Setting a High Bar for Your Customer Service

CURT NICKISCH: Welcome to the HBR IdeaCast from Harvard Business Review. I’m Curt Nickisch.

There’s something that 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 the 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 busboy. And he worked his way up to eventually become cofounder and COO of The Ritz-Carlton Hotel Company – and later CEO of the Capella Hotel Group.

Schulze credits all that to 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 Wins: 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.

HORST SCHULZE: I’m delighted to be here.

CURT NICKISCH: 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 looked down on. Is that right?

HORST SCHULZE: Correct. That’s kind 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 something.

Or any job, even a carpenter or a roofer. That was respected. But saying to my parents when I was eleven, I want to go work in the hotel business, that was not respectable. In fact, they didn’t take it seriously 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 had never been in a hotel. Consequently, as a consequence, my parents looked how I could have a career, and at 14, I left home and started working in a hotel, the best in the region, which unfortunately was 100 kilometers away from home. At that time, very far.

CURT NICKISCH: And the years for this, about, are?

HORST SCHULTZE: I left home at 14 in 1954. It truly formed my life, because there was, a maître d’ in that hotel who was an exceptional, fine gentleman. He had 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.

CURT NICKISCH: 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, what, 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?

HORST SCHULZE: 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, and advised properly, etc. And that will never change. So, the moment between customer and employee may be on the telephone or may be on the internet. But it will not change. It always has to be a response with respect and efficiency, etc.

CURT NICKISCH: 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?

HORST SCHULZE: Well, both. I had a dream to create the finest hotel company in the world. And in order to do that, I realized I wanted to go not compete with Hyatt and with Hilton and with Sheraton and with Westin. 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 you, 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 wanted to create a brand. And we created enough excellent processes that were – I could bring into Shanghai or Hawaii or in Germany or in Korea, wherever we were, and make sure that are the leader in that location. And incidentally, they were successful. Everywhere we opened a hotel, we were the leader.

CURT NICKISCH: I read that you personally went to every one of those hotels when they opened and did the training of employees. Is that right?

HORST SCHULZE: That is right, 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 them to join us in our dreams.

CURT NICKISCH: How did you do that? I mean, what did you tell them that purpose was?

HORST SCHULZE: I told them very clearly, it is my dream that we are creating together the finest hotel company and 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’s so that you will be respected. And my motive is so that we will have to grow, so that you have opportunities, to be honored, in a way, and so, that to make more money, so that you make more money. So, in other words, I invited them to join a purpose, told them the motive of that purpose, and connected their motives to the motive of the organization.

CURT NICKISCH: I want to get into some of the processes that you just mentioned. Because I imagine it is, getting people to 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.

HORST SCHULZE: Yeah, exactly. Well, everything is a process. And so, 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 identify 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 to 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 told them which – we identified us to 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 taught those 21 points to everybody and we repeated one point every day. Because those 21 points will make us superior to the competition. So, they 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 get a complaint, you own it. And for that, again, every employee was certified to handle problems and solutions.

CURT NICKISCH: 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?

HORST SCHULZE: Well, because our studies showed, what people want when they say they feel at home. We heard that all the time. So, I wanted to know what that 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?

CURT NICKISCH: She took care of it.

HORST SCHULTZE: Come here. I’ll take you in the arms. And Mom never said, call a manager. Once I knew that, I had to empower and teach every employee how to handle that.

CURT NICKISCH: 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.

HORST SCHULZE: 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 threatened to sue me. And said, 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 wants to, if they give a complaint, they want an immediate reaction. I also knew statistically that there are three types of customers. There is the one that is angry, who becomes a terrorist against your company. Then there is the satisfied customer, who is going to next door when there is 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 busboy would say, after you have a little complaint, I’ll buy you breakfast, I feel bad, I assure you, you would move from being angry to become a loyal guest.

So, I knew that. And I knew also that no employee would ever give away $2,000. That happened once or twice in the whole organization.

CURT NICKISCH: I know some people will listen to this and think, well, that maybe works in a high-end hotel chain, or places where you can afford to, yeah, where you have income that can support higher quality talent. Or that works in, yeah, that works in this kind of service industry, but not in a fast food restaurant, or not in a story on the corner, or not in, you know, my industry. What do you tell them?

HORST SCHULZE: 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 totally different market segments, and the philosophy is extremely successful there.

Because everybody wants to be treated with respect and 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, and it doesn’t matter. You still want to be respected. And that has to be expressed with words, and it doesn’t cost a penny.

CURT NICKISCH: 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 just not a great way to run operations. That you can’t have, you know, in another industry or another place, you just can’t have everybody paying so much attention to the customer because that’s somebody else’s job, and they need to focus on what they’re doing.

HORST SCHULZE: And what is the value of your reputation as an organization? That’s a 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 in the end than finding new customers.

And the number two thing you do in a great organization is find new ones. And you know, you usually find them through the ones that are happy already. And number three, what you do, of course, get as much money from the customer as you can. Hey, one second. 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.

CURT NICKISCH: 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 just can’t handle doing all this. Or you can’t trust them.

It sounds like that will rub you the wrong way, too. So, what do you say to people with that argument? You must have been there before.

HORST SCHULZE: That’s a very sad argument. I am absolutely certain that nobody leaves their home in the morning, go to work and says, I’m going to make sure to be lousy. Nobody is saying that. Nobody has ever said that.

But what is the difference between people, between organizations 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? Well, you know, so did we. Only we were afraid to ask.

So, and leadership should tell them what’s in it for me. In fact, the first day. Here’s how we would benefit if we accomplish X. And you know, Adam Smith made a study in his book, not Wealth of Nations, the next book he wrote, about the human being. And he came to the conclusion that people cannot relate to orders – directives. But well, you know, what do we do? Management still gives orders and direction. Adam Smith said, people can only relate to objective and motive. Well, they were things that I say, give them an objective. Give them a good reason. Make them joint the vision.

CURT NICKISCH: I’m curious how you see customer service in the hotel and service industry has 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. How do you see customer, the customer excellence evolving now?

HORST SCHULZE: Yeah, well, when we did Ritz Carlton, the perception of excellence and luxury, 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.

CURT NICKISCH: And what’s an example of that? Just in a hotel room, for instance?

HORST SCHULZE: Well, yeah, I want to be on a high floor. I want to, I like chocolate cookies. Once I know that, when you check in, I automatically check you in on a high floor and send you chocolate cookies, or otherwise individualize to your particular desire. You, I know you like to check out by three o’clock, so I extend, automatically extend your checkout time to three 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 food restaurant. And everybody, and the fast food restaurant must know that. I went and ordered my number one. I order number one, hamburger, or whatever. You know?

The Millennial will come, I’ll 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 is, that individualized means to the customer today, it means luxury.

In the ultra-luxury business like mine, well, that’s why we call you before you even, after you made the 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 to make any reservations, 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.

CURT NICKISCH: Last question. You did start your career in hotels with those chandeliers and big Oriental rugs.

HORST SCHULZE: Yes.

CURT NICKISCH: 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?

HORST SCHULZE: Well, it changed my life. This maître d’ who said to me, don’t come to work to work. Come here to create excellence. After a few years away from there, in the meantime I have worked in the greatest hotels in Europe, and I worked in, in the meantime in San Francisco in the Hilton, and I planned to go back in about a year, year and a half to Europe, but hope to have a promotion.

And I knew I was the best waiter in the hotel, and so, I would get my promotion. I was a room service waiter. And to a room service supervisor. The job came out, and I didn’t get the 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 five 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, I would say, why me? Why not the other guy?

Once I admitted that, I went back to talk to my old maître 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 that 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 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.

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

HORST SCHULZE: Thank you. Great to be with you.

CURT NICKISCH: That’s Horst Schutze, cofounder of the Ritz-Carlton Hotel Company 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 Dooe. We get technical help from Rob Eckhardt. Adam Buchholz is our audio product manager. Thanks for listening to the HBR IdeaCast. I’m Curt Nickisch.