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 / Spring 2007 / Issue 46(originally published by Booz & Company)


The Luxury Touch

Rigorous Selection
Successful luxury brands give the same attention and care to selecting employees that they put into nurturing them. Ritz-Carlton uses a process that may set the standard for methodical rigor. It evaluates each applicant using scientific, behavior-based assessment tools developed by the human resources consulting firm Talent+, tools derived from statistical analysis of top performers’ behavioral characteristics in each job category. Potential hires are tested both for cultural fit and for traits associated with customer service excellence, including what Ritz calls an innate “passion to serve.” Says John Timmerman, vice president for quality and program management: “The smile has to come naturally.”

As part of the interview process, candidates spend time with established Ritz employees performing their daily routines, a practice that gives job candidates a realistic view of Ritz’s performance standards and encourages those with misgivings to drop out. Company research has shown that its “mis-hired” employees — those who leave within a year or two because they are uncomfortable with the work environment —  are expensive. On average, a mis-hired hourly worker costs the company two and a half times that worker’s annual salary; a mis-hired sales employee costs eight to 10 times his or her annual salary. Ritz’s staff turnover is one-seventh the industry average; this level of stability contributes to high profitability.

Nordstrom does not require new sales hires to have previous retail experience, but the company works hard to hire salespeople who are both service-minded and entrepreneurial, people who are likely to enjoy working in an environment with limited structure and guidance. The service mentality, says one Nordstrom executive, is difficult to fake. He sometimes takes prospective sales staff to lunch and deliberately knocks his napkin off the table to see if their impulse is to help.

Like Ritz-Carlton and Nordstrom, Lexus promises extraordinary customer satisfaction. To deliver it, the automaker needs outstanding personnel who share the company’s values and possess the disposition and the talent to deliver on them. But many of the extraordinary individuals who make this brand so successful don’t work for the automaker, which seldom interacts directly with the buying public. Instead, they work for franchised local dealerships. Thus, from the moment Toyota launched the marque in 1989, Lexus has set extremely high standards for its dealer selection process. It gave initial priority to existing Toyota dealerships, but even they were subjected to a demanding application process that required extensive customer satisfaction surveys and related data.

The application process included several face-to-face interviews between the company and each prospective dealer. In the end, only 80 existing Toyota dealers were chosen from a field of 1,500 applicants. “The process was unbelievable,” recalls one of the winners, “and the absolute prerequisite was high customer satisfaction.” Having turned down 95 percent of the Toyota dealers who wanted a Lexus franchise, the company then turned to top dealers of competing luxury brands, subjecting them to the same exhaustive process.

And the pressure doesn’t end when the dealership is selected. The Lexus Covenant, to which all Lexus dealers must agree, reflects a groundbreaking business model. It promises that Lexus will produce the finest cars ever built. In turn, Lexus dealers must promise to constitute the industry’s best dealer network, reflecting the company’s intent to make its relationship with dealers a strong partnership. Evidently, this covenant is working. In a survey of dealer attitudes published by the National Automobile Dealers Association in mid-2006, Lexus dealers were by far the most satisfied of any dealership group.

Lexus dealers go to remarkable lengths to please their customers. Lexus execs tell the story of one South Atlanta dealership, which serves a vast portion of Georgia, whose service and parts personnel fly their own planes to reach distant customers whose cars need maintenance. “This is beyond service!” exclaimed one customer after watching the Lexus team fix her car in her own driveway. In Chicago, Lexus salesman James Hebinck spotted a Lexus coupe stuck in a snowbank. Not only did Hebinck pull over and dig out the car, he invited the owner to buy a pair of snow tires at a generous discount. The customer followed up on the offer and later referred two friends to the dealership.

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