Robert J. Habeeb leads First Hospitality Group through the recession without slashing jobs

Robert J. Habeeb, President and COO, First Hospitality Group Inc.

Robert J. Habeeb had no intention of taking the easy path to lead First Hospitality Group Inc. through the recession. He wasn’t about to slash jobs and close hotels and then sit in his office and wait for the economic storm to pass. In fact, Habeeb was even leery about cutting bonuses.

“We took a contrarian approach,” says Habeeb, president and COO at the 2,000-employee hotel management company. “Everyone would have understood if we had cut benefits or did away with reward programs or things like that. We did none of that. All of our benefit programs and our sophisticated network of reward programs are what we use to motivate the team. Our approach was to tell the team that their jobs were secure and we didn’t intend on laying anyone off.”

This was, of course, good news for employees at First Hospitality. But could Habeeb really pull it off? Could he manage through what was going to be viewed as the worst economic slowdown since the Great Depression without laying anyone off?

It was going to be a challenge because the hotel business was one of many industries getting slammed by the recession.

“We found ourselves, after a wonderful year in 2008, falling right off the edge businesswise in terms of consumer spending in 2009,” Habeeb says. “We didn’t know where the bottom was and there was a long period of time where the best news you could hear was that it didn’t get worse and that news didn’t come. We expected our strategy, which was to hold firm and keep the team together as best as we could, we knew that would be in jeopardy if things diminished to the point where we had no choice but to go to some of those measures.”

Habeeb made no promises. But make no mistake; he was putting himself out there with his people. By being public about his belief that First Hospitality could manage through the recession without draconian cuts, he was offering hope that could easily have been dashed. And that would have made the bad news and ensuing cutbacks that much more painful to take if it came to that.

“It would be untruthful to say that it’s not difficult,” Habeeb says. “The picture just looks so frustratingly bleak. But there’s nothing to be gained by not having yourself in forward motion and dealing with it.”

Steady the ship

Habeeb needed to speak to his people. The stock market was crashing seemingly every day, keeping people away from his hotels in droves. But perhaps just as bad, the news was only fanning the flames of fear in his employees.

“It’s the fear of the unknown that’s really wreaking havoc on the markets and creating a lack of confidence,” Habeeb says. “We tried to overcompensate for that. We communicated regularly with our team. We told them where we were at. We told them what our strategy is and how it’s working. Our employees really like that Steve Schwartz, who is our chairman, and myself, we went to great lengths to interpret what’s happening in the economy and what impact it’s going to have on our company, our business and their job.”

That last part is crucial to any kind of pep talk you might try to give your people when times are tough. As much as they may appreciate your financial analysis, they really have only one concern.

“Their first concern is how does this impact me?” Habeeb says. “While all of us in the business world are very quick to talk about our companies, translating that down to, ‘and here’s the impact this will have on you,’ is really critical.”

If you’ve hired good people, they care about your business. But when they see people losing their jobs every day on the news, your employees may quite understandably become very selfish. You’ve got to give them a reason to believe in you and a genuine indication that you’re thinking about their futures, along with the future of your business.

“You need to take time to rehearse in your head what you’re going to say and what questions you’re likely to hear from the audience when you open it up to questions, while at the same time avoiding sounding rehearsed at all costs,” Habeeb says. “My armchair analysis of what people are becoming really frustrated with today is everyone knows we’re dealing with a tough economy. Mr. and Mrs. Front Porch are getting tired of the demagoguery and the rehearsed speeches with punch lines. What we found is that people really respond when they know you’re talking from the heart and when you’re speaking with honesty and humility.”

Habeeb laid out his plan to not lay people off and not cut employee pay. He quickly added that despite this plan, it wasn’t going to be business as usual at First Hospitality.

“We’d all be going a year without a raise, but no one was going to be asked to take a pay cut,” Habeeb says. “A key on the employee side is fairness. What we find is everyone is willing to do their part so long as they perceive that everybody else is doing their part. The strategy I suggested can come back to bite you if you’re not equally asking everybody to shoulder the burden. We made it clear from the beginning that everyone in the company is going to do their part.”

Show appreciation

So what did Habeeb have in mind to manage through the recession without layoffs and without pay cuts? Well, he started by getting laser focused on the costs he could contain.

“We’re in the service sector, so labor is important,” Habeeb says. “Since we made the conscious decision not to have cutbacks and layoffs, managing the schedule and scheduling people properly became critical. It was making sure that we have enough people to service our guests when we were busy and when we’re not busy, we sent people home early. Those are the day-to-day things, the business of doing business.”

This strategy can easily lead to hard feelings if you’re not careful.

“The easiest way to deal with a situation like this is to begin to cheat everybody,” Habeeb says. “You can cheat your guests and cheat your employees. The proverbial take the beef off the bun in a hamburger restaurant. But our belief is that is a very short-sighted strategy and it’s going to come back to negatively impact your business very quickly.”

The obvious answer, which isn’t always easy in practice, is to maintain the same level of customer service with fewer people and make sure you’re not shorting or favoring one group of employees over the other in terms of how work and responsibility is distributed.

But in addition to trying to be fair, you’ve again got to show employees that you truly value their presence at your company. You don’t need any money to do that.

“You’ve seen all the studies that talk about how people in job satisfaction, they look to monetary reward,” Habeeb says. “But they also look for recognition. They also look for feeling appreciated. They look for a sense of belonging. We really play heavily on those things and on making sure everyone feels part of the team and helped make the decisions on what we were going to do to keep our company healthy during this tough time.”

Habeeb’s ability to manage costs would ultimately determine whether he could get through the recession without having to lay people off. So why not get the people whose future is at stake involved in the effort?

“You have to ask yourself, ‘Am I truly fostering an environment where people feel comfortable giving feedback?’” Habeeb says. “The biggest wall that you have to knock down in getting honest feedback from your team members is that everyone is afraid of communicating upstream to the boss and that there might be consequences if they are critical.”

Talk to your people about the personal challenges that they face in making ends meet. Make that connection that will enable them to feel better about offering you their suggestions. And try to remove that image of you being the person who is looking to catch employees doing something wrong.

“We try to go out of our way to catch them doing something right and then compliment them for it,” Habeeb says. “People identify with a leader who brings themselves into a room as someone who speaks with humility and a little bit of humor and talks to people shoulder to shoulder and on their level. My experience over the years is that people really embrace that.”

It’s got to be genuine, however. If you really want to build those bonds and earn their loyalty, it’s got to be more than small talk.

“Focus on the human side,” Habeeb says. “If you can’t relate to those folks and empathize with them and learn from them, it won’t work. I’ve learned a lot.”

Make some money

The other piece of Habeeb’s plan to successfully navigate the recession without cutbacks was to find areas where the company could make money.

“When the market softens up, you either have to shrink with it or attempt to gain share to get back what you lost from the market circumstances,” Habeeb says. “For some reason, when times get tough, there is this natural tendency to begin making cutbacks in areas like sales. Our view has been that that is crazy. At a time need to grow share, you need to deploy more assets against that problem rather than less. We actually staffed up in our sales area during this last downturn and it helped us.”

Don’t just talk about how tough things are out there and wallow in frustration. Do something to make your situation better.

“We tried to be as forward-looking as we could be,” Habeeb says. “I found that was of great psychological help to the team. We’re all in recession fatigue. I’m so tired of hearing about it. We found that it was of great benefit psychologically to show that the company is still forward-looking and we still have a growth plan.

“We changed offices. We upgraded our computer systems. We spent over $1 million upgrading our IT infrastructure over this time because it was prudent to do so. There are so many vendors out there that are far more negotiable than they were a couple years ago. Because we have a clean balance sheet, we took advantage of that to undertake big projects. People saw that and I think they took comfort in it.”

Your people feed off the confidence or lack of confidence that you convey to them.

“Regardless of what words we use, if the company is seen to be shrinking or running or not continuing to look forward, than they know we might be in trouble and we have an inward focus and we’re becoming battered by the recession,” Habeeb says. “We want to set that example that we’re dealing with it like everybody else, but we’re continuing to look for a better tomorrow.”

The team approach has paid off for Habeeb and First Hospitality.

“We’ve grown our business through this recession,” Habeeb says. “We certainly were faced with the same challenging environment as everybody else. But we doubled our efforts and worked hard at marketing our hotels and maximizing the revenue potential. I’m very proud to say through this recession, and after 9/11, we didn’t lay off a soul and in fact we added jobs back.

“We made it clear we were all going to hang together and that the company wasn’t going to back down from its responsibilities. We hoped everybody would follow our example and people did.”

How to reach: First Hospitality Group Inc., (847) 299-9040 or

The Habeeb File

Born: Scranton, Pa.

Education: Undergraduate degree, general business, Lackawanna College, Scranton, Pa.

What was your very first job?

While I was going to college, I took a job in a bar and restaurant. That’s how I got drawn into this industry. I fell in love with it and stayed. It was exciting and very people-oriented. It’s pseudo entertainment. For a young person, it was pretty exciting on a daily basis. You were in the middle of things that were happening. I worked my way up. I have done everything from tending bar and cooking to serving guests and managing. There isn’t much of this industry I haven’t done at some point.

Who has been the biggest influence on you?

Far and away, my dad. I teach a grad class and I ask this question and I’m amazed at the number of people who have that same answer. So much of your character is developed by the time you are 18 years old and I give my dad No. 1 position there. And I’d say Steve Schwartz, who is the [CEO], chairman and founder of this company. I’ve been here since 1997.

What was the most important thing your dad taught you?

Integrity. My dad was very old-fashioned and old-school. Hard work and integrity, those were all lessons he really pounded into our heads.

What is the advice you’ve ever been given?

Protect your name. If everything you do, you remember in the back of your mind that you’re signing your name to it and you only endeavor to do things you’d be proud to sign your name, too, then you never do things you wouldn’t.