Chip Conley, Second Interview: By Bob Morris

Posted on: June 28th, 2011 by bobmorris

Chip Conley

Conley is the founder and CEO of Joie de Vivre Hospitality, California’s largest boutique hotel company, founded in 1987. At the age of 26 with no industry experience, Chip created The Phoenix, taking a 1950s seedy motel and turning it into a world-renowned “rock ‘n roll hotel” that catered to celebrities as diverse as David Bowie to Linda Ronstadt. Building on transformational leadership practices, and an innovative design formula that enables customers to experience an “identity refreshment,” he now leads a company that consists of more than 30 unique and award-winning hotels (as well as restaurants and spas) throughout the state with more than 3,000 employees and revenues approaching $250 million. Joie de Vivre was awarded the 2nd Best Place to Work in the San Francisco Bay Area in 2008. Chip and his company’s time-tested techniques have been featured in TIMEFast CompanyFortune, and People magazines as well as the Wall Street Journal.

In his most recent book, PEAK: How Great Companies Get Their Mojo from Maslow, Jossey- Bass, 2007, Conley shares his unique prescription for success based on Abraham Maslow’s iconic “Hierarchy of Needs.” His new theory illustrates how employees, customers and investors are ultimately motivated by peak experiences—and he demonstrates how to create these for each using real-world examples from his own company and from other peak performers like Southwest Airlines, Apple, Whole Foods Markets, and Harley-Davidson. Conley has delivered numerous keynote presentations and leadership seminars to diverse industries from health care to high-tech to non- profit arts organizations. He has spoken to hundreds of corporate groups as varied as Schwab, State Farm Insurance, and Google. His other books include The Rebel Rules: Daring to be Yourself in Business and Marketing That Matters: 10 Practices That Can Profit Your Business and Change the World, co-authored with Eric Friedenwald-Fishman.

He is a member of the Young President’s Organization and received his BA and MBA from Stanford University. In 2007, Conley was named the Bay Area’s Most Innovative CEO by the San Francisco Business Times, among business leaders across all industries in the Silicon Valley, San Francisco, and East Bay business communities.

Note:  Today is June 28, 2011. Chip has just announced  the debut of www.peakorganizations.com, a site featuring new programs and resources based on his book PEAK: How Great Companies Get Their Mojo from Maslow.

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Morris: Before discussing any of your books, a few general questions. First, a great deal has happened in the business world since out last conversation. In your opinion, what is the single most significant change? Why?

Conley: We’re all broke.  Actually, the system is broken.  It’s time for a reboot and transformational leaders will have a leg-up on transactional leaders.  In general, companies like transactional leaders or managers who make the trains run on time.  But, when the world is in the midst of change, when adversity and opportunity are almost indistinguishable, this is the time for visionary leadership and when leaders need to look beyond the survival needs of those they’re serving.

Morris: Closer to home, what specific impact has that change had on your company, Joie de Vivre Hospitality (JVH)?

Conley: Well, the timing of this downturn was pretty rotten.  We launched 15 hotels around California between the start of 2008 and the summer of 2009…by far our fastest growth ever, but at exactly at the wrong time.  The good news is that more than 70% of our hotels are gaining market share, but we’re just getting a large piece of a shrinking pie.  So, we’ve rethought how we’re baking our pies.

Morris: How involved are you in hiring and what is your primary objective during each interview?

Conley: I do interview senior candidates at the home office or many of our hotel or restaurant General Manager candidates.  My two favorite questions are “tell me about a failure in your career, what you learned from it, and how you’ve leveraged this lesson” and “all of us are misperceived at one time or another, what’s the most common way you’re misperceived in the workplace and why?”  Both of these questions require a certain amount of self-awareness and a willingness to not give pat, normal answers that we offer experience in interviews.  Three other things I’m looking for: do I trust this person, does this person have passion for what they do and is that a magnet for talent, and do I generally like who they are?  Someone could be amazing at what they do, but if you don’t like them, why bother hiring them?

Morris: Because each of your hotels is so different from the others, does that create problems when developing people to manage them? Must your managers be much more versatile and resilient, for example, than managers in other hotel organizations?

Conley: Boutique hotel GM’s need to be independent because they can’t rely on a Marriott or Hilton reservations system to succeed.  A great boutique hotel becomes the local’s favorite, so a manager needs to be very grass roots oriented in how they connect with the community.  I’ve seen some great big brand managers join us and fail because they didn’t realize how entrepreneurial this business could be.

Morris: I share your high regard for Maslow’s insights, notably his concept of a “hierarchy of needs.” Here’s a two-part question. How specifically has Maslow influenced your own thinking about JVH’s clientele?

Conley: Maslow helped me see that each of us in life is attempting to “be all we can be” and do that which comes naturally that brings us a sense of self-actualization.  Boutique hotels are mirrors for the aspirations of their customers.  “You are where you sleep” is the way I put it rather than “you are what you eat.”  When we get it right, we create a habitat for our guests that make them feel like this hotel was specifically created for them because the words they’d use to describe the hotel might be the adjectives they’d use on themselves on a good day.

Morris: How specifically has Maslow influenced your own thinking about JVH’s employees?

Conley: One of my breakthroughs when studying Maslow’s work was to see there are three key themes: Survival (Maslow’s two lower level needs: physiological and safety), Success (social/belonging and esteem) and Transformation (self-actualization).  When you apply these three themes to the three ways we connect with our work, you realize that someone with a Job tends to be purely focused on the comp package or Money (Survival.

Those who see their work as a Career are focused on Recognition on the Success level of the pyramid.  But, those who have a Calling (there are fewer which is why the pyramid is smaller at top) are Transformed by their work due to the sense of Meaning they get from the company they work for and/or the work that they do.  Money, Recognition, Meaning.  Job, Career, Calling.  That’s the progression up the pyramid.

Morris: Maslow on Management was published in 1998. It is an updated version of his Eupsychian Management, a series of his journal notes from the early 1960s. I am curious to know the extent (if any) that Maslow has influenced your thoughts leadership.

Conley: Well, of course, Maslow on Management is a better title than Eupsychian Management that only sold 3000 copies when Maslow wrote it.  When you realize that Maslow wrote this nearly 50 years ago, he was way ahead of his time as he realized that knowledge workers needed to be inspired by what they do and that the old command and control approach to business leadership wasn’t appropriate now that we’ve graduated beyond the assembly line.  I was fortunate enough to spend some time with Deborah Stephens who was a co-author of Maslow on Management and really helped me to see Maslow’s perspective on business.  In fact, she gave me his personal journals for the last 10 years of his life when he was pondering about how to apply the Hierarchy of Needs to organizations and business.  Unfortunately, Abe died at age 62 so I often feel like my role is to “channel Abe” because I’m just introducing what he might have talked about if he’d lived longer.  And, I’m fortunate to have credibility to talk about this because I’m a CEO and business practitioner rather than an academic.

Morris: What do you know now about the hospitality industry that you wish you had known when, in 1987 at age 26 without any prior experience in that industry, you created The Phoenix?

Conley: The reality is the Hospitality Business used to be big H, small B, but it’s really become the opposite (big B, small H).  Many who’ve joined this industry by buying hotels or resorts could just as easily be in the widget business and their focus is primarily transactional.  How do we add a resort fee that our customers can pay, etc…?  I guess I’m frustrated with that because for me the most profound thing I’ve learned about hospitality is that if you treat your employees and customers well, they will serve you well.  I call this “Karmic Capitalism” as what goes around, comes around.

Morris: In one of your books, you identify and discuss what you characterize as “rebel rules.” Which is the most important? Why?

Conley: I’m not sure there’s a most important rebel rule, but I will say that today business leaders need to be much more rebellious and more creative in their thinking than they were 30 years ago.  The key qualities that we need today are vision, passion, instinct, and agility.  “Fail quickly” is an appropriate mantra today.  Beta test initiatives  (e.g. in guest amenities) and then focus on what works.

Morris: Is it also the most difficult to follow? Please explain.

Conley: As an entrepreneur, it’s not difficult being a rebel because you have to be courageous and authentic in operating your business.  Being rebellious is much more difficult as you join a larger company because the culture is typically fear-driven and CYA (i.e. Cover You’re Axx).  Great leaders of large companies have to solve the conundrum of how they stay fresh and innovative as a company that becomes more rigid and inflexible while aging.  Companies are like people…over time, you need more yoga.

Morris: To what extent (if any) have the ten fundamental rules of “marketing that matters” changed since you wrote the book with Eric Friedenwald-Fishman that bears that title?

Conley: This subtitle of this book really gets the point across: 10 Practices to Profit Your Business and Change the World.  I don’t think the idea of mixing success in business and significance to the world has changed in the 4 years since that book came out.  That book just helps a socially-minded entrepreneur or business leader understand what steps they can take to calibrate being conscious and being a capitalist and doing so in a way that can lead to great marketing success.

Morris: In my opinion, the rules you examine in the book are relevant to almost any organization, whatever its size or nature may be. Is that a fair assessment?

Conley: Yes, we used examples from small start-ups to Wal-Mart with respect to how a company can assure that their purpose is compelling in such a way that marketing becomes less a set of tactics and more of a just a way of being.

Morris: For those who have nit as yet read PEAK, in it you offer a step-by-step process by which to build a great company. After acknowledging Maslow’s influence on your thinking (and in process explaining Mallow’s core concepts) in Part One (Chapters 1-3), you examine three “relationship truths.” What are they and what are the unique challenges when attempting to sustain each?

Conley: The three relationship truths just relates to how we took that Transformation Pyramid I talked about earlier and applied it to our employees, our customers, and our investors.  I call these “truths” because we’re applying Maslovian motivational thinking to the needs of our key stakeholders.  As an example, the Survival need for all customers is having their expectations met, but – in today’s competitive economy – that doesn’t necessarily create loyalty.  Loyalty happens on the Success level when a customer’s desires are met.  But, in this “word of mouse” world we live in, customer evangelism can mean you may not have to spend any money on marketing.  The Transformational truth for customers is that we are evangelists for the products and services that address our “unrecognized needs.”  When a company delivers to you something that you didn’t even know you wanted, this is a quantum leap above just having your desires met.

Morris: In Corporate Culture and Performance, John Kotter and James Heskett suggest a causal relationship between a strong culture and peak performance: “Corporate culture can have a significant impact on a firm’s long-term economic performance.” My own opinion is that in all peak performance companies, the words “culture” and “character” are synonymous. Your own thoughts about this?

Conley: Yes, we use the words “culture” with respect to a company and “character” with respect to an individual.  One of my most profound lessons of this downturn is that culture is the ultimate inoculation against fear in a company and fear is the most predominant emotion in most organizations and it is contagious.  When there’s a flu epidemic, we take a shot to inoculate ourselves.  Companies need to realize that their investment in their culture is the way they protect themselves from becoming a fear factory.

Morris: Recent Gallup research suggests that (on average) less than a third of a company’s employees are actively and productively engaged. Most of the others are passively engaged and at least some are working against the best interests of the company. Here’s my question: How do you maximize employee engagement throughout the JVH organization?

Conley: Chapters 4-6 of my book PEAK speak specifically about this.  It’s simple.  Help people move from Money to Recognition to Meaning and you’ll have the most engaged employees in your industry.  The idea is simple, the execution is challenging.  But, I know that if we can help a housekeeper who cleans toilets for a living feel a sense of calling in their work, then most any other company can do this too.

[Note: This is precisely what Dave and Wendy Ulrich acknowledge in their just-published book, The Why of Work.]

Morris: I know you share my high regard for Danny Meyer and his organization, Union Square Hospitality Group. In Setting the Table, he explains what he characterizes as “the transforming power of hospitality in business.” How has that power transformed your own organization and its relationships with its guests?

Conley: The most neglected fact in business is that we’re all human.  Danny’s book and the idea of hospitality in any kind of business speak to this.  Daniel Goleman showed that when you look at successful leaders in all industries when you look at three variables: their emotional intelligence, their IQ, and their level of expertise or experience, two-thirds of the indicators of why a leader is successful comes from the quality of their emotional intelligence.  Hospitality really speaks to that as it suggests that we’re all in business to serve each other.

Morris: Here’s an opinion to which I ask you to respond: Organizations as well as individuals can achieve “self-actualization” but only if there is a commitment to the welfare of the community and society in which they exist. In other words, a commitment to public service, philanthropy, and good citizenship. That certainly seems true of both you and JVH.

Conley: This is a philosophical question that is better-suited for Milton Friedman and Whole Foods Market’s founder John Mackey.  At the end of the day, a healthy community is good for us as a business and its giving back to the community builds a deeper relationship and more respect for our organization.  In a world in which traditional advertising is no longer valuable, how people talk about you and the relationship you create with your community have an enormous impact on your likelihood of success.

Morris: With all due respect to the importance of “peaks,” all of us spend at least some time down in the “valleys” of confusion, rejection, loneliness, failure, and despair. On those occasions when you have been in a “valley” of one kind or another, what did you do?

Conley: There are times during this downturn when I feel like my next book should be called Trough because that’s how I feel at times.  During the dot-com crash, my lessons were very organizationally-driven based upon studying Maslow.  But, in this downturn, my lessons have been more on the personal side.  I’m working on a book right now called Emotional Equations which will sum up how to pick yourself up when you’ve fallen down by realizing that, just like in fingerpainting with primary colors, when you mix one emotion with another, you create a secondary emotion.  So, I’ve learned to become very conscious of my mixture of emotions and how I can fingerpaint my life in a way that serves me rather than diminishes me.

Morris: Here is my favorite passage from Lao-Tzu’s Tao Te Ching:

“Learn from the people
Plan with the people
Begin with what they have
Build on what they know
Of the best leaders
When the task is accomplished
The people will remark
We have done it ourselves. ”

What’s your take on this passage?

Conley: Better to teach a man to fish than to catch it for him.  The reality is that the secret to leadership isn’t just giving people the sense they are empowered and they made the decisions.  Instead, it’s really getting them to love fishing, so passionately that they are out fishing far longer and more aggressively than the people who taught them to fish in the first place.

Morris: In PEAK, you discuss what you characterize as “business mojo.” What is it, how to get it, and then how to keep it?

Conley: It’s the secret sauce that exists in many companies.  It’s momentum, that intangible that great companies have that propels them along.  I love it when a guest says to me, “Your hotels don’t just look different, they feel different.  There’s something indescribable that makes me feel good when I’m staying at your hotels.”  That’s a result of mojo.

Morris: As I re-read your book prior to formulating questions for this interview, I was reminded of comments made by William L. McKnight in 1924. At that time, he was chairman and CEO of 3M and said, “If you put fences around people you get sheep. Give people the room they need.” How does JVH give its people the “room” they need?

Conley: Through Joie de Vivre University, we teach all kinds of classes – some skill-building, some lifestyle-enhancing – that help our employees feel empowered to make great decisions.  We also tell them that our customers are much happier when our staff “owns” a problem and immediately tries to solve it without involving a manager.  If the employee gets it wrong, this becomes a teachable moment with the manager.  If the employees get it right, they may get a thank you card from me or one of our senior execs since we do a big “recognition ritual” every two weeks with our top 20 senior leaders in which we recognize employees throughout the company.

Morris: Although peak performers certainly feel stress, they never seem to burn out. Why? In an article published by Harvard Business Review in 1993, Teresa Amabile offers the best explanation I have found thus far: They do what they love and love what they do. That seems one of the core values for those in the JVH organization. Is that a fair assessment?

Conley: When you’re living your calling, the emotional equation is “Calling = Pleasure/Pain.”  What might be an impediment for some people because of the possible pain is indistinguishable for the person who is living their calling and enjoying the pleasure.  This is exactly what a pregnant mother goes throughout the later stages of pregnancy.

Morris: How does JVH deal with “toxic” guests?

Conley: If they’re truly toxic, we’ll fire them as we believe the employee comes first and the customer comes second.  If a guest is unreasonable to the point that they are harassing employees such that an employee’s happiness and safety are at risk, I’d rather keep the employee than the guest.  It shouldn’t come to this and it rarely comes down to this kind of choice.  Most toxic guests just want to be listened to.

Morris: In your opinion, what is the single greatest challenge that JVH will face during the next few years? What is being done now to prepare for that challenge?

Conley: We’ve just brought in a strategic partner who now has a majority interest in the company.  This means we will grow nationally but there’s obviously risks associated with that since we’ve been a California company for 23 and a half years.

Morris: To what extent (if any) would a revised and updated version of PEAK differ from the first edition?

Conley: The revised and updated edition is now out. Tony Hsieh (CEO of Zappos) wrote the Foreword and I wrote a revised Preface.  One of the biggest additions in the book examines the impact of social media (Facebook, Twitter) on business…it’s a clear example of Maslow’s third level of the pyramid (Social/Belonging needs) coming into play.

Morris: What question had you hoped to be asked during this interview – but weren’t – and what is your response to it.

Conley: I think we’ve covered everything.

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You are cordially invited to check out the wealth of resources at these websites:

www.chipconley.com

www.jdvhotels.com

www.peakorganizations.com


 

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