Mike Hohnen

Coaching for personal growth, change and development

Hotel

Happy staff make more money… for you

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“…companies that effectively appreciate employee value enjoy a return on equity & assets more than triple that experienced by firms that don’t. When looking at Fortune’s ’100 Best Companies to Work For’ stock prices rose an average of 14% per year from 1998-2005, compared to 6% for the overall market.” read the Forbes article here

This is a quote from study cited by a new book out by Dr. Noelle Nelson entitled : “Make More Money by Making Your Employees Happy,

For regular readers of this blog this is a well-known theme.

I’m always amazed how much attention this kind of message actually gets: Everybody goes . ohh surprise.. look at this…happy staff is important.

Because if you think about it it is so self evident. In a hyper-competitive world where products are more lookalike than unique, ultimately what makes a difference is the relationship factor.

And the relationship factor is what takes place between your front-line employees and customers.

The missing link

What a lot of people however totally miss in this connection is what it actually takes to keep front-line employees happy and comfortable with their jobs. The big misunderstanding is that it’s a question of more money, perks or friendly pats on the back. It’s not.

As Hertzberg taught us many many years ago, the basics, money work conditions etc, need to be on par with industry standards and if you get that right you can prevent dissatisfaction – Hertzberg called these hygiene factors. But it does not create motivation or the kind of enthusiasm that is needed for front-line employees to actually enjoy building those crucial relationships with customers.

From my perspective employee satisfaction is relatively uninteresting – what really counts is employee enthusiasm. Enthusiasm is what makes a service organisation stand out head and shoulders above the rest.

And the primary driver of enthusiasm on the job – which has to do with job content , what a person is allowed to do – is that person’s immediate supervisor.

The immediate supervisor builds or kills enthusiasm.

So if we want to build a service organisation that is among the best we need to make sure that our middle management team understands the crucial role that they play in this connection.

It is as simple as that.

A hard question for you as a leader

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The name Barbara Kellerman showed up on my screen on a number of occasions this week.

The reason for this is her most recent book The end of Leadership in which she takes the whole leadership development industry (of which I am also part) to task for selling and promoting what at the end of the day turns out to be snake oil.

Leadership crisis

Her point is, that despite more than 50 years of countless leadership development courses, conferences and God knows how many books there is not much to be proud of when you look at the big picture. According to Kellerman only 7% of employees trust their employers, their leaders and managers and the vast majority of them do not consider their superiors to be either honest or competent.

Not impressive statistics by any yardstick.

But what struck me the most was this:

“Clearly one of the problems plaguing the leadership industry is its fixation on developing good leaders, while ignoring completely the problem of stopping or at least slowing bad leaders.”

Why is it that so many organisations are doing such an incredibly lousy job and weeding out the rotten apples?

Because Kellermann has a point. Time and again we see groups of managers being sent off on development courses/training but ‘Joe the terror’ is left to do what he has always done despite the fact that everybody recognises that there is a problem.

But not dealing with Joe the terror sends a very strong signal to the organisation.

One of the things that we know undermines trust dramatically is when leaders says one thing and do something completely different. They could just as well have created a huge poster and on it written: yes we send good boys and girls to leadership development courses because we know it keeps them happy and it’s the right thing to do – but the truth be told we don’t actually give a toss.
All we are looking for is results. So as long as someone is getting the numbers right they can forget about coaching, appreciative Inquiry and feed back and behave any way they like.

But getting the numbers is just one aspect.

The other part of being a good leader is relational. ( I like to call it Results vs Relations Kellerman calls it Effective and Ethical – Either way – to be a great leader you can’t have one without the other)

This point was brought home to me many years ago when I read Chip Conley’s The Rebel Rules: Daring to be Yourself in Business ( still a favourite book of mine) . In the book he has a chapter on performance management and gives an example of how they at Joie de Vivre Hotels evaluate their management teams on a 5 x 5 point grid with results on one axis and relations on the other axis. Conley makes the point that managers who do well on the results scale but badly on relationships need to be coached and made aware that they need to improve on this aspect – and ultimately, if they don’t get it right they will have to leave the organisation despite the fact that they are getting the numbers right. Anything else is shortsighted. (Obviously this also applies the other way round. If we have the nicest person on earth on our management team but who isn’t producing what needs to get done that person too must either shape up or ship out – being ethical but ineffective is also bad leadership)

The cost of bad leaders


If we’re trying to build a better service business following the principles of the service profit chain we also know that the number 1 factor affecting job satisfaction and loyalty of our best front-line people is their relationship with their immediate supervisor.
So some supervisors may be able to drive results short-term but the price they ( we ) pay is always that long-term they lose their best people. ( and we all know that losing our best people eventually leads to losing your best clients)

Furthermore by not dealing with the bad apples we send a strong signal to the other managers on the team that under performing behaviour is okay. As a result over time we develop a toxic leadership culture, with zero trust

Focusing only on bottom line results is a classic misconception. What many leaders in the service industry forget is that financials are lagging indicators – you will have had employee dissatisfaction and/or client dissatisfaction for a while before it actually shows up in your financials and by then it may be way to late to do anything much about it.

So now’s a good time to ask yourself the hard question: are you a good or a bad leader? In the sense do you deal effectively and ethically with your non-performing managers? Because if we want to rout out bad leadership and re-establish trust this is where it all begins.

The Social Nature of Brands

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Great article in B+S

Some might attribute this trend — the increasing use of social engagement by marketers — to the rise of online social media: Facebook, Twitter, YouTube, fan sites, and social marketing websites (also known as private-label media) created by companies themselves. But the trend represents a more fundamental change in marketing practice, linked to insights from social psychology, behavioral economics, and neuroscience and brain research. Every form of interaction between companies and consumers — taking place online and offline, in stores and over mobile devices, in branded content and by word of mouth, and indeed through all direct consumer experience — is now understood to be shaped by the social nature of brands.

Read it all here : The Social Life of Brands

In my book Best! i also argue the point of the Ambassador effect and how it affects the Service industry – you can find the book here

Culture. The intangible competitive advantage

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Great article in Fast Company

Although cultivating a great culture demands a lot of emotional investment, leadership wisdom, and a genuine care for people, it is a financially low-cost investment with a high economic return. This is why great leaders pay attention to it. An authentic culture, at the very soul of a business, is something competitors cannot imitate. Like soul, culture is intangible. Yet given a little inspiration, this intangible commodity can be converted into untold wealth. Incredibly, the next big wave of growth will come from businesses whose leaders know how to convert low-cost intangibles like culture into high bottom-line value.

Where to Play and How to Win…

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Do you have a clear strategy ?

I have lost count of how many hotels and conference centers I’ve encountered over the years who define their strategy as ”delivering great customer experiences” or being ”among the top 5 in their category or region”.

But that’s not a strategy. At best it’s a vision and and worst-case it’s just wishful thinking

Strategy is distinctly different from visions missions and goals. Strategy crystallizes the very hard choices that we all need to make. Strategy defines how we create value. Value emerges when we have the skills to produce something that costs us less to produce than somebody else is willing to pay for it. Period.

Value = ( Sales Price – Cots to produce/deliver)

At first, that sounds simple – but it quickly gets trickier, what I may be happy to pay € 100 for is probably quite different from what you are happy to pay €100 for. Value is deeply subjective, each of us computes it in our own way depending on the circumstances and the situation.

It therefore makes no sense to talk about creating value without at the same time answering the question value for whom?

Because if I try to be everything to everybody I risk ending up being nothing to anybody and there’s not much value in that.

Where to Play
Developing an effective strategy therefore boils down to defining target market segments and clearly understanding what it is they need. (But but when targeting certain segments we also need to understand that that means there are other segments that we are willing to forgo)

How to Win
The better we understand the specifics of a segment the better we can tailor our service delivery in such a way that we produce value for exactly that segment.

So the 3 hard questions we need to ask our selves are:
1. Who is the target customer?
2. What is the value proposition to that customer?
3. What are the essential capabilities needed to deliver that value proposition?

Obviously, if we are running a hospitality business that is open 365 days a year we will need to identify several target segments ( time of year, day of the week – day part etc). Remembering, that what differentiates segments is not the demographics but the situation.
I have very different needs when I’m traveling in connection with a weekend break, compared to when I am traveling to conduct a workshop – same fellow very different needs ( and price points).

So we need to break down our value propositions into situations.

In my book Best! . No need to be cheap if you are … I have a chapter on how to work on you value proposition using the value equation.

Also here is a great article from S+B on the same subject – and finally the best tool to visualize and brainstorm some more on this is the Business Model Canvas as explained in the video here.

Why write a book…

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We live in a world of abundance which basically means that there is too much of everything. Supply outstrips demand in virtually any business category you can imaging. This hyper competitive situation forces us all rethink our approach if we want to be successful.

This is the core idea of my new book.

So why write another book you might ask – it’s not as if the world is craving for more books on service, customer focus or management?
Surely there is also an abundance of books?

Well – Yes… But on the other hand… No!

Let me explain.

My work in the service industry has been based on the principles outlined in a book that caught my attention in 1990 called The Service Profit Chain – shortly after the book was published I became the CEO of a large hospitality group and the principles outlined in the book became the basic foundation for the approach that we took. It worked like a dream for us.
In fact it worked so well that in 2001 I decided to form a consulting and training company that would help others implement the principles of the Service Profit Chain.
So for the past 10 years or so I have been delivering workshops, training, and keynote speaking to companies in the service industry from consulting engineers to managers in large hospitality groups.

I nearly always get asked at some point: ”Where can we read more about this? ”

And I refer people back to the original work published by Harvard in 1989.
But when I then check back later and ask if they enjoyed the book I very often get slightly sheepish looks and some mumbled excuses about not really getting past the first chapter.

I suspect this has to do with the fact that a lot of the people working in the service industry prefer a very practical hands-on approach to their learning. The original service profit chain book is a fabulous piece of work but it is in parts quite theoretical and with more than 360 pages to get through it is also quite a mouthful when you have a lot of other stuff on your plate.

Invariably the discussion therefore leads the obvious question from my client: Why don’t you write an easy to read, simple to understand hands-on guide to implementing the service profit chain – we really need that!

And funnily enough when I then researched what’s already published I can’t find anything that integrates all seven steps of The Service Profit Chain into one coherent system that is easily understandable at all levels of the organisation.

So there was nothing els for it but do it my self – and here is is:
Best! No need to be cheap if you are…

Flash sales – good or bad idea?

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Together with spa/beauty, travel /travel tourism and restaurants are the top 3 categories both in the number of deals and amount of revenue generated by flash sales.

Discounting is clearly increasingly popular. Customers love it and more and more companies are piling in to catch a bit of the action. Nonetheless Groupon and LivingSocial are still by far the 2 largest players.

But is it good business in the hospitality sector?

I think that question is the most frequently debated subject amongst industry players wherever they gather at the moment.

On the surface there are 2 fronts.

Those that are doing it and therefore have all sorts of sophisticated arguments why they consider it good business. On the other side those that are not doing it because they consider it the worst form of business ever.

What until now has been really hard to evaluate is who is right and who is wrong.

But now the Centre for Hospitality Research at Cornell University has just released a study that tries to answer exactly that question and a few more – this most useful report can be downloaded here

Key findings are:

Generally participating hotels surveyed report moderate success.

The deals do bring in new business. But as to producing repeat business this is too much less extent the case than what hoteliers hope for when arguing for using these promotions.

“One factor often cited to justify offering a flash sale pro- motion, repeat business, did not seem to operate for these respondents.”

Hoteliers who are happiest with the outcome of their deals are also the ones who have managed the total cost of the deal most assertively.

Overall the conclusion seems to be that flash deals can work for you if you are very astute in negotiating the deal with the coupon provider and you find a way to either upsell to these customers when they are there or have a surefire way to convert them into repeat customers.

This is very neatly illustrated by the authors like this

“Evaluating your property on these two dimensions allows you to better frame the value proposition offered by flash deals. If you don’t expect to be able to convert customers from flash sales deals into returning guests, you must carefully manage the margins of any deal you develop and creatively identify opportunities for cross-selling and up-selling once guests are on property. When you expect high conversions from flash sales customers to returning guests, you could justify the deal as a marketing expense. You should carefully avoid structuring any flash sales that will land you in the lower left quadrant.”

Emerging Marketing Channels in Hospitality:
A Global Study of Internet-Enabled Flash Sales and Private Sales
by Gabriele Piccoli and Chekitan S. Dev – you will find it here

Question:
What are your experiences with Flash sales – are they working/not working for you?

Implementing the Service Profit Chain

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My new book has now been published !





Inspired by the principles developed in the “Service Profit Chain”, Mike Hohnen takes you through each of the steps needed to create an outstanding service business.

You will find it here on Amazon

Best!


We live in a world of abundance – there is plenty of choice everywhere. And since 2008 we have experienced significant drops in demand as consumers became more careful. The result is a widening gap between supply and demand in virtually any category you can imagine.
When that happens, many companies have a knee-jerk reaction, and the recipe is more or less always the same: initiate rigorous cost-cutting programs, reduce staff and/or services, offer discounts in many forms, and increase advertising aggressively.
This, however, is the equivalent of trying to steer and brake as your car begins to skid on black ice while going through a sharp curve.
As you hit that declining demand curve, you need to perform what at first seems like a counterintuitive move: hold your price, increase your services, improve your quality, and narrow your focus in the market.
In this book, you will not only understand why but also see how you can do that.