers Erhi T
HI, which would take over the management after August 2002 proposed
that by November 2002, the old section of the hotel would be close and
stripped for demolition. Only the modern, more expensive section of the
hotel would be open for the guests

With smaller number of rooms to serve, employee redundancies were

imminent as there were 675 employees while the estimated number of
employees required to serve the smaller number of rooms was around 350
HI planned to bring in eight expatriate professionals to manage the
takeover and later, when the time was right, expand their international
management team to include pastry chefs, an executive chef, food and
beverages manager and a much stronger professional management team
Paul Fortune, the GM appointed by HI announced that from the beginning
of August 2002, a two month training period for all the employees would
begin in search for employees with the right attitude and ability
He also proposed that the previously valued Guanxi networks would
become irrelevant and powerless as Co-owners Erhi T and provincial
government would have no control over the selection process and Erhi T
would be financing the employee redundancies or re-employing them
elsewhere