Imagine that you are the CEO of InterLodge. You face a big problem: your share price has been falling for some time. You need to do something to deal with the issues of high costs and low profitability. You find that the occupancy rate and the average price point per room are too low. And the surveys suggest that Interlodge’s customer satisfaction levels are well below where they should be.
Over to you. What are you going to do about this? What approach will you take? What levers will you use to address the issues?
What Did The Top Management Team Do?
The management team did what most management teams do? It restructured and reengineered. Specifically:
- It created a shared service initiative to serve groups of hotels by region. Why? To cut costs and drive up quality.
It redefined roles & responsibilities of hotel employees. Why? To improve productivity and focus resources on driving up quality.
It rolled out a new computerised yield management system. Why? To improve the occupancy rate.
Did the desired outcomes show up? No. The authors of Six Simple Rules state:
A year later, none of these changes had produced any of the improvements the management team sought …… The share price continued to slide.
What Did Top Management Do Next?
Top management took a bold step. InterLodge’s management committed, via a public announcement, to doubling its share price within three years. Why did management do this? Clearly to support-boost the share price and at the same time to energize the hotel employees. Did it work? The authors say that it had a powerful effect on InterLodge employees. The opposite of what management intended: terrified rather than energised. Why?
Because these hotel managers were expected to increase occupancy rates, raise the average price point, and improve customer satisfaction whilst working within the parameters set by the centralised yield management system, the shared services offer, the organisational design and staffing levels set by the centre.
So the hotel managers acted on the one measure that they felt they could make an impact on: customer satisfaction levels. They acted on the hotel receptionists. Why? Because they came to the conclusion that: the hotel receptionists were young and didn’t care about doing a good job; they lacked the right customer handling skills; and they were not selling rooms to travellers who arrived late in the day even when rooms were available.
So what did the hotel management do? Three things. One, they clarified roles, processes and scorecards. Two, they put the receptionists through a soft skills training course to improve their communication and guest engagement. Third, they set up an incentive plan to motivate the receptionists to sell more rooms and increase the occupancy rate.
Did it work? Here’s what the authors of Six Simple Rules say:
Six months later, however, the problems remained. In fact things had gotten worse. The occupancy rate had dropped further. Average price point was down. Customer surveys showed lower levels of satisfaction. Receptionist turnover had risen.
So what did management do next? It looks like they hired a bunch of smart consultants. What did these smart consultants do.
First, Seek To Understand The Work Context At The Concrete (Lived-Experienced) Level
The consultants sought to understand the work context of the receptionists at InterLodge. Please note that the work context is not the objective situation. By work context I am pointing at the work-context as experienced-lived. How does one get to terms with the work context? In this case, the consultant spend a month observing and talking with receptionists at various hotels. What did the consultants uncover?
- The most difficult, most unpleasant, part of the job for the receptionists was dealing with angry customers;
The receptionists had to deal with angry customers on their own – by the time customer’s rang down to complain the maintenance folks had gone home; and
The maids cleaning the rooms were best placed to spot problems and alert maintenance. Yet, they did not do so due to the silo based performance metrics to which they were held accountable – productivity in cleaning rooms.
What is the insight that eventually hit the consultants? Here it is in their words:
the goal of the receptionists was not to earn a financial incentive by improving the occupancy rate. No, the goal of the receptionists was to avoid the unpleasantness of dealing with unhappy customers.
How did the receptionists deal with the situation that they found themselves in?
- The younger receptionist sought to fix the problem themselves. This meant they found themselves running back and forth between their front desk and the problem rooms. This behaviour didn’t work for the customers who arrived at the front desk and found nobody there. And so had to wait.
They kept rooms in reserve so that they could placate customers. Why? Because even if the new room wasn’t so much better, angry customers appreciated the receptionist who went out of his/her way to help.
They adjusted the room rate downwards. The customer harnessed their new found guest engagement skills to negotiate a refund, rebate, or voucher to deal with angry customers.
What Can We Learn From This Understanding of The Work Context?
The authors have something powerful to say and I urge you to listen, really listen:
… the young receptionists were forced to bear the adjustment cost caused by the behaviour of the back-office functions [Housekeeping, Maintenance]. They had little choice in the matter, somehow, they had to deal with the angry customers. The adjustment costs they suffered were simultaneously financial (they didn’t achieve their bonus), emotional (they were blamed by both managers and customers), and professional (at a certain point they would become so burned out that they would quit….).
But customers were also bearing adjustment costs in the form of poor hotel experience. And of course, so were the shareholders in the form of declining returns….
Receptionists could never fully compensate for what the back-office functions [Housekeeping, Maintenance] could have achieved had they been cooperating with each other…
Once the management team took time to understand the context of the work in its hotels, it came to realise that the problem was not that the receptionists were badly trained, or had some psychological issue or attitude problem, or needed more incentives. Rather, their behaviours were rational solutions to the problems they faced.
What actions did the InterLodge management take to shift-shape-transform the work context? And what kind of results showed up? I will share these with you in the next post.
What Is The Weak Point Of Many Organisations?
In a few days I had grasped the main principles on which the hotel was run …….
What keeps a hotel going is the fact that the employees take a genuine pride in their work, beastly and silly though it is. If a man idles, the others soon find him out, and conspire against him to get him sacked…… everyone in the hotel had his sense of honour, and when the press of work came we were all ready for a grand concerted effort to get through it….
This is the good side of hotel work. In a hotel a huge and complicated machine is kept running by an inadequate staff, because every man has a well defined job and does it scrupulously. But there is a weak point, and it is this – that the job the staff are doing is not necessarily what the customer pays for. The customer pays, as he sees it, for good service; the employee is paid, as he sees it, for the boulot – meaning, as a rule, an imitation of good service. The result is that, though hotels are miracles of punctuality, they are worse than the worst private houses in the things that matter.
Take cleanliness for example. The dirt in the Hotel X, as soon as it penetrated into the service quarters, was revolting ….. the bread-bin was infested with cockroaches….. The others laughed when I wanted to wash my hands before touching the butter. Yet we were clean where we recognised cleanliness as part of the boulot. We scrubbed the tables and polished the brass work regularly, because we had orders to do that; but we had no orders to be genuinely clean, and in any case had no time for it. We were simply carrying out our duties; and our first duty was punctuality, we saved time by being dirty.
In the kitchen the dirt was worse….. he [French cook] is an artist, but his art is not cleanliness..… When a steak is brought up for the head cook’s inspection, he does not handle it with a fork. He picks it up in his fingers and slaps it down, runs his thumbs round the dish and licks it to taste the gravy, runs it round and licks it again, then steps back and contemplates the piece of meat like an artist …. then presses it lovingly into place with is fat, pink fingers, every one of which he has licked a hundred times that morning…..
Dirtiness is inherent in hotels and restaurants, because sound food is sacrificed to punctuality and smartness. The hotel employee is too busy getting food ready to remember that it is meant to be eaten. A meal is simply ‘une commande’ to him, just as a man dying of cancer is simply ‘a case’ to the doctor. A customer orders ….. a piece of toast. Somebody pressed with work in a cellar deep underground, has to prepare it. How can he stop and say to himself, ‘This toast is to be eaten – I must make it eatable’? All he knows is that it must look right and must be ready in three minutes. Some large drops of sweat fall from his forehead onto the toast. Why should he worry? Presently the toast falls among the filthy sawdust on the floor. Why trouble to make a new piece? It is much quicker to wipe the sawdust off… And so it was with everything…..
Apart from the dirt, the patron swindled the customers wholeheartedly. For the most part the materials of the food were very bad, through the cooks knew how to serve it up in style. The meat was at best ordinary, and as to the vegetables, no good housekeeper would have looked at them in the market …… The tea and coffee were of inferior sorts, and the jam was synthetic stuff out of vast unlabelled tins ……. There was a rule that employees must pay for anything they spoiled, and in consequence damaged things were seldom thrown away. Once the waiter on the third floor dropped a roast chicken down the shaft of our service lift, where it fell into a litter of broken bread, torn paper and so forth to the bottom. We simply wiped it with a cloth and sent it up again. Upstairs there were dirty tales of once-used sheets not being washed, but simply damped, ironed and put back on the beds. The patron was as mean to us as to the customers ….. And the staff lavatory was worthy of Central Asia, and there was no place to wash one’s hands, except sinks used for washing crockery.
In spite of all this the Hotel X was one of the dozen most expensive hotels in Paris, and the customer paid startling prices. The ordinary charge for a night’s lodging, not including breakfast, was two hundred francs …. If a customer had a title, or was reputed to be a millionaire, all his charges went up automatically…..
George Orwell, Down and Out in Paris and London
What is that the astute change agent can learn here?
I don’t know. Here is my take on the matter of leadership and organisational change – including shifting organisations to be more responsive and aligned to customer needs:
The context is decisive
- Werner Erhard
The underlying structure of anything determines its behaviour
- Robert Fritz
I urge those of you who strive to be effective in effecting change need to master and obey these insights. Most of us don’t – even if we get these distinctions we don’t have the time, the energy, the resources, or the passion to do that which is necessary. Which explains why it is that most organisational change efforts yield disappointing harvests. And why most ‘customer-centric’ change efforts fail to yield an organisation that shows up as customer-centric. Perhaps genuine customer-centricity is unnecessary – maybe it is a matter of faking it like the patron and employees of the Hotel X were faking it. Perhaps not – today just about everyone has digital media and access to social media. You decide.
I dedicate this post to James Lawther who reached out to me when reaching out occurred as a most welcome kindness. James called me back to the conversation that occurs in this blog.
What is the connection between happiness, leadership and customer-centricity?
A lot has been written about happiness. Not much of it speaks to me. And there are some speakers whose speaking resonates with me. Let’s start by listening to a wisdom master:
Happiness is almost not worth talking about because the instant you turn happiness into a goal it isn’t attainable any more. In other words, happiness isn’t something you can work towards.
- Werner Erhard
Let’s follow this up with the following quote which is in alignment with that which Werner Erhard is pointing at:
Happiness is not a station you arrive at, but a manner of travelling.
- Margaret Lee Runbeck
Many want what are presented as the trappings of leadership. Few get the reality, lived experience, of being a leader and the exercise of leadership. What is the reality? I’d say it something like the following:
Being a leader and the exercise of leadership is not a destination you aim for or arrive at. Nor is it the path that you take. It is a manner of being-showing up in the world and travelling.
If that sounds a little philosophical for you. Then I share the following with you, courtesy of Shane Parrish at Farnham Street:
.. actually leading is different. A leader decides to accept responsibility for others in a way that assumes stewardship of their hopes, their dreams, and sometimes their very lives.….
It is mostly just hard work. More than anything else it requires self-discipline. Colorful, charismatic characters often fascinate people, even soldiers. But over time, effectiveness is what counts. Those who lead most successfully do so while looking out for their followers’ welfare. Self-discipline manifests itself in countless ways. In a leader I see it as doing those things that should be done, even when they are unpleasant, inconvenient, or dangerous; and refraining from those that shouldn’t, even when they are pleasant, easy, or safe.
- General Stanley McChrystal
I’ll leave you with my take on customer-centricity which is manifested in many ways including creating-generating customer experiences that leave customers feeling happy, even delighted, in doing business with you:
Customer-centricity is not a station you arrive at. Nor is it the path that you travel. Customer-centricity is the manner of your showing up (in the world) and travelling.
I wish you a great day. And on this first day of a new year of living for me, I thank you for listening to my speaking. Your existence makes a contribution to my existence. Let’s work together to co-create a world that works for all.
It occurs to me that customer-centricity has become a religion in many ways. And as such is characterised by a particular philosophy-ideology, rituals and practices. We have many books-articles published on customer-centricity, customer experience, CRM, customer service etc. We have many gurus expounding their particular philosophy of customer-centricity. We have many consultancies pushing their flavour of customer-centricity and associated paths to customer-centric nirvana. We have the IT industry pushing an array of systems under the customer-centricity and customer experience banners. And, we have many conferences centred on the topic of customer-centricity in one or more of its flavours.
What difference does all this make when it comes to lived experience – the real world of business? I say that customer-centricity has become the new game to play: a charade. And in this sense, customer-centricity shows up for me as a Sunday morning religion. This was brought home to me, recently, when listening to the advice given by an engagement manager to a project manager. It went along the following lines:
“Looks like you have a happy customer. Ring up the customer and ask if he would be willing to give us a 10. If he is willing to give us a 9 or a 10 then send him the NPS survey.”
Am I faulting the engagement manager? Not at all. The engagement manager through his instruction has simply made visible the game that has become the norm under the religion of customer-centricity. How many Christian’s who turn up on Sunday morning are actually Christians? By that I mean how many embody-live the principles-values-practices embodied by Jesus Christ? Please note, I am not attacking Christianity. I find that the same has occurred as regards Islam: rare is the person I encounter who calls himself a muslim and shows up for me as being as such.
I ask you consider, be with, reflect on the following sage speaking by a sage:
The intricate maze of philosophy of different schools claims to clarify matters and reveal the Truth, but in fact they create confusion where no confusion need exist. To understand anything there must needs be the understanding being. Why worry about his bodies, his ahankar, his buddhi, creation, God, Mahatmas, world – the not-Self – at all? Why not remain yourself and be in peace? Take Vedanta, for instance: it speaks of the fifteen pranas, the names and functions of which the student is asked to commit to memory. Will it not be sufficient if he is taught that only one prana does the whole work of maintaining life in the body? Again, the antahkarana is said to think, to desire, to will, to reason, etc. Why all these details? Has anyone seen the antahkarana, or all these pranas? Do they really exist? They are all conceptual divisions invented by teachers of philosophy by their excessive analysis. Where do all these concepts end? Why should confusion be created and then explained away? Fortunate is the man [person] who does not lose himself in the labyrinths of philosophy, but goes straight to the Source from which they all rise.
- Ramana Marashi
I say put aside customer lifetime value. I say put aside share of customer wallet. I say put aside big data. I say put aside data mining and predictive analytics. I say put aside CRM and CRM systems. I say put aside Voice of the Customer and Customer Experience. I say put aside customer loyalty programs….
Now ask yourself some really hard questions and answer truthfully:
am I/we willing to put the needs-concerns-wellbeing of the customer at least on par with our needs-concerns-wellbeing?
am I/we willing to sacrifice revenues and profits (‘bad profits’) that I/we are making from taking advantage of our customers?
am I/we hungry (passionate) about coming up with products-services-solutions-experiences that simplify and enrich the lives of our customers?
Does Amazon deserve the label of ‘Earth’s most customer-centric company’? Before I answer that question, allow me to tell you a little story about a well-known telecommunications company, one whose official strategy was to become customer-centric.
What Customer-Centricity Meant At A Well Known Telecommunications Company
I once did some consulting work for one of the world’s largest telecommunications companies. In the process, a certain kind of fellowship grew between me and the billing manager. To some extent he was a frustrated man. Why? The billing challenge was growing more and more complex: requiring more people, more expensive IT equipment, stronger oversight etc. .
What was the cause of the increasing complexity and thus challenge in billing? The number of unique billing plans in place. There were thousands of them. And most of them were legacy billing plans – many years old. So I asked the billing manager, why he didn’t just move customers to the latest billing plans. And in so doing he would be free to delete the thousands of legacy billing plans that were the cause of the headache. Can you work out his answer?
He told me that he built a ‘business case’ and presented to his boss. Yet, the proposal had got nowhere because Marketing had vetoed is proposal. What was the basis of the veto? The legacy billing plans were much more profitable for the company. Why? Because compared to the latest, competitive, price plans, the legacy plans were overpriced. And if the company took the decision to move these customers, arguably the most loyal as they had been with the company for a long time (3+ years), then this would mean giving away revenues and profits.
What did customer-centricity actually mean in this company? It involved lots of activity: vision statements, presentations, meetings, talk, customer research, mystery shopping, process changes, balanced scorecard. What it did not involve was the conscious choice to do right by the customer: to put the wellbeing of the customer on par with the wellbeing of the company (revenues, profits, share price).
Does Amazon Deserve To Be Called The Earth’s Most Customer-Centric Company?
We all know that Amazon works. It is easy to find and buy from Amazon. It is easy to keep track of where one’s order is. Amazon delivers the goods within the promised window. It is easy to return goods and get a refund. And on the only occasion something did not turn up when expected, I found it easy to get hold of Customer Services, and the call was handled by a friendly agent, who got my situation, validated my feelings, made a promise to have the issue fixed by the next day, and it was fixed.
This level of performance has kept me doing business with Amazon despite my concerns over Amazon’s tax avoidance strategy, and the concerns about how Amazon treats the folks who work in the warehouses. And to some extent my disposition towards Amazon has been a pragmatic one rather than one of affinity with what Amazon stands for.
This week the situation changed. What happened? My wife signed up for the Amazon Prime offer and she then enrolled me into it as well. As a result, I found renting and watching a movie (on demand) with my eldest son. The experience of selecting, paying for, and watching the movie was effortless.
The next day, to my astonishment (I do not use the world lightly), I found myself reading the following email:
We’re contacting you about your recent attempt to purchase “The Wolverine”. We recently learned that a technical issue may have prevented you from being able to watch this video. We’re very sorry about this.
To help make it up to you, we’ve issued a £3.48 for this order. The refund will be applied to your original order payment method and should complete within the next 2-3 business days.
We look forward to seeing you again soon.
Please note: this e-mail was sent from a notification-only address that cannot accept incoming e-mail. Please do not reply to this message.
Why was I astonished? I was and continue to be surprised that there is a commercial organisation that gives! What does it give? Proactive service. An apology. A refund. And all on the basis that a technical issue may have prevented me from watching the movie!
Once I got over my astonishment who was I left thinking-feeling? Given that I had watched the movie without any problems, and Amazon had been generous, I found a strong urge to contact Amazon and ask them to take their money back. Why? Because, I was brought up to repay good with good, generosity with generosity, considerateness with considerateness. Then I read the bottom of the email and found I could not reply to the email.
What did I find myself doing within 24 hours of receiving this email? I found myself buying a book, that I had been meaning to buy and had not bought, for £9 and watching a movie that I had not been intending to watch (this week) for £3.49.
Why did I do this? It occurred to me that I could not treat badly one who has treated me well. And as such I felt a pull to repay Amazon’s ‘goodness’ by repaying the £3.49, which I did by buying and watching a movie on the day of the email.
If the acid test of customer-centricity is putting the needs-interests of customers on par with the needs of the company then I am in no doubt that Amazon is customer-centric. Is this enough to show up as Earth’s customer-centric company? No. To win that mantle it occurs to me that an organisation chooses to prosper only by doing right by customers. That is how Amazon shows up for me this week. I cannot imagine any other company (that I am doing business with) taking the stance that Amazon takes in relation to its customers.
For those who are cynics, I get that Amazon may have taken a pragmatic decision to provide the refund so as to reduce the number of calls (and/or emails) coming into the call-centres. Even if this is the case, then the action that Amazon has taken is smart. So at the very least the folks at Amazon are smart in a way that also benefits customers.