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Does It Reflect on Students' Financial Literacy?

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Does It Reflect on Students' Financial Literacy? A Systematic Analysis of the Financial Competencies in the Hospitality Industry: Does it Reflect on Students’ Financial Literacy? A Project Presented to the Faculty of California State Polytechnic University, Pomona In Partial Fulfillment Of the Requirements for the Degree Master of Science in Hospitality Management By Chongwen Xie 2018 SIGNATURE PAGE PROJECT: A SYSTEMATIC ANALYSIS OF THE FINANCIAL COMPETENCIES IN THE HOSPITALITY INDUSTRY：DOES IT REFLECT ON STUDENTS’ FINANCIAL LITERACY? AUTHOR: Chongwen Xie DATE SUBMITTED: Fall 2018 The Collins College of Hospitality Management Donald St. Hilaire Project Committee Chair The Collins College of ______________________________________ Hospitality Management Zhenxing Mao Project Committee Member ______________________________________ The Collins College of Hospitality Management Linchi Kwok Project Committee Member ______________________________________ The Collins College of Hospitality Management ii Abstract This paper presents a systematic analysis of the technical skills required by the hospitality industry. The financial competencies identified in the literature include: handling payments; cost management; profit control; forecasting and budgeting; labor scheduling; transactions supervision; revenue management; and, data and reports management. This study emphasizes the links between financial competencies and financial literacy by exploring approximately 36 published articles and unpublished dissertations from the past two decades. A holistic reflection of the links and gaps between financial competencies and financial literacy will be used to identify which competencies are missing in students’ literacy skills. In addition, this study indicates the need and requirement for financial competency skills in the hospitality industry, specifically, within the food service component. Based on the above content, the study will identify what type of hospitality job positions might be suitable for students with different backgrounds. The implication of this study is to point out the entry requirements of job positions related to finance in the hospitality industry and indicate the expected knowledge levels of industry practitioners. Keywords: Financial Literacy, Financial Competencies, Educational Attainment, Hospitality Industry Expectation, Training Program iii Table of Contents Signature Page……………………………………………………………….………..ii Abstract……………………………………………………………………….………iii List of Tables…………………………………………………………………….…….v Introduction……………………………………………………………………….…...1 Literature Review ……………………………………………………………………..3 (i) Definition of Financial Competency……………….................................................3 (ii)Financial Competencies Required in Industry…………………………...…….…..4 (iii)Critical Financial Activities Needed in the Hospitality Industry….…...……….....5 (iii)Training Programs in the Hospitality Industry………………………………..…..8 (iv)Definition of Financial Literacy……………………………………….................10 (v)Financial Literacy in Educational Background……………………………….......11 (vi)Role of Household Income………………………………………………...……..21 (vii)Additional influencers on financial literacy (Ethnicity, Gender)……….……….23 Methodology ….…………………………………………………..............................27 Results………………………………………………………………………………..29 Discussions.………………………………………………………………………......36 Conclusion………………………………………………………................................47 Limitations and Future Directions…………………………………………………....48 References………………………………………………………………………….49 iv List of Tables Table 1. Financial Literacy of High School……....………………………………...13 Table 2. Financial Literacy of College in Education ……………………………....15 Table 3. High School Test Results in Financial Literacy……………………….......15 Table 4. Financial Literacy of College Students in Money Management…………..17 Table 5. Outline of Financial Skills in Education Attainment ...................................20 Table 6. Test Results of Financial Literacy by Household ………………………....22 Table 7. Asset Ownership and Financial Literacy……………………………..........23 Table 8. Differences (%) in the Mean of financial literacy.………............................25 Table 9. Regression on Financial Literacy Score……...……………………….........26 v Introduction Hospitality management is an experiential and practical major, highly involving practical skills, whereas conceptional education may not fully satisfy requirements in some professional environments, such as specific hospitality positions, particularly in financial positions like the Accounting and Financial Department and the Marketing Department. This paper will introduce a brief conceptual framework in financial competencies and compare current financial literacy with financial competencies required in the hospitality industry. The expected findings can be considered as a reference towards job selection and career path in the future. Additionally, this study will highlight how financial competencies are aligned to financial literacy, since Chen and Volpe (1998) point out that lack of financial literacy is likely to lead to biased decisions that might directly affect financial planning. With the increasing significance of managing personal financing nowadays, people should be able to handle the balancing of their saving and checking accounts, lifelong personal health or labor insurance as well as car and house loans. Seriously, any false monetary choices of individual households negatively influence financial wellness and raise a chain of economic problems locally and even globally. A remarkable example is the great recession in 2008, known as the recent worldwide economic and financial crisis. Thus, it is important to identify how financial literacy affects competencies and what financial skills and knowledge might be commonly missing in students’ mindsets. 6 Objectives The objectives in this study emphasized: (1) introducing a brief conceptual framework in financial competencies and summarizing what factors will directly affect financial literacy; (2) comparing current financial literacy with financial competencies required in the hospitality industry, like hospitality certifications and food service; (3) exploring the extent to which students’ financial literacy match the job requirements of financial positions within the hospitality industry; (4) demonstrating what financial competencies are crucial for hospitality managers and making suggestions that will guide them to accurately understand their career path. 7 Literature Review Definition of Financial Competency With the Charted Global Management Accountant (CGMA) competency framework, Amato (2014) defined four categories of skills that finance practitioners should possess in their organizations’ operation: technical, business, people, and leadership. Organizations should have a deep insight into the CGMA competency framework, and be able to offer employers a reference underlying CGMA financial competencies, establish clear training programs, and offer education institutions a reference structure (Amato, 2014). The four knowledge areas of financial competencies are divided into four proficiency levels: foundational, intermediate, advanced, and expert. Individuals will focus on different areas when they progress continuously by enhancing proficiency and experience; the weighting of each knowledge area varies by proficiency level and position. For instance, basic-level professionals may be relatively proficient on technical skills, while advanced-level professionals emphasize leadership skills (Amato, 2014). Technical skills include data reporting and accounting, cost accounting, treasury management, tax strategy and planning, and compliance, storing and analyzing information to which investors and stakeholders are accessible. People skills are widely used in decision-making actions and the mindset of investors as well as stakeholders, such as negotiations and collaborations or partnerships. 8 Business skills require finance professionals to deal with strategy, market, and the business environment, customer relations, project management, and economic analysis with the business knowledge and background to turn statistics into business scope. Business skills help organizations to measure and forecast their strategic position, as well as create a business model linked to their strategy, performance, and opportunities. Leadership skills are implemented at different levels. There are three categories of leadership that have been identified: peer, functional, and strategic. Peer leadership includes a comprehension of related financial implications in events and problems in both the organization’s interior and exterior operating environments. Functional leadership is involved in accomplishing its leadership objectives for the organization, being frequently used at the advanced level. Strategic leadership is executed at the strategic level. Experts, accompanied by leaders in other functional areas, will jointly define, enact, and monitor the implementation of the organization’s strategy. Financial Competencies Required in the Hospitality Industry Financial competencies are integrated into almost every aspect of hotel and restaurant operation. Given this diversity of hospitality operations, hospitality management requires basic financial competency in the hiring process, across all positions including front-desk staff, bottom-layer management (e.g. reservation management), medium-layer management (e.g. front-desk manager), and advanced-layer management (e.g. general manager). 9 Burgess (2007) explored the expectation
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