Lifestyles Fitness Centres: Case Study

The Case Analysis of Reyes Fitness Center, Inc. and the Changing the Role of Human Resources

The Reyes Fitness Centers, Inc. (RFC) was started in May 1999 as a result of the early 1990s when John Reyes amassed $150,000 of his own money and also from other resources which three of his college friends who attended the same business classes at the University of North Carolina had also initially invested. In the city of Raleigh, North Carolina, the first health club was not too far from its Alma mater and was popular at once. Such health clubs have a number of modern training facilities, exercise classes, personal trainers, an outdoor swimming pool, daycare, and a kitchen. Through continued private investment, Reyes started to expand from 1999 to 2007. At the end of the fiscal year 2007, the Reyes brand grew to operating 28 fitness centers, grossing over $51 M in revenue, $1 M in net income due to the 900 + employees, overhead expenses, and other liabilities (Sherlock 2008). Obviously, John tended to maintain a high debt-to-equity ratio as part of John's initial success, but the long-term effects would pay off dramatically as short-term debts are paid off.

Identify and Prioritize

The Reyes Fitness Centers, Inc. a rapidly growing medium-sized business in an over-saturated market, faced some serious issues as user retention was seen as 20% below the industry average (Sherlock 2008). As John had started to scale back his day-to-day involvement and transitioned into the role of chairman, he incorporated general managers at each of his centers, then fully removing himself, John hires Mike Lowe who took over the reins and fully morphed into the role of CEO. Mike seemed intent on utilizing more traditional means from his experience and understanding of running other fitness industry businesses, into his strategy which included lowering costs to combat losses of revenue. This time seemed like the perfect time for Lori the HR director to step up and devise a way in which HR might be able to help contribute more to the issues the company was facing by using.

Challenges

As with most service-based companies, customer service is an integral part of a company’s success, especially in regard to the specific problems facing the Reyes Fitness Centers. Unfortunately, because of the lack of training, the quality is less than satisfactory and management is not stepping up to change the problems at Reyes Fitness Centers. In order for any enterprise to grow a company needs empowered and informed employees to have happy customers. Every query Mike seemed to face was due to the existence of the company as it operated currently and not knowing the workers or their history and capabilities made his decisions that much harder as he only saw the financial and revenue issues as an issue in itself not as a part of employee interaction or culture. If a major business concern is felt from the top occurs, it will be clearly felt from within the organization. It's clear that the very real challenges facing the Reyes Fitness Centers and their overall strategic goal should be focused on client retention, but how to do that without knowing the employees can be a daunting challenge for a new CEO, which is the case in which Lori has the ability to offer resolutions based upon her more familiar strengths and weaknesses regarding the staff. This is also a strength of having not only individual HR responsibilities broken up within an organization but an even larger strength is demonstrated here when there is also a centralized HR department that has a better understanding of the strength of not only each center but the company as a whole. Lori’s strategic scorecard approach that suits the company's strategic objectives should focus on the investment of the people within the organization, provide learning and training opportunities, create new and measurable performance goals, and provide the opportunity for individuals to contribute to the learning and performance methods. As this is coming from an HR-premised background, the scorecards created should also include other organizational areas within the company and should also be tracked, in order to achieve the overall desired business strategy results. There are some changes in the organization, when HR shifts into a strategic position, the Department needs to remind all employees of the importance of maintaining the status and standards. A clear measurable goal that also focuses on internal communication and engagement should be included in the scorecard. That's the other way around what RFC needs to do 'changing our relationship with our service provider and having service providers change their relationship with each other. In consulting terms, we need more balanced contracting, more joint discovery, and a new dialogue' (Block 2015).

Lori’s HR department should provide its staff with the experience of a marketing consultant in order to develop a better means that employers can use software to reach current employees and new customers. Generating an email marketing type of campaign application that allows prospective and current club customers to plan their visits would make them and RFC more accountable for interaction, both what the club can offer at the time of the visit and what the customer can get out of it. Subtle messages that they did good work during their visit or that they were missed by RFC for today's workout will help create a habit-forming thought process which leads to long-term involvement and better sourcing of employees “HR professionals need to build a compelling intellectual and emotional case for change. The intellectual case often comes from empirical evidence that successful change will lead to positive personal or organizational outcomes' (Ulrich Et al. 2012). Furthermore, job analysis can help find out what each person does and what adds value to the organizational success and can even recognize what may not add value, thus being able to train staff better and become more focused on offering other facilities and services. When performing a work review, Lori's learning on developing the scorecard is tailored and precise enough to influence the results in a short time, which has been monumental for RFC.

Understanding the Strategy

Documentation throughout the process of Lori’s challenging tasks would provide good, conceptual guidance about how other companies should build, tailor or execute their version of HR scorecards. Regrettably, in their quest to find the elusive numbers, HR officials took a hard jaunt in most cases and mostly stuck to only what they know. Misguided metrics are typically centered around HR efficiency improvements like the time it takes to get a new hire and onboarding. Measurements of efficiency are reliable ways of measuring performance, but not enough in offering a better and more impactful voice as Lori did. Through demonstrating more efficiency, costing controls assess their effectiveness and HR should in reality be able to provide real business implications and take simple and direct measures if it wants to be a legitimate business partner that contributes more to revenue influx measures.

Managers such as Mike Lowe would want to believe in the interest of their workers but often struggle to really understand how the role of HR actually supports the importance of the employees of the company. Usually, HR fits a staff commitment score that is not a business result. We may also provide indicators for selling trends, but these statistics tell us nothing about what really drives sales. The establishment of sound parameters from Lori’s actions to promote business-driven results will strengthen their accountability and give her and other future HR leaders a better chance to become more respected consultants in the future as well as a distinguished voice.

Innovations

What drives business results in one company The side individuals can not contribute to business results in another, as each business is unique. Therefore, it is important to evaluate the data and to link it to business performance. There is still no standard set of accepted parameters for human resources, such as billing. For HR, that's not bad, as different people-focused initiatives will affect company results differently. Innovation can be a vital skill for Amazon, but not so much for local hardware store employees.

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The brilliance of this personalized, analytical approach that Lori has enabled, is that it will make her more trusted and listened to. Envision when she might have displayed to the executives such as John and Mike how her HR scorecard and revealed the statistical metrics as to why the business results of Mike's decisions and the diminished returns for each of his choices were causative. Also, envision when Lori demonstrates how her measurements for her HR recommended scorecard efficiency measurements could be appropriate and develop a more efficient means of operating.

Lori was correct as to how she convened with her staff before such a new HR initiative and scorecard method was to be put in place, which was likely to affect all or nearly all of RFC’s employees. The creation of the SHRM-guided measurements as was suggested to her are only as important as the buy-in and communication of the measurements to the rest of the staff. The findings of Lori’s research on the new HR system indicated the formation of measurements to be included in the scorecard. If involvement in the flexibility of the programs contributes to lower customer turnover rates and higher productiveness from their employees, then it would be an invaluable metric to include as a participation rate target in this new program.

As Lori mentions during the staff meeting “To add strategic value, we must shift our focus to measure outcomes, not activities. Further, those outcomes must add essential value to RFC’s ability to execute its strategy and meet its objectives” (Sherlock 2008) the following are some suggestions for measurable activities that would add value.

Suggestions regarding how RFC should collaborate with the trainers between the non-busy times to depict how a successful customer engagement conversation should flow, and that end with more committed visits from patrons and purchases from the business. In the non-peak times, customers who are interested in attending online lessons to learn about new techniques before they attend a gym session should be a member or be a service that allows a non-member to pay the gym's viewing fee.

Culture is a big part of changing a business into a better and more prosperous enterprise. If employees feel that they can more easily approach management, with their own proposals or work-based problems, they will also want to stay with RFC and be a part of the changes. One harsh issue that Lori faces is the employees who are only available for a paycheck and how to handle those issues of either retraining, relocating to another department, or expelling them from the company. It is better to maintain and train willing employees, regarding customer cares or how to respond to consumer grievances which are important and also a measurable act that could also be a part of the new bonus compensation system that is also suggested.

It is pertinent that Lori’s management team be present and engaged to deal with the many changes that will be taking place as changes are made. They may already know who deserves an increase, bonus, or recognition, but with this new culture change, everyone should be scored in a non-biased manner allowing everyone a fresh start, pending there are no current violations. This way it would be known that the month's best employee has their pictures on every RFC place while their customers walk. This method of public praise will illustrate that both customers and employees appreciate the efforts made by RFC to assist their employees. The best thing to do is to have low costs but a huge impact on the results-driven metrics.

Conclusion

It is to be concluded, that the issues the Reyes Fitness Centers, Inc was facing are clearly outlined and that alternative recommendations and suggestions were suggested. As some front-line employees and managers face challenges, their first reaction when they hear about corporate distraught is to resort to self-preservation and that isn’t healthy especially when RFC was facing the challenge of maintaining and growing customer engagement and commitment. The best practices and references as provided by the SHRM acted as a helpful guide to Lori and her team in allowing her to develop methods that would impact the bottom line and contribute to solving the real problems they were facing with the tools and methods that HR had within their control. As a lesson to other managers, it is important to realize what tools you have available to you, and as Lori use those tools to your advantage.