Changing a Company Culture: From bottom line to customer service and the guest experience
By Todd Walter President & Chief Executive Officer, WTS International | January 2010
In general, a company's culture is defined by the shared values, beliefs, and behaviors of the people who represent it. While strategies and specific objectives may change or evolve over time, a company's core values and beliefs, and hence its culture, should not. But what if they do?
This year, Elizabeth Arden Red Door Spas is celebrating its 100th anniversary. Over the course of the last century, the company's history has been marked by three distinct periods, each bringing its own set of priorities and cultures. The first 56 years were marked by the founding entrepreneur, Elizabeth Arden herself. She held a deep-seated belief that "every woman has the right to be beautiful," and she dedicated her life to bringing beauty and well-being to women. She was also a somewhat tyrannical leader and was once overheard saying, "Dear, never forget one little point. It's my business. You just work here."
Not surprisingly, the company's culture died with her in 1966. Over the next twenty-six years, the company was bought and sold by several luxury consumer products companies, and the priority shifted from service to products. From 1966 to 1992, the number of Elizabeth Arden salons around the world declined from over 100 to just two. In 1992, Red Door Spas was acquired from Unilever by two entrepreneurs who began to build back the number of salons around the country. In 1999, the spa business was sold to a private equity group, which has continued the rebuilding process. During this period of private ownership, the priorities once again changed, and bottom-line profits became the primary driver.
The Need for Change
By 2006, Red Door Spas was once again growing and was operating 29 salons and day spas, six of which were in hotel and resort locations. While growth in the absolute number of units was good, a closer examination of guest and associate behavior was less comforting. In 2006, Red Door Spas invested in a customer relationship management system. The detail and quality of the information was excellent. What gave rise to concern was the realization that Red Door was only converting approximately 30% of its first-time guests into repeat clients. Red Door didn't have a foot traffic issue, it had a guest retention issue.
As we conducted focus groups and customer surveys to ascertain the problem, it became clear that the company's business practices were geared towards maximizing profit during each guest visit. Customer service was sacrificed to cost efficiencies and associates were encouraged to maximize the sale to each individual guest. Further exacerbating the problem was the impact that the focus on profits was having on our associates. A bottom-line, profit-oriented culture did little to create a sense of belonging among our associates, and as a result, associate turnover on an annual basis was high.