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.