“Smart Simplicity,” and How It Benefits Hoteliers, with Peter Tollman

Robin: Welcome to the “Innovative Hotelier Podcast” by HOTELS magazine, with weekly thought-provoking discussions with the world’s leading hotel and hospitality innovators. Welcome to the “Innovative Hotelier Podcast” brought to you by HOTELS magazine. I’m your host Robin Trimingham, and my guest today is Peter Tollman, senior partner Emeritus and senior advisor at BCG. Today, we’re chatting about leveraging the principles of Smart Simplicity to improve efficiency in hotels. TV5MONDE, an extra star for your guests. TV5MONDE is the number one destination for premium entertainment en français, international news, cinema, magazines, documentaries and youth programs, and so much more. Subtitled in 14 languages worldwide. Visit our website travel.tv5monde.com. TV5MONDE, the luxury French touch that makes all the difference.

Robin: Welcome, Peter.

Peter: Thank you, Robin, and lovely to be on this podcast together with you.

Robin: Well, I was quite fascinated when I came across an article on the BCG website about Smart Simplicity. This was a new concept to me, although I have quite a background in hotels myself. So for all of our listeners, let’s start off what is the Smart Simplicity model? And just very briefly, how was it developed?

Peter: Sure. So, Smart Simplicity is BCG’s way of understanding how organizations work. It was developed by my colleague and friend Yves Morieux, and he and I have pioneered it in a number of places. And it’s been widely used by many BCG colleagues since then. Essentially, it’s a model that looks at human behavior within organizations. Because organizations, after all, are made up of people. And so how people behave, what they do, decisions that they make, how they interact with one another, is the essence of how that organization performs. And it was based on the realization that organizational thinking today doesn’t focus on that to its detriment, but rather focuses on structures, on incentive structures, on reporting relationships, and the like. All of which are ways of controlling people, we wanted to get to a more fundamental level of understanding how an organization operates, how people behave within the organization, of understanding how to improve the performance of that organization, and the experience of the people involved in that organization.

Robin: Fair enough. Give us a tiny little more detail here. What makes this approach to simplifying complex problems unique?

Peter: What makes it unique is that we essentially look at how people act and why they act the way they do, with a view to promoting people’s enthusiasm, energy and autonomy in service of the mission of the organization. Far too often thinking and certainly conventional organization, the theory almost does the opposite. It’s about control. It regards humans as the weak link in an organization and therefore humans need to be controlled. And when humans need to be controlled, that brings in complexity because you need controls about how people behave, controls about how people take on risk, controls that get people to cooperate, controls in some organizations about when people go to the bathroom. All of which is aimed at essentially, as I’ve said, viewing people as the weak link and therefore something that needed to be managed. Now, this may have worked to a decent extent in the Industrial Age when people were on assembly lines. It certainly doesn’t work in an age like today where most workers knowledge work.

Robin: Yeah, I would agree with you because more and more we need independent thinkers who can assess a problem and act effectively. As our listeners are painfully aware, one bad customer experience in a hotel can have an immense and lasting impact, not just for that hotel, sometimes for the entire brand. Why, in your opinion is Smart Simplicity ideal for improving guest experience in the hotel industry?

Peter: What you’re looking for in any kind of business, but certainly in the hotel industry, which is an industry that deals with guests and deals with customers the whole time, you want the team to be focused on the guest experience, and to optimize the guest experience. If you have an organizational construct as a Smart Simplicity, which aligns people, if it’s working well, the organizational construct will align people towards that mission, and will have them working together in service of that mission, then your chances of mistakes remain…of course, people make mistakes all the time, I make mistakes every day, but your chance of repeated mistakes, or inadequate ways of responding to mistakes, which so often happens in the hotel industry are really going to be minimized because people will look at the team in an ideal sense, will look at the integration points, the integration points is always the guest or the customer, and they’ll think about how best can we deal with that integration point using our collective enthusiasm and collective intelligence, and our collective alignment of the hotel. So that’s the ideal that one ought to be looking for.

Robin: So for our listeners, let’s give them a real life example, and chat about it for a minute. One of the most typical things I used to hear or/and have experienced myself when I stay in hotels is, it’s 2:00 in the afternoon, I’m staying over and my room isn’t clean. That’s one of the complaints that I’ve heard most often throughout the industry, how am I analyzing the root cause of this universal breakdown in hotel operations, from a fresh perspective, improve things holistically?

Peter: Well, it’s interesting points you raised. One of the things that we’ve noticed in hotels is that the people that are closest to the points of integration, for example, the front desk staff in a hotel, are often the people that have limited amounts of empowerment, they’re relatively junior in the organization, and they don’t have many levers to draw on. Ways of empowering those kinds of people, ways of improving their ability to deal with situations can improve customer experiences tremendously. For example, if a room isn’t available at 2:00 in the afternoon, perhaps they can find them an alternative room, perhaps they can find them a temporary space, perhaps they can get the room service staff to respond quickly, it doesn’t take that long to get a room together. And they have to be empowered to be able to do that. They have to have some level of empowerment over their teammates in order to be able to do that. That’s all in the moment. And then of course, one needs to think about that that’s a recurring issue, if customers want to check into their rooms earlier and our systems are not set up to allow us to do that, how should we enable ourselves to do that? But one of the things that… Any organization in today’s world is quite complex, one of the things that one has to realize is that you can’t run a complex organization on rules alone. So you make rules, you make rules about when rooms need to be ready, for example, but you need to be able to interpret the rules, and you need to be able to respond to the rules. And that’s what requires the empowerment that I’m talking about.

Robin: And I guess that’s where becoming smart also comes in.

Peter: Yeah. Well, a little bit of… there are various books written about why do smart people act stupidly, etc. And yeah, when you put smart people in dysfunctional organizations, they tend to act stupidly.

Robin: Well, that’s a good point as well. So, if I’m understanding all of this, Smart Simplicity, at its core, is a recognition that humans follow incentives. And that being the case, it would seem to me anyway, that the most effective way to make change is to understand the hidden incentives that are creating this behavior. So can you talk a little bit about some of the more surprising hidden bad incentives maybe that you’ve even witnessed personally, in the hospitality industry?

Peter: So, I wanna be a little careful about how we use the word incentives just because it can be misinterpreted as something quite narrow, financial incentives. Or it can be interpreted as people are only out for themselves. And what about altruism? So the way I prefer to think about it or to articulate it is that people follow strategies, any behavior, people have a reason, you know, when people behave in a certain way, there’s always a reason why they’re behaving in that way. And they don’t necessarily analyze it this way themselves, but they tend to follow individually winning strategies. So, for example, if I’m a junior employee in the hotel, and in order to advance in the organization, I need the approval of you, Robin, then perhaps what I will do is act in ways that I believe will gain your approval, rather than acting in ways that promote the guest experience. So not bothering you, because there’s an angry guest who can’t get into the room at 2:00 in the afternoon may be a winning strategy for me, because I believe that that’ll cause you to favor me more. But of course, it’s not in the interest of the hotel, nor is it in the interest of the guest experience. Those kinds of small examples happen all over the place. And that’s where there ends up being a misalignment between the behaviors of the people in the organization, and what’s best for the organization and its mission and the guest experience.

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Robin: Yeah, I think you’re making an excellent point. Because of course, the hospitality industry in general is known for this enormous hierarchy of roles and managers and who reports to who, and if you have what I’m going to call a difficult manager, yeah, you’ll do anything in the world to avoid having to actually go and talk to that person. So yeah, I can see how that would be the case all the time.

Peter: And a lot of that’s about control. It’s that philosophy, which we all grew up with, which many of us learnt about it at university, or when we went to various training courses, or management courses, or business schools, we all got taught that you need to control people, and you control them through the levers of carrots and sticks. And then that leads to this kind of dysfunctional behavior. One other thing I’ll say is that management… Often, it’s the frontline worker that actually does stuff. Those are the people that interact with guests, etc. The role of management is nothing other than to support the frontline people in doing their job as effectively as possible. In other words, getting them to do what they wouldn’t do spontaneously. That’s the definition of leadership, getting people to do what they wouldn’t do spontaneously in a way that supports the mission of the organization. So often, that relatively simple concept gets lost in the bureaucracy of an organization.

Robin: Yeah, that’s a good point as well, I understand that you travel almost constantly for business yourself. Can you give us a couple of examples of situations that you have experienced personally, that would have benefited greatly from a deep dive into the root cause of the behavior that you were witnessing?

Peter: Well, fortunately, I travel a bit less now, my travel came to a pretty sudden halt at the start of the pandemic, but I did for almost 30 years prior to that travel about 50 weeks a year. So traveled extensively, lots of different situations, and mostly wonderful people who helped in situations despite the context, despite the kind of organizational dysfunction that we’ve been describing, just so many wonderful people is my overwhelming experience. But to give you one example, there’s a hotel in the area of Princeton, New Jersey, where I stayed at quite extensively over many years. And the staff there were just fantastic to me, it was like a home away from home for me, even to the extent that they knew the kinds of rooms that I used to like, they knew how I like to use the gym, I enjoy drinking tea, they would always put a kettle in my room for me, which wasn’t standard. And we developed a terrific relationship. But the systems of the hotel didn’t support that. It all ended up being done through relationships. And there was no institutional memory even in the hotel in order to be able to do that and support that. And I think that organizations that are able to capture those kinds of learnings and systematize those kinds of learnings end up being able to… you know, there’s a cliched phrase, the learning organization, but they truly are able to learn the right lessons from their experience.

Robin: I agree that you can’t know too much about a guest, particularly in this age and time with everything that’s going on. And there’s actually some great new software products for helping people stay on top of that. Can you give me an example of a hotel or a brand that you think is really getting this Smart Simplicity thing right?

Peter: I’ve sat at many boutique hotels, or owner-operated hotels, generally they get it right, because they don’t have an agency problem. It’s a small organization, they are closely tied to what they’re trying to accomplish and what they’re trying to achieve, and the guest experience that they’re trying to give one, and it works really well. And so I’ve had a lot of delightful experiences in those kinds of organizations. The question is how you translate that into a larger organization or into a corporate setting. And I would say that it’s a minority of instances where it’s executed on well. There’s usually so much leakage between the intent of the organization and how things play out on the ground. But there are certain brands that do a great job of it. I mean, one that comes to mind, for me is the Four Seasons, I’ve had some excellent experiences at various Four Seasons properties, and the experience of the staff, the way they train, the systems that they use, the attitudes towards one, the friendliness, etc., is oftentimes a marked difference from many other hotels or brands. So you know, they’re not the only one. But if you press me to give an example of a brand, which you did, well, that is the one that came to mind.

Robin: Do you think sometimes when you have a really big brand, and there’s a universal concentration on establishing brand standards, and making sure that there’s consistency from one property to the next, one country to the next, do you think that sometimes there’s a disconnect between what looks good from the top and how things are playing out in the lobby with the frontline staff?

Peter: There’s often a disconnect, because the frontline staff, you know, to our earlier conversation, you know, the frontline staff aren’t stupid, they’re gonna wanna make their bosses, the people at the top of the organization feel like they’re doing a good job based on the metrics and the thinking of the people at the top of the organization. Oftentimes, that involves downplaying or hiding bad news, and playing up good news. And so the people at the top of the organization, unless they have a real sense of what’s going on, unless they make the effort to understand what’s going on at the frontline, they’re lucky to get a warped sense of the situation. And by the way, that’s another I would say, if you think about what constitutes great leadership, being present in those moments of truth, so that you can lead through those moments of truth is a really important characteristic of great leadership.

Robin: And one, I think that has to be practiced by a lot of us. I don’t think in this age and time it naturally comes to all that many people, although I wish it did. When a hotel receives poor online reviews these days, quite often what happens internally is we’re all rushing to look for somebody to blame, or we’re sending whole groups or departments of people off for training, “This is going to fix the problem.” What’s the real downside to simply reacting to complex situations, as opposed to taking the time to fully analyze what’s going on from an organizational context?

Peter: Well, that’s a really great example that you’ve raised, Robin, because if we think about what we’ve been discussing, you know, people’s behavior strategy, and they follow individually winning behaviors, and also that people generally are smart. The smart reaction in an organization that looks for people to blame when things go wrong, is to hide the things that go wrong, you got to be stupid not to want to do that. If you bury the things that go wrong, it’s not good for anyone. It’s not good for your guests, it’s not good for management, it’s not good for the hotel brand, it’s not good for retention, and it’s not going to be good for your reviews either. So one needs a different culture, and a different way of treating people who find problems. Punishment should not be due to those who make mistakes, you know, punishment should be due to those who hide their mistakes, who refuse to improve, who don’t ask for help. That then would create a different context and would encourage a different set of behavior. But an organization that looks for people to blame invariably is heading in a bad direction. And we often say, well, we learn from our mistakes and it’s great to learn from our mistakes. So often, an organization will learn the wrong lessons from mistakes and one of the ways to make sure that you’re gonna learn the wrong lessons is by reacting to things that go wrong by looking at to blame people.

Robin: I think you’re very interesting perspective on human behavior and how to get the best out of your team. Peter, I want to thank you very much for your time today. You’ve been listening to the “Innovative Hotelier Podcast”, brought to you by HOTELS magazine. Join us again soon for more up to the minute insights and information specifically for the hotel and hospitality industry. You’ve been listening to the “Innovative Hotelier Podcast” by HOTELS magazine. Join us again soon for more conversations with hospitality industry thought leaders.