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the links between financial competencies and financial literacy by exploring approximately 36 published articles and unpublished dissertations from the past two decades.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 and understanding of financial
controllers, focusing on whether hotel managers had the basic financial competency to
manage their business effectively and strategically. The results reflected a huge
demand for managers with developed financial skills, associated with the prevailing
perspective that management may use such skills to monitor revenues and costs.
Burgess (2007) suggested that specific and professional financial training needed to
be offered to both entry-level managers and non-financial managers, specifically to
those working at lower levels of management, as these managers may need to develop competency in budget control.
Another study, by Birdir and Pearson (1998), emphasized that hotel managers needed financial competencies to deal with different routine tasks, including cost management, budgeting, data analysis, and property management. Yang (2014) summarized other research in this area and listed that there are many widely desirable financial competencies in the hospitality industry, such as budgeting, financial analysis, forecasting, revenue management, and asset management. In the lodging industry, Yang (2014) established a research study to evaluate and analyze the role of finance in management and finance competency skills in the lodging industry from both management and financial practitioners’ perspectives. The conclusions indicated that financial competency skills, including budgeting, financial analysis, pricing strategies, forecasts, and planning, were viewed as critical to hotel managers. In the food and beverage service, Yang (2014) pointed out that financial competency was
seen to be one of the most essential skills in management. Indeed, managers in food 10 service usually made decisions with accounting and finance skills, particularly in transactions, inventory, invoicing, and pricing.
Critical Financial Analytical Skills Needed in the Hospitality Industry
Numerous researchers have supported that financial analytical skills are important in hospitality practitioners’ career paths, as financial competency is valued by hospitality employers (Green & Weaver, 2008). For instance, Burgess (2007) pointed out that financial analysis plays an important role in financial skills, since it helps financial staff to divide monetary affairs into a series of items for further planning in business.
Given the high demand, along with the lack of qualified candidates in financial analysis within the hospitality industry, it is critical to be aware of the differences between industry expectations and students’ ability. Especially, corporations should ensure that those freshmen would be willing to enter this industry after being specifically trained, leading those candidates to fulfill tasks efficiently and balancing profit and loss.
According to Vega (2012), there are several key competencies a qualified candidate or employee should possess: handling cost and revenue, matching the results to budgets and forecasts, and taking actions to improve operations. Green and
Weaver (2008) have suggested that analysis of financial statements, cost controlling, capital management, financial planning, and budgeting were primary financial competencies needed in managerial positions. These positions manage forecasting and
11 costs, revenue, and capital.
Revenue management (RM) is an essential skill in accounting and finance for hospitality operation, since job assignments in RM positions are mostly related to tasks and strategies in finance management (Vega, 2012). Forecasting, budgeting, and yield management are the responsibilities of revenue managers. The hospitality business is complex in nature, because of its widespread operation with a stationary dimension, and employees will promptly react to variable customers’ demand, intangible inventory, seasonal expense, and diverse consumer segments (Burgess,
2007). In fact, RM could effectively lower the loss from perishable products in food service, avoiding unnecessary purchases and wastage (Birdir & Pearson, 1998). RM has enabled hotels to acquire a nearly 2% to 5% increase in revenue through dynamic pricing.
Forecasting is another inevitable financial activity to implement revenue optimization. Within the hotel industry, which is always aiming to increase its revenue, forecasting activities mainly focus on accurate estimation of flexible demands such as demand for room rate and availability. Financial forecasting enables hotel managers to theoretically predict sales and operating expenses, and to avoid shortfalls in RM
(Green et al., 2008).
In addition, budgeting is a frequently used competency for forecasts and cost control, widely covering many financial positions in the hospitality industry, particularly in hotel management. Green and Weaver (2008) noted that budgeting
12 practices for cost control would remarkably optimize business operations. As most
hospitality functions involve a high amount of fixed costs and variable costs,
budgeting means cost control will tightly influence profit and loss in the hospitality business. Specifically, budgeting primarily serves for capital expense and cost; both are critical for hospitality management to gain an insight into budgeting strategies in capital expense, since a huge part of their revenue is subject to capital expense.
Thus, with the emerging demand in hospitality corporations along with job requirements, financial competencies have rapidly stimulated the need to deal with crucial financial issues and relevant activities that positively affect revenue and profit.
Financial practitioners should improve service quality by balancing revenues and minimizing costs. Therefore, hospitality practitioners should create a holistic understanding of the functions of cost control and revenue management, as well as other financial competencies frequently used in 24/7 operations.
Training Programs in the Hospitality Industry
Panda Express Pre-Entry Training
For the cashier: Since this position is accountable and responsible for processing
sales and transactions, as well as assisting with inventory purchase and stocking activities, cashiers need to be trained before entry in how to fulfill all responsibilities assigned by either the corporation or a regional department. This training mainly focuses on cash handling and monetary payments, as well as learning customer service, cash-handling policies and procedures, transactions verification, and
13 operating electronic machines to process data.
For the store manager: The pre-entry training will mainly focus on the following
sections:
(i) Overring (An overring occurs when the cashier tenders out the sale and over
charges the customer. Or tenders out before the sale is done, or the customer changes
their mind.
(ii) Check the billings
(iii) Increase/decrease to change/register funds
(iv) Verification of cash funds
(v) Bank deposit/change fund order
(vi) Inputting cash sheet (end of day)
(vii) Cash over/short
(viii) Customer deposits (catering orders over $200)
(ix) Safe type and security
(x) Cash Pull
Olive Garden – Casual/Upscale
Olive Garden Manager-in-Training (MIT) Program
Manager-in-Training is an extensive training program, lasting for approximately
12 weeks. During the first phase of the program, trainees go through 8-weeks
fundamental training. They need to take additional specialized training at the Darden
Restaurant Support Center in Orlando, Florida, for four days. Each candidate is
14 instructed by a coaching manager who acts as a mentor for the remaining three weeks
of training. For the accounting and finance section, a new restaurant manager learns
the following: inventory tracking; invoicing; menu pricing; front and back of house reporting; and profit and loss reporting.
Marriott Hotel
Voyage Global Leadership Development Program
Voyage Global Leadership Development in Marriott International will last for around 12–18 months. This training program grants assistance and opportunities for potential leaders across branch companies in Marriott’s portfolio. Voyage Program
highlights are:
• Taking hands-on and virtual training in many disciplines: accounting & finance,
revenue management, sales
• Committing yourself to the operations of a hotel through mini-departmental
rotations
• Creating a social network with global colleagues through social collaboration
tools
• Engaging with Marriott senior leaders.
Definition of Financial Literacy
With the increasing significance of managing personal financing nowadays, people should be able to handle their saving and checking account balances, lifelong
15 personal health or labor insurance, as well as car and house loans (Ambuehl,
Bernheim, & Lusardi, 2014).
Generally, financial literacy originates from basic learning of monetary matters,
as Ambuehl et al. (2014) described. Therefore, financial literacy is being increasingly seen as fundamental within long-term academic education, affecting financial
well-being, economy issues, and lasting financial decisions (Nguyen, 2013). Another viewpoint, proposed by Dameron (2017), is that financial literacy could be an integrated financial comprehension facilitating financial empowerment, leading individuals to maintain a satisfactory monetary saving in the upcoming years. This
definition asserts that as an everyday routine to manage personal finances, the level of
financial literacy should be evaluated and efforts analyzed.
On the other hand, Chen and Volpe (1998) pointed out that lack of financial literacy was likely to result in biased decisions that might directly affect financial
planning. With increasing monetary circulation currently, transactions are mostly
processed through bank accounts within a short time, including stock, mutual fund,
insurance, as well as car and house loans. Any false monetary choices by individual
households negatively influence financial wellness as well as financial decisions in
job positions.
Financial Literacy in Educational Background
Financial Literacy in High School
Previous studies have discussed the importance of financial literacy, the role of
16 financial education, and the demonstration of financial competency, indicating that
personal finance education needs to be popularized early at both home and campus.
Ideally, the basic concepts of personal finance should be instructed in elementary, middle, and high school, then subsequently taught in college. Like mathematical courses, these courses will start with number counting, step forward into addition and subtraction, and then move into division and multiplication. Financial literacy education should be considered as a gradual, cumulative learning process, being consistent with students’ ages and with different topics being taught in each academic year.
A well-known study by Sundarasen et al. (2016) is associated with the required education in high school about personal finance. The study concluded that financial education facilitated effectiveness in financial behavior.
However, the truth that previous researchers have pointed out is that many states and school districts do not offer any fundamental personal finance education instruction until high school. In terms of the past five surveys conducted by Mandell, focusing on a sample population of high school seniors from 2000, 2002, 2004, 2006, and 2008, these surveys show that none of the results significantly support the viewpoints from Sundarasen et al. (2016).
The total number of participants over the five surveys was 22,984. The survey conducted in 2008 (see Table 1) asked high school seniors about what financial education they had ever taken. Unfortunately, the results showed that there was little
17 evidence or data indicating that financial literacy could be improved by high school
courses in personal finance improvement (Mandell & Hanson, 2009). The findings
indicated that high school students who took the entire-length course in money management or personal finance would not become more financially literate than those who had taken just part of this course (Sundarasen et al., 2016).
Table 1.
Test Results in Financial Literacy of High School Seniors 2000 2002 2004 2006 2008 Classes in High School
Entire Course in 51.4 48.2 53.5 51.6 47.5 Personal Finance
Part Course in Personal 52.9 49.8 52.7 53.4 48.9 Finance
Stock Mkt. Game in 55.1 52.4 55.8 55.0 51.1 Class Total (N=22,984) 51.9 50.2 52.3 52.4 48.3 Notes: Total Score=100
Therefore, this result revealed that those finance courses in high school do not prepare adults to be more financially literate. In terms of this result, William et al.
(2010) suggested that the main purpose of such financial education should be to establish a foundation for deeper understanding or an orientation toward financial knowledge that would be helpful in life after high school graduation
Financial Literacy in College
Full-time undergraduate college students in the first national sample were
18 surveyed to measure financial behavior and the level of financial literacy. College
students are legal adults with experience in finance. Interview results indicated the
levels of financial literacy and financial competency. College students may recall past
assignments related to personal finance.
In addition, Cullen (2013) interpreted that college students bore a heavy debt burden at graduation, including student loans, car loans, and credit cards. This indicated college students needed more financial knowledge and skills to promote their financial literacy. Theoretically, college students may be more proactive in approaching this field in comparison with high school students.
The findings in Table 2 exhibit that college students who had taken an entire financial education, both personal finance and money management, still stay at a low
level, according to the mean score of a financial literacy test. Rather, the mean score
of participants who had just taken part in the course was relatively higher. But Table 2
shows a positive and monotonical relationship between level of education and
financial literacy. For instance, college freshmen got 59.3% of mean score on the
2008 test in comparison with 48.3% for high school seniors (see Table 3), and the
study found that if students had learned to play the stock market game, their score
sometimes increased and their financial literacy was better.
19 Table 2. Financial Literacy of College in Education All Freshmen Sophomore Junior Senior
Classes Category
Entire Course in 59.3 58.7 58.6 58.2 63.1 Personal Finance
Part Course in Personal 62.1 58.9 59.4 66.4 64.9 Finance
Stock Mkt. Game in 65.6 62.3 65.6 67.7 68.3 Class All Students 62.2 59.3 61.0 62.1 64.8 Notes: N=22, 984, Total Score=100
Table 3. Test Results in Financial Literacy of High School 1997 2000 2002 2004 2006 2008 2008 2008 2008 Mean Mean Mean Mean Mean Mean % of “C” or % Score Score Score Score Score Score Students Better Failing Gender Female 57.9 51.6 50.7 52.2 52.3 47.9 55.3 3.8 75.4 Male 56.9 52.2 49.8 52.4 52.6 49.0 44.7 5.8 71 Race White 60.9 54.5 53.7 55.5 55.0 52.5 55.0 7.1 64.4 African 50.4 47.0 42.1 44.0 44.7 41.3 13.6 1.4 89.1 Hispanic 55.1 45.3 44.8 48.3 46.8 45.1 20.1 2.5 83.4 Asian 55.8 53.5 50.6 48.3 49.4 47.2 3.7 1.7 77. Notes: N=22, 984, Total Score=100
20 Table 4 shows that if college students went through a semester-length course about Personal Money Management or Personal Finance, they did better in the test than those who had never taken such a course. On the other hand, students who have taken an entire course for a whole semester will have better financial literacy than those who have taken portions of such a course, including part of freshman orientation.
Conclusively, personal finance courses taught in college are likely to improve financial literacy among college students (Sundarasen et al., 2016). That is why the previous researchers also found large differences in financial literacy based on differentiation in educational attainment, particularly in the group of college students
– their percentage of correct answers in the inflation and risk diversification questions was about 7–8% higher than high school students who had already graduated, and the result showed that the differences were statistically significant (Lusardi, Mitchell, &
Curto, 2010). Hence, it has been proven that there is a strong positive relationship between education level and financial literacy in college.
According to these results, educational background might be one of the most significant determinants in financial literacy. Lusardi et al. (2010) explained that the main attribution might be the debt load currently borne by college students. Because student loans are relatively troublesome, these students have a huge motivation to acquire financial knowledge during college, and therefore successfully handle their individual financial issues. In addition, financial literacy among college students is a basic and important ability because it is also a required skill in life, and it should be 21 seen as an intellectual competency and included in academic performance and degrees
(Lynch, 2016). Those who have struggled with finance issues in college or university will still confront the same obstacles as an adult. This means that students who are not introduced to financial literacy in college tend to be financially illiterate after
graduation.
Table 4. Test Results in Financial Literacy of College Students Classes in College Score Semester-Length Course in Personal Finance 60.1 Coverage of Personal of Finance (incl. Orientation) 58.2 Economics 63.2 Finance 64.6 Accounting 65.4 All Students 62.2 Notes: N=22,984, Total Score=100
Graduate School
In general, graduate students are older than undergraduate students, and they are more likely to struggle with financial decisions. Graduate students currently face
financial burdens and pressures as they attempt to strike a balance between study,
work, family, and retirement planning for their futures. Unfortunately, even if they
need more in-depth financial knowledge and skills, those are not necessarily taught by
either graduate schools or financial institutions (Prawitza & Cohartb, 2016). They described that having a low level of financial knowledge negatively affected their ability to make correct decisions.
22 Cullen (2013) further explored financial literacy among graduate students. Many students had limited knowledge of basic finance concepts before entering college. The studies conducted by Cullen (2013) focused on both financial knowledge and literacy of graduate students who were relatively older than college-aged students (22–35).
Some difficulties of financial literacy resulted from a lack of basic financial knowledge.
A U.S. study interpreted by Cullen (2013) was conducted with 312 graduate students from State Universities; the questionnaire included questions related to credit card, insurance, personal loans, record keeping, and overall financial management.
The objective of this study was to evaluate financial literacy among graduate students between the ages of 22 and 35. This population sample was a diversification of students from different family backgrounds. These students used their student loans to cover tuition fees, textbooks and supplies, as well as their overall living and personal expenses. Some students also had prior student loan debt, credit card balances, and car loans when they entered graduate school. However, some of the graduate students had no options other than to create larger amounts of student loan debt in order to complete their degree.
This study raises awareness of the level of financial preparedness of students between the ages of 22 and 35. In terms of this questionnaire, the sample population appeared to be quite proactive to improve their financial literacy. Nearly 52% of respondents stated that they were slightly or highly interested in improving their financial knowledge. The results in the questionnaire indicated that over 70% of 23 respondents remained at a low level of financial management, which not only affected their finances but also threatened their academic performance, mental and physical well-being, and even their skill in occupations after graduation. It is necessary to realize that many graduate students were still stuck with an insufficiency of financial knowledge; supplemental education would give them both immediate and long-term benefits. By undertaking such education, students might get a better opportunity of career success and avoid heavily-loaded debt after graduation (Cullen, 2013).
24 Table 5.
Outline of Financial Literacy Skills in Educational Attainment
Educational Attainment Financial Literacy Skills
High School (a) Credit card use (b) ATM card use (c) Paying for insurance (d) Bank account (e) Interest on savings (f) Income tax preparation and return (g) Managing a budget
(a) Investment strategies College or University (b) Paying for debt (c) Saving and investment (d) Paying for tax and tax return (e) Risk, return and liquidity (g) Short- and long-term saving
Graduate School (a) Budget and tracking spending (b) Money management (c) Handing billing and invoice (d) Preparing plans for future financial needs and goals (e) Minimizing taxes and insurance expenses
25 Role of Household Income
Financial literacy and financial education were uncommon in theoretical research
before the late 1990s. However, since 2000 more researchers have begun to address
the financial knowledge of individuals. Chu, Wang, Xiao, and Zhang (2017) showed that previous researchers attributed students’ financial behavior to their future income level. Those researchers indicated that there was a positive correlation between understanding financial knowledge and level of regular income, as well as the rate of savings. The higher their financial literacy when they graduated from college, the lower the financial hardships they might meet in the future (Cullen, 2013).
Further, Van Rooij et al. (2011) proposed that the correlation between financial literacy and household income was critical, because individuals were likely to get involved in planning and responsibility for their financial planning. The study conducted by Agarwal et al. (2011) revealed that over one-third of respondents were not concerned about early retirement provision and more than half of those described it inaccurately. The rest of the respondents, who got correct answers, were mostly on higher incomes and had a higher level of education and vocational experience.
Moreover, this study combined the empirical evidence with the influence of financial education and the content of financial behaviors (French & McKillop, 2016).
To explicitly present the influence of household income, Table 6 shows a positive relationship between financial literacy and household wealth by comparing household income within a sample population of high school students. The results demonstrate
26 that lower-income students’ households had lower mean scores than their middle- and
higher-income counterparts, since they may have insufficient economic resources to
get an insight into financial knowledge (Nguyen, 2013).
Table 6.
The Mean Score of High School Financial Literacy with Household Income 1997 2000 2002 2004 2006 2008 2008 2008 Mean Mean Mean Mena Mean Mean % of % of Score Score Score Score Score Score Student Failing Household Income Below $20,000 55.2 46.3 45.7 49.5 48.5 43.4 10.7 85.2 $20,000-$39,000 58.2 52.0 50.7 51.3 50.8 47.3 20.1 77.9 $40,000-$79,000 59.6 57.2 52.3 54.1 53.7 50.3 26.5 70.9 $80,000 or 59.0 55.0 52.7 55.9 55.6 52.3 23.0 62.0 above
Notes: N=22,984, Total Score=100
In addition, Table 7 delineates a generalized chart about the correlation between
financial literacy and asset ownership, including stocks, mutual funds, house
ownership and bonds (Chu et al., 2017). In terms of the results in Table 7, Henager
and Mauldin (2015) pointed out that house ownership seemed to be uncommon and
rare in the group that stayed at a low level of financial literacy, and even investments
in assets were nearly absent in this subgroup. French and McKillop (2016) found that
the weighted percentage in the high literacy quartiles was, significantly, quadruple
that in the low literacy quartiles. The differentials in individuals’ asset ownership
27 across basic financial literacy quartiles were huge, as well as the differentials across advanced literacy quartiles.
Thus, according to the above differentials, if respondents were more likely to accumulate wealth, they may have better basic knowledge. Similarly, the evidence also supported that financially literate households would be more likely to put their wealth into a wider class of assets and hold more diversified portfolios (Calcagno &
Monticone, 2015).
Table 7.
The correlation between Asset Ownership and Literacy (N=3,517) Percentage of Households owning Stocks Mutual Funds Bonds Home
Basic Literacy Quartiles
Low 2.4 5.6 1.9 40.5 Intermediate 10.2 16.5 3.0 54.4 High 18.1 23.9 6.1 60.8 Advanced Literacy Quartiles
Low 2.0 6.5 1.4 44.6 Intermediate 14.2 11.8 5.0 44.8 High 25.2 33.1 8.8 70.9 Notes: N=3517, Total Percentage=100%
Additional influencers on financial literacy (gender, ethnicity)
The surveys conducted by Wagland et al. (2009) found some slight differences in financial literacy by comparing gender. In several studies, researchers concluded that male students did better than female students by a significant margin (Mottola, 2013).
28 In 2008, males had a higher score than females (49% versus 47.9%), as they did in the
previous years. One explanation for this was that female college students were less
familiar and less skillful in handling financial markets in comparison to male college
students.
However, the study conducted by Mandell (2008) found no statistically
significant difference in JumpStart scores between male and female participants.
Further, in another two JumpStart surveys (1997 and 2002), females had a better score
than males and Chen and Volpe (2002) showed evidence that women might be more
likely than men to have a budget. Another explanation for disparity in gender about
over- or under-performance was their investing style. Women have been shown to be
somewhat more conventional and risk averse in financial investment than are men
(Wagland & Taylor, 2009).
Chen et al. (2002) explained that male students presented a higher ability to deal
with personal finance while women demonstrated relatively higher responsibility in
financial behaviors. In terms of the research of Chen et al. (2002), they attributed the
discrepancy to the fact that males historically had better performance than females
when it came to mathematics (Lynch, 2016).
On the other hand, financial literacy seemed to be correlated to ethnicity. In general, the study conducted by Van Rooij, Lusardi, and Alessie (2011) noted that white students did not precede other races since both African Americans and Hispanic
Americans also had good scores in the test.
29 Tables 8 and 9 demonstrate differences in financial literacy by comparing
ethnicities: African and Hispanic respondents were more likely than white
respondents to answer all three financial literacy questions correctly. The differential
in the correct response rate between African American and white participants was
around 18.7% in the inflation question and 12.3% in the risk diversification question.
The corresponding differentials for Hispanic respondents were around 16% and 8.5%,
representing a statistically significant difference (Lusardi et al. 2010).
Table 8.
Regression on Financial Literacy Score B Sig. Male 0.037 0.001 Ethnicity 0.052 0.000 Years of College 0.017 0.000 Full Semester in HS Money Mgt. 0.034 0.020 Notes: Significance of the findings depends on the p value: Significant at <0.05 level
Table 9.
Differences (%) in the mean of financial literacy Interest Rate Inflation Diversification Gender Male vs Female 4.9*** 10.9*** 11.6*** Race White vs African 3.4*** 18.7*** 12.3*** White vs Hispanic 6.8*** 16.0*** 8.5*** Education College vs HS 2.8*** 7.9*** 7.4*** College vs Grad 8.4*** 22.9*** 17.8*** Total (N=7417) Notes: *p<0.1 **p<0.05 ***p<0.01
30 Methodology
Based on the conceptual framework in financial competencies and the qualitative review in financial literacy, this study is to identify if high school, college and graduate students are eligible and competent to match the specific requirements of different management positions within the hospitality industry as well as F&B service.
The expected findings will allow us to further create a comprehensive understanding of job descriptions and requirements related to financial management position within the hospitality industry.
Subjects of Interest
The purpose in this study is to compare financial competency skills required by
hospitality certifications and food service finance positions. It may raise attention and
interest from hospitality practitioners and potential candidates as well as academic educators.
Literature Search
To analyze domains of the key areas of both financial literacy and financial competency, our study collected and classified relevant journal articles, dissertations, books and newspapers available on Google Scholar, ProQuest and CPP Library. An initial literature search started with keywords searching, including “financial literacy”,
“high school”, “college and university”, “graduate school”, “financial competency”, and “corporate level”. The journal articles collected in this study will be limited to those published after 1998. After browsing the conceptions and content, our study generalized the content and classified it into several specific sections and categories
31 that can be added into the comparison, like educational background and different requirements in job positions.
The Coding Process
This study will set up a coding process to match the levels of financial literacy based on different job requirements in hospitality. First, the table covers the labels of each certification and job position to project each job title. Second, our study assigned major skills in financial competencies to the table in terms of the job requirements.
Third, we started comparing and matching financial literacy skills in different levels
of education with the features of each category in hospitality certification as well as
entry level requirements in management positions in restaurants.
32 Results
The results in the systematic review noted that positions in food service might have a lower entry threshold for most candidates with a high school degree. Given the effects of different educational attainment, it is important to develop a comprehensive understanding of job description and requirement related to financial management positions within the hospitality industry. For instance, the entry thresholds of food service corporations are noticeably lower than those of hotel corporations. A competent manager who has ever worked in financial management in Panda Express is unlikely to get a comparable position in hotel corporations, since their occupational features are somewhat different. Even if there are limited financial managerial positions in fast food restaurants and casual scale restaurants, their job requirements are still distinct. In terms of previous results of surveys, questionnaires and tables focus on the financial literacy of different educational attainments, then create several tables to classify each specific relevant financial competency and make an in-depth comparison. Hospitality certifications are relatively demanding in evaluating financial competencies, since a candidate’s educational attainment will be specifically evaluated before obtainment. It seems to be more laborious for candidates who have poor financial literacy or lower education attainment to apply.
33 Basic Requirement in Hospitality Certification
Industry Certification Minimum Educational Attainment
Certified Hospitality Degree from an accredited academic Revenue Manager (CHRM) institution will take 1 year off requirement
Certified Hotel Administrator (CHA) Degree from an accredited academic institution eliminated time requirement
Certified Hospitality Accountant Degree(s) from accredited colleges or Executive (CHAE) universities plus above 2 years related experience
Certification in Hotel Industry The Certification in Hotel Industry Analytics (CHIA) Analytics (CHIA) is a knowledge-based certification and does not have a time in position requirement.
Coding Process Position Job Classification Classification Classification Description High School University Graduate requirement Cashiers Operating a (Panda Express) cash or credit card
Assisting Inventory Purchase
Verifying the accuracy of transactions
Operate equipment with peripheral electronic data 34 Inputting cash sheet (end of day)
Managerial Review service Position invoices for (Panda Express) proper billing
Assisting Finance Department in budgeting annual capital expenses
Overring Bank deposit/change fund order
Ability to understand sales growth, cost management, and profit growth
Restaurant Labor Manager (Olive scheduling Garden) Purchasing food, supplies, equipment
Administering payroll
Managing the budget 35 Estimating food and supply needs
Overseeing the placement of orders
F&B Manager Comprehending (Marriott budgets, International) statements and payroll progress report
Reading Profit and Loss Statement
Using a menu engineering worksheet Menu pricing
Cost management
Forecasting sales
Hospitality Evaluation High University Graduate Certification Requirement School Certified Analyzing Hospitality inventories Revenue Manager Calculating (CHRM) rate/occupancy
36 Managing data and report
Managing block activity
Monitoring property management system
Forecasting and planning
Statistical analysis
Certified Hotel Financial Administrator accounting (CHA) concepts
The balance sheet
The income statement
Cash flow statement
Managerial accounting concepts
Analytics
Revenue management
Budgets forecasting 37 Labor analysis
Certified Financial Hospitality reporting Accountant Executive Analyzing (CHAE) financial statements
Managing capital/ controlling cash
Hotel financing trends and schemes
Concept of time Value of money
Investment analysis Supply/demand
Certification in Revenue, Hotel Industry occupancy, Analytics ADR, RevPAR, (CHIA) percentage changes
Interpreting the numbers, Excel-based
Setting up monthly, weekly, and daily STAR report
Step through 38 each page of each ad-hoc report (trends, pipeline, HOST, forecast, destination reports, others)
39 Discussion
Two basic conceptions in this study have to be highlighted in the discussion
section. In terms of the definition derived from The National Financial Educators
Council, financial literacy can be measured as an ability to possess skills and
knowledge in dealing with financial issues and make a prompt decision confidently.
Excellent financial literacy will be able to accomplish an individual’s personal, family,
and business goals (Kamiya, 2017).
Mandell and Hanson (2009) stated that financial literacy was built from an accumulative finance education that aroused students’ understanding of various financial terms including fields related to personal finance, money, and investment
(Nkomazana et al., 2015). Financial literacy aimed at the basic ability to handle personal finance matters proficiently, such as knowledge of making accurate monetary decisions involved in insurance, real estate, college, budgeting, retirement, and tax planning (William et al., 2010).
On the other hand, Brinckmann et al. (2011) asserted that financial competencies could be identified as a combination of “observable and measurable knowledge, skills, abilities and personal attributes,” focusing on enhancement of employee performance and further organizational development and corporation success. Financial competency was a changeable and developing proficiency or dexterity with increased working experience in mental operations or physical involvement through either education or specialized training (Prawitza et al., 2016).
40 According to the relevant articles published by CGMA, financial competencies have been adapted from the summary of employers’ conversations around the world
about their expectations and requirements for their finance staff and candidates. The staff and candidates in financial positions should possess traditional accounting and finance skills, plus other advanced skills in finance, such as business, leadership, and people skills that finance professionals also need to possess (Amato, N., 2014).
In addition, financial competencies are tightly associated with corresponding decisions about whether an individual has an ultimate authority to manage part or all
financial affairs with a legal decision (Kershaw & Webber, 2008). This is another
reason why educational intervention is being supported by Ambuehl et al. (2014). The
contribution of educational intervention will strengthen the importance of financial
competency assessment, rather than merely depend on conventional results from
research surveys. Educational intervention is a proactive approach to enhance
financial literacy and competencies in both understanding and demonstration.
Therefore, an educational intervention should be implemented on campus and it may be a highly successful method to arouse awareness in students’ minds and improve the quality of their financial decisions (Ambuehl et al., 2014).
A proficient demonstration of financial competency is equally important in terms of the conception of competency introduced by Arnold et al. (1999), comprising the vocational demonstration so far. The key feature of competency is what individuals do at work, rather than the level of their knowledge or skills, although many researchers disagree with this assertation about the concept of financial competency. 41 However, there is no doubt that financial competencies consist of different operational elements involved in practical tasks. These business-related skills should be able to be decently performed, as well as other specific job functions. Indeed, financial competencies can be sometimes considered as an integration of individual’s personality, mental powers, motivation, values, and morality, which all contribute to a qualified financial practitioner. Although those features seem to be unrelated to financial skills or knowledge, many employers of managerial and professional staff focus on those unmeasurable features in long-term evaluations (Arnold et al., 1999).
Conclusively, financial competency has a deeper standard and higher requirement in both understanding financial knowledge and demonstrating actual financial skills; undoubtedly, the latter is more crucial in a job position (Brinckmann et al., 2011).
Therefore, this study may establish a new direction in the hospitality research area and leave a practical contribution for current students, pre-entry candidates, even practitioners in hospitality. In the discussion, this study will establish a generalized chart, shown below, to summarize why financial competencies and financial literacy link to each other in job positions and how those competency skills align to literacy in a systematic dimension.
In terms of the chart below, financial competency skills can be classified specifically based on job requirements in entry-level positions and managerial positions (Burgess, 2007). Literally, hospitality certifications are apparently distinctive and demanding in comparison with positions in the food service industry since the content in hospitality certifications seems to be relatively tougher and more 42 complicated. Thus, the links and gaps between financial competencies and financial literacy can be explicitly distinguished in this study. Most financial competency skills
have not been covered among the group of high school students, except for entry-level
positions in quick-food service. In contrast, the situations in the group of college and
graduate school are better than those of high school students, because the
requirements of entry-level positions in either food-service or hospitality certifications
primarily match the major financial literacy knowledge that skilled students learn.
However, managerial positions in both casual dining and certification with higher
level including CHRM and CHA might be relatively strict in evaluations.
Competency Skills in Job Position Level
Entry Level
Competency Skills Quick Casual H. Cert (CHIA)
Cash & Credit Card Handling
Inventory Purchase
Cash Sheet Input
Transaction Supervision
Equipment Manipulation
Invoice Review
Budgeting Capital Expenses
Bank Deposit/Change Fund
Understanding Sales/Profit Growth
and Cost Management
43 Labor Scheduling
Administering Payroll
Estimating Food and Supply
Understanding Budget Statements and Payroll Report
Profit and Loss Statement
Menu Pricing
Inventory Analysis
Calculating Rate/Occupancy
Managing Data and Report
Forecasting and Planning
Statistical Analysis
The Balance Sheet
The Income Statement
Cash Flow Statement
Revenue Management
Financial Reporting
Financial Statement Analysis
Finance Trends and Schemes
Cost and Cash Control
Analysis of Supply/Demand
44 Managerial Level
Competency Skills Quick Casual H. Cert(CHRM,CHAE)
Cash & Credit Card Handling
Inventory Purchase
Cash Sheet Input
Transaction Supervision
Equipment Manipulation
Invoice Review
Budgeting Capital Expenses
Bank Deposit/Change Fund
Understanding Sales/Profit Growth and
Cost Management
Labor Scheduling
Administering Payroll
Estimating Food and Supply
Understanding Budget Statements and Payroll Report
Profit and Loss Statement
Menu Pricing
Inventory Analysis
Calculating Rate/Occupancy
Managing Data and Report
Forecasting and Planning
45 For current students or educators in college/university, this chart indicates that
cost management, budgeting, financial supervision, and comprehension of relevant
statements seems to be essential and critical, compared with other financial skills
solely focusing on monetary issues. Therefore, current educators should be aware of
the importance of those kinds of competencies in their academic instructions. College
students need to learn more about the budgeting and cost management being specified
in the evaluation sheets of hospitality certifications.
In addition, the core knowledge and skills at the upper level of managerial
positions, as well as hospitality certifications, are involved in statistical analysis and forecasting and planning, whereas most financial literacy skills do not cover a comparable content in the group of graduate school students. This means that it is still slightly difficult for graduate students to apply for managerial positions in hotels without any pre-entry training or extra education. Thus, the current graduate students should start up a specific and further study focused on forecasting, data reporting, and statistical analysis.
Recommendations
Greenspan (2003) suggested current students, as well as educators in high school, should aim to improve their ability to handle basic monetary issues by enhancing their financial skills and knowledge, like cash handling and transactions processing, which frequently occur in their positions. For instance, HR directors may require candidates in financial positions to take a pre-entry test or evaluation during the interview. The
46 difficulties of such a test depends on what position you are working in. Like
entry-level positions in both the casual-dining and quick-food service, the test may
start with number counting, and step forward into addition and subtraction, and then
move into division and multiplication, making changes as well as operating the POST
machine. Thus, those positions in food service are suitable for candidates whose
education attainment is below college/university.
Importantly, in the past, personal finance was relatively simple and
straightforward compared with nowadays, since wages were saved and merely
aggregated compound interest (Desjardins, 2017). Additionally, it was relatively
easier and cheaper to get into the housing and stock market (Kamiya, 2017).
In today’s environment, personal finance is more complex and diversified.
Particularly, in terms of chart delineated by Desjardins (2017), only five states in the
U.S. currently require high school students to take at least a personal finance course,
and the graduation requirements of only approximately 16% of U.S. high school students include a personal finance course. In the four states with the largest populations—California, Texas, Florida, and New York—less than 1% of the high school students are required to take a personal finance course.
Consistently, given the low level of financial literacy, student debt in outstanding loans in 2017 saw a 79% increase since 2010. This means graduated students have been accumulating their loan for years and attempting to pay it off (Greenspan, 2003).
Basic financial knowledge and skills are particularly important to younger
47 generations. These topics include: saving money; making budgets; and managing
investments in a way that prepares individuals for the future. It’s important for them
to make their financial decisions, such as house mortgage or college tuition payments, independently (Arnold et al. 1999).
According to Today’s chart conducted by Desjardins (2017), researchers have started to focus on the most recent youth generation: millennials. Remarkably, the results have shown that around 76% of millennials lack basic financial knowledge, which marks a dramatic gap in U.S. high school education. Thus, the nationwide
deficiency of financial literacy has been statistically exposed and it is becoming an
urgent issue for us to pay more attention to. It is important to identify the importance
of financial literacy; meanwhile, some researchers have started to broader their scope
into the emerging population: millennials. However, only one-fourth of the
millennials possess “basic” financial knowledge; indeed, around 70% are struggling
to save for their future planning.
Therefore, an improved, systematic approach to financial education that provides
a variety of teaching techniques has the potential to provide greater access to higher
levels of financial literacy.
Regarding job engagement and the turnover rate, a recent study measured the link between workplace financial education and job satisfaction. According to the analysis conducted by Hira and Loibl (2005) from a national sample of employees, the respondents who participated in workplace financial education were more likely to
48 understand the content in financial competencies and easily deal with financial
matters in their job positions. Financial literacy influenced their financial
competencies in the work environment. Further, Kershaw and Webber (2008)
explained that employees who have undertaken professional training before job entry
will considerably enhance literacy in financial matters as well as their confidence in their future financial decisions. Significantly, those employees may be more likely to be promoted and regarded as a supportive member of their company (Hira et al.,
2015).
On the other hand, most employers point out that the reason for offering
workplace financial education was not to teach their employees how to cope with
financial matters and issues with corresponding financial skills or knowledge (Vitt,
2014); instead, it was to encourage employees to further engage with a high
participation. Even if some managers have excellent performance in leadership or
business, they are suffering the lack of basic skills in money management. With a
specific demand from those managers, it has become apparent that corporations need
to establish customized financial education in the workplace (Prawitza et al. 2016).
This action would prevent employees from job depression and loss of confidence,
which could lead to an increase in the turnover rate. Thus, remedial instruction in the
workplace seems to be indispensable and crucial.
In addition, Vitt (2014) proposed that educating employees was a win-win
situation to guide them in dealing with new financial realities. The companies noticed
that offering financial education to employees enhanced their overall commitment and 49 has turned out to be great value, particularly in their commitment to long-term financial well-being, which may generate a competitive advantage, according to the
HBRAS survey (Kershaw et al., 2013).
The recommendation in this study will focus on the following directions:
1. Academic educators need to be encouraged to pay more attention to the
nationwide lack of financial literacy in high school.
2. It’s necessary for students to learn the basic knowledge and skills as early as
they can, because finance issues also affect long-term life planning, not just
career paths or job selections.
3. For the hospitality practitioners, the importance of workplace finance training
should be established and improved, since the role of financial training is
highly related to job engagement and turnover rate.
4. For the researchers, since this field is gaining some attention and awareness,
especially in the relationship between financial literacy and competency,
future directions can reach towards the link between financial literacy,
financial competency, and the feedback from employees who have been
through training.
50 Conclusion This analysis suggests that there are a limited number of studies investigated the links between levels of financial literacy in current students and financial competencies hospitality industry expected, although many existing researchers have found students may be lack of knowledge to handle their personal finance, decision-making and financial issues. In addition, academic educators seemed to ignore that financial literacy would impact job selection and career path in the future.
That’s what this final research reflected by aligning a clear theoretical framework in financial competencies hospitality industry expected to financial literacy skills students currently possessed.
Literally, in terms of the literature reviews and the above systematic analysis, there is still a huge gap between understanding and demonstration of both Financial
Literacy and Financial Competency. Importantly, this study merely presented a series of comparison and attempted to match each financial knowledge students learnt with each vocational requirement our industry currently expects. For most of academic educators, hospitality practitioners as well as industry corporations, demonstration of financial competency seems to be more extensive and broader comparing to the level of understanding in financial literacy.
51 Limitations and Future Directions
Although much content was interpreted from other previous literature review,
our study still had insufficient conceptual framework in some key factors, like students’ feedback of current curricular in graduate school. In addition, as hospitality industry increasingly need more competent candidates to takeover financial position, it’s essential to know about the feedbacks from candidates who have taken pre-entry
training and what sorts of financial knowledge will be commonly missed by
candidates from majors in college and grad school. Thus, another limitation in this study might be a holistic survey or research about the missing financial skills of
different educational levels.
Since this topic in our study is to explore both students’ occupational skills and
expectation of a given industry, this study has more implication in practical dimension
instead of theoretical dimension. By identifying respectively distinctive competencies
needed in financial management position in hospitality, it’s clear and accessible to
have a preliminary insight into what financial skills are necessary in our job-entry and
career path. Such a research set a great example of what hospitality practitioners
concern about in hiring procedure, even academic educators can be inspired with
some career-based clues related to their courses. As a result, we are looking forward
for more explorable efforts in establishing more research surveys and statistics
analysis to guide graduated students in job decisions and understanding in how each
critical factor may influence the willingness of candidates.
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