ARISE: A Destination-for-a-Day Spa

A new Dallas-based health and beauty spa aims to use a highly distinctive human resource system as the foundation of its competitive strategy. By encouraging employees to act as "personal wellness coaches" (PWCs) with high commitment and broad responsibilities, the leadership intended to provide a level of client service that would justify premium rates. However, the system is not working. Issues include: tips are lower than expected, reducing expected compensation; scheduling issues create bottlenecks; and the level of commitment varies among PWCs. The result is a high employee turnover rate, and departing employees take an average of 35% of their client base with them when they go. Now, with financials for the spa's second year completed, the VP of spa operations, the VP of business operations, and the CEO must evaluate what is and what isn't working.