The Emergence of the Joie de Vivre Heart

In the mid-1990s, we started to study the idea of corporate culture and how we could harness our Joie de Vivre culture in a way that would allow us to be at our peak. We found studies showing that the culture of an organization, and in particular, the way people feel about their work climate, can account for nearly 30 percent of business performance. In studying positive and negative company cultures, we came to define culture as “the standards and values that define how people in an organization are expected to behave, especially in their relationships with each other” or, in other words, “it's the way things are done around here.” I also like this definition of culture: “it's what happens when the boss is not around.”

Soon after this management retreat, we created what became known as the Joie de Vivre Heart, which is illustrated on page 204. It harkens back to a theory I'd learned in business school called the service-profit chain, which suggests there is a mutually reinforcing relationship between company culture, employee morale, customer satisfaction, and profitability. This model defines profitability as a lagging—not a leading—indicator of peak performance. To clarify, most standard indicators of financial performance, like an annual profit- and-loss statement, measure results of actions that took place in the past. These are called lagging indicators. Lagging indicators may predict future performance, but it's really the leading indicators that have the greatest influence on where the company is going. Leading indicators measure inputs—the investments of a company—while lagging indicators measure outcomes. For example, whether employees show continued growth in morale based on how the company is investing in its culture is a leading indicator, especially in a service business in which our primary product is the relationship between our customers and our employees. In sum, long-term sustainable profits are a consequence of the three other leading indicators: (1) corporate culture, (2) employee satisfaction, and (3) customer loyalty.

The service-profit chain taught me about the cycle of capability. In The Service Profit Chain, James Heskett, W. Earl Sasser, and Leonard Schlesinger suggest, “The philosophy behind the cycle of capability is that a satisfied employee is a loyal and productive employee. Their satisfaction stems, at least among the best frontline employees, from their desire and ability to deliver results to customers. In order to deliver results to customers, they must have the ability to relate to customers and solve their problems, the latitude (within well-specified limits) to use their judgment in doing so, the training and technological support needed to do so, and recognition and rewards for doing so.” In essence, successful companies create a culture of capability in which employees are well prepared to be empowered. These employees feel a deep resonance with the company culture, and they also appreciate the ability to influence that culture.

Creating the Joie de Vivre Heart was a huge breakthrough for our organization, given the growth we were experiencing in the mid-1990s. It also created a simple symbol that crossed all language and cultural barriers and was a relevant fact to all of our varied hotels, restaurants, bars, and spas. Before creating the heart, I usually stumbled when trying to describe our unique business approach to our employees or to outsiders. Creating the heart diagram helped us to come up with a universal visual icon (hearts and pyramids—we've got an iconic theme here). We all have a heart, right? But this icon is also emblematic of Joie de Vivre's service from the heart approach to our customers, as opposed to service from the employee manual or service from the brain. When our customers feel that our employees are giving service from the heart, they appreciate the emotional connection we are making.

Every new employee learns about the heart in orientation. Many carry a laminated card with this diagram on it. They use the Joie de Vivre Heart to engage with each other about whether we're walking our talk. The basic premise is simple: a unique corporate culture creates happy employees, which leads to greater customer loyalty that, in turn, drives a profitable and sustainable business.

I'll never forget one particular new-hire orientation where I was introducing the idea of the Joie de Vivre Heart and asked the group, “What carries blood through the heart?” A 60-year-old room attendant who had recently emigrated from Vietnam raised her hand. With tears in her eyes (and in broken English), she told us that the arteries carry the blood. She knew this because her husband had gone through heart surgery six months earlier but was now fully recovered.

Her story touched the entire room and prompted a deeper discussion about how we can tell whether the Joie de Vivre Heart is working in each of our businesses. I told her and the group that the most valuable artery in the Joie de Vivre Heart is the link from point number one (corporate culture) to point number two (employees). The role of our senior leadership is to create a unique corporate culture and to help it spread throughout all of our businesses. We enlist our cultural ambassadors (one line-level employee per property who is paid extra for this six-month role) to be cheerleaders and facilitators of culture at their particular property. Point one is where the blood pumps from, but if we have clogged arteries, such that our employees don't feel the positive culture at point two, then we're never going to get that blood to points three and four, and we won't foster customer loyalty or sustainable profits.

Now, I know some of you may find the heart icon to be a bit too Hallmark-y. I understand; when I draw that heart in front of an MBA class or when I'm giving a speech to international CEOs, I initially get a few smirks. But I've yet to find an icon that better defines the virtuous circle associated with the service–profit chain and that does it in a manner that translates across all cultures. If you think it's a little too hokey, don't forget that Southwest's stock market ticket symbol is LUV.

Creating Corporate Culture

Like those upper reaches of the pyramids, which tend toward the intangible, the subject of corporate culture is one many executives have a hard time getting their hands around. It may seem a little soft or difficult to define. For those of you who want to jump into the deep end of this subject, I recommend Corporate Culture and Performance, an academic book that examines why there is a relationship between strong cultures and peak performance. But most of you are probably looking for an easier way to make this subject more tangible. At Joie de Vivre, we decided to use competitive benchmark metrics at points two, three, and four of the heart to help us determine whether what we were doing at point one—the intangibles of culture—was making a difference throughout the rest of the organization.

At point two, we use the details of our annual work climate survey to analyze our trend on various employee satisfaction issues. As well, we can compare our scores versus the industry average. At point three, our monthly customer satisfaction tallies, which are benchmarked against hospitality industry averages, help us determine whether the blood is making it to that part of the heart. In 2010, my last year as CEO, we were proud to score the highest customer satisfaction numbers of any upscale hotel company in the United States. Finally, at point four (as mentioned in Chapter Ten), we have chosen to use market share as our primary definition of sustainable profits because we can compare ourselves with our competition on that metric, but we can't make a profitability comparison because our competition is primarily private companies.

One thing you'll notice is that most of the corporate cultures people admire—from Google's to Whole Foods Market's to Starbuck's—have the imprint of the founders indelibly implanted in the company DNA. Maintaining a great culture is much easier than turning around a bad one. It's not impossible to have a flowering culture sprout from hardened earth, but it helps to have a change in the senior leadership. To change a culture, the leaders have to change the rules of what it means to be part of the organization. It's almost as if the rules for belonging to a club were to change overnight.

Leaders who have been successful in changing their culture did so through tangible changes in organizational behaviors: they literally changed habits. Ken Iverson and his team at Nucor took over one of the most troubled companies in America (Nuclear Corporation of America) and turned it into a thriving steel-making enterprise with a positive culture. He did this by creating more of a horizontal organization, with senior executives actively building relationships with line-level workers. Then, Iverson preached consistency in staying true to the new habits that he was implementing at Nucor. Similarly, Gordon Bethune inherited a truly awful company when he took over as CEO of Continental Airlines in 1994. Let's look at some of the tangible things Bethune did to turn that culture around.

Before Bethune took over, Continental was simply the worst airline in America on virtually any metrics you could imagine: the worst on-time arrivals, the highest number of mishandled-baggage reports, the greatest number of customer complaints, the lowest customer satisfaction, the least profitable—so much so that the company had gone into Chapter Eleven bankruptcy protection twice in the preceding decade. The company had suffered through 10 leaders in 10 years. While there is no litmus test that would allow us to measure Continental's culture versus its competitors' at that time, I believe that all of these other metrics were the lagging indicators of the simple leading indicator: Continental Airlines had a corrosive culture that dated back to 1983, when Frank Lorenzo bought the airline on the cheap and then operated it in a similar manner while exhibiting a blatant contempt for his employees. To echo a phrase from Chapter Ten, Continental was plagued with the wrong-owner syndrome for quite some time, and that created a truly dysfunctional organization.

In his book From Worst to First, Bethune suggests that there was no way Continental could beat the outside competition if they didn't start by dealing with the competitive challenges within the organization. After years of the Lorenzo legacy, no one at Continental trusted anyone else there. Bethune decided to “make it a corporate goal to change how people treated each other: to find ways to measure and reward cooperation rather than infighting, to encourage and reward trust and confidence. That was the only real solution to our problems in the long run.” In fact, after Continental had made its turnaround, Bethune said, “We didn't just change the symptoms of what was wrong with Continental. We changed Continental. We changed its corporate culture from top to bottom.”³

How did Gordon Bethune change the culture, and what does it mean for you and your organization? He started by just listening. What he heard was a demoralized team, one that didn't believe in itself. This is one of the simplest but most overlooked things a new leader can do on joining an organization. He writes, “These people needed to learn that they could make a difference before we could expect them to want to.” One of his most famous solutions was creating a companywide goal that everyone could buy into. Based on customer satisfaction surveys, Continental found that the number one determinant of customer satisfaction was on-time performance (the airplane being at the gate within 15 minutes of the scheduled time of arrival). This on-time metric seemed to make the biggest difference to its customers, and Continental, unfortunately, was in last place among the top 10 airlines. Bethune and his team also found that not being on time was costing the airline $5 million per month (late connections led to housing customers in hotels overnight, paying for their meals, and occasionally giving them free tickets for future travel).

Bethune rallied his senior leaders and boldly suggested something that was antithetical to Continental's divisive and hopeless culture. He vowed that each month that Continental scored in the top five airlines nationally (as measured by the Department of Transportation), they would reward every one of their 40,000 nonmanagers with a $65 bonus (if you do the math, you realize that's a $2.5 million bonus per month if they make their goal). That was a big expenditure for a company that hadn't shown a profit in 10 years. But Bethune thought of it as an investment. If they reached that goal, it would certainly shrink that $5 million monthly cost associated with being late. It would also improve customer satisfaction. Most importantly, though, this group goal might help shift the culture so that a divided company could unify around a common goal.

Remarkably, within three months, Continental went from last to first in on-time performance. Then Bethune upped the ante and started paying all employees $100 per month for each month that the company came in first. And of course, Continental's team made them the consistent on-time performance king for the next few years. Bethune and the management team didn't leave it at that. They made other investments in culture that drove employee satisfaction, from improving lunchrooms to providing a better means of giving managers feedback. They changed the way they conducted employee meetings, including ending the meetings with each employee talking about which improvements they appreciated most in the company.

And when it came to understanding their customers, Bethune even trotted out a little wisdom from our favorite psychologist. In his book, he advises:

Keep Maslow's Hierarchy of Needs in mind when you're working on your business. For us at Continental, that means we don't want to get so interested in the kind of food we serve that we lose track of getting our planes in on time. We're not going to go too far if we've got one little element right but we're missing the basics. After all, look at our OnePass frequent flyer program, which year after year was voted the best in the business—and all the while we were losing bags, screwing up flights, and losing customers. It's great to have the best frequent flyer program. But we had to have the basics—clean, safe, and reliable flights to places people wanted to go [the food, clothing, and shelter of an airline]—before that was going to get us anywhere.⁴

Changing Continental's culture turned a losing airline into one of the industry's best. Every metric related to employees, customers, performance, and finances shot to the top of the industry. While Continental (now part of United) became one of the most awarded airlines, I think that the most remarkable award is the one Continental received in 2006 as the Most Admired U.S. Airline from Fortune magazine. They beat their intrastate rival Southwest (who came in second), which for years had been at the top of the list.

What's the Right Culture for Your Company?

The Gallup Organization's “Manage Your Human Sigma” study of sales and service organizations found that a highly engaged employee and customer leads to, on average, 3.4 times more financial productivity. For example, they found that in one luxury retail chain, the stores that scored substantially higher on both employee and customer satisfaction generated $21 more in earnings per square foot of retail space than their remaining stores and that this translated into $32 million in additional profits for the entire chain. This stuff works. Don't take my word for it. Dozens of admired companies have explicitly created their own version of the Joie de Vivre heart. John Mackey's quote at the beginning of this chapter conveys Whole Foods Market's commitment. We know Southwest Airlines believes in the service–profit chain because that's who Joie de Vivre learned it from. And Danny Meyer writes about his version of the service–profit chain theory in his book, Setting the Table.

So, what do you, and your company, need to do to ensure you have a culture that will enhance your profits? First, know that the effects of culture are simple, and they come down to the following basic points that are articulated in The Enthusiastic Employee:

1. People and their morale matter tremendously for business success, including customer satisfaction.
2. Employee morale is a function of the way an organization is led and the way that leadership is translated into daily management practices.
3. Success breeds success (the feedback loops). The better the individual and organization perform, the greater is employee morale, which, in turn, improves and sustains performance.⁵

There is no one perfect kind of culture. What might work for a biotech company in the San Francisco Bay Area could be completely inappropriate for a Midwestern equipment manufacturing company. Your company's history, location, the nature of your employees and customers, and the nature of your industry will all influence your cultural choices. Any company that focuses closely on the Employee Pyramid (discussed in Chapters Four, Five, and Six) will likely be successful in creating a unique culture that enhances employee performance and customer satisfaction. But beware of the myth that morale or culture has to mean people just getting along. Peter Drucker used to say culture is about “performance not conformance.”

I'll use an Herbism to express one more caution. Herb Kelleher said, “The tragedy of our time is that we've got it backwards…we've learned to love techniques and use people.”⁶ Culture is not the same thing as technique. Culture is a framework of values and meaning. It is not a system of specified processes geared specifically to efficiency and results. Culture is authentic and often nonlinear. It doesn't fit into a simple box or some equation. You can't be guaranteed that by taking steps one, two, and three, you will automatically produce a certain result. Yet, when it's incrementally planted, pruned, and harvested, culture develops into a dense and fertile system that yields more than any one leader could have imagined alone.

I've found that culture was at the heart of why Joie de Vivre survived the biggest downturn in the history of American hotels. And when investment bankers and financiers who've studied our success in the 2001 to 2004 period ask me why we did so well, I always point to the Joie de Vivre Heart.

Bringing It All Together

The Joie de Vivre heart was created in 1996. The Employee, Customer, and Investor Pyramids are a manifestation from when my company was suffering through the dot-com-9/11 hangover, as they were created in 2003 to 2004. The connection between these business models wasn't immediately clear to me, although at some point I did arrange the three pyramids into one master pyramid, which created an empty inverted fourth pyramid in the middle (stay with me—I promise this will all make sense in the figure on page 212).

My aha moment came in 2005, when I was speaking to a group of Fortune 500 “leaders of the future” as part of a Global Business Network seminar. This group of leaders, from companies like Ford, Dupont, and IBM, wanted to understand Joie de Vivre's unique business model. I told them the history of the company and how creating the Joie de Vivre Heart helped us to define the importance of culture to our organization. Then I launched into my sad tale of what happened after the turn of the millennium and how Maslow had become an inspiration for me in defining the relationship truths and creating the three pyramids. Looking at the diagram in my presentation, someone in the audience asked me about the empty inverted pyramid in the middle of the other three pyramids. Did I have an operating theory that could fill that space? As I pondered this question and studied the image, a woman in the back of the room politely pointed out that our Joie de Vivre Heart was actually shaped like an inverted pyramid, with a slim base and wide shoulders. Why not drop the heart into the middle of the pyramid?

Have you ever had a moment of reckoning when time stops, the world around you fades, and you just completely lock into something that truly captures you? Maslow called this a “peak experience.” Well, I had one in public that day—in front of those 40 ambitious young executives, I got a little teary-eyed when I realized that not only did the heart fit into the pyramid, but the points on the heart also corresponded to each of the contiguous pyramids. Point two on the heart (Building an enthusiastic staff, which comes from creating a unique corporate culture) was placed next to the Employee Pyramid. Point three on the heart (Developing strong customer loyalty) was contiguous to the Customer Pyramid. And point four on the heart (Maintaining a profitable and sustainable business) was hugging the Investor Pyramid.

Okay, it probably wasn't comparable to when Einstein discovered E = mc², but I will tell you that it gave me a profound sense of self-actualization. This is what the Joie de Vivre laboratory has taught me. This is what my life's work has been about. This is why I needed to write this book, even though it's meant serious sleep deprivation while running a fast-growing company.

When you or your organization move from the second level of Success on each of these pyramids to the third level of Transformation, a quantum leap occurs. For example, while the initial move from Money to Recognition on the Employee Pyramid may be gradual, the spark that takes an organization from Recognition to Meaning is powerful. It means employees have moved from being externally motivated to internally motivated. Similarly, the quantum leap on the other two pyramids is equally profound and it's really culture that is the organizational glue and firepower that helps a company empower this move up the pyramid toward self-actualization.

In sum, the heart is the core that holds these three pyramids together. No one relationship suffices to bring success in today's competitive environment. It is a combination of these three relationships held together by a unique operating model, like the service–profit chain, that helps create peak performance.

When I conceived of these three Maslow-inspired pyramids, I instinctively knew they had a deeper connection, but adding the heart as the glue that keeps them together has helped Joie de Vivre use the Relationship Truths Pyramid as a comprehensive and holistic approach to how we develop extreme loyalty with our employees, our customers, and our investors.