Who do you serve ?
During separate discussions I’ve had with the management teams of certain star class hotels, I posed them several critical questions including asking them “who do you serve?” The answers I received were varied and revealing.
Several declared they serve the interests of the ‘owners / shareholders’, to some it was to ‘stakeholders’, a few said our ’external and internal’ customers whilst to the rest, it was the ‘customer’ Although none of the answers can be deemed wrong, some are more right than others. Let me shed some light.
Those who argue that a corporate executives’ only responsibility is to increase profits for the owners belong to the world of shareholder capitalism. They believe that accounting for other social responsibilities by spending someone else’s (owners) money, for general social interest is not within their mandate. Interestingly, many who spoke in favour of this course of action worked in hotels where they reported to only one principal – the hotel owner/s.
Those who held the view that companies should consider not only just owners, but also employees, customers, suppliers and the local community – i.e. stakeholder primacy, argue that attempting to do otherwise may well damage the socio-economic environment, while embedding inequality - were mostly proponents who worked in hotels involving a tripartite relationship between the hotel owner/s, the management company, and the general manager and his team.
First and foremost a hotel (any company), won’t survive in the absence of profits. But profits single-handedly won’t aid a hotel to stay alive…let alone grow. The inherent vision of shareholder capitalism in many businesses is to provide profits for the shareholders – even at the expense of employees and property, rather than drive towards long-term value for all stakeholders.
In the words of Bursby and Wain, “Successful businesses will need to have a clear sense of purpose. Capitalism has changed. It has moved away from "shareholder capitalism" and the obsession with profit, irrespective of impact, to "stakeholder capitalism" where businesses will be judged on their wider impact on employees, society and the environment. Consumers expect businesses and brands to have a sense of purpose and align with these values. Businesses that don’t will get left behind.”
Modern capitalism first ushered in managerial capitalism in 1932. It was driven by the belief that businesses should have professional management. Then in 1976, the concept of shareholder value capitalism emerged. It was based on the principle that the purpose of every firm should be to maximise shareholders’ wealth – where achieving that goal, would be a gain to both shareholders and society. Experts argue that this assertion has proved to be imperfect and that it is time to move to a ‘customer - driven capitalism era.
Consider Proctor & Gamble’s (one of the world’s biggest consumer products company), which put the consumer at the centre of its statement of Purpose, Values and Principles’. Written in 1986, it spells out that customer satisfaction comes before their responsibility to shareholders.
If one were to adapt P & G’s credo for a hotel, it would read thus:
“We will provide products and services of superior quality and value that excite our guests’ expectations. As a result, our guests will reward us with continuous sales and profit, whilst motivating value creation, allowing our people, our shareholders and the communities in which we live and work to prosper.”
Undoubtedly, this is a daring step for any hotel to follow. Take heart though, It was Peter Drucker who said that the primary purpose of a business is to acquire and retain customers. How true.
You cannot be everything for everyone. You need to decide who you are serving and why there is alignment. Why would someone choose you over the rest? What is unique about your offering versus hotels that most closely resemble yours?
Recognising what your guests’ value and focusing on maximising customer satisfaction while ensuring that shareholders earn a reasonable risk-adjusted ROE is a principle worth pursuing.
Shafeek Wahab - Editor, Hospitality Sri Lanka, Consultant, Customer Service Trainer and Ex-Hotelier
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