Happy Employees Create Value

We often talk about the value of employees, and especially how many companies do not recognize that people are more than a set of hands assembling product.  People have creativity, knowledge, experience, and ideas that can create value that doesn’t land on a traditional P&L.

Hotelier Joie de Vivre does understand that oft-hidden but still real value.

Former management at the Hotel Carlton in San Francisco didn’t like to replace aging vacuums, despite staff complaints. After Joie de Vivre Hospitality Inc. took over operations in 2003, the new manager bought a vacuum for each of the 15 housekeepers — and replaces them every year.  The new vacuums make a big difference to employees — in performance and morale, said Ms. Lum, a 16-year Carlton veteran. "It seems that this company cares about us more," she said. "They try to do what we say."

It doesn’t take much.  An industrial vacuum is just a few hundred bucks, if that.  But the direct returns can be very significant.

On average, hotels and restaurants will replace two-thirds of their workers this year, according to hotel survey firm Market Metrix. The company estimates that each departure costs a midrange hotel about $5,000 in lost productivity, and recruiting and training a replacement.  Mr. Conley said, Joie de Vivre’s turnover is 25% to 30% annually, about half of the industry average. At the Carlton, turnover is less than 10%, down from an estimated 50% annually from 2000 to 2002, before Joie took over.

I think they just paid for their vacuums.  But the hotelier doesn’t just buy vacuums. 

Still, it is possible to keep such workers engaged if they feel their jobs are valuable and fun, [Joie de Vivre CEO] Mr. Conley said. He recently wrote "Peak: How Great Companies Get Their Mojo from Maslow," a book on improving corporate performance by keeping employees, customers and investors happy.

Mr. Conley said he tries to make Joie de Vivre fun by sponsoring parties and awards. He arranges paid annual retreats for employees and has regular dinners with those who want to chat. The company offers free classes on subjects from Microsoft Excel to English as a second language, the most popular course. It pushes managers to seek feedback from workers, and it encourages employees to learn how their jobs make a difference for hotel guests and for the company.

Hervé Blondel, the Hotel Carlton general manager who bought the new vacuum cleaners and has since moved to another hotel in the chain, said he tried to treat workers as partners rather than employees. He sat in for front-desk workers on their lunch breaks and heeded staff suggestions to eliminate minibars, which generated little revenue at the midprice hotel.

And the returns aren’t limited to just improved turnover.  Customer service is positively impacted, and especially in the hotel business that hits the bottom line pretty quickly.

The Carlton now wins some of the highest employee- and customer-satisfaction marks among Joie de Vivre’s hotels — up from nearly the lowest right after Joie de Vivre took over.

As Joie de Vivre knows, happy employees create value directly for a company by reducing turnover and indirectly by creating high levels of customer satisfaction.  Now if other companies would learn that lesson.