Lessons from Ritz Carlton: When the Customer is Wrong

Lessons from Ritz Carlton: When the Customer is Wrong

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You’ve seen the sign – the one proclaiming that the customer is always right, even when they are wrong. How do I put this politely? MALARKEY

Sometimes our team members are right and when they are we need to stand up for them. My son worked for the Ritz Carlton hotel company for a number of years. They are legendary for focusing on their customer, or in Ritz Carlton language their “guest”. One day while working as a front desk supervisor he was in the office when he heard a guest berating one of the front desk agents. The guest was abusive and using inappropriate language and despite the front desk agent’s measured and polite tone the guest continued to escalate the confrontation. My son went to intervene and deal with the guest, but as he came out of the office the hotel’s general manager happened to come into the lobby. What happened next had a significant impact on my son, and his team at the hotel.

The general manager calmly introduced himself and began to apologize to the guest. Explaining to him that he was so sorry that they could not meet his expectations and that it would be his pleasure to help him find a new hotel that would meet his expectations. The guest began to back pedal, but the general manager was not moved from his position. He calmly, but firmly, escorted the guest out of the hotel.

After the guest had departed the general manager gathered the front desk staff and told them that they were ladies and gentlemen serving ladies and gentlemen. He would not allow them to be treated any less than that.

That encounter taught my son, and the front desk team at the Ritz Carlton some important lessons:
The boss had their back. The general manager communicated through his actions that his people were more important than a guest who was mistreating them. He not only stood up for them, but he stood in front of them, taking on himself their problem.

The boss reinforced the importance of the guest (customer). The general manager reinforced that the hotel team were ladies and gentlemen – whose mission it was to serve their guest. He didn’t give them a pass or a reason to mistreat or fail to serve a guest. Just the opposite, he highlighted the importance of the guest.

The boss preserved the dignity of the guest (customer). The boss dealt with the guest with compassion and took the blame for failing to meet his expectations. He did not treat the guest in the same manner that the guest treated the hotel team. He paid back rudeness with kindness.

The boss reinforced the values of his company. Part of Ritz Carlton’s culture is that they are “ladies and gentlemen serving ladies and gentlemen”. This is an important part of their customer service focus. It sets the standard for not only how the team interacts with the guest, but also how they interact with one another. By his actions and discussing this with his team he lived the values that the company espouses. This is how culture and values become alive in an organization.

The boss taught his team how to deal with confrontation. The general manager showed that you can be decisive, firm, and tough, without being a jerk. You don’t have to yell, curse, or become animated to effectively communicate when people fail to act responsibly or fall short of expectations.

The boss taught his team that on occasion you have to fire a customer. Sometimes customers are toxic to our business. They may demand a disproportional amount of our time. They may be rude or abusive. Their expectations may not be able to be met by us. Keeping them may be unprofitable to us. Sometimes the customer may be right, but wrong for us. When this is the case we need to act decisively as did the general manager at the Ritz Carlton.

Creating organizational cultures that win starts with a relentless focus on supporting your team. When teams know their leader has their back they are empowered to focus on the customer. As leaders it is our job to protect and support our people. Sometimes the customer is right, and our team members are wrong. When this happens we need to quickly acknowledge it, apologize to the customer, make it right with the customer, and address the issue with the responsible team member.

What do you think about standing up for your team when the customer is wrong?

On Choosing and Being Chosen

On Choosing and Being Chosen

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One of the most valuable leadership traits I have been a part of is the act of “being chosen.”  I have had various people seek me out, bring me on their team, and give me responsibility. This leadership act of seeing what someone can become and calling them to it is invaluable. No one can do this except a leader. A leader must see what another cannot see in themselves. Through mentorship, guidance and direction I was able to grow in ways I never imagined. Everything in my life is different because one person saw something in me when I was 16.

 

Seek others out, bring people on your team who share your values and who you see tremendous potential for. Only you can make this happen. You never know whose life you could change.

Make Money or Do Good

Make Money or Do Good

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For the last 50 years academics, investors, and economists have argued over shareholder and stakeholder theories. Shareholder theory says that companies sole duty is to maximize profits within the law. Stakeholder theory says that companies should balance the returns of all stakeholders even if it reduces profits. So, which is it, make money or do good?

When we think about this we usually default to examining large multi-national public companies, but they are just a piece of this debate. According to the Small Business Administration there are 18,600 large companies in the U.S., about 3,700 of these are publicly traded. They define a large company as having more than 500 employees. There are 28,800,000 small businesses! That is 99.9% of all businesses! Small businesses employ about half of the non-governmental workforce and over the last 20 years have created over 63% of net new jobs. Those of us who work in small businesses have a role in this debate.

Milton Friedman is one of the leading voices of shareholder theory. He said, “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it…engages in open and free competition without deceit or fraud.” There is a common misconception about shareholder theory that it precludes charitable giving or any activity that reduces short term profits. The theory simply says that for an activity or charitable contribution to be made it must in the long term be beneficial to the company’s profits. For example, if a company made a charitable contribution to build a new hospital that would reduce the cost of employee healthcare, such that company profits would increase, this would be consistent with shareholder theory. Ultimately, all activities must increase profits.

Stakeholder theory on the other hand says that a company must consider all of its “community” and must act in a way that yes, makes a profit, but does so in a way that benefits its employees, vendors, customers, and neighbors.

Each of these are normative theories, that is, they say would a company should do, in contrast to descriptive theories that show what they actually do. (We intend in the coming months to share with you some stories of what our company is actually doing to promote our communities, along with what some others are doing. We invite you to share your stories with us.)

So, which is it, make money or do good? Companies can’t exist without making a profit, and making a profit is hard. About 50% of small businesses survive for five years and only 33% last ten years. If your business isn’t profitable you eventually run out of money and close. There is no conflict here between shareholder and stakeholder theories, you have to make money period. You can’t do good if you’re not in business.

The problem with shareholder theory is that it leads to a myopic focus on profitability that results in lower profitability. Shareholder theory operates in a vacuum. It assumes that what happens to a business’s stakeholders doesn’t affect the operations of the company. The welfare of stakeholders is critical to the success or failure of a business. Our team members have joy and sorrow in their lives. Times of health and illness. Customers have times of expansion and contraction. Innovation leads to changes in our environments. A rising tide lifts all boats, but a receding tide lowers all boats. Our companies are interconnected with our team members, customers, and communities. We cannot succeed, if they don’t succeed. This is why stakeholder theory matters.

“Doing good” is about making our communities better. Our communities include all of our stakeholders. When we do good, we help create a rising tide, and oh by the way, we are more profitable, not less so.

So, what do you think, is it making money or doing good?

The Importance of Social Responsibility

The Importance of Social Responsibility

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You have heard the term “social responsibility” used more and more over the past few years. Companies everywhere have begun to examine their carbon footprint and ways they can give back to communities. Every year more companies engage this in a new way. It is reported that Fortune 500 firms spend more than $15 billion a year on Corporate Social Responsibility. With so many engaged in this new way of thinking, the question begs to be asked: what makes social responsibility so important?

 

In regards to going green our need is to conserve our resources. Though it can seem like small steps, having lower powered light bulbs or recycling plastic bottles, really can make a difference. How we link arms and work together is a crucial part to this. It matters that we all take steps we can within our industry, few can argue that if we all did that, change would occur.

 

A newer approach to social responsibility is giving back to the community. In kind and financial donations can make incredible differences in lives of those that are impacted by organizations. One of the best ways I have seen this done is through nonprofit partnerships. Around the world there are organizations doing life changing work. It is exciting to see companies of any size come alongside these organizations, leveraging them to do even more of the important work they do.

 

As ChipHeadley.com develops, corporate social responsibility will be a focus point. We deeply care about the people and the environment around us. Our desire is for those values to be continually integrated into the business sector. Through our own experience and research, we are excited to share more of what we know and our passion it.

Organizational Cultures That Succeed

Organizational Cultures That Succeed

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It sounds simple. Of course people matter, but too often we find ourselves focusing on systems, processes, controls, and technical skills. In the midst of our daily challenges we often lose sight of the fact that organizations consist of people, not systems or processes. So what causes us to lose our focus on people? It has its roots in the theory of Scientific Management.

This theory is based on the premise that people are the problem and systems are the solution. Economists and psychologists told us for years that people always act in their own self-interest. By attacking a problem with detailed analysis such as time and motion studies and devising a rigid unyielding procedure for each and every task you would produce predictable and stable results. This would prohibit people from acting in their own interest instead of the organization’s. This may have worked in the manufacturing factories of yesterday, but not in the knowledge based economy of today.

Research has proven that people act in the best interest of the group, when they perceive that they are a member of the group. In fact, people will act against their own self-interest when it is for the benefit of the group. This is why people matter.

Your competition can reverse engineer your products, duplicate your processes, and leap over your technology. What they can’t do is replicate your unique culture. Culture is your only sustainable competitive advantage. People create, sustain, and destroy culture. This is why you must have a relentless focus on your people.

The Relaunch of ChipHeadley.com

The Relaunch of ChipHeadley.com

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The launch of ChipHeadley.com came from a seasoned entrepreneur’s desire to share his knowledge and start conversations. Three years later, that desire has remained the same. With new focus, consistent content, and a fresh format, the best is yet to come.

This relaunch of this blog contains some shifts in focus and format. First, this site is intended to be a collection of voices. This will occur through multiple authors and audience commentary.  Our desire is for the comment section to be a collection of people discussing topics, sharing and debating ideas, and mostly coming together over the things that matter to us and our businesses. The other shift will be in content. We will still discuss entrepreneurship, and leadership but we will add a few other things to the docket as well. One is corporate social responsibility. Though not new, this concept is shifting every industry to some degree. We will discuss how it is being incorporated into our lives and companies as well. Another topic will be company culture and teamwork. We will discuss how work place dynamics effect overall company effectiveness, and consider millennials in the work force.

We are thrilled for this next season. Our hope is that you join the conversation, learn new things and share lessons you’ve learned over the years with us.

Welcome to the new ChipHeadley.com!