I learned about the Contribution Factor decades ago, During one of America’s boom times. Major companies were hiring by the thousands. Boards of Directors were getting uncomfortable. They started asking questions.
“Justify your hiring by the numbers?” Contribution Factor was introduced as quick, easy way to do that. At that time, I was at major corporation. Totally different industry.
Years later America was in another boom time. One of our staff read about the Contribution Factor. She asked if it would work in hotels and resorts? I didn’t see why not. She asked if she could run a test on 100 hotels. She put together excellent proposal. At that time hotel industry was broken into full service and focused/select service.
We identified Economy, Standard, Upscale, and Luxury full-service hotels. Added select service hotels charging various room rates.
We had the hotels send us 2 pieces of information from last year:
How long employees had been in their current jobs.
Total salary dollars.
Based on that we told them what their prior year revenues were.
Were we perfect? No, but we were never more than, 5% over or under. That demonstrated the Contribution Factor was accurate for hotel industry.
Remember the goal: quick, easy tool to measure revenues in advance.
What about for corporate offices? That was harder sell. Turned out lot of owners were not anxious to see how their numbers stacked up. We did find some that had total confidence in their teams. Contribution Factor proved out again.
Hotels quickly understood how to use Contribution Factor to anticipate their revenues. That enable hotels to adjust during the month. Anticipate for next month.
If revenue was going to be under projection they could adjust. Identify where they could raise rates. What incentive to offer for more business from corporate clients. How could they raise prices, offer more specials in F&B. Where to get an additional piece of group business. How to attract more locals. Small steps to make incremental increases in revenue.
Sometimes they achieved the months revenues. Other times they missed. When they missed they already know what had to improve the next month.
Contribution Factor encourages hotels to anticipate instead of react.
Coming next, articles on how EC’s and F&B Directors use the Contribution Factor. How to use Contribution Factor to advance careers. Become a better leader.
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Tom Ferree is the founder of Ferree & Associates and SecureEmploy, organizations focused on helping companies find exceptional talent and helping professionals advance their careers. Since founding Ferree & Associates in 1977, Tom has worked extensively with hospitality companies, executives, and rising leaders across the industry. Through SecureEmploy, he shares practical career strategies, leadership insights, and real-world advice to help professionals grow their careers and help organizations build stronger teams.
