Service Showdown at the Four Seasons

June 30, 2009

The NYT described some recent challenges at the Four Seasons.  Among them is healthy tension in the underlying business model, which separates asset ownership from service management.  The Four Seasons — a management company that owns none of  its hotels – has expensive tastes.  And some owners’ appetite for excellence is being suppressed by the recession.

Four Seasons managers want to keep the flowers fresh and the payroll fat to protect the brand and its future.  But the incentives of individual property owners aren’t necessarily aligned with this strategy.  Owners are ready to trade off on some aspects of the service experience to weather the economic storm in their particular markets, and managers are systematically refusing.  Things have gotten so bad in San Diego that the owners of the Aviara Resort and the Four Seasons are now suing each other — after a showdown that included locked doors and accounting ledgers being forcibly removed.

One source of the animosity is that some property owners are pressuring Four Seasons managers to drop their prices.  Managers are pushing back, arguing that once customers are trained to expect price breaks, it’s almost impossible to get them to pay full fare again.  And these managers are right.  If your service model depends on high prices, then it’s risky to give up ground.  But it takes a strong stomach to execute, particularly when you’re feeling quite a bit of financial pain.  As one airline manager said to me, “we need to tie one hand behind our back so that we stop giving discounts.”

The brand’s ownership structure, which gives most owners a a deep view of only one property, may also be obscuring the true source of the Four Seasons’ advantage.  The company competes on standardization and scale, not words we usually associate with luxury.  But impeccable service comes from exquisite attention to the details of an experience, and that experience isn’t necessarily diminished by the fact that it’s being replicated all over the world.  In fact, companies like the Four Seasons achieve excellence because of — not in spite of — a high degree of standardization.  Standardization of operations frees up the time, space and money to compete on a main driver of excellence in hospitality industries:  personalized, detail-oriented interactions with guests.

Prince Walid bin Talal, one of the majority owners of the Four Seasons, described the strategy this way:   “It takes a lot of effort, a lot of perseverance and a lot of consistency to reach the stage that [the] Four Seasons has.”  Consistency is probably a more palatable word than standardization for the luxury market. Now we need a new word for litigation.


The Redemption of Mark Sanford

June 25, 2009

The governor has been found.  Governor Sanford was not, it turns out, hiking the Appalachian Trail. He was in Buenos Aires with “Maria,” a woman who is not his wife or the mother of his four sons. It is a familiar, human ending to a grim story.  Except for the B.A. part.  Great town, as Sanford himself pointed out.

Is there any reason to dwell on the details? We’ve basically got it. Marriage over, career destroyed, family shaken by scandal and lies.  Soon enough the facts will retreat to the private sphere, where they mostly belong, and the cameras will be redeployed.  The 24-hour news beast will consume another public figure’s private pain.

I do find myself wanting to linger, if only briefly, on one part of this story. Sanford’s staff issued a series of clumsy, misleading statements (and Tweets) on the governor’s trip that culminated in an attempt to convince us that what we were observing wasn’t actually real. No, Sanford had not disappeared for six days under highly unusual, if not unprecedented circumstances for an acting governor. He was hiking.

What’s happening inside an organization that lies aggressively to its stakeholders?  State Senator John Land described the staff as “dishonest, secretive and bizarre,” and now we know why. They were taking one for the team, covering up for the boss man, and it wasn’t the first time. Manipulation was in the organization’s DNA, and they came by it honestly. They were taking signals from the top on how to divert people from the truth and its consequences. The press “strategy” was likely not even up for debate. Lie ourselves out of this one? Why stop now?

Here’s the issue.  The reason we care about the private lives of our public leaders is not that they might hurt themselves or the people who love them.  We regret these costs on a basic human level, but the players are strangers to us, all of them, and this is not the source of the outrage.

We care about “Maria” because the absence of integrity is a highly toxic human condition. It cannot be contained to one part of our lives. It infects everything we touch, including the organizations around us that react intuitively to our structural weakness.  At best, lying about who we are destroys our ability to lead. At worst, it puts institutions at risk of rotting from the inside out, as the behavior of Sanford’s staff so vividly illustrates.  These are the soldiers on the front lines of our democracy, and they internalized the governor’s arrogance and duplicity.

The good news is that the presence of integrity is even more powerful.  The governor may think that his career is over, but the world just gave him the gift of intolerance for the small, broken version of him that we’d been getting.  A bigger version may exist, someone with the ability to effect real change, and now we have a chance of someday meeting him. By my measure, Mark Sanford may just be getting started.


What Have Your Customers Done for You Lately?

June 22, 2009

Customer goodwill is also difficult to measure — or even define.  But we know it matters.  Certainly, it makes a difference to the top line.  Customers who like you are more likely to buy things from you and tell their friends about it.  They’re also more likely to behave once they cross the operational boundaries of your organization, which can make a big difference to service companies.  Customers with “good will” are better customer operators, better partners in the sometimes complex project of joint value creation.

How much better?  We still don’t have good universal measures of customer goodwill, but one that comes close is the number of complaints you receive relative to your competitors.  Airline customers tend to complain at a relatively high rate.  One reason is that airline service routinely fails to meet expectations.  Another is that the service is mission-critical for both business and leisure travels.  If you lose my luggage on the way to my daughter’s wedding or delay me for an important meeting, I’m going to want you to feel my pain.

But not if your Southwest Airlines.  Customers file official complaints about Southwest far less frequently than they do about other airlines, even when Southwest has similar mishaps.  Their customers also go above and beyond the call of duty in helping Southwest succeed.  A favorite example of the value of this devotion is captured in an HBS case written by Jim Heskett.  Early in Southwest’s run, an airline called Braniff International offered a 60-day “sale” on tickets between Dallas and Houston — Southwest’s core market — for half the price of Southwest’s fare, $13 instead of $26.  Southwest countered with an ad proclaiming that “nobody’s going to shoot us out of the sky for a lousy $13.”  And the company gave its customers a choice:  pay either $13 or $26 for exactly the same seat on Southwest.  80% of Southwest customers chose to pay $26.

Would your customers stick around if your competitors cut their prices in half?  There are lots of reasons that Southwest has thrived in a difficult service environment, but one primary reason is their ability to answer yes.  Let’s call it customer goodwill for short.


Employee Goodwill

June 17, 2009

British Airways has asked its employees to work for free for a month.  As CNN reported, the airline sent an e-mail out to its staff that “offered workers between one and four weeks of unpaid leave — but with the option to work during this period.”

How would this e-mail go over in your company?  What kind of relationship do you need to have with your employees for this message to be taken seriously?  In my experience, organizations spend a lot of time trying to measure the unmeasurable, trying to value concepts like culture and goodwill.  We know that these things often make or break the deal with customers and employees, but they don’t fit easily into a spreadsheet.  I would suggest that the organizational uptake on management’s offer to let people work for free is a very good measure of employee goodwill.

Employee goodwill matters in the best of times, particularly for service businesses.  As Heskett, Sasser, and Schlesinger argue in the Service Profit Chain, it is difficult to create value without employees, and so it helps to take great care of them.  But employee goodwill may matter even more in the worst of times, as the British Airways experience illustrates. The more that employees feel an organization is devoted to them, the more likely they’ll be to share the pain of adversity.  Strong relationships with your employees may help to buffer you against an unforgiving competitive environment.

On the flip side, antagonistic relationships between employees and organizations are never a good idea, but they may be disproportionately costly when the environment turns ugly. This dynamic is playing out around us with the widespread rise in layoffs and salary cuts.  Some of these wrenching decisions are being made a context of mutual trust and mutual regret. And some are happening in an environment of fear and anger, with untold costs to everyone involved, including customers.

We don’t yet know how the British Airways story will end, but I have a prediction. I think we’ll be able to confirm what we suspect, that employee goodwill makes an enormous competitive difference, particularly in hard times. And we may finally have a way to measure the size of that difference.  In the spirit of what-you-measure-is-what-you-get, this may increase the chance of its occurrence.


Palin 2012

June 16, 2009

I started to write about Sarah Palin as a serious presidential contender — not something people like to think about in this neck of the woods — and then I found a piece from Roger Simon in Politico with better insight into Palin’s candidacy than I was bringing to the table.

Simon’s advice to Palin, which includes “Don’t Believe You Can’t Do It” and “Don’t Worry About Failure,” applies beyond the strange, through-the-looking-glass world of electoral politics, particularly for aspiring leaders who think of themselves as outsiders.  The best of his advice was this:

SURROUND YOURSELF WITH PEOPLE SMARTER THAN YOU ARE. That shouldn’t be hard, her opponents will say.  OK, let them laugh.  They laughed at George W. Bush when he ran for president in 2000 and at Arnold Schwarzenegger when he ran for governor of California in 2003.  Both benefited from low expectations and smart staffs.

I am not one of those people who believe that staffs win or lose elections — candidates win or lose elections — but the Democratic presidential race in 2008 certainly demonstrated the difference that staffs can make.  Hillary Clinton assembled a staff of loyal people who were largely inexperienced in presidential campaigning.  Barack Obama assembled a staff of loyal people who were very experienced in presidential campaigning. It made a difference.

As Simon’s advice suggests, women legitimately identify as outsiders in politics.  The number of women serving in higher office in the U.S. doesn’t reflect the female fraction of the population, not by a long shot, and there are more and less surprising reasons for this phenomenon.  For anyone interested in the subject, Jennifer Lawless, a political science professor at Brown University who ran for Congress in Rhode Island and lost, wrote a compelling, data-driven book on the subject called  It Takes a Candidate:  Why Women Don’t Run for Office.

Lawless points out the structural barriers to female candidates, including a system strongly biased towards incumbents, who are usually male.  But I found the more useful and challenging parts of her message to be the things that individuals can change instantaneously.  One lever that female candidates control is mustering up the audacity to run, which women seem to systematically resist.  Another is getting over the distaste for becoming subjects of “attack politics” and “dirty campaigning,” which Lawless herself had to do.

I heard Lawless speak recently.  She said she got over the mudslinging relatively quickly, once she realized that being attacked meant being taken seriously.  She said a highlight of the campaign, in fact, was the first time her opponent ran an attack ad against her, with thinly veiled critiques of her age, gender and weight.  When she saw the spot she hugged her campaign manager with delight, a response that seemed inconceivable at the beginning of the campaign.

By this measure, do not let the widespread fear and loathing of Sarah Palin (and Hillary Clinton) turn you off, ladies.  It may be a very good sign for female candidates everywhere.  Or as Roger Simon might advise, “Pick More Fights With David Letterman.”


Kagame on Aid: Not Your Mother’s Peace Corps

June 12, 2009

President Paul Kagame of Rwanda has written a powerful piece for the Huffington Post that invites readers to have “A Different Discussion About Aid.” He uses the occasion of the Peace Corps’ return to Rwanda for the first time since the 1994 genocide to propose that we stop thinking about foreign aid as a one-way transfer of resources and knowledge, that we begin to define it as a global “exchange of values and ideas.”

He starts with the exchange of symbols and traditions.  The examples are consistent with our understanding of the gifts that a young Peace Corps volunteer might receive in the process of serving — the exposure to Rwandan foods and traditions, to an African concept of family, where “an entire generation treats the next as its own children.”  These images are satisfying and comfortable.  They reinforce our belief in the value of global engagement.  We are not surprised to learn that Africa can teach us things about food and family.

But the power of the essay is in where he goes next.  Kagame throws open the doors to Rwandan “restaurants…staff rooms and classrooms,” and challenges us to engage his fellow citizens on the great questions of our time:  how to build societies that work, how to create prosperity without destroying the planet, how to identify and nurture the next generation of leaders.  Under Kagame’s extraordinary leadership, Rwanda has been focused on these questions with an intensity and moral purpose that is difficult for us to imagine in the West.  And the results have been exceptional, as Kagame points out, including an 11% rise in GDP last year as the world economy contracted.

We are not used to looking to Africa for these kinds of insights.  We are used to speaking not listening.  Kagame’s invitation is revolutionary.  He follows it with a final offering to his readers, a leadership act with global resonance. Kagame closes by modeling the spirit of shared humanity we’ll need to not only think differently about aid, but to make the whole concept obsolete:

…the only investment with the possibility of infinite returns is in our children, and…after a couple of years in Rwanda, working and learning with our people, these Peace Corps volunteers will be our sons and daughters, too.


Leadership in Absentia

June 9, 2009

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The decision to lead is not particularly complicated, at least not on the surface.  It’s a simple, often quiet commitment to create the conditions for other people’s success. The NYT had a great illustration of this philosophy in its article on Clarence Otis Jr., the CEO of Darden Restaurants.  In Otis’s words:

…leaders really think about others first. They think about the people who are on the team, trying to help them get the job done. They think about the people who they’re trying to do a job for. Your thoughts are always there first…you think last about “what does this mean for me?”

I was particularly moved by one of his reference points, his predecessor’s response to 9/11:

…we had an all-employee meeting…One of the first things he said was, ‘we are trying to understand where all our people are who are traveling.’ The second thing he said was: ‘We’ve got a lot of Muslim teammates, managers in our restaurants, employees in our restaurants, who are going to be under a lot of stress during this period. And so we need to make sure we’re attentive to that.’ And that was pretty powerful. Of all the things you could focus on that morning, he thought about the people who were on the road and then our Muslim colleagues.

Otis went on to describe a sometimes trickier part of the leadership task — giving people the room to learn and grow, and ultimately to succeed in your absence. Sometimes this means stepping down not up, being passive rather than active, being silent rather than vocal. These are not the leadership acts we tend to celebrate, but sometimes they’re the most crucial. This balance is Otis’s current focus:

It’s less and less about getting the work done and more and more about…getting the right people in place who have the talent and capability to get the work done and letting them do it… you’ve got to give other people the chance to speak, voice a point of view. Some people are passionate, but it manifests itself in a different way, and so they’re more reflective in conversation. And so, you’ve got to leave some space for them to fill.