Open Letter from a Hotel GM to Peter Drucker
I am a Hotel General Manager with a sense of ambivalence in my beloved hospitality industry. I used to be passionate about my job, but at the same time I’ve detested. I loved the philosophy, which sees the customer as the number one priority, as the lifeblood of any business. But I also hate that other philosophy, which caught me and kept me away from the customer’s principle. That is, the philosophy, which says, that profits have to be maximized, in which the bottom-line and the short-term financial performance means everything.
I have seen and done terrible things and would like to confess them with this open letter to you.
At the beginning of my career as a student, I learned that customers were supposed to be top priority of any business. It was understood that, satisfying customer needs, especially unidentified needs, could be a potential opportunity for providing more value to clients. I was stunned about it. When I graduated from the Hotel Management School in Switzerland these principles were in my head. I read Philip Kotler, again and again, and was amazed about many cases and situations delighting guests. They called it “the moments of truth”. So I was eager to start working and do my best.I have a feeling of regret for not having read more of your works. In addition, my management professor didn’t contribute not teaching your visionary ideas. If I had studied you before, I would have not give up on your thesis as is. The truth is that, after 19 years working in the hospitality industry, I have seen and done awful things.
Of course, I loved my job serving guests! At the beginning of my working experience customers were in the top of my priorities, but there was a certain moment in my professional life, that my passion and attitudes started to change. What’s even worse, I started seeing many guest (specially the ones who complained) as a pain in the neck. Then I began considering customers as being capricious, sometimes even stupid, and above all, very unpredictable. Even if I thought so I never told anybody; otherwise my career would have stopped immediately after revealing such a confession.
“Our philosophy is delivering happiness to customers and employees. People may not remember exactly what did or what you said, but they always remember how you made them feel”. Tony Hsieh –CEO at Zappos.
Yet, as I said before, in when I started working I did not have such mind-set. When I worked in the front office department as desk agent, I was always ready to solve problems or complaints. I used to turn around complaints and dissatisfied customers into opportunities. I had a sort of special talent. I also discovered how creative anyone can be by anticipating customer needs; it was just a matter of having the right attitude and vision. I definitely was very empathic, thus dealing with difficult customers and tough situations effectively.
Asia was supposed to be the perfect continent to work in having such a mind-set. So I worked in a very luxurious and historic hotel in the Philippines, but even there, I saw awful things. I recall a time when a group of Japanese guests were very angry because, due to an overbooking situation we had, their rooms were sold out and their reservations were moved to another hotel. You should’ve seen the customers’ reaction. They made a scandal in our impressive and luxurious lobby. The poor guide was overwhelmed and threaten, almost beaten up by the Japanese group. I recall other hotel guests watching the scene quite shocked. The front office Manager did not even bother at getting involved and she hid in her office. The rooms division Director seldom stepped out of his office, so he was obviously not going to take care of the problem and manage the conflict personally. To both of them the problem was supposed to be solved because the hotel they chose to move the group to had the same luxury category, and they were even paying for the transportation expenses.
“What business is Joie the Vivre in? We are in the business of refreshing our guests’ identities and creating priceless memories for them. We want to wow or guests by delivering them experiences they hadn´t even imagined. We know that if we accomplished that, our guests will be loyal. These loyal customers may become evangelists”. Chip Conley –Joie de Vivre hotels CEO and Founder.
Back in my country, Spain, things didn´t get any better. In fact, they became worse. The market situation was the complete opposite of today´s, there was a lack of supply and an excess of demand. So for hoteliers, customers weren’t a scarce resource to worry about. I guess this was the point in my career when I started getting a misguided mind-set. Because of the fact of a corrosive organizational culture and a poor vision in the hotel I was working in, I started seeing guests as nuisances, even sometimes stupid, and many other times as annoying. In this hotel everything was set to follow policies and procedures. It seemed as if hotel manuals were set in stone. Customers’ wants and needs weren’t really considered when executives started stonecutting them. There wasn’t much flexibility because managers would repress any initiative or improvement proposal. Even if such action or idea could have been on behalf of the guests! My teammates, especially senior coworkers, completed my re-education. “Why is it that guests don’t understand our policies and procedures?” –I asked myself being converted into such a bureaucratic mindset. “No doubt some customers were unpredictable, dizzy and stubborn; it is just a matter to make them understand our hotel policies”.
Mr.Drucker, as you mentioned in your essays, Frederick Winslow Taylor has been demonized because of his ideas and principles of scientific management (1911). In spite of his contribution to productivity to American society, his ideas were far from trusting workers capabilities. He thought about a forced standardization of the working methods and procedures and a forced adoption of these methods. Workers were supposed to be incapable of understanding what they were doing. As you wrote: ”Taylor considered both workers and managers as dumb oxen. When World War II came, however, we had to ask workers. We had no choice. U.S factories had no engineers, psychologist or foremen. To our immense surprise, as I still recollect, we discovered that workers were not dumb oxen nor immature nor maladjusted. They knew a great deal about the work they were doing”. Now I know that if executives had asked me, or if they had empowered me, there is no doubt that I would have contributed with good ideas to improve my work and performance. I am also sure that I would have provided more value to our customers.
My next experience was as front office manager in Cancun, Mexico. I had this fascination about big resorts and paradise beaches, therefore I imagined that working for leisure tourists was going to be more pleasant. But here again, the principles of scientific management were waiting for me. My bosses made it clear the day I arrived: I was hired primarily to watch over the company procedures. Of course, my experience, education and ideas mattered, but hotel policies and procedures had to be safeguarded first. “Policies and Procedures were at all levels more important than guests” –this statement was not explicitly written, but it was implicitly understood. In this top of the class big resort they applied the worst version of Taylor´s thesis. Executives managed by fear throughout their chain of command. Neither customers nor employees had much concern within their priorities. Nowadays, I remember how far this mindset was from the Total Quality Management (TQM) principles by Joseph M. Juran and W. Edwards Deming. Understanding such Quality Management as a set of coordinated activities in order to continually improve the effectiveness and efficiency of the working procedures, focusing on customer expectations and ongoing review and improvement. In such view, employees and managers are considered to be the cornerstone of the working system, so they are empowered in order to accomplish improvements.
I saw terrible things and did awful things. The first days working under such mechanical and bureaucratic system were pretty tough. I almost gave up and returned to Spain. “How could executives design such working procedures against customers?” –I asked myself at the beginning.
I got a warning: “Whether you change your mind-set or there is no possibility for you to work for us”. “You are supposed to follow hotel procedures and not question our policies” –My boss said. Since I was the manager in charge to handle most of the hotel complaints. There were just too many stressful situations to handle as many guests had complaints. I recall an extreme and surrealistic situation caused by such procedures. One day, I had to retain a professional soccer team because of the hotel policy that stated: “Any room item damage has to be refunded by guests -if such damage was caused by them. The price we will charge to guests will be equal to a sum of the item cost plus a 300 percentage additional charge”. In this particularly event one of the soccer players, accidentally damaged a desk lamp in his room. The resort’s executive housekeeper came to my office to remind me the procedure I had to follow: “you have to charge the lamp -plus an additional 300 percentage- to the guest”. So I couldn´t make an exception -after all, these people were famous –and thus I had to order security not to let the soccer team leave the hotel property until they had paid for the damage. The team’s coach and assistants wouldn’t agree on the price charged –obviously, because it was overpriced. In spite of any common sense action, I had to apply an uncommon sense policy. Therefore, I finally made them pay and they were able to leave the hotel.
“There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.” Sam Walton - founder of Wal-Mart.
After a year working for this company I thought it was time to leave, otherwise I would have risked of converting in a firm believer of such mindset. I then moved to Dominican Republic working for a well-known Spanish hotel group. There I was able to experience a strong colonialist behavior against native workers and a generalized attitude lacking humbleness. Here too, management styles were based on fear. Mistrust in native workers was an axiom. The prevailing colonialist behavior was very rooted in the management culture. It first originated from the top; a behavioral chain of reaction starting from the Resort GM to the rest: hotel directors and my fellow managers. The prevailing way of thinking could be summarized in these statements: “Native workers cannot think properly, they are unskilled and dishonest. We must at all times watch over them”. “Control is everything”. “They are all suspicious workers to mistrust”. This big resort had 5 hotels and it was overstaffed. Labor expenses were so cheap and most of the operational employees were unskilled. Though employment necessities were high in this country, the hotel turnover rate was also extremely high. Because of a lack of proper leadership the best and most trustful employees moved to other resorts in the area. A self-fulfilling prophecy happened when managers treated employees as unreliable, untrustworthy and incapable of accomplishing higher work performance, then reaffirming their professional bias once we had any distrustful situation or lower performance.
“The good boss or the good leader in most situations must have as a psychological prerequisite the ability to take pleasure in the growth and self-actualization of the people”. – Abraham Maslow.
In this resort, firing workers was the executives’ favorite sport. Directors would fire employees just for the benefit of the doubt. But because managers were by nature very suspicious, doubts were all over. They didn’t coach, warn or evaluate workers collecting objective facts. Instead, subjectivity, intuition and gut sense was all that they needed. I recall the Resort General Manager as being a dictator in a small island. He would drive through the property with his 4x4 Jeep. Plants and flowers withered on his way driving. If he ever saw something suspicious –I always wanted to know his perception for this term- he would report it to the HR Director. Then the HR Director would proceed following orders: quickly and without anesthesia, the suspicious employee was fired. You can imagine how much fear was delivered just by driving around. Employees would petrify when they saw this 4x4 Jeep. Not even Stephen King could think of such terror when he wrote his novel Christine.
“Probably the one that trips us up the most in the hiring process (about our core values) is the last one: be humble. Because there’s a lot of really smart, talented people out there that are also egoistical. Also it’s the harder question because you can’t ask: How humble are you? And they say, “I’m the most humble person in the world”. But we actually test this when we pick up candidates with our Zappos’ shuttle at the airport and give them a first tour. Most of our candidates are from out of town. Then we conduct the interview process. So after this interview process is finished the recruiter will actually go back to the shuttle driver and ask how he or she was treated. If he or she was not treated well we won’t hire the person. It doesn’t matter if the rest of the process went well.” Tony Hsieh CEO at Zappos.
I have to admit that some hotel guests here were also a pain in the neck. The most bothersome were: Puerto Rican, American, Spaniards, Canadians…In summary, they were all. They were all overcritical since they complained for small issues. Why did they complain about?
Mr.Drucker, I should have studied your ideas more. You were very right when you said: “Businesses are not paid to reform customers. They are paid to satisfy customers”. Or, how keen you were when you clearly stated what’s the main purpose of any company: “There is only one valid definition of business purpose: to create satisfied customers”. You also wrote: “It is the customer who determines what a business is. It is the customer alone whose willingness to pay for a good or service converts economic resources into wealth, things into goods. What the business thinks it produces is not of first importance – especially not to the future of the business and to its success… What the customer thinks he/she is buying, what he/she considers value, is decisive – it determines what a business is, what it produces and whether it will prosper”.
Seldom people are aware how visionary you were developing these ideas so long ago. Paradoxically, in the present, although your ideas are considered as common sense, why is it that so many hoteliers, executives, and shareholders still think that maximizing profits is the first purpose for their businesses? How come is that the exclusively financial short-term approach is still the mainstream thinking?Back again in Spain, after staying one year in Germany, as a Hotel General Manager I learned soon from my bosses that profits meant everything. The exclusive purpose of the business was to make money and make a profit. Management was supposed to focus almost exclusively in such purpose. You were considered a good executive if you maximized profits –it didn’t matter if you mislead workers in the meantime. How could I have questioned this “wise” way of thinking? I really admired my bosses; they were charismatic and brilliant professionals with a successful career as well.
The problem came when the selling price (Average Daily Room Rate) started to decrease. We struggled as competition increased every year. Every new hotel property was a better asset striving for its share of the market. Yet, it was still a period of economic opulence in Spain. During the economic boom –from 2000 to 2007 Spain developed a real estate bubble, which reduced significantly the entry barriers to the hospitality markets. The banks opened up financing and credits, and investors –especially construction and real estate companies- found a new business opportunity: hotel development. However, business for these new players wouldn’t stop there; they also wanted to run the hotels. It was an easy business to enter and very positive for investors. The hotel was profitable in itself, because the bubble would generate secure gains over the real estate and building property. This fact attracted many new hotel developers and investors. Though hotels were built everywhere to the point of oversupply. That is, supply grew at a higher rate than demand.
Despite difficulties, I was pretty well trained to cut expenses; people used to call me the Edward Scissorhands of expense cutting. My bosses were my role models and I applied myself in the discipline of maximizing profits. We hired consultancy companies and worked with them designing better procedures. I also prepared the hotel for audits and certifications in the ISO 9001-2000, ISO 14000, and “Q” Spanish Quality. It was stated in every page of our working manual that we cared about our customers. Quality teams were composed, who came together to analyze and discuss quality concerns.
They surveyed guests’ opinions and made recommendation for improving quality, they also brought light into critical problems, but they didn´t have much decision-making authority. This hotel had very good facilities, restaurant buffets were delicious, beach front rooms were superb and service employees were very professional. So we achieved good quality performance metrics. But, does this kind of quality really add more value to clients and adjust itself to environmental changes? Again, Mr.Drucker, we were still far away from your precepts: “Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A product is not quality because it is hard to make and costs a lot of money, as manufacturers typically believe. This is incompetence. Customers pay only for what is of use to them and gives them value. Nothing else constitutes quality”.
Our employees were demoralized and burned out too, because we were paying to them less money for several extra-working hours they were “forced” to realize.“Keep Maslow´s Hierarchy of Needs in mind when you´re working on your business. For us at Continental, that means we don´t want to get so interested in the kind of food we serve that we lose track of getting our planes in on time. We’re not going to go too far if we’ve got one little element right but we’re missing the basics. After all, look at our OnePass frequent flyer program, which year after year was voted the best in the business –and all the while we were loosing bags, screwing up flights, and losing customers. It’s so great to have the best frequent flyer program but we had to have the basis- clean, safe and reliable flights to places people wanted to go (the food, clothing, and shelter of an airline) - before that was going to get us anywhere” Gordon Bethune –Former CEO at Continental Airlines.
In the meantime, I developed more experience and skills and ended up being a Master in accomplishing budgets. So it was time to move to a more prestigious company. The problem was, as in many other hotel groups by the time, that because of the expansion fever, many hotel groups incorporated low quality products to their group portfolios. Hotel chains were eager to grow and acquire new properties, increasing their number of hotels and pretending that with such strategy gain brand recognition. But, because of this anxiety to grow faster, many hotel groups started to incorporate under management contracts low quality hotel properties. In my case I had to manage a hotel, which desperately needed renovations. Notwithstanding those burdens, executives at corporate offices demanded to increase profits every year. It didn’t matter we were in a competitive disadvantage; indeed we had to maximize profits.The first year I accomplished the financial objectives. The second year I didn’t.
Competition was very strong and number of tourists decreased overall for that specific season and destination. We had no choice but to constantly offer promotions and reduce certain levels of quality. Inasmuch as we had to reduce our selling price to maintain our occupancy rates, we needed to cut expenses doubling the effort in order to sustain profits. My bosses recriminated not accomplishing budget objectives. We really tried. I learnt the lessons of trust and transparency with my team. I knew that the only way to accomplish objectives was to change my leadership style, and make the rest of my team not only participating but also accountable for the economic performance. So I incorporated the philosophy of Open Book Management that sees cost saving as everyone’s duty. The responsibility for saving costs or making costs more efficient lied to all workers. Of course, everyone was supposed to act within his or her sphere of action. In this way, managers had more accountability than bottom-line employees. By working under such philosophy I could make more people be more committed to analyzing costs and making them more effective.
In retrospect, thinking of all of those years I must admit that I failed leading people. What’s even worst, I demanded too much effort from the people I managed without providing them with a higher purpose. Maximizing profits could be a purpose to shareholders, but it’s not a purpose that would inspire workers and certainly it is not a sustainable strategy for any business. It is a common strategy among hoteliers to focus strategies just in product development. That is not to say that it’s an incorrect strategy but it does not suffice by itself nowadays. It doesn’t, if the hotel is competing in a hyper-competitive market. A hyper-competitive market is defined by a very commoditized oversupply in one hand, but not enough demand on the other hand. Commoditization occurs when a goods or services market loses differentiation across its supply base. In the eyes of the customer there is no significant value of differentiation among brands, so a lower price is the main consideration for customers when making their decision. In fact, price turned out to be very important, because in the commodity market prices go down. In a commodity market the one whose prices are the lowest is better positioned to attract guests.
Mr.Drucker, although there is no single best way to manage, because it would always depend in many circumstances, I would like to commit myself with the following precepts. I might not be able to apply all of them at all times but I will try to have them with me very present.
I. My first commitment is with customers, but at the same level, also with employees. It is mistakenly understood that it should be enough to provide good service to customers. This was the cornerstone of a good strategy in the past but it doesn’t suffice in the present. Providing great assets and facilities is not even enough. What customers value today might not be what they value tomorrow so innovation, creativity, and flexibility must be within the equation. Yet, in hospitality, the part of the human touch or human experience can make that difference; and this means understanding and feeling what customers feel when you are providing service. Danny Meyer (CEO of Union Square of Hospitality Group) reminds us this important precept, also saying that not everyone is apt to accomplish such purpose. It takes a high degree of HQ or Hospitality intelligence (empathy, curiosity, self-aware of the own emotions, integrity, a inherent pleasure to make others feel good…) to make it happen.
II. Maximizing profits is good, even necessary if part of the money will be reinvested in the business, but this also has to be balanced with a long-term approach. The problem is when we just focus on maximizing profits just in the short-term, because we want to provide more value to shareholders to the expense of other stakeholders; especially customers and employees. What we can never forget is that profits are, after all, a lagging indicator. Lagging indicators measure outputs, leading indicators measure inputs. So the key thing here is to focus priorities in leading indicators such as a higher purpose, developing a competitive hotel culture and core values, boosting individual and organizational learning and innovation, having a shared vision…for then having higher outcomes or profits.
III. I will try to manage in order to never waste human potential. To the contrary, I will try always to enhance workers’ knowledge and skills. By centralizing decision, automatizing tasks and not letting our employees developing higher levels of autonomy, we are limiting our operational knowledge and innovation possibilities. At the same time, we are also limiting our options to provide better experiences to our guests. Frederick W. Taylor scientific management thesis has no place in here. Of course, there must be norms, policies and procedures, but they should be seen as the base to start and continually improve. Levels of empowerment are needed since improvements should come also from operational employees, and not only from executives, managers or corporate offices. Danny Meyer made us remember the shortness of the cycle of any idea in our businesses: “Internet has completely disrupted everything but what it has disrupted more than anything is the sanctity of a good idea. In the old days you could be calm and best of what you did by having a better idea than the guy next door, and executing that idea. Today all it takes is for you to have the idea, put it into action and someone is going to take the IPhone, take a picture and email to someone to whoever could copy it”.
IV. I will have as priority within my core values to be humble. To be humble means to be able to listen carefully, to respect other’s opinions even if those differ from ours. There is no better learning without humility. It was the great psychoanalyst and philosopher, Erich Fromm who said in his book The Art of loving that being objective meant to use self-reasoning, and that would only be possible with the proper humble attitude.
V. Finally, I will put my efforts to develop a real team built on trust, communication and transparency, built day-by-day in every working issue and interaction among workers. Instead of any individual or departmental view, it will be key to understanding other persons and other departments’ jobs. The priority will be set in a holistic view despite single tasks, functions and departments. Everyone should understand what others do and respect it, no matter the position, level, knowledge or skills. Everyone, no matter what job he or she is accomplishing, should be a valuable part of a whole process, contributing with his or her efforts to the company objectives and purpose. And at the same time, be aware how are his or her efforts contributing to the whole business.
With my sincere gratitude for your inspiration, ideas and wisdom.
Rest in peace.