Discovering the Soul of Service: The Nine Drivers of Sustainable Business Success

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Overview

In a world where customers regard flawless products as a given, service is the key differentiator between competitors in any field. This wise and inspiring book by Leonard Berry, our leading service expert, moves far beyond his pioneering work in services marketing and service quality to explain how great service companies meet their toughest challenge: sustaining long-term success.
From Berry's exacting study of fourteen mature, highly successful, labor-intensive companies comes an astonishing revelation: the single most important factor in building a lasting service business is not a matter of savvy business practice, but of humane values. In all fourteen award-winning companies — Bergstrom Hotels, The Charles Schwab Corporation, Chick-fil-A, The Container Store, Custom Research Inc., Dana Commercial Credit, Dial-A-Mattress, Enterprise Rent-A-Car, Midwest Express Airlines, Miller SQA, Special Expeditions, St. Paul Saints, USAA, and Ukrop's Super Markets — values-driven leadership connects with strategic focus, executional excellence, control of destiny, trust-based relationships, generosity, investment in employee success, acting small, and brand cultivation to drive customer satisfaction, innovation, and growth. Dedicating a chapter to each of these nine drivers, this book is the most far-reaching and insightful vision ever presented of the principles and step-by-step actions that continuously bring success to life in a company.
Berry's comprehensive model reveals the soul that underlies the strategies and day-to-day operations of great service companies, guiding the thousands of daily decisions of individual employees. Clear, compelling, pathbreaking, Discovering the Soul of Service is essential reading for managers everywhere.

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Editorial Reviews

From the Publisher
Tom Peters author of The Circle of Innovation Waiting for the "masterwork" on service? Wait no longer. Leonard Berry's Discovering the Soul of Service is it! A brilliant book, eminently compelling case studies from Charles Schwab to Midwest Express. It doesn't get better than this.

David Glass President and Chief Executive Officer, Wal-Mart Stores, Inc. A blueprint that will work for anyone wanting to sustain successful service. A must for anyone interested in service businesses.

Garrett H. Jamison President and Chief Executive Officer, Banc One Investment Management Group A treasure for anyone truly serious about sustaining a service culture.

Robert L. Tillman Chairman, President, and Chief Executive Officer, Lowe's Companies, Inc. Captures the essence of what is required to sustain success in a labor-intensive service business. An outstanding book.

Jerry Richardson Owner/Founder, Carolina Panthers A world-class resource on leadership values and the human side of business.

Stanley Marcus Chairman Emeritus, Neiman Marcus Len Berry holds the black belt in customer service.

Tom Peters
Waiting for the masterwork on service? Wait no longer. Leonard Berry's Discovering the Soul of Service is it. A brilliant book, eminently readable, and loaded with believable and compelling case studies. It doesn't get any better than this.
Harvard Business Review
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Product Details

  • ISBN-13: 9780684845111
  • Publisher: Free Press
  • Publication date: 2/12/1999
  • Edition description: Simon & Schuster
  • Pages: 288
  • Sales rank: 593,233
  • Product dimensions: 6.12 (w) x 9.25 (h) x 1.00 (d)

Meet the Author

Leonard L. Berry holds the JCPenney Chair of Retailing Studies, and is Professor of Marketing and Director of the Center for Retailing Studies, at Texas A&M University. A former national president of the American Marketing Association, he is author of On Great Service and coauthor of Marketing Services and Delivering Quality Service, published by The Free Press. Dr. Berry received the 1996 Career Contributions to Services Marketing Award from the American Marketing Association. He also has twice been recognized with the highest honors Texas A&M bestows on a faculty member: the Distinguished Achievement Award in Teaching (in 1990) and the Distinguished Achievement Award in Research (in 1996). He is a board member of CompUSA, Hastings Entertainment, Lowe's Companies, Inc., and the Council of Better Business Bureaus.

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Read an Excerpt

SUSTAINING SUCCESS IN SERVICE COMPANIES
A customer, recovering from knee surgery and walking with a cane, was Christmas shopping. When the customer asked for an item in most stores, the salesperson would point and say disinterestedly, "Over there." However, the customer's experience was different at The Container Store. After determining the product the customer wanted, the salesperson replied, "It's in the back of the store. I'll go get it for you." Before the salesperson returned, two other salespeople cheerfully asked the customer if they could be of service.
Another customer of The Container Store completed her purchase of multiple items and headed for her car, children in tow. She placed her package on the ground as she put the children in the car — and then drove off forgetting the package. Realizing her mistake just a few minutes later, she returned to the parking lot, but the package was gone. She reentered the store hoping that someone had turned in her package, but no one had. Salesperson James Castleberry remembered the customer and asked her what she had bought. He then proceeded to gather up the products, handed them to the customer without charge, and said: "Your day will get better." And it did, starting at that moment.
Amy Carovillano, vice president of inventory control and distribution at The Container Store, was at the airport waiting for her flight to Houston. She noticed a woman animatedly talking to the airline's gate agents. Considerable head shaking suggested that the woman was not receiving the response she was seeking. She was obviously displeased when she left the counter.
She began looking around as if she were searching for someone. More than 100 people were in the area at the time. Then the woman headed for Amy, passing at least 50 people closer to her. She asked Amy if she were flying to Houston. When Amy replied yes, she asked for a favor. The woman's husband had flown to Houston on an earlier flight but was stranded at the airport's rental car counter. He had left his wallet home and could not rent a car without his driver's license. The woman had come to the airport hoping that one of the airline's crew would carry the wallet to Houston on the next flight. No one was willing to do so, which brought the woman to Amy.
Amy was glad to help but did have one question: Why did the woman single her out? The woman said it was because Amy was wearing a Container Store tee-shirt. She assumed Amy was an employee. The woman added that she was a loyal customer and knew how nice and willing to help all the employees were. Amy met the woman's husband when she deplaned in Houston and handed him his wallet.
The Container Store is one of America's most successful retail chains because it has employees who delight in helping customers solve problems — and who possess the freedom and confidence to do so. The Container Store sells storage and organization products — boxes, bottles, jars, trunks, trays, racks, baskets, buckets, hooks, shelving systems, hangers, garment bags, drawer organizers, and much more — about 12,000 different products. The company is the largest retailer of elfa® storage systems and Skandia shelving systems in the United States, even though, by design, it is not a large chain with only 19 stores at year-end 1997. From its founding in 1978 with two employees, the company has achieved average annual sales growth of 25 percent without incurring debt. Two-thirds of the revenue growth comes from existing stores, one-third from the one or two new stores opened each year. The company's owners, Garrett Boone, Kip Tindell, Sharon Tindell, and John Mullen, all actively involved in running the company today, continually say "no" to suitors wanting to fund rapid expansion through venture capital, franchising, or a public offering. Becoming big was never the dream; creating the perfect retail store in which employees would earnestly, enthusiastically, and creatively work together to serve customers and improve operations and products was always the dream. As Garrett Boone states: "We are a company that understands our business is helping customers. We have a willingness to continually reexamine what we do and ask if we can do it better."
The Container Store has been notably successful in attracting exceptional employees who share the strong customer-focused values of the owners. More than 1,500 employees strong now, The Container Store's values-driven execution of the business is difficult for imitators to match. The company patiently practices its craft of selling excellent boxes excellently. It waits until it finds just the right employee, just the right store location, just the right vendor. Elizabeth Barrett, vice president of operations, admits: "I still have the reputation for holding a store position open for six weeks to look for the right person."
The quest for excellence pays off in human terms as well as financial terms. Employees love working in this company that celebrates excellence, and customers love the experience of shopping in the stores. Once a minister announced from his pulpit that for his birthday his family was taking him to The Container Store. The whole congregation applauded. Messages from a departing part-time employee, a ninth-grade student, and a frantic customer reflect the human dividends contributed by corporate excellence.

Dear Kip:
I am a part-time employee working in the Virginia store. I work full-time for CNN.
When I was hired last June, I wanted to gain knowledge about opening abusiness. What I learned was more important. I learned customer service.Our extensive training was exceptional. The people sent to train us were incredible. Jane Dunnington is one of the best managers I have worked under inmy career! She disseminates information and is fair. Chris Hix and Lori Stuardi have gone out of their way to keep me informed and enthused.
I enjoy the "team atmosphere" at the store and will miss it very much. Otherprojects in television are demanding more of my time. I am forced to resign my part-time position.
I leave with a more demanding attitude about customer service, a better organizer of closets, a contributor to a million dollar sales month, feeling valued and appreciated. If I didn't love television so much I would be tempted to come aboard full-time.
Thank you for creating a positive environment, and I hope to contribute that attitude wherever I go.

Dear Container Store,
In late April I came to your store to purchase some packaging materials. I needed these materials to ship my ninth-grade science project to Tucson, Arizona, where I would be attending the International Science and Engineering Fair in early May. I had been searching in many places for these materials, and finally found them at The Container Store, thanks to an employee named Amy Robertson. As soon as I walked into the store, she found the materials that I needed to pack my oversize project. Amy not only found the materials but spent an additional two hours and helped me pack the project in the store. She brought out tape, scissors, and screwdrivers and finished within hours what would have taken me days. The project arrived in Tucson in beautiful condition. At the Science Fair, I was awarded third place in the world in the category of microbiology. I would like to sincerely thank Amy Robertson and all of The Container Store employees who helped me on Thursday, April 25. My gratitude cannot be expressed.

Dear Container Store,
I am writing to praise Chris Grey, one of your employees. On September 11, 1996, I spent 40 minutes with her on the phone as she "coached me and encouraged me" as I put the metro system together. The following day I came to the store to thank her in person. I was in the middle of a move and frantic. She helped me tremendously. When I met her I cried, I was so grateful to her.
I hope this letter will go into her employee file.

STUDYING SUSTAINABLE SUCCESS
The Container Store is a mature, service-intensive company that continues to improve its operations; its financial performance is stellar, its human dividends rich. Growth has not dulled its enthusiasm, success has not moderated its work ethic, praise has not slowed its efforts to improve. This company, and 13 other service companies I studied for this book, model sustainable success. The companies in my study range from local to worldwide operations. Although operating different businesses, they create value for customers through labor-intensive service operations. All are highly successful by any measure. The average age of these companies as of 1999 is 31 years.
My purpose in this book is to identify, describe, and illustrate the underlying drivers of sustainable success in service businesses. Creating a successful service operation is unquestionably a difficult task. However, sustaining success can be even more difficult. Services are performances, and the challenge of sustaining the performers' energy, commitment, skills, and knowledge day after day, week after week, month after month, year after year — especially as the organization grows and becomes more complex — is daunting. The greater the involvement of people in creating value for customers, the greater the challenge. This is a book on the lessons 14 outstanding service companies teach about sustainable success. And the lessons they teach are clear indeed. Although the sample companies differ on the outside — the nature, size, and structure of their businesses — to a remarkable degree they are the same on the inside, sharing the drivers of their ongoing success.
The companies selected for the sample met several tests. The primary consideration was the achievement of sustained customer acceptance and financial success. I also sought a balanced sample — companies in different businesses and of varying sizes. Firms representing fresh case studies for readers also was an important criterion.
Selecting companies with a high labor component in their services was purposeful. Labor-intensive service companies should provide the best test of a services success sustainability model. If a model could fit companies that were absolutely dependent upon the actions, creativity, and commitment of service providers to survive, then it would fit to some extent all companies. All companies after all are service companies to the degree that they create customer value through performances.
I visited each sample company, interviewing senior and middle managers and frontline service providers. I also followed up with numerous telephone interviews. In all, I interviewed more than 250 people from the 14 companies. In addition, I observed and directly experienced service delivery at the sample firms, collected a small mountain of documentation from them, and conducted secondary research on service management. My career-long specialization in services marketing and management provides a vital backdrop for this research, the most ambitious project I have undertaken.
The sample companies readers will meet in this book are, in addition to The Container Store:

  • Bergstrom Hotels, a group of three full-service hotels in northeastern Wisconsin: The Paper Valley Hotel, The Pioneer Inn, and The Valley Inn. The hotels have built strong relationships with employees, customers, and their communities through attention to detail, caring, and a big corporate heart. The company was awarded the 1996 Wisconsin Service Business of the Year Grand Award.
  • The Charles Schwab Corporation, a securities brokerage and investment company that passionately and innovatively champions the investors' cause. Schwab's energy for continuous improvement, technological leadership, and profitable growth is remarkable.
  • Chick-fil-A, one of the world's best quick-service restaurant chains with an unwavering commitment to excellent food, respectful customer service, store operator success, and teamwork. At Chick-fil-A, there is a free lunch — in the employee cafeteria at the home office in Atlanta.
  • Custom Research Inc., a highly progressive marketing research company that has built a strong business with Fortune 500 clients through team service delivery, innovative practices, competence, and an emphasis on continuous improvement. Custom Research won the 1996 Malcolm Baldrige National Quality Award.
  • Dana Commercial Credit, an indirect wholly owned subsidiary of Dana Corporation providing lease financing services with integrity, quality, and creativity. Notable for investing in its people's success, Dana Commercial Credit won the 1996 Malcolm Baldrige National Quality Award. The company also won the 1995 Michigan Quality Leadership Award.
  • Dial-A-Mattress, a company that sells bedding over the telephone 24 hours a day, seven days a week, and delivers orders as soon as customers want them — within two hours if desired. For years it was nearly impossible to live in New York City and be unfamiliar with the company's advertising theme: "Dial 1-800-MATTRES and leave the last 's' off for savings." The company's founder, president and CEO Napoleon Barragan, probably is the nation's most passionate believer in the marketing power of toll-free 1-800 numbers.
  • Enterprise Rent-A-Car, the fastest-growing rental car company in America, which attracts talented, entrepreneurial-minded people to the organization and allows them to run their businesses. In recent years, Enterprise has been hiring more college graduates than any other company in America.
  • Midwest Express Airlines, a jewel of an airline that began service in 1984 as part of Kimberly-Clark Corporation. Now an independent, public company, Midwest Express takes great pride in offering "the best care in the air." In Zagat's 1997 survey of 60 of the world's largest airlines on comfort, service, timeliness, and food, Midwest Express ranked first in the United States and was the only U.S. airline to place in the world's top 10.
  • Miller SQA, a highly successful division of Herman Miller that is reinventing office furniture manufacturing and marketing by focusing on the process rather than the product. Miller SQA lives the initials in its name — "simple, quick, and affordable."
  • Special Expeditions, an environmentally conscious travel company that uses small ships and Zodiac landing craft to expose travelers to dramatic geology, wildlife, and native culture in remote places in the world. Travelers are active participants in an expedition led by a staff of naturalists. The company was rated among the top 10 cruise lines in the world in the 1996 Condé Nast Traveler Reader's Choice Awards.
  • St. Paul Saints, a minor-league baseball team in St. Paul, Minnesota, that sells out every home game and has a season-ticket waiting list of more than 1,000 people. Operating on the principle that "fun is good," the Saints offer a strong entertainment value for families and have earned the affection and loyalty of the entire community.
  • Ukrop's Super Markets, a family-owned chain in Richmond, Virginia, that in 1997 held an astonishing 37.6 percent share of the local grocery market. A leader in ready-to-eat meals, a pioneer in relationship marketing, a generous and active corporate citizen, Ukrop's has forged an unshakable bond of trust with its customers, associates, and community.
  • USAA, headquartered in San Antonio, Texas, a worldwide insurance and diversified financial services association that primarily serves members of the U.S. military and their families through toll-free telephone calls, fax, and mail. Aggressive investment in technology, customer feedback systems, employee training, and the quality of work life contribute to superlative service and an insurance customer retention figure of about 97 percent. USAA was included in the book The 100 Best Companies to Work for in America.

These 14 sample companies provide the book's foundation. Their lessons not only teach but also stretch us to imagine, to ask "what if" questions about our own companies; they inspire. Lessons from the sample firms are infused into every chapter, and readers will be intimately acquainted with all 14 companies upon completion of the book. These truly are great service companies, companies that demonstrate the grand possibilities accompanying leadership with heart, companies that show the way to sustainable success.
THREE CHALLENGES IN SUSTAINING SERVICE SUCCESS
Three specific challenges in sustaining success are accentuated in enterprises that create value for customers primarily through services. The more labor-intensive the services, the greater the challenges of:
  • operating effectively while growing rapidly
  • operating effectively when competing on price
  • retaining the initial entrepreneurial spirit of the younger, smaller company

Execution Versus Growth
Balancing the need for growth with the requirements for execution is one of the most difficult challenges managers face. In the early 1990s, computer marketer CompUSA was the fastest-growing retail company in America. However, by 1994 the company's survival was threatened as a result of weak financial controls, undisciplined merchandising practices, and poor in-store operations. Rapid growth had outstripped the small-company infrastructure and systems in place at the time. The chief executive was ousted and the new CEO, Jim Halpin, halted the expansion. Most senior managers were replaced. The company centralized merchandising, revamped store operating practices, and strengthened the balance sheet. Only then did it cautiously ramp up new store expansion. CompUSA has become a strong performer under Halpin, and the lesson of out-of-control growth still reverberates in the company's boardroom to this day.
During periods of rapid growth, adhering to original operating standards becomes problematic. Relaxing standards is common when fastgrowing companies select, orient, train, and educate many new managers and employees. Maintaining effective internal company communications, reinforcing the company's vision and culture, and delivering consistently high quality service — essential success factors — are challenged by expansion. Not allowing the pressures of growth to undermine the effectiveness of labor-intensive value creation requires a higher level of leadership and discipline than exists in many companies.
No matter how brilliant a company's strategy, it still must be executed. Otherwise, the strategy is simply being advertised for competitors to imitate, execute better, and win away the market. Service companies create value through performances. "Product quality" is a function of performance quality, which, in turn, is a function of the ability and motivation of the performers. Performance suffers when growth weakens organizational practices that promote employee ability and motivation.
ValuJet was a fast-growing, profitable — yet deeply troubled — airline well before its tragic May 11, 1996 crash of Flight 592 in the Florida Everglades that killed 110 people. Yes, it was a moneymaker, but its profits came to a sudden halt on the day of the accident. Lax controls, the outsourcing of all maintenance and training, and a weak culture undermined by a lack of attention to nonfinancial goals paved the way for ValuJet's undoing. Six days after the crash, ValuJet cut its daily schedule of 320 flights by about half in an attempt to maintain reliable operations during an FAA evaluation. The airline was forced to refund more than $4 million to passengers who were reluctant to fly ValuJet or whose flights were canceled. On June 17, 1996, ValuJet became the largest airline ever to be grounded by the FAA. The company resumed flights three months later but was unable to regain profitability. The negative brand equity associated with ValuJet became a liability that could not be overcome. In 1997, ValuJet assumed the name of an acquisition and renamed itself Air Tran Airlines.
Service companies sell a promise. Passengers who board an airliner have no technical basis for judging the competence of the crew or the airworthiness of the airplane. All they can do is trust, and their willingness to do so is a function of their prior experiences and the company's reputation. The customer's confidence is the most precious asset for any company that sells promises for a living. Superb execution of the service day after day after day is a cornerstone of confidence building. Strengthening the customers' confidence isn't about making promises but about keeping them. When a service company loses its customers' confidence, it loses everything. This is what happened to ValuJet. ValuJet made $20.7 million in profits in 1994 — its first full year of operations. Southwest Airlines earned as much only after its first eight years. Yet Southwest Airlines became America's most consistently profitable airline with a strong reputation for value, reliability, safety, and fun; Valujet had to change its name to, in effect, disguise who it is and to begin building a new reputation.
Execution Versus Price
The lack of physical differentiation among competing services encourages managers to overuse price as a marketing tool. Whereas the fit and feel of a pair of trousers or the styling of an automobile can give customers nonprice reasons for favoring one brand over another, services managers often are limited to nonphysical means of differentiation. They frequently choose price cutting, which may lead to cost cutting and may weaken execution. Although managers could strive to differentiate their services with higher quality rather than lower price, price cutting is a favored path because it can be implemented quickly and may be deemed more salient with targeted markets.
One of the biggest mistakes managers make is assuming that value and price mean the same thing to customers. They do not. Price is part of value but not its equivalent. To customers, value is the benefits received for the burdens experienced; it is what customers receive in exchange for what they must endure to receive it. Burdens have both a monetary component (price) and a nonmonetary component (for example, unknowledgeable service providers, inconvenient service locations or hours of operation, busy telephone lines).
Price is price; value is the total experience. Companies that sacrifice the customers' satisfactory experience for lower costs to support lower prices may decrease rather than increase customer value. Preparing for deregulation and expected price competition, local telephone service providers began eliminating thousands of workers from their payrolls in the mid-1990s. The layoffs occurred as demand for services escalated because customers were requesting additional telephone and fax lines. More demand combined with less capacity undermined adequate service delivery, resulting in rising consumer complaints and regulator activism. In 1996, for example, New York's Public Service Commission ordered NYNEX to rebate $50 million to five million consumers because of slow repair and installation services; Wisconsin's Public Service Commission filed a civil suit against Ameritech for slow, unreliable service; and Idaho levied fines on US West for taking too long to fix telephone outages. By equating price and value, decision makers in these companies took the wrong path.
Preparing for intensified competition requires strengthening execution, not weakening it. The tougher the price competition in a market, the more important quality of service is to sustainable success. Why? Because without differentiated quality, without a superior total experience to offer customers, a company has few, if any, nonpricing options when key competitors cut their prices.
Entrepreneurship Versus Maturity
Maintaining an entrepreneurial culture that celebrates continuous improvement and discovery is challenged by organizational maturity and growth. Innovative entrepreneurship comes from conditions more typical of newer, smaller organizations than mature, larger ones: the dream of building a great business and the fear of failure.
Inspired service providers are most likely to invest the personal energy and endure the risks of improvement seeking. They are most likely to identify better ways to perform their service and to speak up when they see their company going in a wrong direction. Yet, inspiration is jeopardized as the business grows and adds employees, locations, and more formalized operating policies and systems. Rules replace the informality that nurtures personal interaction throughout the organization. Turfism replaces teamwork. Memos replace face-to-face communications. Supervisory layers replace impromptu visits with the owner. The power of the dream, the sense of mission, can easily fade as a company not only becomes more successful but also bigger, more complex, spread-out, and bureaucratic.
Most service positions involve significant discretionary effort, which is the difference between the maximum amount of energy an individual employee can bring to the service role and the minimum necessary to avoid penalty. The difference between the maximum and minimum energy investment is discretionary to the individual employee. Personal entrepreneurship is a discretionary act; the individual service provider decides whether to try something new, whether to risk helping a customer with an unusual or difficult request, whether to assume the mantle of leadership in solving a company problem. One of the principal differences between outstanding and mediocre service companies is that the former receive far more discretionary effort from employees. Personal entrepreneurship — a discretionary act — is jeopardized as firms grow, age, become more complex, and change leadership. And yet sustained success requires continual innovation and improvement.
Holiday Inn was a feisty, innovative company in its youth. Founder Kemmons Wilson envisioned creating a chain of clean, comfortable, consistent, and economical way stations for families traveling by automobile. In the 1960s, Holiday Inn emerged as the undisputed winner in the U.S. hospitality market. By the 1980s, however, the chain's fortunes and reputation had begun to decline. The market was changing — more segmented hotel concepts, more price discounting, more business travelers supplanting families as the primary customer — and Holiday Inn was losing its leadership position. Strategic innovation in the company was centered more on new concepts such as launching Embassy Suites and entering into the gaming industry than on the core Holiday Inn business.
Holiday Inn was built on consistency of presentation but was allowed to become inconsistent with a highly variable mix of properties operating under the brand name. Many Holiday Inn properties became tired and worn. The negative images evoked by the brand became sufficiently strong and so widespread that management removed the Holiday Inn name from the company's more upscale Crowne Plaza properties. By 1997, with the company belatedly but vigorously replacing or renovating older, run-down Holiday Inn properties, the company found it necessary to air television advertising portraying hotel housekeepers with chainsaws destroying a sleeping room and then completely refurbishing it. In effect, Holiday Inn was admitting that many of its hotels were worn out — and was asking for a chance to restore the confidence of travelers. A famous brand name became tarnished because the service it represented lost its currency. In its evolution as a company, the founder's vision and entrepreneurial spirit faded away. An innovative company ceased to be very innovative. It happens in many companies.
Execution versus growth. Execution versus price. Entrepreneurship versus maturity. These perils may simultaneously contribute to a company's decline. Companies frequently become less effective strategically and executionally because strategy affects execution and vice versa and because both are a function of the quality of leadership in the company. A weak strategy drains the commitment of the service providers who are supposed to implement it. It is difficult for employees to be excited about a strategy that doesn't excite customers. Conversely, poor execution undercuts even the most brilliant strategy. Customers cannot receive the full benefits of a company's service strategy if the performers do not perform it well. Eventually, the strategy loses its luster because it is not producing the expected results.
SUSTAINING SUCCESS IN SERVICES
Sustaining the skilled actions, personal innovation, and emotional commitment of people in service businesses as time passes and the organizations change is a tall order. The quality of machine-produced products is far less dependent on the actions, creativity, and commitment of individual employees — perhaps hundreds or thousands of them — than the quality of people-produced products. In services performed directly for customers, such as in retailing, education, health care, and transportation, the service is inseparable from the people performing it. An inept salesperson is an inept store; a nurse's personality may send patients in search of a new doctor.
In 1983, Royal Dutch Shell commissioned a study on corporate longevity. The purpose of the research was to identify the success drivers of firms older than Shell, which was then 100 years old. The study focused on 27 companies in North America, Europe, and Japan that ranged in age from 100 to 700 years. The findings from the research, discussed in a 1997 book, The Living Company, are fascinating. The book's author, Arie de Geus, makes a strong point when he argues that most companies are underachievers and do not come close to realizing their full potential. In an article on his findings, de Geus writes:
The high corporate mortality rate seems unnatural. No living species suffers from such a discrepancy between its maximum life expectancy and the average span it realizes. And few other types of institutions — churches, armies, or universities — have the abysmal record of the corporation.
Why do so many companies die young? Mounting evidence suggests that corporations fail because their policies and practices are based too heavily on the thinking and the language of economics. Put another way, companies die because their managers focus exclusively on producing goods and services and forget that the organization is a community of human beings that is in business — any business — to stay alive. Managers concern themselves with land, labor, and capital, and overlook the fact that labor means real people.
Companies need not die young. I was inspired to research and write this book to learn, distill, and share the success sustainability lessons of great service companies. Despite the perils posed by time, growth, and success, some service companies keep getting better. How do the Charles Schwabs, Enterprise Rent-A-Cars, and Chick-fil-A's do it? I anticipated that these long-time achieving companies would share certain traits in common but also would differ in certain respects, if only because the particulars of their businesses were different. I sought to identify and understand the underlying success sustainers in service businesses that transcended the particulars of any one type of business. What came from intensive study of truly outstanding service companies is the most exciting discovery of my research career to date: the drivers of sustainable success in labor-intensive service businesses are common across the different businesses. The portraits of success sustainability for 14 distinct companies ranging from a supermarket chain to an airline to a furniture manufacturer to a baseball team are virtually identical.
I need not draw multiple success models for different types of service companies; if a company creates customer value through labor-intensive performances, I need draw only the one picture shown as Exhibit 1-1. This exhibit is a comprehensive, accurate portrait of each sample company I studied. This is what a world-class service company with sustained success looks like.
Each chapter of the book develops one part of the success sustainability model. Exhibit 1-1 is a picture of the book. Just as there are no shortcuts in implementing this sustainable success model, there are no shortcuts in understanding it. Readers are encouraged to read every chapter in sequence as each chapter builds on previous ones. I found nine drivers of excellence in my study of the sample companies. The central driver of excellence, values-driven leadership, gives root to the other eight. The bold arrows in the model depict the primary relationships. The dotted-line arrows from the circle indicate the interrelationships among the success drivers; each success driver in the model nourishes others.
The book is about the overriding importance of humane values in building a lasting service business. Great service companies build a humane community (the organization and its partners) that humanely serves customers and the broader communities in which they live. Everyone benefits from the existence of a great company — customers, employees, suppliers, investors, cities, nations. Strong institutional values enabling human beings at work to realize their full potential as individuals and as members of a community contribute to the creation of compelling value inside and outside the company. The company survives as a success because it is more fully alive.
Restaurant owner Drew Nieporent has not had a single failure since opening his first restaurant in 1985. By 1997 he was operating seven restaurants — five in New York City, one in San Francisco, and one in London. He has won every major restaurant industry award. By any measure, he is successful in a difficult, fickle business. Nieporent understands the central role of values-based leadership in creating a lasting business. "Restaurants are like children," he says. "They need your attention when they're young. You give them values and principles and hope they grow up strong."
This is a book about lessons learned from service companies that have grown up strong. These companies have much to teach us.

Copyright © 1999 by Leonard L. Berry

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Table of Contents

CONTENTS
Acknowledgments
Author's Note

  1. Sustaining Success in Service Companies
  2. Success-Sustaining Values
  3. Leading with Values
  4. Strategic Focus
  5. Executional Excellence
  6. Control of Destiny
  7. Trust-Based Relationships
  8. Investment in Employee Success
  9. Acting Small
  10. Brand Cultivation
  11. Generosity
  12. Lessons from World-Class Service Companies

Notes
Interviewees and Other Contributors
Index
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First Chapter

SUSTAINING SUCCESS IN SERVICE COMPANIES

A customer, recovering from knee surgery and walking with a cane, was Christmas shopping. When the customer asked for an item in most stores, the salesperson would point and say disinterestedly, "Over there." However, the customer's experience was different at The Container Store. After determining the product the customer wanted, the salesperson replied, "It's in the back of the store. I'll go get it for you." Before the salesperson returned, two other salespeople cheerfully asked the customer if they could be of service.

Another customer of The Container Store completed her purchase of multiple items and headed for her car, children in tow. She placed her package on the ground as she put the children in the car -- and then drove off forgetting the package. Realizing her mistake just a few minutes later, she returned to the parking lot, but the package was gone. She reentered the store hoping that someone had turned in her package, but no one had. Salesperson James Castleberry remembered the customer and asked her what she had bought. He then proceeded to gather up the products, handed them to the customer without charge, and said: "Your day will get better." And it did, starting at that moment.

Amy Carovillano, vice president of inventory control and distribution at The Container Store, was at the airport waiting for her flight to Houston. She noticed a woman animatedly talking to the airline's gate agents. Considerable head shaking suggested that the woman was not receiving the response she was seeking. She was obviously displeased when she left the counter.

She began looking around as if she were searching for someoowth of 25 percent without incurring debt. Two-thirds of the revenue growth comes from existing stores, one-third from the one or two new stores opened each year. The company's owners, Garrett Boone, Kip Tindell, Sharon Tindell, and John Mullen, all actively involved in running the company today, continually say "no" to suitors wanting to fund rapid expansion through venture capital, franchising, or a public offering. Becoming big was never the dream; creating the perfect retail store in which employees would earnestly, enthusiastically, and creatively work together to serve customers and improve operations and products was always the dream. As Garrett Boone states: "We are a company that understands our business is helping customers. We have a willingness to continually reexamine what we do and ask if we can do it better."

The Container Store has been notably successful in attracting exceptional employees who share the strong customer-focused values of the owners. More than 1,500 employees strong now, The Container Store's values-driven execution of the business is difficult for imitators to match. The company patiently practices its craft of selling excellent boxes excellently. It waits until it finds just the right employee, just the right store location, just the right vendor. Elizabeth Barrett, vice president of operations, admits: "I still have the reputation for holding a store position open for six weeks to look for the right person."

The quest for excellence pays off in human terms as well as financial terms. Employees love working in this company that celebrates excellence, and customers love the experience of shopping in the stores. Once a minister announced from his pulpit that for h is birthday his family was taking him to The Container Store. The whole congregation applauded. Messages from a departing part-time employee, a ninth-grade student, and a frantic customer reflect the human dividends contributed by corporate excellence.


Dear Kip:

I am a part-time employee working in the Virginia store. I work full-time for CNN.

When I was hired last June, I wanted to gain knowledge about opening abusiness. What I learned was more important. I learned customer service.Our extensive training was exceptional. The people sent to train us were incredible. Jane Dunnington is one of the best managers I have worked under inmy career! She disseminates information and is fair. Chris Hix and Lori Stuardi have gone out of their way to keep me informed and enthused.

I enjoy the "team atmosphere" at the store and will miss it very much. Otherprojects in television are demanding more of my time. I am forced to resign my part-time position.

I leave with a more demanding attitude about customer service, a better organizer of closets, a contributor to a million dollar sales month, feeling valued and appreciated. If I didn't love television so much I would be tempted to come aboard full-time.

Thank you for creating a positive environment, and I hope to contribute that attitude wherever I go.


Dear Container Store,

In late April I came to your store to purchase some packaging materials. I needed these materials to ship my ninth-grade science project to Tucson, Arizona, where I would be attending the International Science and Engineering Fair in early May. I had been searching in many places for these materials, and finally found them at The Container Store, t hanks to an employee named Amy Robertson. As soon as I walked into the store, she found the materials that I needed to pack my oversize project. Amy not only found the materials but spent an additional two hours and helped me pack the project in the store. She brought out tape, scissors, and screwdrivers and finished within hours what would have taken me days. The project arrived in Tucson in beautiful condition. At the Science Fair, I was awarded third place in the world in the category of microbiology. I would like to sincerely thank Amy Robertson and all of The Container Store employees who helped me on Thursday, April 25. My gratitude cannot be expressed.


Dear Container Store,

I am writing to praise Chris Grey, one of your employees. On September 11, 1996, I spent 40 minutes with her on the phone as she "coached me and encouraged me" as I put the metro system together. The following day I came to the store to thank her in person. I was in the middle of a move and frantic. She helped me tremendously. When I met her I cried, I was so grateful to her.

I hope this letter will go into her employee file.

STUDYING SUSTAINABLE SUCCESS

The Container Store is a mature, service-intensive company that continues to improve its operations; its financial performance is stellar, its human dividends rich. Growth has not dulled its enthusiasm, success has not moderated its work ethic, praise has not slowed its efforts to improve. This company, and 13 other service companies I studied for this book, model sustainable success. The companies in my study range from local to worldwide operations. Although operating different businesses, they create value for customers throu gh labor-intensive service operations. All are highly successful by any measure. The average age of these companies as of 1999 is 31 years.

My purpose in this book is to identify, describe, and illustrate the underlying drivers of sustainable success in service businesses. Creating a successful service operation is unquestionably a difficult task. However, sustaining success can be even more difficult. Services are performances, and the challenge of sustaining the performers' energy, commitment, skills, and knowledge day after day, week after week, month after month, year after year -- especially as the organization grows and becomes more complex -- is daunting. The greater the involvement of people in creating value for customers, the greater the challenge. This is a book on the lessons 14 outstanding service companies teach about sustainable success. And the lessons they teach are clear indeed. Although the sample companies differ on the outside -- the nature, size, and structure of their businesses -- to a remarkable degree they are the same on the inside, sharing the drivers of their ongoing success.

The companies selected for the sample met several tests. The primary consideration was the achievement of sustained customer acceptance and financial success. I also sought a balanced sample -- companies in different businesses and of varying sizes. Firms representing fresh case studies for readers also was an important criterion.

Selecting companies with a high labor component in their services was purposeful. Labor-intensive service companies should provide the best test of a services success sustainability model. If a model could fit companies that were absolutely dependent up on the actions, creativity, and commitment of service providers to survive, then it would fit to some extent all companies. All companies after all are service companies to the degree that they create customer value through performances.

I visited each sample company, interviewing senior and middle managers and frontline service providers. I also followed up with numerous telephone interviews. In all, I interviewed more than 250 people from the 14 companies. In addition, I observed and directly experienced service delivery at the sample firms, collected a small mountain of documentation from them, and conducted secondary research on service management. My career-long specialization in services marketing and management provides a vital backdrop for this research, the most ambitious project I have undertaken.

The sample companies readers will meet in this book are, in addition to The Container Store:

  • Bergstrom Hotels, a group of three full-service hotels in northeastern Wisconsin: The Paper Valley Hotel, The Pioneer Inn, and The Valley Inn. The hotels have built strong relationships with employees, customers, and their communities through attention to detail, caring, and a big corporate heart. The company was awarded the 1996 Wisconsin Service Business of the Year Grand Award.
  • The Charles Schwab Corporation, a securities brokerage and investment company that passionately and innovatively champions the investors' cause. Schwab's energy for continuous improvement, technological leadership, and profitable growth is remarkable.
  • Chick-fil-A, one of the world's best quick-service restaurant chains with an unwavering commitment to excellent food, respectful customer service, store operator success, and teamwork. At Chick-fil-A, there is a free lunch -- in the employee cafeteria at the home office in Atlanta.
  • Custom Research Inc., a highly progressive marketing research company that has built a strong business with Fortune 500 clients through team service delivery, innovative practices, competence, and an emphasis on continuous improvement. Custom Research won the 1996 Malcolm Baldrige National Quality Award.
  • Dana Commercial Credit, an indirect wholly owned subsidiary of Dana Corporation providing lease financing services with integrity, quality, and creativity. Notable for investing in its people's success, Dana Commercial Credit won the 1996 Malcolm Baldrige National Quality Award. The company also won the 1995 Michigan Quality Leadership Award.
  • Dial-A-Mattress, a company that sells bedding over the telephone 24 hours a day, seven days a week, and delivers orders as soon as customers want them -- within two hours if desired. For years it was nearly impossible to live in New York City and be unfamiliar with the company's advertising theme: "Dial 1-800-MATTRES and leave the last 's' off for savings." The company's founder, president and CEO Napoleon Barragan, probably is the nation's most passionate believer in the marketing power of toll-free 1-800 numbers.
  • Enterprise Rent-A-Car, the fastest-growing rental car company in America, which attracts talented, entrepreneurial-minded people to the organization and allows them to run their businesses. In recent years, Enterprise has been hiring more college graduates than any other company in America.
  • Midwest Express Airlines, a jewel of an airline that began service in 1984 as part of Kimberly-Clark Corporation. Now an independent, public company, Midwest Express takes great pride in offering "the best care in the air." In Zagat's 1997 survey of 60 of the world's largest airlines on comfort, service, timeliness, and food, Midwest Express ranked first in the United States and was the only U.S. airline to place in the world's top 10.
  • Miller SQA, a highly successful division of Herman Miller that is reinventing office furniture manufacturing and marketing by focusing on the process rather than the product. Miller SQA lives the initials in its name -- "simple, quick, and affordable."
  • Special Expeditions, an environmentally conscious travel company that uses small ships and Zodiac landing craft to expose travelers to dramatic geology, wildlife, and native culture in remote places in the world. Travelers are active participants in an expedition led by a staff of naturalists. The company was rated among the top 10 cruise lines in the world in the 1996 Condé Nast Traveler Reader's Choice Awards.
  • St. Paul Saints, a minor-league baseball team in St. Paul, Minnesota, that sells out every home game and has a season-ticket waiting list of more than 1,000 people. Operating on the principle that "fun is good," the Saints offer a strong entertainment value for families and have earned the affection and loyalty of the entire community.
  • Ukrop's Super Markets, a family-owned chain in Richmond, Virginia, that in 1997 held an astonishing 37.6 percent share of the local grocery market. A leader in ready-to-eat meals, a pioneer in relationship marketing, a generous and active corpor ate citizen, Ukrop's has forged an unshakable bond of trust with its customers, associates, and community.
  • USAA, headquartered in San Antonio, Texas, a worldwide insurance and diversified financial services association that primarily serves members of the U.S. military and their families through toll-free telephone calls, fax, and mail. Aggressive investment in technology, customer feedback systems, employee training, and the quality of work life contribute to superlative service and an insurance customer retention figure of about 97 percent. USAA was included in the book The 100 Best Companies to Work for in America.

These 14 sample companies provide the book's foundation. Their lessons not only teach but also stretch us to imagine, to ask "what if" questions about our own companies; they inspire. Lessons from the sample firms are infused into every chapter, and readers will be intimately acquainted with all 14 companies upon completion of the book. These truly are great service companies, companies that demonstrate the grand possibilities accompanying leadership with heart, companies that show the way to sustainable success.

THREE CHALLENGES IN SUSTAINING SERVICE SUCCESS

Three specific challenges in sustaining success are accentuated in enterprises that create value for customers primarily through services. The more labor-intensive the services, the greater the challenges of:

  • operating effectively while growing rapidly
  • operating effectively when competing on price
  • retaining the initial entrepreneurial spirit of the younger, smaller company

Execution Versus Growth

Balancing the need for growth wi th the requirements for execution is one of the most difficult challenges managers face. In the early 1990s, computer marketer CompUSA was the fastest-growing retail company in America. However, by 1994 the company's survival was threatened as a result of weak financial controls, undisciplined merchandising practices, and poor in-store operations. Rapid growth had outstripped the small-company infrastructure and systems in place at the time. The chief executive was ousted and the new CEO, Jim Halpin, halted the expansion. Most senior managers were replaced. The company centralized merchandising, revamped store operating practices, and strengthened the balance sheet. Only then did it cautiously ramp up new store expansion. CompUSA has become a strong performer under Halpin, and the lesson of out-of-control growth still reverberates in the company's boardroom to this day.

During periods of rapid growth, adhering to original operating standards becomes problematic. Relaxing standards is common when fastgrowing companies select, orient, train, and educate many new managers and employees. Maintaining effective internal company communications, reinforcing the company's vision and culture, and delivering consistently high quality service -- essential success factors -- are challenged by expansion. Not allowing the pressures of growth to undermine the effectiveness of labor-intensive value creation requires a higher level of leadership and discipline than exists in many companies.

No matter how brilliant a company's strategy, it still must be executed. Otherwise, the strategy is simply being advertised for competitors to imitate, execute better, and win away the market. Service companies create value th rough performances. "Product quality" is a function of performance quality, which, in turn, is a function of the ability and motivation of the performers. Performance suffers when growth weakens organizational practices that promote employee ability and motivation.

ValuJet was a fast-growing, profitable -- yet deeply troubled -- airline well before its tragic May 11, 1996 crash of Flight 592 in the Florida Everglades that killed 110 people. Yes, it was a moneymaker, but its profits came to a sudden halt on the day of the accident. Lax controls, the outsourcing of all maintenance and training, and a weak culture undermined by a lack of attention to nonfinancial goals paved the way for ValuJet's undoing. Six days after the crash, ValuJet cut its daily schedule of 320 flights by about half in an attempt to maintain reliable operations during an FAA evaluation. The airline was forced to refund more than $4 million to passengers who were reluctant to fly ValuJet or whose flights were canceled. On June 17, 1996, ValuJet became the largest airline ever to be grounded by the FAA. The company resumed flights three months later but was unable to regain profitability. The negative brand equity associated with ValuJet became a liability that could not be overcome. In 1997, ValuJet assumed the name of an acquisition and renamed itself Air Tran Airlines.

Service companies sell a promise. Passengers who board an airliner have no technical basis for judging the competence of the crew or the airworthiness of the airplane. All they can do is trust, and their willingness to do so is a function of their prior experiences and the company's reputation. The customer's confidence is the most precious asset for any comp any that sells promises for a living. Superb execution of the service day after day after day is a cornerstone of confidence building. Strengthening the customers' confidence isn't about making promises but about keeping them. When a service company loses its customers' confidence, it loses everything. This is what happened to ValuJet. ValuJet made $20.7 million in profits in 1994 -- its first full year of operations. Southwest Airlines earned as much only after its first eight years. Yet Southwest Airlines became America's most consistently profitable airline with a strong reputation for value, reliability, safety, and fun; Valujet had to change its name to, in effect, disguise who it is and to begin building a new reputation.

Execution Versus Price

The lack of physical differentiation among competing services encourages managers to overuse price as a marketing tool. Whereas the fit and feel of a pair of trousers or the styling of an automobile can give customers nonprice reasons for favoring one brand over another, services managers often are limited to nonphysical means of differentiation. They frequently choose price cutting, which may lead to cost cutting and may weaken execution. Although managers could strive to differentiate their services with higher quality rather than lower price, price cutting is a favored path because it can be implemented quickly and may be deemed more salient with targeted markets.

One of the biggest mistakes managers make is assuming that value and price mean the same thing to customers. They do not. Price is part of value but not its equivalent. To customers, value is the benefits received for the burdens experienced; it is what customers receive in exchange for what they must endure to receive it. Burdens have both a monetary component (price) and a nonmonetary component (for example, unknowledgeable service providers, inconvenient service locations or hours of operation, busy telephone lines).

Price is price; value is the total experience. Companies that sacrifice the customers' satisfactory experience for lower costs to support lower prices may decrease rather than increase customer value. Preparing for deregulation and expected price competition, local telephone service providers began eliminating thousands of workers from their payrolls in the mid-1990s. The layoffs occurred as demand for services escalated because customers were requesting additional telephone and fax lines. More demand combined with less capacity undermined adequate service delivery, resulting in rising consumer complaints and regulator activism. In 1996, for example, New York's Public Service Commission ordered NYNEX to rebate $50 million to five million consumers because of slow repair and installation services; Wisconsin's Public Service Commission filed a civil suit against Ameritech for slow, unreliable service; and Idaho levied fines on US West for taking too long to fix telephone outages. By equating price and value, decision makers in these companies took the wrong path.

Preparing for intensified competition requires strengthening execution, not weakening it. The tougher the price competition in a market, the more important quality of service is to sustainable success. Why? Because without differentiated quality, without a superior total experience to offer customers, a company has few, if any, nonpricing options when key competitors cut their prices.

< B>Entrepreneurship Versus Maturity

Maintaining an entrepreneurial culture that celebrates continuous improvement and discovery is challenged by organizational maturity and growth. Innovative entrepreneurship comes from conditions more typical of newer, smaller organizations than mature, larger ones: the dream of building a great business and the fear of failure.

Inspired service providers are most likely to invest the personal energy and endure the risks of improvement seeking. They are most likely to identify better ways to perform their service and to speak up when they see their company going in a wrong direction. Yet, inspiration is jeopardized as the business grows and adds employees, locations, and more formalized operating policies and systems. Rules replace the informality that nurtures personal interaction throughout the organization. Turfism replaces teamwork. Memos replace face-to-face communications. Supervisory layers replace impromptu visits with the owner. The power of the dream, the sense of mission, can easily fade as a company not only becomes more successful but also bigger, more complex, spread-out, and bureaucratic.

Most service positions involve significant discretionary effort, which is the difference between the maximum amount of energy an individual employee can bring to the service role and the minimum necessary to avoid penalty. The difference between the maximum and minimum energy investment is discretionary to the individual employee. Personal entrepreneurship is a discretionary act; the individual service provider decides whether to try something new, whether to risk helping a customer with an unusual or difficult request, whether to assume the mantle o f leadership in solving a company problem. One of the principal differences between outstanding and mediocre service companies is that the former receive far more discretionary effort from employees. Personal entrepreneurship -- a discretionary act -- is jeopardized as firms grow, age, become more complex, and change leadership. And yet sustained success requires continual innovation and improvement.

Holiday Inn was a feisty, innovative company in its youth. Founder Kemmons Wilson envisioned creating a chain of clean, comfortable, consistent, and economical way stations for families traveling by automobile. In the 1960s, Holiday Inn emerged as the undisputed winner in the U.S. hospitality market. By the 1980s, however, the chain's fortunes and reputation had begun to decline. The market was changing -- more segmented hotel concepts, more price discounting, more business travelers supplanting families as the primary customer -- and Holiday Inn was losing its leadership position. Strategic innovation in the company was centered more on new concepts such as launching Embassy Suites and entering into the gaming industry than on the core Holiday Inn business.

Holiday Inn was built on consistency of presentation but was allowed to become inconsistent with a highly variable mix of properties operating under the brand name. Many Holiday Inn properties became tired and worn. The negative images evoked by the brand became sufficiently strong and so widespread that management removed the Holiday Inn name from the company's more upscale Crowne Plaza properties. By 1997, with the company belatedly but vigorously replacing or renovating older, run-down Holiday Inn properties, the company found it necessary to air television advertising portraying hotel housekeepers with chainsaws destroying a sleeping room and then completely refurbishing it. In effect, Holiday Inn was admitting that many of its hotels were worn out -- and was asking for a chance to restore the confidence of travelers. A famous brand name became tarnished because the service it represented lost its currency. In its evolution as a company, the founder's vision and entrepreneurial spirit faded away. An innovative company ceased to be very innovative. It happens in many companies.

Execution versus growth. Execution versus price. Entrepreneurship versus maturity. These perils may simultaneously contribute to a company's decline. Companies frequently become less effective strategically and executionally because strategy affects execution and vice versa and because both are a function of the quality of leadership in the company. A weak strategy drains the commitment of the service providers who are supposed to implement it. It is difficult for employees to be excited about a strategy that doesn't excite customers. Conversely, poor execution undercuts even the most brilliant strategy. Customers cannot receive the full benefits of a company's service strategy if the performers do not perform it well. Eventually, the strategy loses its luster because it is not producing the expected results.

SUSTAINING SUCCESS IN SERVICES

Sustaining the skilled actions, personal innovation, and emotional commitment of people in service businesses as time passes and the organizations change is a tall order. The quality of machine-produced products is far less dependent on the actions, creativity, and commitment of individual employees -- perhaps hund reds or thousands of them -- than the quality of people-produced products. In services performed directly for customers, such as in retailing, education, health care, and transportation, the service is inseparable from the people performing it. An inept salesperson is an inept store; a nurse's personality may send patients in search of a new doctor.

In 1983, Royal Dutch Shell commissioned a study on corporate longevity. The purpose of the research was to identify the success drivers of firms older than Shell, which was then 100 years old. The study focused on 27 companies in North America, Europe, and Japan that ranged in age from 100 to 700 years. The findings from the research, discussed in a 1997 book, The Living Company, are fascinating. The book's author, Arie de Geus, makes a strong point when he argues that most companies are underachievers and do not come close to realizing their full potential. In an article on his findings, de Geus writes:

The high corporate mortality rate seems unnatural. No living species suffers from such a discrepancy between its maximum life expectancy and the average span it realizes. And few other types of institutions -- churches, armies, or universities -- have the abysmal record of the corporation.

Why do so many companies die young? Mounting evidence suggests that corporations fail because their policies and practices are based too heavily on the thinking and the language of economics. Put another way, companies die because their managers focus exclusively on producing goods and services and forget that the organization is a community of human beings that is in business -- any business -- to stay alive. Managers concern themselves with l and, labor, and capital, and overlook the fact that labor means real people.

Companies need not die young. I was inspired to research and write this book to learn, distill, and share the success sustainability lessons of great service companies. Despite the perils posed by time, growth, and success, some service companies keep getting better. How do the Charles Schwabs, Enterprise Rent-A-Cars, and Chick-fil-A's do it? I anticipated that these long-time achieving companies would share certain traits in common but also would differ in certain respects, if only because the particulars of their businesses were different. I sought to identify and understand the underlying success sustainers in service businesses that transcended the particulars of any one type of business. What came from intensive study of truly outstanding service companies is the most exciting discovery of my research career to date: the drivers of sustainable success in labor-intensive service businesses are common across the different businesses. The portraits of success sustainability for 14 distinct companies ranging from a supermarket chain to an airline to a furniture manufacturer to a baseball team are virtually identical.

I need not draw multiple success models for different types of service companies; if a company creates customer value through labor-intensive performances, I need draw only the one picture shown as Exhibit 1-1. This exhibit is a comprehensive, accurate portrait of each sample company I studied. This is what a world-class service company with sustained success looks like.

Each chapter of the book develops one part of the success sustainability model. Exhibit 1-1 is a picture of the book. Just as there are no shortcuts in implementing this sustainable success model, there are no shortcuts in understanding it. Readers are encouraged to read every chapter in sequence as each chapter builds on previous ones. I found nine drivers of excellence in my study of the sample companies. The central driver of excellence, values-driven leadership, gives root to the other eight. The bold arrows in the model depict the primary relationships. The dotted-line arrows from the circle indicate the interrelationships among the success drivers; each success driver in the model nourishes others.

The book is about the overriding importance of humane values in building a lasting service business. Great service companies build a humane community (the organization and its partners) that humanely serves customers and the broader communities in which they live. Everyone benefits from the existence of a great company -- customers, employees, suppliers, investors, cities, nations. Strong institutional values enabling human beings at work to realize their full potential as individuals and as members of a community contribute to the creation of compelling value inside and outside the company. The company survives as a success because it is more fully alive.

Restaurant owner Drew Nieporent has not had a single failure since opening his first restaurant in 1985. By 1997 he was operating seven restaurants -- five in New York City, one in San Francisco, and one in London. He has won every major restaurant industry award. By any measure, he is successful in a difficult, fickle business. Nieporent understands the central role of values-based leadership in creating a lasting business. "Restauran ts are like children," he says. "They need your attention when they're young. You give them values and principles and hope they grow up strong."

This is a book about lessons learned from service companies that have grown up strong. These companies have much to teach us.

Copyright © 1999 by Leonard L. Berry

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Interviews & Essays

Discovering the Soul of Service

Business editor Laurie Petersen talked with Leonard Berry, author of Discovering the Soul of Service and holder of the JC Penney Chair of Retailing Studies at Texas A&M University, about what he learned from the 14 service standouts profiled in his new book.


barnesandnoble.com: In researching your book, what did you discover that surprised you?

Leonard Berry: I was surprised at how consistent my findings were from one company to another. It was really quite remarkable that in the end I could draw a picture of a successful service company and it fit all 14 of them.

bn: How did you pick the companies you feature?

LB: The key criterion was sustained success in a labor-intensive service business. I also wanted all the companies to be in different businesses. And I wanted to provide fresh examples for readers. Some companies are overused in my opinion in business literature. You're left with the impression that there are only five good companies in America.

I really delight in introducing some of these fresh faces in my book, such as The Container Store in Dallas. The average age of the companies is 31 years. The one notable exception is the St. Paul Saints, which is an organization that is only five years old. It's selling out every home game and has a season-ticket waiting list of more than 1,000 people.

bn: What did you find is the most important factor in a successful service business?

LB: The kind of leadership. What's required in a human-driven service company is a values-driven leadership. People leading with humane values look for a certain kind of talent. You can have the requisite set of skills and still be wrong for the job. You need a very rich value system that inspires human beings as employees and customers. The way you do that is by hiring for values.

bn: Just what kind of things can you ask people in an interview to get at their value systems?

LB: Get a number of people involved in the hiring decision, including people who are already performing the job. Look at people more than once. Have them actually perform the service or simulate the service. Questions that can reveal a person's value system are things like: Tell me something in your life you're particularly proud of, ashamed of. What was your best job? Your worst job? The ultimate purpose is to get these people to reveal their values and principles -- to put their values on the table.

It's easier to get a job in the FBI than it is to get a job as a store operator for Chick-Fil-A, one of the companies I studied. They get exceptional people to run their fast-food stores. This difference leads to longevity, maturity, and leadership potential.

bn: What common thread did you find in how these 14 companies deal with problems?

LB: They run to them as opposed to ignoring or postponing them. They see them as opportunities to repair something that's broken, to restore someone's confidence. They also see problems as a way to get better, to improve, to fix the system.

bn: What role does technology play in these companies' success?

LB: It's critical. Every one, with the possible exception of the St. Paul Saints, is a legitimate high-tech company. Many of these take a backseat to no one. USAA uses innovative image technology. Custom Research does innovative things with market research. One of the key lessons is that although all of these companies are high-tech, they're also high-touch.

bn: Who do you want to read this book?

LB: I want managers to read this book, but also people who are running stores and departments of stores and running departments within manufacturing companies. Every business in any business is a service company. No company can go into the future and ignore service.

bn: How do you make change and improvement happen within your own organization?

LB: We tend to think the key to any business is who's at the top. The key is, who's the store manager? Who's running the distribution center? To make change happen, you start at home. You become a role-model operation and demonstrate the benefits of that approach to the business and document the benefits -- things like higher customer retention and lower employee turnover.

When I'm on the road speaking, the most common reaction I get is: "I wish my boss was here. I believe what you're saying, but he doesn't." My answer is: Have you done everything in your control to implement the ideas I've talked about? Marshal some evidence. Go to management and ask to do a seminar. Start a sharing rally to share innovations. There are lots of creative ways to market internally.

bn: If you were just starting your career today, where would you go to work?

LB: I've been in this business for 30 years. I've been to a lot of companies, and 98 percent of the time I can't wait to get home because they are so screwed up. I've become frustrated by the mediocrity in corporate America, the needless waste and bickering. I had the complete opposite impression after studying the 14 companies in my book. I wanted to go to work for these companies. I found them to be fantastic places for human beings to be. That's a miracle in itself.

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Reading Group Guide

Discussion Group Questions

1. What does it mean to be a service company? Is your organization a service company? Are you a service provider?

2. Like money in a bank, values are the company's treasure. What are your company's core values and how do they compare with those values discussed in the book? How can an organization acquire such values?

3. What does "values-driven leadership" really mean? How can values-driven leadership actuate sustainable service success? How can a company's leadership articulate, cultivate, and reinforce organizational values?

4. What are the common traits of an excellent core strategy? Should an organization's core strategies ever change? How does an organization know what to preserve and what to change? What does "listening for innovation," mean?

5. How do great service companies control their destiny? What are the advantages and disadvantages privately held companies have in controlling their destiny? How can public companies sustain control of the business?

6. Why are trust-based relationships important in success sustainability? How can organizations build trust with customers, employees, business partners, and shareholders? What level of trust does your organization have with each of these constituents?

7. What does the author mean when he discusses investing in employees' success? Is this a practiced approach in your company? What implications do these employee investments have on the future success of the company?

8. Is it possible to be a large company yet act small? How can large companies act small? How can small companies retain their nimbleness, responsiveness, teamwork, and personalization as they grow and mature?

9. When a company creates value for customers primarily through service, the company becomes the brand. How do you describe your company's brand? How would customers describe your company's brand? How do you communicate the brand to various stakeholders?

10. Is generosity an outcome or input of success? How can generosity contribute to a company's success both inside and outside the organization?

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Sort by: Showing all of 2 Customer Reviews
  • Anonymous

    Posted August 23, 2004

    From insight to understanding

    Implementation of excellent customer service is something that all serious business leaders talk about, but seldom master. This book is a great help because it identifies the various components that need to come together for great customer service to be possible. It provides a good framework to develop a solid plan for focusing the organization. Unfortunately, it is not strong on practical checklists and workbook type resources.

    Was this review helpful? Yes  No   Report this review
  • Anonymous

    Posted December 31, 2010

    No text was provided for this review.

Sort by: Showing all of 2 Customer Reviews

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