While you will have heard of the Ritz Carlton hotel group, you may not necessarily know who founded it – meet Horst Schulze, the man, the myth, the legend.
Horst is legendary for creating the infamous operating and service standards for which the Ritz Carlton Hotel Company are renowned.
“I talked to an institution recently and I said, ‘Don’t you want to be the very best in the country?’ He said, ‘well that would be arrogant’. In other words, you don’t intend for your investors, for your employees to be the very best?”
Horst has been in the hotel business since he was 14 years old, cutting his teeth as a server’s assistant in a German resort town. He ‘worked to work’ before realising one day that he’d been approaching work wrong. An inspirational maître d’hôtel had taught him early on to ‘work to create excellence’, and he hadn’t been doing that.
“I didn’t go to work to create excellence, which you taught me. I apologise, it will never happen again. And what a silly thing to waste your time to just fulfil a function, like a chair.”
That was the turning point for him. From there his career accelerated and exploded.
After leaving The Ritz Carlton Hotel Company, Horst went on to found Capella Hotel Group. Again, you may not know who they are, but you’ll remember when President Donald Trump met with North Korea’s Supreme Leader, Kim Jong-un – that meeting took place in the Capella Hotel in Singapore.
“Excellence is never an accident. It’s always the result of high intentions. Vision and high intention and hard work. Yeah, that is culture. High intention, hard work.”
This is a truly insightful and entertaining conversation, we hope you enjoy it.
On today’s podcast:
- Building a culture of excellence
- Tipping in hotels
- The difference between a manager and a leader
- How to build the best organisation
- Repeat teaching values
- The three types of customers
- Empowering employees
How many CEOs of billion-dollar businesses teach the front line staff of their organisation what is expected of them? Horst Schulze did.
The founder of the Ritz Carlton Hotel Company realised that in order for his hotel group to be the finest in the world he had to teach his employees what excellence looked like in the hotel group, and how to achieve it.
Business is business
You may be thinking ‘but he worked in the hospitality industry, that isn’t relevant to me’, but Horst says business is the same everywhere – business, customers and employees.
“You have to make sure the employee knows what the customer wants and delivers to the customer when the customer wants, and later you count the money.”
But, says Horst, that’s where people go wrong. Business owners count the money instead of managing the stuff that creates the money. Instead of managing the things that create value for customers, which consequently creates the money.
“What is cash flow? Cash flow is our customer, they bring the cash. It’s not all those manipulations. But everybody is thinking about money and nobody concentrates on the very thing that creates the money. And what creates the money is excellence of product and services to the customer. That creates the money.”
The secret to a successful business
The secret to a successful business, says Horst, comes down to three things:
- Loyalty of your customers
- Finding new customers
- Getting as much money from the customers as possible without losing them
But of those three things, loyalty is the priority.
“What is loyalty? Loyalty is nothing more but trust into your product. Who creates that trust? Nothing more than a relationship. That relationship is not created by the CEO who sits in some kind of an office and talks about money. That relationship is created by the front line who actually faces the customer.”
So that means you not only have to hire employees who believe in excellence and want to encourage customers to return, but you have to teach them how to create loyalty.
Tipping in hotels doesn’t create the right behaviour in an organisation, says Horst. Employees shouldn’t get tipped because they did their job, they should work hard because they want to achieve excellence. And the only way to create the right sort of behaviour in an organisation is by having a leadership who demonstrate and teach it.
And there is a difference between a manager and a leader.
“The leader has to be a manager too, but the leader has a destination in mind. Leadership implies going somewhere. The leadership has a vision, meaning purpose. And that purpose is excellent. It’s excellent for all concerned. For example, in Ritz Carlton, our purpose was to become the finest hotel company in the world.”
The importance of purpose
Purpose, says Horst, is the greatest gift an employer can give an employee. As Aristotle said, 3000 years ago, people can only be happy and fulfilled in life if they have purpose and belonging.
If you want to create an organisation that is the best in the world, give employees purpose, not just work. A function isn’t purpose. As Horst says, a chair fulfils a function; hire human beings for purpose. Hire people and then orient them to your organisation when they come to work.
This idea that humans need purpose was also explored by Adam Smith in The Wealth of Nations. Smith said, human beings cannot relate to orders and direction. But what do we do? We give orders and direction. Human beings can only relate to objective vision, purpose and motive.
So if you want your employees to have purpose, you have to teach them the values of the organisation, and when you’re done teaching, you go back and repeat, repeat, repeat, says Horst.
“I always said, ‘do you know what Coca Cola is? Yeah? Then why do you think they still spend billions on advertising? Because they know they have to keep it front of mind.’ So why as an organisation, would you not take the 20 points that will make you superior to the competition, repeat and repeat and repeat and teach and teach and teach it?”
Giving employees purpose is one thing, but if you want loyal employees, empower them too, advises Horst.
“25 years ago I went to my vice president saying I want to empower my employees in a very meaningful way. I know I don’t want to lose a customer. In fact, I feel so strongly about it, every employee should make a decision up to $2,000 if there’s a problem, to keep the customer.”
And that is just what Horst did.
He wanted everyone down to the busboys to be able to do everything within their power to keep customers. Because that is how customer loyalty is created.
Horst knew that the potential value of a Ritz Carlton guest, their average potential lifelong spend by a single guest could be $200,000. And he didn’t want to lose a guest like that. So he told his employees, I trust you, and empowered them to spend up to $2,000 to keep them where necessary.
Leadership is powerful
This is what makes Horst an exemplary leader, setting him head and shoulders above other leaders.
“Leadership is a very powerful thing. But leadership starts with a destination. Leading implies that you have a destination in mind. But leaders, tell your leaders, once you determine your destination, you must agonise and say is this good for everybody? Once you know it’s good for everybody, you know all the decisions to make, you know not to compromise, you know everything.”