The Disney magic

When half the world is predicting things will get a whole lot worse before they get better, especially after the next general election, it is perhaps time for some inspiration. Last Friday’s seminar on Disney’s approach to business excellence, organised by the Sector Skills Academy for Hospitality and led by the Disney Institute, was just the tonic. The day – attended by over 200 senior people from the sector and the culmination of a week long programme – was about reinforcing much of what we should be saying, doing and implementing every day – but also with a bit of added Disney magic sprinkled on top. Yes it was American and yes it was very cheesy, but as Disney’s Chris Caracci pointed out: “We are an American firm led by a mouse – what did you expect?” One of the most valuable parts of the day was hearing about Disney’s interpretation of The Profit-Service Chain, a theory identified by Harvard Business School that many people in the eating-out and drinking-out market will be familiar with. In 1997 three Harvard professors studied the best and most effective service organisations both in America and around the world. They identified that the most critical factor in current and sustainable future success was shareholder value. Nothing new in that but the three academics – James Heskett, W Earl Sasser and Leonard Schlesinger – determined that the disciplines that must be in place to reach the promised land of shareholder value for service oriented companies all started with these organisations’ own people. The companies with what they dubbed the best “Internal Service Quality” (ISQ) – the quality of service and care delivered by a firm’s leadership team to its own staff – determined everything. Harvard established that high levels of ISQ led to employee satisfaction and retention. Happy staff were productive and performed well, and therefore typically delivered superior External Service Quality – ie a great experience for the customer – which led to better customer satisfaction, longer customer relationships and loyalty. This delivered revenue and profit growth, and enhanced shareholder value. Clearly the point of all this is that the most important people in the lives of senior managers are staff not customers: financial objectives are hit by making sure (first and foremost) staff are happy and valued. Disney says part of how it made this live and breathe in its organisation was by systematically measuring the behaviour – not just the performance – of its managers. The financial performance of managers, no matter how good, was not enough. The results had to be achieved in the right way. The company also spoke of how it utilised a powerful tool in reinforcing the value of customers, by including Lifetime Value Estimates (LVE) of customers in its training – how much is a customer worth to us over their lifetime, or the lifetime of the relationship between them and us? In the US, LVEs for car manufacturers is $332,000, for insurance it’s $100,000 and for a pizza delivery company it’s about $8,000. For a periodic visitor to a Disney theme park, it’s about $50,000. Measuring this creates a powerful story for employees to understand how customers should be valued. There were lots of other nuggets largely relating to the relentless focus on detail and the pursuit of perfection (cue more cheese: “perfection is not attainable but it allows us to settle for excellence”). Some of the detail around operating a business like Disney was fascinating. By virtue of its Orlando theme park in Florida, it is the largest single-site employer in the world with 60,000 staff in one place every day, plus a further 20,000 workers contracted to provide services to Disney or its customers in the same location. Disney is now a fully-fledged weddings business, hosting 125 weddings every week at parks and hotels around the world (last year one couple spent $700,000 making their dreams come true). There was lots more besides and doing the Disney session justice in this column is difficult. While clearly the path to prosperity does not begin and end with Disney, some of the values at the centre of what was discussed on Friday will resonate with everyone – people, service and customers. As David McHattie, chief executive of the Sector Skill Academy for Hospitality, said: “Disney is clearly about excellence, and this has been about showcasing it, highlighting it and finding things that we can take back to our own businesses.” Congratulations to McHattie and his team for securing the Disney Institute, and to those enlightened companies that supported it, ensuring 1,000 people from the sector were touched by the programme last week, surely the first of what will become an annual event.