Setting a High Bar for Your Customer Service

AI is transforming the world. And it starts with the right compute. ARM is the AI compute platform trusted by global leaders, proudly NASDAQ listed, built for the future. Visit arm.com discover. Welcome to the hbr ideacast from harvard business review. I'm kurt nickish. There's something you can see in all kinds of retail stores and airports and hotels that our guest today wishes would just go away. And that's the customer service desk. You know what I'm talking about. The desk or stand with a sign above it where you often have to wait in line and then explain everything that happened to finally get something taken care of. Our guest believes that that desk sends the wrong message, not just to customers, but to employees. That it's silently telling all the other workers they don't have to mess with problems or handle complaints because customer service will take care of it. It's their job. Well, our guest believes strongly it's everyone's job and he should know. Horst Schulze began his long career in the service industry as a hotel restaurant. And he worked his way up to eventually become co founder and CEO of the Ritz Carlton Hotel Company and later CEO of the Capella Hotel Group. Schulze credits his success to always chasing perfection and never accepting good enough. And he says the principles of excellent customer service don't just apply to luxury hotels. They can lead to success in every business. Schulze recently wrote the book Excellence A no Nonsense Guide to Becoming the Best in a World of Compromise. And he joins us now. Horst, thanks for coming on the show. Go.

I'm delighted to be here.

Your career in the hotel industry is maybe unlikely given that you grew up in a small village in Germany where that didn't even have a hotel and where working in a hotel is something that people actually look down on. Is that right?

Correct. That's kind of a German small town psyche. What you do, you work in a real job. If I would have told my parents I want to become an engineer, they would have danced on the table. That meant honor to the family. That meant some or any job, even a carpenter or a roofer, that was respected. But saying to my parents when I was 11, I want to work in the hotel business, and that was not respectable. In fact, they didn't take it serious in the beginning. But I kept on insisting on it and my grandfather was very embarrassed. My parents tried to talk me out of it, but I was kind of possessed and I don't know why. I must have read something because as you said, there was no hotel in My village. I never had been in a hotel. Consequently, as a consequence, my parents looked how I could have a career. At 14, I left home and started working in a hotel, the best in the region, which unfortunately was 100 km away from home at that time, very far.

And the years for this about are.

Well, I left home with 14 in 1954. It truly formed my life because there was a mattress in that hotel who was an exceptional, fine gentleman. He truly impacted my life. As I started the first day with him in the restaurant. He told us now, from now on, when you come to work every morning, it's not work that you want to create. You want to create excellence. Frankly, that went over my head at the time. Washing dishes and cleaning ashtrays, what is excellence in that? But he kept on persisting on it and it truly impacted my life.

It's so interesting to hear about the seeds of your culture for customer service. To some people, that world of that kind of a hotel almost seems like another time and maybe old fashioned, but you eventually went on to create very modern leading brands and companies through those early experiences. So for people who hear that and think that's just, that's like another time and another era, what's common about all of this?

Well, what has not changed is that every customer, be it in a hotel or be it in a shoe store, want to have caring attention to themselves. That has not changed. And in fact it will never change that every customer wants to feel respected, honored, taken care of, properly advised, properly, et cetera. And that will never change. So the moment between customer and employee may be on the telephone or maybe on the Internet, but it will not change. There always has to be a response with respect and efficiency, et cetera.

Now, when you started Ritz Carlton, it was a time when a lot of luxury hotels were independent and maybe only in a few cities or just one. Do you feel like the competitive positioning and the network of a global brand was more important? Or was the fact that you were able to keep a culture of customer service across all the hotels more important to the success of Ritz Carlton?

Well, both had a dream to create the finest hotel company in the world. And in order to do that, I realized I want to go not compete with Hyatt and with Hilton and with Sheridan and with Weston, but go above them and pull the best of their customers out of them into my product. Now, in order to make this global, I had to make sure that I had processes where I could transfer what we do from one hotel to the next and not Just be a name. A name is not a brand. If the name makes a promise and lives up to that promise anywhere in the world in that moment, it's a brand. So I want to create a brand. And we created enough excellent processes that I could bring into Shanghai or Hawaii or in Germany or in Korea, wherever we were, and make sure that we are the leader in that location. And incidentally, that was successful. Everywhere we opened hotels, we were the leader.

I read that you personally went to every one of those hotels when they opened and did the training employees, is that right?

That is very true. And that is how I transferred the thinking and the philosophy from one hotel to the next. The first 55 Ritz Carltons, I was there to train. During the opening. I was there to orient the employees to who we are, to tell them to join me. Not just come to work, join our purpose. Giving purpose, I think, is an obligation, really, of an organization. I didn't just want them to fulfill a function. I wanted to join us in our dreams.

How did you do that? What did you tell them their purpose was?

I told them very clearly it is my dream that we are creating together the finest hotel company, the finest service organization in the world. And then I told them my motive for those dreams. I told them my motive for that is to be respected. And that so that you will be respected. My motive is so that we will be able to grow. So that you have opportunities to be honored in a way. So that. To make more money. So that you make more money. So with other words, I invited them to join a purpose, told them the motive of the purpose, and connected their motives to the motive of the organization.

I want to get into some of the processes that you just mentioned, because I imagine it is getting people to join you on this mission is one thing. To have higher service and do a better job than everybody else. To achieve excellence is maybe another thing.

Yeah, exactly. Well, everything is a process. Very simply. Our process was simply to have a unique selection process. Not just hiring people, which most people do hire. Not hire, select people for that. We identified the key talent needed in each job category, from general manager down to the dishwasher. The next process was what we call orientation. That means the first day people come to work. And that first day is a key day when people are attentive. People actually listen to what you have to say. And that day we didn't turn the employee over to learn their function. We explained them who we are. We invited them to participate. We invited them to think like us. We said, don't work for us. Join us. Be a part of something. The next day of orientation, the second day, we taught them, which we identified as the 21 points. If we would do those 21 points superior to the competition, I knew we would be the best in the world. And after that, we started teaching the function and following from there on, we took those 21 points and we repeated one point every day. You couldn't go to work because those 21 points will make us superior to the competition. So you couldn't go to work. You had to listen to the point of the day. Today it may be point 11. If you get a complaint, you own it. That point is discussed in every department, every hotel around the world. If you own a complaint, if you get a complaint, you own it. And for that, again, every employee was certified to handle problem resolution.

That point about owning a problem might sound anti process to some places, right? Where you know you have a job and you do what's in your domain and your role, and other people worry about other things that are above your pay grade or maybe below your pay grade. Why don't you like that?

Well, because our study showed what people want when they say they feel at home. We heard that all the time. So I want to know what it means. And the analysts came back and said they don't want to feel at home. They want to feel like in their subconscious memory, they remember their mother's home. And here's what happened in mother's home when something went wrong. And you said as a little kid, mom, something is terribly wrong. What did mom say?

She took care of it.

Come here, I take you in your arms. And mom never said call a manager once. I knew that I had to empower and teach every employee how to handle that.

The word empower brings to mind the fact that you authorized every and any employee up to $2,000 to be able to address an issue that a guest had faced or was facing, which to some people just seems crazy.

Right.

So explain your thinking behind that.

Well, believe me, everybody thought this was nuts, including the vice president of our company. When I came up with it, everybody. And including the owners of our hotels who tried to sue me and said, we. You mean you want a busboy to give away $2,000? No, I want the busboy to not lose our customer, to keep the customer. I knew that the potential lifetime value of a customer is $200,000. I had also learned that a customer, if they give a complaint, they want an immediate reaction. I also knew statistically there are three Types of customers. There is the one that is angry who becomes a terrorist against your company.

Yeah, right.

Then there is the satisfied customer who is going next door when there's a better deal. And then there's the loyal customer. Now I want to have the chance and do everything to move a potential terrorist to become a loyal ambassador of the organization. And I assure you, if you would go into the restaurant and the bus would say, after you have a little complaint, I buy you breakfast, I feel bad. I assure you, you would move from being angry to become a loyal guest. And I knew also that no employee would ever give away $2,000. That happened once or twice in the whole organization.

I know some people will listen to this and think, well, that maybe works in a high end hotel chain, but not in a fast food restaurant or not in my industry. What do you tell them?

That's a typical response. That's a very poor response you get typically. Number one, I have worked and consulted with numerous companies in total different market segments and the philosophy is extremely successful there because everybody wants to be treated with respect, with some kind of dignity. It doesn't matter if you buy a fast food sandwich or hotel, stay in a luxury hotel, or you go into a red roof inn, it doesn't matter. You still want to be respected. And that has to be expressed with words and doesn't cost a penny.

What about efficiency? Some people might think that it's just not worth some people stopping from whatever they're doing to take care of a problem that's somebody else's job and they need to focus on what they're doing.

What is the value of your reputation as an organization? That's the question. What's the value of an individual customer and what is the value of your reputation in any business that you have? Any business. It doesn't matter if it's a hardware store or a shoe store or a barber shop. The number one effort of your organization should be to keep the customer loyal. Customers should be the number one effort because it costs less on the end than finding new customers. And the number two things you do in a great organization is find new ones. And you usually find them through the ones that are very happy already. And number three, what you do of course get as much money from the customer as you can by giving value. That's what I mean. And number four, what you do is do it efficiently. Of course efficiency is part of an organization, but I can assure you it's much more efficient to keep the customers through good service that you have than Finding new ones with promotion and advertising.

I have to ask one more sort of devil's advocate question. Some people will think, hey, some people are just not up to those jobs. Some workers, they don't have the communication skills, they don't have the people skills. They. They just can't handle doing all this. Or you can't trust them. Sounds like that will rub you the wrong way, too. So what do you say to people with that argument? You must have heard that before.

Well, that's a very sad argument. I'm absolutely certain that nobody leaves at their home in the morning, go to work, and says, I'm going to my shop to be lousy. Nobody is saying that. Nobody has ever said that. But what is the difference between people, between an organization where people are nice and do the right thing and the other organizations? It's leadership. It's simply leadership. That's the difference between management and leadership. Managers force things to happen. And forcing things to happen, including forcing the employee to do certain things, cannot create employees that have the right style and the right attitude. Leadership, though, creates that. Leadership creates an environment in which people want to do the job and not have to do the job. They want to do the job because they have joined a mission and a purpose. You know, we're saying today, funny enough, everybody talks about the millennials. What's different about the millennials? Well, they're saying, what's in it for me? What? You know, so did we only. We were afraid to ask, and leadership should tell them what's in it for me. In fact, the first day, here's how we will benefit if we accomplish X. You know, Adam Smith made a study in his book not wealth of nations, the next book he wrote about a human being. And he came to the conclusion that people cannot relate to orders, directives. Well, you know, what do we do? Management still gives orders and direction. Adam Smith said people can only relate to objective and motive, while the various things that I say give them an objective, give them a good vision.

I'm curious how you see customer service in the hotel and service industries changed recently. Because if you think back to the experience of Ritz Carlton in the 1980s, for example, that's different from what people conceive of as luxury today. And how do you see customer excellence evolving now?

Yeah, well, when we did Ritz Carlton, the perception of. Of excellence and the perception of luxury was chandeliers, marble, real paintings, oriental rugs, and so on. And that's not true anymore. Luxury is seen as do it my way, very personalized Individualized attention.

And what's an example of that? Just in a hotel room, for instance.

Well, yeah, I want to be on a high floor. I like chocolate cookies. Once I know that when you check in, I automatically check you in on the high floor and send you chocolate cookies with otherwise individualized to your particular desire. I know you like to check out by 3 o'. Clock. So extend automatic, extend your checkout time to 3 o'. Clock. Those are the things that are individualized. And when I see you, I call you by name. That's personalized. But that's going to be true even in the fast foods restaurant. And everybody and the fast food dresser must know that I went and ordered my number one. I ordered number one hamburger or whatever.

Yeah, yeah, right.

The millennial will come. I have a number one with two slices of pickles and half a slice of tomato. That's individualized. That more and more will happen and that individualizing means to the customer today means luxury in the ultra luxury business like mine. Well, that's why we call you before you, even after you made a reservation and say if you come to Singapore, when you come to Singapore, do you want us to prepare anything? Do you have a diet? Do you have an allergy? Do you want us make any reservation, any kind of restaurant? What do you want me to do for you in Singapore before you even come? So I individualize your trip, your visit to Singapore.

You did start your career in hotels with those chandeliers and big oriental rugs. Looking back, like starting out as a dishwasher and then a busboy and then a waiter in those lower level jobs. What did you learn there? That you still, that is still a lesson that you carry with you today. That is a great lesson for all managers and leaders.

Well, it changed my life. This met a D who said to me, don't come to work, to work, come here to create excellence. And if I made champ a few years away from there, in the meantime I worked in the greatest hotels in Europe. And in the meantime I worked in San Francisco and Hilton. And I planned to go back in about a year, year and a half to Europe, but hoped to have a promotion. And I knew I was the best waiter in the hotel. And so I would get my promotion as room service waiter and two rooms of a supervisor. The job became available. I didn't get a promotion and I suffered. My ego was crushed. But it took me three months to admit the other guy deserved it more. The other guy deserved it more. He didn't come late 5 minutes. Sometimes in the morning like I did. He didn't. When I came to work sometimes, I wasn't only tired, you could see it from 100 yards that I was tired. When the boss said, can you do this? And I said, why me? Why not the other guy? Once I admitted that, I went back to talk to my old mentor. D. Now, mind you, he had passed away in the meantime. But I talked to him and I told him, forgive me. I went to work, to work and not to create excellence. And I promise I will never happen again. Why? Why do it to yourself? To just go to work like a chair works. Why not create excellence? And once you make that decision, it's all a decision. Once you make a decision, you have to work on it every day and keep on repeating the decision. And life becomes much more valuable. It becomes much more fulfilling. It becomes something where you're using your time to define yourself. And the first one who will see it and will be happy about it is you yourself.

Horst, thanks so much for coming on the show to talk about this.

Thank you. Great to be with you.

That's Horace Schulze. He's the co founder of the ritz Carlton Hotel Co. And author of the book Excellence Wins. A no Nonsense Guide to Becoming the Best in a World of Compromise. This episode was produced by Mary Dew. We get technical help from Rob Eckhart. Adam Buchholz is our audio product manager. Thanks for listening to the HBR IdeaCast. I'm Kurt Nickish. Sam.