June, 26, 2017
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The Contribution Factor
Rule


The Contribution Factor has been used by many industries to quantitatively measure the effectiveness of management teams. Several years ago, we started using this tool to evaluate the profitability of hotels and resorts. The Contribution Factor turned out to be very accurate.

Why Does The Contribution Factor Work?
Premise 1: People make 95 percent of their total contribution to a position during their first three years in the position.
Premise 2: Plan your attrition.
Premise 3: When management turnover exceeds 20-30% per year, profit improvements will be minimal, or at best short lived.
Expected Contribution To Profit
Critical Evaluation
How Does It Work?
Uses For The Contribution Factor:
By the Hotel Management Team
By the Management Company or Chain
By an Owner, REIT, Pension Fund, or Financial Institution
By Potential Buyers of Hotels or Companies
By Chains to Evaluate Performance from Various Divisions
Job Applicants
When Interviewing