Article

    The expenses related to sponsoring a conference can be immense. An organization sponsoring a conference can recoup these expenses through registration fees and partnership with the host hotel. As part of the partnership, the host hotel sets aside a block of rooms for conference attendees, with rooms available at a slightly higher-than-normal rate.

    While most conference attendees prefer to stay in the host hotel, they often follow an alternate strategy to avoid the extra cost of reserving a room within the block at the host hotel. Some attendees reserve rooms outside the host hotel—the ROHH strategy. Others reserve rooms outside the block—the ROB strategy.

    Conference sponsors have succeeded in countering these strategies by increasing the conference registration fee by a fixed amount and then offering an equivalent registration fee discount to attendees who book rooms in the block. A study has shown that if this registration discount is equal to at least half the potential savings of an attendee's particular cost-saving strategy, the attendee is much more likely to reserve a room within the block.

Weekend Conferences

    Ten conferences are scheduled for the same weekend in City X. For each conference, the table lists the conference sponsor, the registration fee, the discounted registration fee (if any), the host hotel, the rate for rooms in the block at the host hotel, and the lowest rate for an available room in the host hotel during that same weekend. Conference attendees will require two nights lodging, and all room rates are per guest, per night, assuming two guests per room. The lowest rate for an available room in City X on this same weekend is S65.

    Many managers are influenced by dangerous myths about pay that lead to counterproductive decisions about how their companies compensate employees. One such myth is that labor rates, the rate per hour paid to workers, are identical with labor costs, the money spent on labor in relation to the productivity of the labor force. This myth leads to the assumption that a company can simply lower its labor costs by cutting wages. But labor costs and labor rates are not in fact the same: one company could pay its workers considerably more than another and yet have lower labor costs if that company's productivity were higher due to the talent of its workforce, the efficiency of its work processes, or other factors. The confusion of costs with rates persists partly because labor rates are a convenient target for managers who want to make an impact on their company's budgets. Because labor rates are highly visible, managers can easily compare their company's rates with those of competitors. Furthermore, labor rates often appear to be a company's most malleable financial variable: cutting wages appears an easier way to control costs than such options as reconfiguring work processes or altering product design.

    The myth that labor rates and labor costs are equivalent is supported by business journalists, who frequently confound the two. For example, prominent business journals often remark on the "high" cost of German labor, citing as evidence the average amount paid to German workers. The myth is also perpetuated by the compensation consulting industry, which has its own incentives to keep such myths alive. First, although some of these consulting firms have recently broadened their practices beyond the area of compensation, their mainstay continues to be advising companies on changing their compensation practices. Suggesting that a company's performance can be improved in some other way than by altering its pay system may be empirically correct but contrary to the consultants' interests. Furthermore, changes to the compensation system may appear to be simpler to implement than changes to other aspects of an organization, so managers are more likely to find such advice from consultants palatable. Finally, to the extant that changes in compensation create new problems, the consultants will continue to have work solving the problems that result from their advice.