The alternative to the small, few-frills motels was the large downtown hotel catering to business travelers. Such hotels usually had at least seven hundred fifty guest rooms and extensive amenities, including conference facilities, multiple restaurants, and banquet rooms. (More recently, such hotels have added fitness centers, business centers, and teleconferencing facilities.) Sharp’s fourth hotel, a sixteen hundred-room downtown convention hotel with extensive amenities, including a huge shopping arcade, met that description. Like Sharp’s first motel, it was profitable and popular.
Each type of hotel had its advantages, as well as distinct drawbacks. For all its comfort and intimacy, the small motel simply wasn’t an option for the business traveler who needed a well-appointed meeting room or state-of-the-art communications facilities. Large hotels produced a big enough pool of revenues to fund the amenities the market demanded, but they tended to be cold and impersonal places; it was easy for guests to feel anonymous and fungible.
After opening that fourth hotel in 1972, Four Seasons Sheraton, Sharp mulled his next move. He loved his cozy little Four Seasons Motor Hotel but realized it couldn’t generate the revenue to maintain the amenities expected by his target market, well-heeled business travelers. He and his guests loved the amenities the Four Seasons Sheraton’s cash flow afforded, but its sheer scale ensured that guests would never feel truly at home there.
Rather than choose one of the existing dominant models and accept the downside it entailed, Sharp used his opposable mind to hold the two models in his head, roll them around, and design a creative resolution of the tension between them. He sought, he told me, “to combine the best of the small hotel with the best of the large hotel.” He envisioned a medium-sized hotel—big enough to bring an extensive array of amenities within range but smaller than the standard large hotel to maintain the sense of intimacy and personalized service.
He even had a prototype. His third hotel, London’s Inn on the Park (now the Four Seasons) had been built under tough London space constraints. With 220 rooms and suites, it was smaller than a typical luxury hotel and gave Sharp a glimpse of the intimacy, luxury, and comfort possible on an in-between scale.
But the scale that made the Inn on the Park so attractive to Sharp and his guests also presented a seemingly insurmountable economic obstacle. The Inn would earn only anemic profits if it charged the same per room as competitors did, because it had to spread the cost of amenities over fewer rooms than other high-end hotels. But Sharp refused to be bound by the traditional economics of the hotel business. He reasoned that if the Four Seasons offered distinctly better service than its competitors, it could charge a substantial price premium, boosting revenue per room to the point where the hotel could afford top-of-the-line amenities. Before he could ask guests to pay a super-premium room rate, though, Sharp understood that Four Seasons Hotels would have to offer them an entirely different kind of service in return.
Salience at Four Seasons
What did an entirely different kind of service look and feel like? Answering that question meant thinking differently than the average hotelier. And thinking differently started with going beyond conventional notions of what was salient. Like other hoteliers, Sharp considered factors such as location, staffing levels, room size, and furnishings. But Sharp didn’t stop there. He asked what his guests, mostly traveling business executives, were looking for when they booked a hotel room. His rivals recognized that businesspeople wanted to be treated well and catered to. Sharp’s view of salience was more nuanced and humane. He understood that the vast majority of his guests traveled much more frequently than they ever would have wanted and that the experience they longed for most was to feel as if they were at home or at their office. They didn’t want grand and formal. In Sharp’s words:
We studied, surveyed, and listened to our customers. Most were business executives, often pressured by time and the need to be productive. Luxury, then, was seen chiefly as architecture and décor. We decided to redefine luxury as service—a support system to fill in for the one left at home and the office.
Seeking to replicate that at-home feeling, Four Seasons was the first to offer shampoo in the shower, twenty-four-hour room service, bathrobes, makeup mirrors, hair dryers, overnight shoe shines, dry cleaning, and pressing. To make his guests feel more like they were in their own offices, Four Seasons was the first to install a two-line phone in every guest room, as well as a big, well-lighted desk. Four Seasons was also the first to provide twenty-four-hour secretarial services. In due course, rivals copied all of these initiatives, but not before Four Seasons established a reputation for providing service that its competitors couldn’t match because it was literally unimaginable to them.
Also salient to Sharp was the structure of the hotel market in each new Four Seasons location. The traditional approach in the industry was to set a relatively fixed standard of physical and service quality across the entire chain. That simplified operations and made it easier to maintain a distinct brand identity.
Sharp, though, rejected the one-size-fits-all approach. Toronto was different from Chicago, which was different from New York, which was different from Paris. To be the number-one hotel in town, each city’s Four Seasons would have to reflect what Sharp calls the local “color and culture.” Its standard of quality would depend on the local context, even if matching the standard to the city created a much more complicated managerial challenge.
The results were worth the extra managerial effort. By taking the local market’s structure and standards into account, Four Seasons is less likely than its rivals to overshoot or undershoot the local market in price and quality. The Four Seasons George V Hotel in Paris earns Zagat’s rating as the best hotel in the world precisely because Sharp and his senior managerial team designed the hotel to embody Parisian standards of luxury, rather than some internal standard that doesn’t recognize local differences.
Sharp, unlike his rivals, also recognized the salience of the hotel’s ownership structure. To his rivals, operating and owning a hotel went hand in hand. But Sharp had learned from experience that ownership entailed as many drawbacks as benefits. Ownership tied up capital and exposed the hotelier to fluctuating local real estate values. It diverted valuable senior management time. Four Seasons shed those burdens by becoming the first big hotel company to manage, rather than own, the hotel facilities that bore its name. Investment groups would come to own all of Four Seasons’ hotels, which Four Seasons manages under long-term contracts. As with the in-room amenities Four Seasons introduced, some competitors in due course copied Sharp, splitting their hotel management from hotel ownership. But Sharp got there first, because he saw salient features that his industry rivals overlooked.
Causality at Four Seasons
To carve out a distinctive identity for Four Seasons hotels, Sharp had to do more than take an expansive view of what was salient. He also had to perceive causal relationships among points of salience that other hoteliers had overlooked.
Certain causal relationships are obvious to anyone in the hotel business. There’s a clear relationship between room utilization and profitability, and between room revenue and food and beverage revenue. But Sharp saw other, more subtle causal relationships that escaped the notice of rival hoteliers.
Sharp saw a more complex relationship between hotel size and amenity level. The traditional belief, based on industry standard room rates and occupancy levels, was that a full-service business traveler hotel needed at least seven hundred fifty rooms to generate the revenue to pay for the amenities business travelers demanded. Sharp saw the causal relationship between scale and profitability a little differently. He understood that if he could give guests a good reason to pay significantly more per room per night, he could offer amenities at least as attractive as those of his rivals.
What would constitute a good enough reason to pay a lofty premium? Service that was different from other hotels not just in degree, but in kind. And how could Sharp attain that
level of service? By seeing the causal link between the way a hotel treated its employees and the way employees treated their guests, and making that link the cornerstone of the Four Seasons brand.
Traditionally, managers in the hotel industry view employees as disposable. Turnover is very high, and employee payroll, the biggest variable cost by far, is the first thing cut during economic downturns. Most hotel workers come to see themselves as management sees them: as short-term, interchangeable parts whose employment could end tomorrow.
Although there’s little loyalty or sense of shared purpose on either side of the equation, most employees do what’s asked of them. Their job security, such as it is, depends on adhering to certain rules and standards. Hence the causal relationship as understood by both management and employees is that good service is a matter of meeting fixed, context-independent standards—which just might explain the mechanical quality of the courtesy extended by many hotel employees. What’s more, good service isn’t an end in itself but a means to continued employment.
Sharp had a different idea of how to motivate and discipline employees. He saw a direct causal relationship between employees who felt well-treated by their employer and guests who felt well-treated by hotel employees. “Employees believed only what they saw,” he told me. “If we were seen showing greater concern for profit, prestige, quotas, rather than for customers and employees, there’d be no belief in our values, no whole-hearted commitment.”
Four Seasons set out to treat its employees far differently than the rest of the industry. To make them feel as permanent a part of Four Seasons as economically possible, Four Seasons went further than any other chain to retain employees during downturns. It offered more employee training than any other chain. It sought to fill managerial jobs from within rather than by hiring from outside. According to Sharp, Four Seasons sought to be different “by hiring more for attitude than experience, by establishing career paths and promotion from within, by paying as much attention to employee complaints as guest complaints, by upgrading employee facilities whenever we upgraded a hotel, by disallowing class distinctions in cafeterias and parking lots, by pushing responsibility down and encouraging self-discipline, by setting performance high and holding people accountable, and most of all, adhering to our credo, generating trust.”
Sharp’s management has generated enough trust to establish Four Seasons as the employer of choice in the hotel industry. When the Four Seasons in New York City opened in 1994, more than thirty thousand people applied for four hundred jobs. 4 As of this writing, the company has appeared on Fortune magazine’s list of the “Top 100 Companies to Work For” every year since the ranking first appeared in 1998. 5
Architecture at Four Seasons
In designing his decision on Four Seasons’ competitive strategy, Sharp did not proceed sequentially or dole out separate pieces of the strategy-making to various functional areas. Instead of first deciding how big a hotel would be, then establishing service standards, and then setting human resources policy, he kept the chain of considerations firmly, clearly, and centrally in mind while working on individual links in the chain.
One organizing principle, or “credo” as Sharp calls it, runs through the entire Four Seasons organization. Everyone at the Four Seasons is guided by “the Golden Rule: to deal with others—partners, customers, coworkers, everyone—as we would want them to deal with us.” This of course is not a novel concept—it’s taught by countless parents to countless children around the world (with, of course, variable effect). The novelty was Sharp’s decision to make it the bedrock management principle of a high-end hotel chain.
More than a management principle, however, the Golden Rule bound together all the parts of the strategy decisions at Four Seasons. Four Seasons senior management, beginning with the courtly, impeccably groomed Sharp, was going to treat its employees the way the managers themselves would want to be treated. And employees would respond by treating guests in the same spirit. Every phase of hotel operations would cohere around a strategy based on extraordinary service.
Plenty of companies pay lip service to the notion that people are their most important resource, but Sharp left no doubt that he meant it. “What was new was that we enforced it,” he told me. “Senior managers who couldn’t or wouldn’t walk the talk were all whittled out within a few years. It was a painful process and personally distressing—perhaps the hardest thing I ever did. But the fastest way for management to destroy its credibility is to say employees come first and then to be seen putting them last. Better not to profess any values than not to live up to them.”
To ensure that his entire operation remained focused on extraordinary guest service, Sharp issued one last, crucial decree: Four Seasons would have no customer service department. Instead of making customer service the responsibility of a discrete department, everyone at the Four Seasons was not just a member of the customer service department, but in charge of it.
Resolution at Four Seasons
Sharp arrived at a resolution that went above and beyond the two dominant models that had guided the decisions of other hoteliers, while incorporating significant elements of both. Sharp’s resolution produced a system of reinforcing activities, each of which fits with and strengthens the whole, to outperform the dominant models in the industry (see figure 2-2). 6
FIGURE 2-2
Sharp set out to create “a reputation for service so clear in people’s mind that Four Seasons’ name will become an asset of far greater value than bricks and mortar,” and the results speak for themselves. With seventy-three hotels in thirty-one countries at last count, and with twenty-five properties under development, Four Seasons is considerably larger than the next biggest luxury player—Ritz-Carlton, with fifty-nine hotels. Condé Nast Traveler ranks eighteen Four Seasons hotels in its global Top 100 list, more than three times the next most cited chain. J. D. Power and Associates ranks Four Seasons first in luxury hotels. Zagat ranks the Four Seasons as the top U.S. hotel chain. Cities and countries send delegations to Sharp to plead with him to open a hotel in their locale, because a Four Seasons signifies that a city has become a global destination.
Sharp did nothing less than fashion a new way to succeed in the luxury lodging business. He would say he applied his experience and practical knowledge to the problem. But with all due respect to Sharp’s long years in the business, plenty of people in the hotel industry have experience and know-how. Only Sharp came up with the Four Seasons business model. I would argue that the key difference between Sharp and other shrewd veterans of the lodging business was Sharp’s willingness to consider a broader set of salient features, delve into more complicated causal relationships, and view the decision he was facing holistically. Those three features of his thinking pattern enabled him to find a way around the unpleasant trade-offs he faced.
Throughout Sharp’s decision process, it’s possible to discern clear differences between the mental mechanisms of integrative thinkers and those of conventional thinkers, and I go into those differences next. For the purpose of discussion, I posit a stark dichotomy between an integrative and conventional thinker, although it’s more accurate to think of a spectrum that ranges from unadulterated integrative thinking to not-at-all integrative thinking. There’s no intent in this discussion to disparage conventional thinkers, but rather to highlight the differences between them and integrative thinkers.
Embracing the Mess
The first difference between integrative thinkers and conventional thinkers is that integrative thinkers take a broader view of what is salient. Instrumental to Sharp’s winning resolution was his choice to attend not just to the stated demands of his guests but also to their unstated but deeply held wish to be either at home or at their office. Because that wish was in his field of vision, he was able to take into consideration things his competitors couldn’t—because they didn’t know those things existed. When other luxury hotels put shampoo in their showers, it wasn’t because they understood guests
at a deeper level; it was because Four Seasons had done it and it seemed to work.
More salient features make for a messier problem. But integrative thinkers don’t mind the mess. In fact, they welcome it, because the mess assures them that they haven’t edited out features necessary to the contemplation of the problem as a whole. They welcome complexity because they know the best answers arise from complexity. And they feel confident that they will not get lost along the way but emerge on the other side of the problem with a clear resolution.
Second, integrative thinkers don’t flinch from considering multidirectional and nonlinear causal relationships. Simple, unidirectional relationships are easier to hold in the mind, but they don’t generate more satisfactory resolutions. So rather than simply think, “that competitor’s price cutting is hurting our bottom line,” the integrative thinker would conclude, “our product introduction really upset our competitors. Now they’re cutting prices in response, and our profitability is suffering.” In Sharp’s case, he saw a more complicated relationship between hotel size and profitability than did the rest of the industry. Most people in the industry accepted that a minimum number of rooms was necessary to cover the cost of amenities and still provide an acceptable profit. Above that minimum, profit increased in a straight line with number of rooms. Sharp saw a more complex and nuanced relationship. He perceived an inverse relation between the number of rooms and his guests’ feeling of comfort and intimacy—there were, in other words, both costs and benefits to increasing the number of rooms. His competitors saw only the benefits.
The Opposable Mind Page 4