The importance of employee engagement: transforming the strategy for a new era
By Kelly McGuire, SVP, Revenue Management at MGM Resorts International
CHR Insights features industry analysis and commentary from Kelly A. McGuire, MMH '01, PhD '07, who is a CHR fellow and vice president, advanced analytics, for Wyndham Destination Network. Previously the leader of the SAS Hospitality and Travel Global Practice, and a member of the CHR Advisory Board, she has long been active in advanced analytics and big data. Her blog posts will feature industry research and guest interviews to address current industry issues.
Hiring, training, and retaining great talent is critical for service companies. This statement is not news to anyone in the hospitality industry. It is something that most hospitality companies have been struggling with for decades, with no silver-bullet solution in sight.
Lately, hospitality companies have been leveraging technology to automate more components of the service experience. With technology to replace human-executed processes, it would be nice to think that this problem of finding and keeping great people will become less acute. In fact, we believe that no matter how pervasive technology enablers become, people will continue to matter very much in the delivery of the all-important customer experience.
It has been demonstrated over and over again that employee engagement is a key driver of performance and retention. In the face of consumers taking more control of their service experience, rising costs, and continued focus on value, your best and most experience employees will make the difference. Therefore, it is becoming essential that hospitality companies look at this problem of employee engagement in a new way. It is time for creative strategies that focus on employee needs and concerns, even those outside of their core work responsibilities. Fortunately, there is both research and great examples in practice that hospitality companies can leverage as they tackle this crucial challenge.
I recently had a chance to chat with Michele Sarkisian, president of P3Advisors (www.p3advisors.biz) on this topic. Michele has been focused on employee engagement in some capacity for much of her 30-plus-year career, and is very passionate and well-informed about this topic. It's always a treat for me to be able to spend time with Michele because she remains current and engaged with the hospitality industry and the many and varied issues that we face (see, for example, her CHR report on how the hospitality industry can help prevent human trafficking). Michele brought up some really interesting points about the continued importance of the human component of service today, and pointed me to some research that can help companies build a strategy for maintaining employee engagement, from line level up to the executive suite.
Michele noted that, due to the digital evolution and the resulting proliferation of digital enablers, the consumer has taken more control over their service experiences. Hotels must struggle to differentiate themselves in the face of new competition, but also along with evolving consumer expectations. The bar has been raised as consumers compare their experience with your website, your mobile app, your front desk, your restaurant reception, with every other service experience they have, whether in hospitality or outside of it. Your booking process is compared to Amazon. Your front desk is compared to retailers like the Apple Store or the Container Store. Your service recovery, or the way you field requests for information, is compared with their cable company, phone company, or insurance provider (this might not always be a bad thing for us…)—or with Zappos, Whole Foods, Zillow, or even Expedia, Airbnb, and Uber!
This means if consumers don't get what they need or expect from your brand, they'll go elsewhere. If you aren't able to communicate with them through the channel they prefer, be it call, text, chat, or Twitter, they'll interact with someone who does. If you don't or can't recognize them appropriately at every interaction point, despite their loyalty membership or repeat business, they'll gravitate toward the provider that will.
Many hotel companies are pointing to personalization as the silver bullet to differentiation through fostering guest engagement and providing "authentic brand experiences." Yet your personalization promise is often delivered at your disparate sites by the lowest-paid employees in the system (either yours or your partner's). Do customer-facing employees understand your brand promise? Can they promote it and bring it to life through a personable, informative, and helpful interaction with the guest? Do they have the tools and technology to recognize your most loyal guests? Do they care about your company's reputation and feel a part of your company's success? Personalization falls apart if it can't be executed properly at the operations level.
A second reason why employee engagement is so crucial is that costs in hospitality have increased dramatically. Minimum wage is rising in many areas, so labor is becoming more expensive. Distribution costs are rising as well, putting pressure on hotels to find ways to generate direct business. We all know how expensive it is to acquire and train new employees, and how much less productive a rookie is than a seasoned employee. An experienced call-center agent can significantly drive conversions and upsells, as can a great front-desk agent. A friendly and knowledgeable server in your restaurant can encourage guests to explore special menu items. These line-level employees generate incremental revenue by being excellent at what they do as they function, in effect, as your brand ambassadors. They provide the service that keeps guests coming back to you, rather than to a third party. An inexperienced agent or server doesn't match up with your brand and he/she misses opportunities to optimize your guest's experience. It is critically important to retain valuable and experienced staff, not just because it's expensive to replace them, but because it takes time for a new staff member to reach that level of performance and to live and breathe your brand.
Finally, with the increased transparency brought about by the social web, consumers have become very focused on their personal value exchange with whomever they choose to do business. They have easy access to a wealth of information, such as reviews and ratings, to assess whether the price they will pay is worth the experience they anticipate they will receive. Your employees play a valuable role in the delivery of your guest's experience that, ultimately, may show up in reviews that trigger future consumer decisions around your brand.
So, what do we do about it? Michele pointed me to an interesting research paper by Nitin Nohria, Boris Groysberg, and Linda-Eling Lee in the Harvard Business Review (hbr.org/2008/07/employee-motivation-a-powerful-new-model). In this paper, "Employee Motivation: A powerful new model," the researchers propose—based on a study of a wide range of employees from Fortune 500 companies—that in order to increase employee motivation, companies should focus on filling their basic emotional drives to acquire, bond, comprehend, and defend (ABCD).
The acquire and defend drivers are reason-based. They represent being rewarded for good performance (acquiring stuff and status) and having fair, trustworthy, and transparent processes for performance measurement and resource allocation (defending "rights"). While a good deal of research shows that employees are not strictly motivated by money, is it still a driver and a motivator, if not generally the primary reason for staying with or leaving a company. Firms need to fulfill their employee's basic need for a fair wage, a clear path to performance-based rewards, and a balanced and transparent process for performance evaluations and promotions.
The bond and comprehend drivers are more emotion-based. These drivers are about growing relationships, developing affinity, building a legacy, and having purpose in work. For example, a culture that values openness and collaboration fulfills the bond drive, and jobs that are meaningful and challenging fulfill thecomprehend drive. Employees who feel part of a team, are proud to be associated with the company, and feel like they have a voice and purpose in the organization are motivated through these drivers. These needs can be easily overlooked. However, sometimes simply including a social impact component to the company strategy can go a long way in connecting with employees longing to be part of something purposeful.
If any one of these four driver buckets is left empty, people will find a way to fill it, usually outside the company. This means that, even if a company is doing well at fulfilling the acquire and defend drivers, they could still have a motivation challenge. If the company's culture offers triggers for all 4 drives, that company is optimizing engagement and raising barriers to exit. Michele pointed out that she spoke to a person who was retiring from a company after 30 years. For each of those 30 years, he had been on the company bowling team. He told her that he had thought of switching jobs over the years, but he really hated the thought of not being able to play with the team anymore. This ongoing bonding experience, enabled by the company, certainly helped keep a valued employee.
Michele had examples of companies that have successfully deployed the four-drive-model culture, either by design or simply by living the values and culture they desired. The Container Store, Chick-fil-A, Southwest Airlines, REI, Whole Foods, and mid-market companies such as Polydeck and Interstate Batteries are examples of companies that engage employees—and by extension, customers—well. They have become exemplars of Best Places to Work and Most Admired Companies. Several are Conscious Capitalism companies or B Corporations as well.
What really struck me about this "ABCD" model for employee motivation is the importance of balance among all of these drives. Employers need to understand employees just as much as they need to understand customers. While wages and fairness are important, they are often not why an employee leaves. It makes a difference to be a part of the community, to feel proud that your company contributes to social causes and is admired in the community it serves. The hospitality industry has huge opportunities to be creative with the assets we have, and the enthusiasm of our service-oriented team members, to fulfill all the drives. It is also clear to me that each company will have to do that in its own way, based on its own strategy, goals, and culture. It must start at the top. If senior leadership does not believe in—and really demonstrate—the connection to the emotional drives, the initiatives will not be perceived as genuine and will not succeed.
Recently, there has been a good deal of conversation about the role of technology in the service experience. Michele and I talked about this as well. My first reaction to the issue of employee engagement and the challenges associated with finding good people was to find ways to automate components of the guest experience such that you need fewer people to execute. Michele understood the rationale, but cautioned that technology needs to be implemented thoughtfully and carefully according to what matters to guests and when it matters. Guests come to you in all kinds of different mindsets, so tailoring experience and interaction around what "I" might want is not necessarily what the guest will want. Michele also noted, as an experienced road warrior herself, that even the guest's stay purpose could trigger different needs and expectations in the same traveler! An example might be a desire for low-touch, technology-based, efficient service on business travel, but high-touch, warm, and interactive service while on vacation with family.
As qualified people become more expensive and scarcer, companies will naturally turn to technology solutions as a replacement. It is important to keep in mind, though, that the novelty and "wow" factor of the latest and greatest technology quickly wears off, and then it becomes a commodity. You can't differentiate for long strictly on technology enablers. Our suggestion is to think of technology as paving the way for service delivery instead of replacing it. Pay attention to what matters to the guest along with the efficiencies that technology provides. (I am fascinated by this idea of how to integrate technology into the service process, so expect to hear more about this from me in this blog and elsewhere.)
Hospitality is about service, and service is about people. Brands and independents know that a memorable experience depends on people. Previous guests' experience, via reviews and ratings, will influence future guests' choices. Our ability to hire—and most importantly, retain—good people, particularly in those line-level positions, will be a huge factor in getting and keeping a competitive edge. A strategy for employee engagement that focuses on fulfilling all of their drivers will get you there.