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.


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.


The MBA Oath

June 1, 2009

Nitin Nohria and Rakesh Khurana published an excellent article in the Harvard Business Review earlier this year about making management a true profession.  In one illustration of the disconnect between management and other professions, the article points out that while med school graduates take a Hippocratic oath to do no harm and law school grads swear to uphold the constitution, business school grads have no equivalent.

This may be changing.  As the NYT reported, a group of HBS students has responded to the economic moment by creating an MBA Oath. The pledge is built on the idea that a manager’s purpose is to “serve the greater good by bringing people and resources together to create value that no single individual can create alone.”  The oath’s definition of greater good is broad, touching on everything from global prosperity to leadership development, but at its core is a powerful challenge to the conventional wisdom that a manager’s only true responsibility is to maximize shareholder value and stay within the letter of the law.  Students and grads can go to mbaoath.org to sign the oath.


Suze Smackdowns: High Standards, High Empathy

May 20, 2009

The NYT Magazine recently did a terrific story on Suze Orman, increasingly known for the tongue-lashing she’s willing to give viewers who aren’t taking full responsibility for their financial lives. Or as Oprah calls these very public rebukes, “Suze smackdowns.”  Suze — she’s achieved first-name-only status — is a worldwide phenomenon, and I think it has as much to do with how she communicates as what she communicates.

I also think there’s a leadership lesson in her success.  Suze doesn’t let empathy get in the way of enforcing high standards.  Nor does she let high standards get in the way of empathy.  If there’s any secret sauce to leadership, I think it’s this.  I think it’s learning how to deliver both simultaneously. A default assumption for most of us is that these positions tradeoff on each other, that you can be supportive or hold people accountable, but not both. The exceptional leaders I know are defying this tradeoff everyday.  They are demanding excellence from the people around them, while helping them achieve it with relentless support.


Customer-Operators: Not Paying Them Doesn’t Mean They’re Free

May 6, 2009

People, it turns out, are desperate to be helpful.  Verizon has discovered this and joined the growing ranks of companies using what I call “customer-operators” to do the work employees used to do, everything from generating new product ideas to servicing other customers when those product ideas fail. Betting on the hope that all these customer-operators need in return are the intrinsic rewards of serving others and the status associated with becoming experts, Verizon is primarily making a cost play by inviting customers to perform routine customer service functions. The company has stumbled on some additional perks of engaging these “super-users,” like their knack for good improvement ideas, but this value is seen as peripheral.

At this point in the experiment, Verizon only sees the upside in recruiting and deploying an army of customer-operators. Before the company doubles down, I want to offer two points of caution:

First, customers are different from employees in ways that matter operationally. In general, they’re more difficult to manage, measure, recruit and fire.  Just because you don’t pay them, doesn’t mean they’re free. The price may be worth it to achieve radically higher levels of quality (Wikipedia) or a radically lower cost structure (eBay), but the tradeoffs aren’t as clear for traditional business models.

New management systems must be designed and maintained once you bring customers into your operations. And the effort may require more than a few “feedback stars” to measure and maintain quality. Reputation is a powerful incentive for good behavior, but it’s not all-powerful (see John Edwards). Have a plan for when the customer you’re relying on to provide good service doesn’t respond to another customer’s inquiry for days.

Second, those feel-good emotions of service and status may not be enough to compensate your most active (and valuable) customer-operators as time goes on. A lesson from many organizations is that when you ask customers to donate their labor, they often feel entitled to a seat at the decision-making table. Back to those feedback stars, I spent some time on the outrage of eBay customers when the color of their own stars was changed in an HBR case. Outrage may be too weak a word. There was an electronic revolt.

I’m with Verizon. I think customer involvement is a tremendous opportunity for many businesses. But I want to add a few caveats — customer-operators aren’t always easy to manage, and they aren’t always willing to stop at the operational boundaries you propose.  You may invite them on to the shop floor, but some of them are taking the elevator up to the C-suite.  Have a plan for what happens next.


Bring Me a Problem (Solution Optional)

April 29, 2009

In what is becoming a consistently provocative column for us, the NY Times recently featured Delta Airlines CEO Richard Anderson as part of its Saturday Corner Office series. Anderson came across as thoughtful, humble, and hopefully up for the task of saving that airline.  Buried deep in the article, however, was a brief statement that worried me.  It was his variation on the theme of “don’t bring me a problem without a solution,'” or in Anderson’s words:

…don’t bring a Rubik’s cube to the table, unless you have an idea on how you’re going to try to get an answer.

Like many other well-intentioned managers, Anderson is getting this one wrong. Finding problems can be a solo sport, but solving the ones that matter usually requires a team effort.  And if we limit the problems that get exposed to the organization to those the observer can handle alone, then we also seriously limit the organization’s opportunities to improve.

As soon as problems are seen as critical inputs to improvement — critical because they reveal the operational path to better performance — then improvement champions will realize that surfacing problems is among their most important jobs.  And they might end their insidiously damaging habit of requiring problems and solutions to be colocated.  Anderson will have a much better shot at saving Delta if he gets unlimited access to what’s going wrong.

I was interviewed about this topic by the Harvard Management Update – the text of that interview can be found here.


Tom Brokaw, Heretic or Hero?

April 21, 2009

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Have we moved beyond these cumbersome divisions we call states? In a recent Op-Ed Tom Brokaw proposed that local governments blur their administrative lines and work together to deliver services more efficiently. In discussing North and South Dakota’s 17 colleges and universities, he made the following blasphemous comment:

I know this is heresy, but couldn’t the two states get a bigger bang for their higher education buck if they consolidated their smaller institutions into, say, the Dakota Territory College System, with satellite campuses but a common administration and shared standards?

Jefferson and Madison may be turning in their graves, but Brokaw makes a legitimate case for consolidating costly and overlapping public services. The economics are clearly in favor of pursuing such a system, but politics often get in the way of this kind of progress. As Brokaw points out, parochial interests will be the biggest hurdle to making these changes a reality.

The same dynamics play out in companies. Even when there are known advantages to centralizing activities — even when it makes things cheaper and better — the self-interest of individuals and business units can undermine a centralization campaign. Firms that overcome this tension usually do a few things right. First, they put someone in charge of “shared services” who has the leadership skills to bring a skeptical organization along. Second, they focus on the better as much as the cheaper, on the upside of leveraging learning and best practices across the entire organization.

It’s not only that the Dakotas’ 17 colleges and universities can buy chalk for less when they combine some activities, but also that the Dakota Territory College System can use the knowledge now embedded in each institution to improve the education being offered by all of them. And designed correctly, realizing these “economies of experience” doesn’t have to come at the price of innovation or agility or even customization. Indeed, done correctly, these changes can free up the time and resources for an organization to deliver unprecedented quality to its constituents.