Two Main Reasons of Failure of Hanon Restaurant - Case Study Example

Case Study: Hanon Restaurant Table of Contents Why did China Delight Concept fail? 3 Two main reasons of failure 4 Justification of the reasons for Hanon’s failure 4 How could Hanon be saved? 6 Using this case study to be a better manager 6 Works Cited 7 Name of the Student Name of the Professor Course Number Date Why did China Delight Concept fail? The Hanon Restaurant Group was best known for its chain of restaurants. It has three major subsidiaries of restaurants, Select Seafood, Italian Palace Restaurants and China Delight restaurant. Among these three subsidiaries the China delight restaurant faced unexpected downturn in terms of managing the internal operations, which got reflected in the decreasing customer foot fall. Eventually the company decided to discontinue the China Delight restaurant chain by closing off all the 51 outlets. The failure of China delight was a result of the consolidated effect of several inappropriate management decisions, which have been discussed below (case study). The business model followed by Hanon compelled the managers to follow all the rules laid down by the corporate office down to every word. Therefore, the corporate office had complete control over all the operational activities of the restaurant chain. Looking at the initial results of success, the higher management decided to expand the business of China Delight. After the expansion the problem started surfacing. As a result of the expansion, the management had to hire general managers from outside. This decision making eventually proved to be the root cause of the downfall of China Delight. The previously implemented model of close control by the corporate office started creating friction with the newly appointed managers. Moreover, they did not possess any experience to run chain restaurants, so they had to be trained in order to get them habituated with the business and operational structure of Hanon. The training did not prove to be fruitful for China delight, as the managers mostly ignored the instructions from the higher management and decided to run the operations based on their own knowledge and expertise. This as a result led to severe deviations from the operations manual provided by the corporate office thereby reducing its control over the restaurant chain. The newly appointed managers who did not had any experience in running restaurant chains failed to maintain consistency and quality standards, which hampered the brand image of the restaurant chain thereby reducing the foot fall level. The decreasing revenue and severe loss making became a severe concern for the company. Moreover, there was a communicational gap between the general managers and the corporate office, as the managers did not file regular reports and mostly ignored the instructions from the higher management; this as a result worsened the problem even further. There was also a great contrast in between the back and front office operations as there was a language barrier between the working staff and the managers. Thus it can be stated that the primary reason behind the down fall of China delight was insincerity among the newly appointed managers who chose to disobey the regulations and guidelines provided by the corporate office. Moreover, the communicational gap also enhanced the problem as the appointed managers belonged to a different cultural background than the working staff, which resulted in poor operational performance thereby degrading the quality of service and food. The gradual deterioration compelled the higher management to close off the China Delight restaurant chain to avoid further losses and brand dilution. Two main reasons of failure Among the several reasons behind China Delights’ failure, the following two are of extreme importance; the sudden expansion of the restaurant chain and recruitment of managers from outside the company. Looking at the surface results of china Delight’s success the corporate office decided to increase the number of outlets. This in turn compounded the problems as the higher management did not have enough internal managers to lead the newly opened outlets. This issue became the initiation of the second one. In order to compensate for the high demand of general managers, the company decided to recruit individuals from outside the company. The newly appointed managers were not habituated with the organizational culture of Hanon and despite of rigorous training they did not follow the instructions given by the corporate office. The sudden deviation from the organizational structure led to severe degradation of the performance of China delight. Moreover, the decision of hiring managers form external sources further enhanced the problem as they faced language barrier, which caused strong contrast between the back and front office activities. The poor management by the external managers was enhanced by the rapid business expansion by increasing the number of stores. The loss making and brand dilution was proportional to the number of newly opened China Delight outlets as the impact of poor management was reflected in all the 51 outlets. Justification of the reasons for Hanon’s failure According to the Hofstede’s framework proposed by Geert Hofstede, people belonging to different cultural background show different organizational behavior. The decision of incorporating general managers from outside caused severe cultural conflict, as they could not connect to the existing environment of the organization. Moreover, based on the success of the other two subsidiaries, Hanon decided to run China Delight by Chinese people in order to offer authentic Chinese experience to the customers. This worked well till the time the newly appointed managers failed to communicate with the Chinese staffs (The Hofstede Centre, “Culture Compass). Hofstede further mentioned that the Chinese populations are high on pragmatism, which suggests that they look at change with suspicion (The Hofstede Centre, “Country Comparison”). This as a result caused high level of conflict when the newly appointed managers decided to deviate from the previously assigned rules and regulation set by the corporate office. Moreover, the workers could not connect with the newly implemented system which in turn degraded the quality of operations; the waiting time of the consumers increased, the quality of food degraded along with their service quality. The performance monitoring and reviewing system was incorporated by the higher management in order to ensure that all the operational activities are running as per instructed. This was achieved by regular communication between the managers and the corporate office thereby allowing the higher management to have a clear insight of the organizational activities. At the same time the corporate office could also give necessary guidance to the managers in order to help them to run the business operations in a proper manner. This performance appraisal system failed to work out as the newly appointed managers did not maintain proper communication with the higher management thereby cutting all major forms of communication. Based on the organizational communicational theories the success of any organization is mostly dependent on the implementation of proper organizational communication (Mohammed and Rashid 220-230). A good level of communication allows the higher management to monitor the ongoing activities and make amendments wherever necessary. This allows the company to avoid any major down turn as the higher management is able to fix an issue before it grows any further. In case of China delight, the general managers did not file reports on a daily basis and they also avoided the instructions given by the corporate office. This as a result led to steep deviation from the organizational objectives which in turn caused severe down turn of the restaurant chain. According to the SMART goal setting theory, the organizational objectives should be set based on certain regulation in order for it to be successful. It suggests that an objective should be measurable and attainable. The progress towards the organizational objectives needs to be constantly monitored which will allow the managers to ensure that all the activities are moving towards the desired direction (UNH 2). The progress management system did not work for Hanon due to the poor communication between the general managers and the higher management. Moreover, the attainability of the organizational goal is also a vital determinant behind its success. The set goals and objectives should be attainable depending on the available resources and competencies of the organization. Over optimistic goal setting can lead to its eventual failure, thus the goal setting needs to be done based on the organizational capabilities. Hanon had set a goal of expanding China Delight without thinking if the existing resources and capabilities are sufficient or not (Kasim and Minai 297-316). Thus in order to compensate for the lack of general managers, it had to recruit them from outside. As a result, the external managers could not connect to the existing organization behavior and operational activities, resulting in the failure of China Delight. How could Hanon be saved? Hanon made a series of wrong decisions which if replaced with alternate decision could save the company’s down fall. The expansion strategies of Hanon need to be approached in a gradual manner. Instead of opening up all 51 outlets in a short time, the company could have increased its outlet number in a gradual manner. This as a result would allow the company to make proper resource allocation in the newly opened China Delight outlets. The corporate office could appoint internal personnel as general managers of the restaurants, which would avoid cultural conflict and communicational gap. Moreover, it would also allow the higher managers to properly connect with the workers, as they all belong to the same cultural background. Thus it can be stated that a gradual expansion would be a more lucrative and sustainable option for the company and it would also help the managers to focus on service and product quality of the restaurant chain (Gherbal and Shibani 3-6). Another reason for China Delight’s failure is that the newly appointed managers did not follow the given regulations by the corporate office. This could have been avoided by employing a more strict performance and activity monitoring system in the subsidiary (Scott and Madsen 4-6). This as a result would compel the managers to follow the given instructions. The organizational structure of Hanon needed to be reorganized in order to ensure a seamless flow of information across the hierarchy. Incorporating a floor manager who could look after the proper implementation of organizational objectives would prove to be fruitful for the organization (Camardella 103-107). The floor manager could also act as a quick medium of communication between the workers and the general managers. This in turn would solve the problem of communicational barrier. Thus implementing these proposed strategies, the company could have been saved from its down fall. Using this case study to be a better manager The Hanon’s failure to maintain China Delight, gives a lot of insight to become a better manager. In order to be a successful manager, one must ensure that the organizational objectives are designed based on rationality and available resources of the organization. Moreover, a good manager should have a certain leadership qualities and communicational abilities. This will help him to properly connect with his subordinates more closely and enhance the level of motivation among them (Suan 21-23). In order to avoid organizational downturn, a manager needs to strictly follow the organizational mission; this will allow them to make sure that all the activities are progressing in the desired direction thereby confirming sustainability and growth. Works Cited Camardella, Mary. “Effective Management of the Performance Appraisal Process,” Employment Relations Today, 30.1, (2007):103-107. Print Gherbal, Nawal and Abdussalam Shibani. “Critical Success Factors of Implementing Total Quality Management in Libyan Organizations”. International Conference on Industrial Engineering and Operations Management. (2012): 3-6. Hofstede centre. “Country Comparison”. Hofstede Centre. Hofstede centre. 2015. Web. Hofstede centre. “Culture Compass”. Hofstede Centre. Hofstede centre. 2015. Web. Kasim, Nor Aziah Abu and Badriyah Minai. “Linking CRM Strategy, Customer Performance Measures and Performance in the Hotel Industry” Int. Journal of Economics and Management. 3.2. (2009): 297-316. print Mohammed, Abdul Alem and Basri bin Rashid. “Customer Relationship Management (CRM) in Hotel Industry: A framework Proposal on the Relationship among CRM Dimensions, Marketing Capabilities and Hotel Performance”. International Review of Management and Marketing. 2.4. (2012): 220-230. print Scott, Ed and Susan Madsen. “Evaluation of Managers: The Challenges of Employee Evaluation of Managerial Staff Through The Use of Performance Ratings”. Woodbury School of Business. (2009):4-6. Suan, Choo. “Factors That Influence Employee Engagement: A Study of Celestica Malaysia” Universiti Utara Malaysia. (2009): 21-23. UNH. “Developing SMART Goals” UNH Performance Management. (2007): 3. Print. Read More