Clara Stilwell_AETHOS Consulting Group_New York_web

The Uberisation of Employment

My father worked for the Midland Bank (better known today as HSBC) for 33 years. His brother, too, had been employed by the same bank. In addition, their father had similarly spent the majority of his professional life at Midland. Their respective generations were of a time when you picked a profession and, if you were lucky enough to be offered a job, you then dedicated your working life to one company until you reached retirement age. Such relationships between employer and employee engendered feelings of pride, security, familiarity and loyalty. It was not a model however that necessarily lead to high performance, and the latter quarter of the 20th century saw a swing towards greater acceptance of people moving from company to company as firms competed for talent. This shift in people’s notion of what employment means to them has been going through further radicalisation in recent years as the concept of working for oneself has gained traction and credibility.

Arguably, no company has done more for legitimising self-employment as a career choice than Uber. The car-hailing app has tapped into the zeitgeist of working people who want more flexibility – flexibility in terms of how they spend their time and flexibility over how and when they make money. As the freelance economy booms, not only do workers satisfy their wants but employers are able to get access to skills with less commitment and at lower cost. In the UK, there are now 4.7 million self-employed workers, a number that is soon due to overtake the numbers working in the public sector. If any proof were needed that the ranks of the self-employed are expanding, it was given by the UK Chancellor’s recent ill-fated attempt to increase National Insurance contributions for the self-employed.

In Europe, where onerous employment laws add extra complexity and cost to hiring and firing, freelancers are the “fastest growing group in the EU labour market;” in the United States it is estimated that more than 50 million people are doing freelance work. Feedback from these freelancers highlights the attraction of earning potential and schedule flexibility as well as the promotion of work/life balance. Furthermore, freelancing is not limited to one particular stratum of the workforce but appeals to a wide range of ages, income levels and educational backgrounds. “Freelancing is now seen as a highly attractive and lucrative career option by 87% of students with first- or second-class degrees.” Many have expressed concern over what this means for employee benefits, and the various attempts around the globe to regulate this sector for the workforce are well-documented. Freelancers are responsible for their own insurances, benefits and retirement plans – that safety net of the 33-year career with a bank has been taken away.

One of the biggest deterrents however against working for yourself is being rapidly eradicated and that is the fear of not finding enough, or regular, work. Technology has significantly shrunken the gap between hiring companies and job seekers. Complex algorithms today can rapidly and cheaply create a match between a professional and a firm in need of that individual’s capabilities. Hiring companies can now quickly view pre-screened candidates and enter a relationship with a freelancer that may only need last a few hours or that may last several months. One example in the hospitality world is the recently launched “jitjatjo” app, which helps restaurants meet their flexing staffing needs. A restaurant business, finding itself down one server for the evening shift, can find a replacement with a few clicks, and then, on shift completion, has the option to rate the individual so that he or she comes up as a priority the next time around.

Freelancing is not limited however to line-level-type roles. An increasing number of professionals, such as consultants, attorneys, marketers and technology executives are opting to work independently, and the former stigma of being ‘freelance’ or an ‘independent consultant’ has vanished. As the worry over how to find the next piece of work has diminished, project work and interim assignments now hold great appeal for top-flight executives who are no longer attracted to the classical corporate world. While many only see the upsides of taking control of their working lives, some of these independent professionals do worry that their opportunity for professional development and learning may decline, but, again, technology and social media are plugging the gap through online groups and ecosystems that support these communities.

There is no question that the way in which we think about our careers – what we want from them, how and where we want work, and who we want to spend time with – is going through a radical change. In the hospitality sector, it is not outlandish to picture a day where a receptionist is behind the front desk of a Hilton one day, and the next morning is greeting guests at an independent boutique hotel down the street; or where the CFO of a restaurant company is hired for a 9-month interim assignment to complete a refinancing; or where a casino uses an app to hire a data analyst for a special project. What is less easy to imagine these days is an individual joining one of these companies and staying there for the next 30 years.

Clara Stilwell_AETHOS Consulting Group_New York_web

CNBC Seeks Input From AETHOS’ Dr. Jim Houran On The Topic Of Psychology

CNBC special correspondent Scott Cohn, known for his documentaries and the annual series America's Top States for Business, explores the topic of "Celebrity Worship".

The American Greed Report: How Star Struck Are You? looks into the reasons behind celebrity worship. Cohn is asking: where do love and admiration end and celebrity worship begin? Click here to read the article for which Cohn interviewed AETHOS' James Houran, Ph.D.

Clara Stilwell_AETHOS Consulting Group_New York_web

“What Millennials Want” – The Real Career Priorities of Gen X vs Gen Y

Millennials (aka “Generation Y” or “Echo Boomers”) are the talk about town. A day rarely passes without a new report explaining what this generation wants out of life and how their value set are economic and cultural disruptors. As consumers and employees, GenY is therefore fast becoming the focal point of marketers, as well as cultural, religious and political leaders. Everyone is talking about how to “win over” this precocious generation. Of course, this is really an old question, which arguably gained prominence from a seminal study conducted back in 2009 by Boston College’s Sloan Center on Aging & Work. Their investigators examined the career priorities of GenY compared to GenX. The study, still available online today, found that Gen Y employees valued access to flexibility for work and family responsibility, whereas GenX employees looked for training and development opportunities and having supervisory roles. Most pundits today likewise continue this nearly 10-year narrative that GenY is all about career choices that emphasize work-life balance, sense of purpose and social consciousness, and that these attitudes differ markedly from previous generations.

However, several complications undermine a clear understanding of what millennials actually want. Careful review of the literature shows that although many studies suggest important generational variances, other research has found little to no meaningful differences. At least two issues likely contribute to this mixed picture on GenY. First, work-life balance, technology and social consciousness are simply a subset of a larger group of variables and priorities job seekers contemplate in their employment deliberations. The most accurate investigations of generational differences are therefore those that consider a wide range of potential factors. Secondly, studies often confuse attitudes with intentions – and it’s important to understand that the two are not synonymous, as an individual’s general attitude towards an issue turns out to be a poor predictor of actual behaviour.

Marketers have known about the distinction between attitudes and intentions for decades thanks to the pioneering work in the 1970s by social psychologist Martin Fishbein. He developed a well-validated model of behaviour called the “Theory of Reasoned Action (or Planned Behaviour).” According to this model, a person’s behaviour is determined mainly by an intention to perform the behaviour. Intention is the cognitive representation of a person’s readiness to perform a given behaviour and is the sole immediate antecedent of behaviour. Thus, it is a hallmark of the theory that only specific attitudes toward a behaviour or the issues in question predict that behaviour.

Conversely, it is unrealistic to expect other general attitudes to consistently predict specific behaviours. For instance, to predict attending church at location X, it is not very useful to use “religiosity” as a predictor. Instead, it is far more productive to assess a person’s attitude toward the behaviour of attending this church at a particular day and time. In other words, qualifying survey and research questions by providing a specific context bolsters the predictive validity. As a result, what we have been told about millennials as consumers and employees might be significantly tainted by studies that focused on asking about their general attitudes, as opposed to their behavioural intentions.

Asking the “Millennial Question” in a New Way
Our survey focused only on GenX and GenY for the sake of simplicity, and given that these two generations form the majority of the global workforce. Following the logic regarding attitude versus intention, we asked carefully-screened, survey respondents across industry sectors from GenX (n = 256, 70% women) and GenY (n = 254, 67% women) to rate a diverse set of career priorities. The sample skewed towards North America (75%), while the other quarter represented Europe and Asia-Pacific. Priority ratings did not significantly correlate with either gender or geography, so only generational differences were considered in our analyses. Finally, the age parameters that defined GenY and GenX matched those used in the 2009 study by the Sloan Center on Aging & Work – Gen Y (b. after 1980) and Gen X (b. 1965-1980).

Participants were not forced to rank-order the list of priorities, as this method (or “ipsative” approach) often imposes artificial “structure” on data and consequently can produce statistically false results. Instead, we worked with a paid research panel to ensure our respondents were matched on group size and behavioural intentions, (all participants were those who either were recently hired for new jobs or were actively considering job offers). In other words, ratings of career priorities correlated to actual deliberations of job and career choices, as opposed to ratings derived from respondents’ general attitudes.

Participants were instructed to, “Keep in mind your most recent job/role change (or specific job offers you are actively considering now) as you consider and rate the importance of these variables in your decision-making process. Please rate every variable in the list.” Each respondent then rated a list of twenty (20) job or career priorities using a 1 to 4 scale: (1) No importance at all, (2) Very little importance, (3) Some importance, and (4) Strong importance. The list of 20 job/career priorities was created in an iterative, consultative manner using an academic literature review combined with discussions with actual job-seekers and seasoned executive search professionals.

Two Significant Findings
Table 1 compares the hierarchies of weighted averages for GenY and GenX across the set of 20 career/job priorities.

    • GenX and GenY generally have similar priorities. The two generations showed a moderately-strong correlation (r = .70, p < .05) between their ratings of specific career priorities. In this sense, GenY and GenX are more alike than different. Interesting, the results modify the common wisdom about Millennials, in particular, while “work-life balance, direct cash compensation, standard benefits and sense of purpose” were rated highest, other factors like “global exposure, opportunities to make a difference, social responsibility, use of technology and company values and reputation” were rated much lower, both in terms of actual ratings and positions in the hierarchies of priorities. Remarkably, GenX showed these same trends. Therefore, both generations conform to Maslow’s classic Hierarchy of Needs, where pragmatism trumps principle when faced with actual career decisions.
    • GenX and GenY generally differ in their rigidity on priorities. Many sources characterize GenY as the “me generation” – implying they want it all and right now. Our results contradict this view. Instead, GenX appears more uncompromising in what they are looking for, whereas Millennials seem more flexible in achieving the same outcomes. This is borne out when looking at the variability in GenY’s ratings compared to GenX. Indeed, those in the GenX group rated “work-life balance, direct cash compensation and workplace autonomy/flexibility” all at the highest level of importance, followed closely by standard benefits, sense of purpose, and fair-supportive system of leadership. In fact, 35% of the career priorities were tied for second-place status for GenX. This effect was absent for GenY.It seems that the way many sources speak about Millennials is actually more descriptive of GenX – which makes sense considering this generation perhaps sees itself as having “paid its dues” and eager to reap the rewards in terms of increased autonomy, flexibility and sense of purpose. As recruiters and HR advisory experts, we interpret GenX’s strong expectations as representing a need for constant advancement or boost in career status and workplace control. So, while the two generations agree on general priorities, they hold different degrees of conviction toward them as well as specific nuances that reflect their professional maturity. The findings suggest to us that GenY is looking for “Balance, Bucks and Benefits,” while GenX is looking for “Balance, Bucks and Boost.”

AETHOS Consulting Group_Top 5 Career Priorities for Gen X versus Gen Y_Dr Jim Houran_Nina Gold

Advice for Leaders when Gaining and Retaining Talent
Knowing that the vast majority of new hires and internal promotions will likely come from GenX and GenY, it is incumbent upon hiring authorities to understand the practical uses of our findings. First the nearly decade-old assumptions of GenY versus GenX seem to require critical revisions. Individuals are consistent and predictable in their priorities when making actual decisions to accept new roles or jobs. Simply put, Millennials are not different than their GenX counterparts.

Rather than being unique to a specific generation or psychographic segment, today’s workspaces and careers are progressively “boundaryless” and unfold outside traditional organizational structures. This has allowed personal values to evolve such that people – and especially GenX – increasingly change work settings for greater autonomy, life balance and meaning in work. GenX shows rigidity in their priorities, whereas GenY seems more flexible when seeking the same priorities. This flexibility can allow employers to be more nimble and creative in the terms of job offers and the conditions of a given workplace. This flexibility is the new dimension in employment.

From previous research for our book, Loneliness of Leadership, we found that the most effective modern leaders are ones who tolerate ambiguity, show flexibility in thought and action, and anticipate rather than fight changing business conditions. It is understandable why companies are striving to hire Millennials, as they have these traits in spades. However, both GenY and GenX hold very similar priorities when it comes to employment. Employers should consider this when hiring knowing that the challenge will likely come when negotiating terms and conditions for employment. Expect GenX to be the “divas,” and GenY often less so.

Finally, keep in mind that subtle variations in these ratings occurred both within and across GenY and GenX. Perhaps this is the most telling trend of all. It suggests that there are risks when generalizing about the characteristics of any group or segment of individuals. Categorizing and treating individuals in a homogenous fashion like GenX versus GenY ignores the fact that we are dealing with unique individuals. In particular, we know that the rise of the lifestyle concept shows that hotel businesses recognize and attempt to deliver on a personalized guest experiences. Yet, it is odd that this identical philosophy is not uniformly applied to a company’s own employees, who are in effect its internal customers.

The best talent, regardless of generation, strives for the same general outcomes in a role, although the strength of expectations varies by professional maturity. The disrupting force of GenY is perhaps best regarded as an urgent wake-up call for organizations again to start thinking and treating team members as highly-valued individuals, with a focus on understanding their idiosyncratic motivators and then devising new and innovative platforms that best leverage their aspirations to keep them personally and professionally engaged.

Note: For references and a recommended reading list please contact the authors.

Clara Stilwell_AETHOS Consulting Group_New York_web

Brexit’s Repercussions on the Hospitality Sector

Article co-authored by Chris Mumford, AETHOS Consulting Group, and Ben Sheldrick, Magrath LLP

The referendum result in the U.K. this past summer has plunged the U.K. into a period of uncertainty as the country waits to find out what the decision to leave the European Union will mean exactly. A plummeting in the value of the pound was the most apparent immediate impact of the vote in June, along with a whirlwind of successive resignations among the country’s political leadership. As the U.K. waits for Article 50 to be triggered and for the terms of exit from the EU to become apparent, we take a look at what immediate impact there has been on the U.K. hospitality sector and what the future may look like.

Hotel, restaurant, entertainment and leisure businesses in the U.K. employ some 400,000+ EU migrant workers. The average five-star hotel in London, for example, has a workforce with more than 50 nationalities represented. Under EU treaty provisions, workers are free to enter the U.K. without any form of work permit or visa, and employers simply have to undertake a “Legal Right to Work” (LRTW) check before they can begin work. This flexible labour market has proven to be hugely beneficial to employers in the hospitality arena. The sector has become dependent on immigrant labour and is now in danger of no longer being the attractive destination for foreign job seekers that it has been traditionally.

As Keith Edwards, Chief People & Development Officer at Soho House, which operates restaurants, clubs and hotels, notes, “At Soho House, in the weeks and months since the Brexit referendum, we have noticed it becoming harder and more expensive to recruit and we expect that trend to continue. The drop in the value of sterling means that many of those from abroad who are working here have less money to send home, and the influx of those moving to the U.K. to seek work is slowing given the general uncertainty.”

This experience is shared in the hotel sector by Jumeirah Group, which has three properties in London. Ann Whelan, VP Human Resources Europe, states, “We are seeing a decline in casual workers, for example, housekeepers. The agencies we work with are seeing a drop in footfall. In terms of resourcing into our properties we not yet seeing any impact — it is too early — but the uncertainty and ambiguity over what’s going to happen does mean some Europeans are expressing reluctance over coming to the U.K.”

In the restaurant sector, outlets are predominantly staffed by young EU workers here in the U.K. for a temporary period to improve their English language skills and/or to study. Many businesses are dependent on being able to employ young people whose primary reason for coming to the U.K. is to learn English before returning to their home country to pursue their professional careers. Many restaurant businesses are now seeing that those who have been in the U.K. for a while are now moving back to their home country as a result of the currency dip.

Whelan notes that those Europeans already here are taking stock of their long-term futures in the U.K. “We are encouraging those EU citizens already here to apply for permanent residency. We are also starting to hear concern from those with children who will be due to start primary or secondary school this summer. As they are not sure how long they will be able to remain in the U.K. and therefore how long their child will remain in school here before having to relocate, they are now bringing forward decisions about their futures in the U.K.”

Not only is a fall in the number of job applicants making it more expensive to recruit, but employers are also facing increased costs through the National Living Wage, currently at £7.20 an hour and due to increase to £7.50 next April. Most hotel employees are on salaries above the National Living Wage, but in the restaurant sector the impact is certainly being felt. The restaurant sector wrote to Prime Minister Theresa May in December (The Evening Standard) to express concern over new business rates and the ability to retain EU workers. The reality is that, while restaurants would like to be able to increase salaries, it is simply not possible. Since the referendum, costs have really come under heavy pressure – on top of business rates going up and the living wage going up, the cost of supplies has also risen dramatically due to the currency fluctuation.

There is no doubt that public concern around immigration was one of the key motivating factors behind the vote to leave the EU in the referendum of June 2016. Consequently, it is very difficult to see how the government can negotiate a new relationship with Europe that continues to permit free movement of workers.

Furthermore, the government remains committed to reducing net migration to the tens of thousands annually. Currently, the figure is running at more than 330,000 per year — workers from the EU make up about half of this annual figure. There is, therefore, a long way to go before the target can be reached. Leaving the EU, with the consequent curb on free movement rights, will go a long way toward enabling the government to reach its long-awaited target.

Given the political narrative around immigration concerns, it seems inevitable that some form of “hard Brexit” will follow the two-year negotiation period after Article 50 has been invoked. This is likely to mean the re-imposition of immigration controls for EU citizens — although, it is very unclear at this stage what the structure of this new regime will look like.

Theresa May has already indicated that the government is unlikely to rely on a Points Based System (“PBS”) for EU workers. Indeed, there is already reference under Tier 3 of PBS (as yet undefined in detail) that in theory will allow for “lower skilled” workers to be recruited by employers who have specific needs. Originally, this was conceived primarily for the agriculture and manufacturing sectors that may require significant additional resources on a seasonal or contractual basis. Tier 3 has never been opened, however conceivably it could be used for EU workers within hospitality and services sectors following Brexit.

Alternatively, the government may introduce a new work permit scheme for these sectors. This would require employers to request permission from a central government authority to employ foreign national workers. If such a scheme is introduced, EU citizens would be unable to take jobs in restaurants, hotels and food outlets, etc., without first obtaining a work authorisation document.

It is possible that the work permit scheme could be introduced on a sector-specific basis (providing for a specific quota of work permits to be made available to the hospitality sector on an annual basis). Alternatively, a regional scheme could be introduced. This could mean that London, a region that relies very heavily on EU migrants in the hospitality sector, could receive a greater quota of work permit allocations than other areas of the country. London’s mayor, Sadiq Khan, has already indicated to government that he would like London’s position as a powerhouse of the economy to be recognised in the new arrangements.

The British Hospitality Association has indicated that at least 100,000 work permits will be needed by employers per annum following Brexit. The government appears to be between a rock and hard place. If they fail to meet their net migration target, they will be deemed to have ignored public concerns around immigration numbers and population growth. Equally, if they fail to provide the requisite number of work permits for sectors in need, the government will be accused by industry of impairing a very significant economic driver.

Whatever the new regulatory regime will look like following Brexit, as Keith Edwards rightly predicts, it is inevitable that business will suffer from additional administrative burdens of immigration compliance. Looking ahead, once Brexit is finalised, business costs are predicted to continue growing. “We will see what kind of Brexit the U.K. ultimately gets, but my expectation is that we will continue to be able to hire EU citizens but with a more burdensome administrative component, which will ultimately mean an increase in the overall cost of hiring.” These financial and administrative burdens risk becoming a significant drain on employers who have until now operated within a very liberal and flexible labour market across the EU.

It seems inevitable that Article 50 will be invoked by the end of March 2017. Consequently, it is entirely possible that the new immigration regimes for EU workers could come into force as early as spring 2019. In the interim, the hospitality sector will be lobbying hard to minimise the negative impact on its constituents.

Ben Sheldrick - NewBen Sheldrick: Ben is a Managing Partner and Head of Business Immigration at Magrath LLP Solicitors, one of the UK’s leading commercial immigration practices. Ben is also Director of Magrath Global, Singapore. He is recognised as a leading UK immigration expert by the legal community and is noted by all of the major legal directories for his expertise in immigration law.

Ben is immigration counsel to many household-name multinational companies and he has extensive experience in strategic planning of global mobility programmes for large organisations. His team also advises individuals of all nationalities seeking entry to the UK as workers, investors, entrepreneurs, artists, performers or for family reunion.

Ben works with the International Bar Association (IBA), the Immigration Law Practitioner’s Association (ILPA), the American Immigration Lawyers Association (AILA), British American Business (BAB) and many other groups in disseminating information in respect of global immigration policy and legal developments.

Clara Stilwell_AETHOS Consulting Group_New York_web

A True Story to Share on Servant Leadership and Talent Development

Over the holidays, I sat down with Andre Zotoff, Vice President & General Manager of the iconic Hotel Del Coronado resort in southern California. The conversation turned to talent – how to cultivate and retain it – and Andre had an amazing story that deserves to be shared.

There is a server in the resort’s high-end restaurant who is a good performer, but not great. In other words, the server goes through the necessary motions to get the job done. One day, the server was simply “off” in his performance and made a mistake with an order. Instead of apologizing and offering to fix it, the server brushed it off and basically dismissed the guest’s dissatisfaction. Later that day, Andre received a complaint from the guest, stating they had never experienced such poor service in the 20+ years they had been coming to the resort. Keep in mind that the guest’s perception was that the resort was an incredible, magical place where three generations of her family have stayed and enjoyed. After the service at lunch, she regrettably made the decision never to return and to hold future family gatherings elsewhere. Think about it, 20 years of brand equity and loyalty with one guest destroyed by a single, negative moment.

As you can imagine, this is not what Andre wanted to hear. He called the server to his office and read the note and explained the situation. The server, still standing, shifted his weight from foot to foot and said, “Well, are you going to write me up or fire me?” To his surprise, Andre responded, “Neither. Please have a seat and, together, let’s figure out how to fix this.” They pulled out a pen and paper and together wrote a note to the guest explaining how the server was having an “off” day and that there was no excuse for his actions and attitude. It was an honest, sincere letter, which they left for the guest that evening.

The next day, and completely unplanned, the server saw the guest in the hotel lobby. For whatever reason, the server, on his own initiative, walked over to the guest and personally apologized. They continued to speak and tears began to fall from the server’s face. He felt horrible for having such a negative effect on the guest’s experience and the organization and brand that he was trusted to represent. Indeed, this resort enjoys a superb reputation in the market, earning to date 3.5/5 stars on Yelp, 4.5/5 stars on TripAdvisor and great employee reviews on Needless to say, the server and the guest connected, shared a few more stories, and the guest was booking her next stay before she left the resort.

To me, there are at least a few morals to the story. First, even the best brands sometimes fall short on brand promises, but service recovery is almost always possible in an organization with a service-driven culture. Second, some team members can be saved and even nurtured to be excellent brand ambassadors. Third, the best development tends to happen when team members are coached or mentored by true servant leaders, not mere managers.

AETHOS partners Keith Kefgen and Dr. Jim Houran recently talked about these issues in their book, The Loneliness of Leadership. If leaders are invested in the success of others, not merely themselves, then the workplace changes for the better in all sorts of ways. For example, employees often “pay it forward,” that is, they will care and have passion for the business and the guests’ experience when they feel that caring and dedication themselves from leaders. As managers, it is easy to say we care or we understand our employees, but a simple action of sitting someone down to understand why something went wrong goes much further than simply solving a problem on your own.

Andre Zotoff’s story had a great outcome, but of course not all such situations end well. Every team member may not be a “hospitality superstar.” However, proactively mentoring others and being actively engaged in their success is where leaders can load the proverbial dice in building and retaining superstars. It’s easy to believe in one’s organization and the direction of the company, but to truly engage with your employees, you need to take actions that demonstrate your belief in them. A simple yet powerful message from this iconic California resort should be shared – we care about our people who take care of our guests.

Clara Stilwell_AETHOS Consulting Group_New York_web

Pizza Rossa CEO Faces “Disruptors” and Social Media in 2017

A month has passed since my initial conversation with Pizza Rossa founder and CEO Corrado Accardi. Since then, we have continued our exchange about the fast casual dining industry. Because I was keen to see him in action, Corrado and I met at his restaurant in the City of London and started going through our agenda items, which included, this time around, third-party delivery companies as well as marketing and social media. Naturally, we also had some time to share a couple of slices of his delicious, newly developed 100% organic pizza. However, as an important and large, last-minute order to cater a co-working space came in, Corrado decided to deliver it himself, and so we finished our conversation in a London black cab. Try to imagine 20 to 25 18-inchcartons of square pizzas stacked up in the back of a car, windows steaming from the heat of the freshly prepared goods and two guys talking shop whilst trying to direct the cab driver through the maze of London’s East End… That’s what I call being a true hands-on entrepreneur!

Talking About Industry Disruptors
At a recent industry briefing, Peter Backman, Managing Director at Horizons, asked delegates to think about whether the industry considers third-party delivery companies its partners in crime or its competitors. What is your view on this? In my opinion, third-party delivery companies have allowed restaurants to gain access to a much larger target audience – increasing potential billings by capitalising on a restaurant’s (kitchen-)capacity without the requirement of increased square footage to accommodate these additional customers. In theory, restauranteurs are thus able to report higher revenues whilst incurring only marginally increased costs, resulting in higher profit margins. Additionally, it is important to keep in mind that by using such third parties, restaurants themselves do not have to invest the capital needed to setup their own delivery service – we actually tried this in the past but the monthly costs to hire a van, to employ drivers and to pay the unavoidable parking fines (and the congestion charges in London) were just crushing us. I therefore consider the Deliveroos, Amazon Restaurants and UberEats of this world as our partners.

Corrado, I understand your point of view, but we are in the back of a black cab delivering pizzas to one of your customers. You therefore seem to be selective in your use of the delivery companies and industry disruptors. Technology has opened up the ‘home market’ for us, the restauranteurs. So, Pizza Rossa is happy to do business with the delivery companies when it comes to gaining access to those customers – including, for smaller orders, which would otherwise require expensive logistics. As long as our business makes money from the customer after deducting our own costs and after paying the commission to the delivery firm, I welcome this incremental revenue. However, I obviously prefer that the larger corporate accounts within a relatively small radius around our premises not go through those third-party intermediaries. If that were the case, then our business would be leaving money on the table. We therefore are taking good care of our existing customers and paying special attention to potential clients in our neighbourhood. So far, this has paid off, because we are receiving most of our larger orders (from 80 to 2,000 people) direct. I might, however, also add that some companies have expressed concerns about ‘big data’ and who ‘owns’ the customers – for us, this is not (just yet) a big issue. Yet, I can see how this might be a concern for the ‘bigger fish’ out there – the larger companies that have a very strong high-street presence, well established brands and a loyal customer following. These firms have already invested a lot of resources into ‘securing’ and getting to know their customers. So, from their perspective, any firm that is trying to ‘interfere’ with their customers and might suddenly be regarded as a ‘representative’ or brand extension of the restaurant brand could be regarded as a threat.

Talking About Social Media
Mustafa Aslandag, founder and CEO of What’s Beef, made the bold statement, “Brands don’t belong to us; we own them together with our customers.” He thus cautioned everyone not to forget that we are in the people business, and if we don’t listen to our (internal and external) customers, it is them who can very easily tarnish our brand and bring down our business. What are your views on that? Consumer behaviour has definitely changed. You must educate your customers about who you are and what you stand for. And if you don’t manage to get the message right, it is easy for the business to suffer from that. For our business, our brand is a promise of Italian quality, and we have noticed that word-of-mouth, especially driven by the Italian community working in the City, is incredibly valuable for us. Consumers talking to other potential consumers are generating a lot of ‘buzz’ on our behalf. From that point of view, it is really them who are your ‘brand ambassadors.’ No matter what your business’ marketing campaign tries to communicate to the consumers, he consumers talk amongst themselves, and they will make their own judgement call as to whether they like your brand and if they would want to recommend it to their friends and family. So, yes, we as business owners may not be in full control of our brands, but we are in control of the promises we make. If customers are talking positively about you, it is worth a lot more than traditional marketing or even social media.

Corrado, what is your strategy, then, relating to social media, and how does it support your business plan going forward? We have just recently hired a social media consultancy firm because we decided it was the right time to restart investing in our social media presence – I will let you know how it goes! Initially, we were planning to have this expertise in-house through my business partner Luca Magnani,who has a marketing background. However, he could not dedicate sufficient time to this, so we decided to let the professionals handle it. The idea is for social media to be fully integrated into our business plan since our reach is starting to extend beyond the small radius around our venue. It will focus on engagement, lead generation and brand building. At the same time, we are planning to move deeper into the organic food sector and have invested heavily into developing the first 100% organic margherita pizza in London, for which it took us more than four months to source the right ingredients from Italian-certified suppliers. Hopefully, our already loyal customers are helping to spread the word! Lastly, we want to make sure that customers in general understand what we are all about – and going forward, this might slightly change. Pizza Rossa 2.0 will not only be a consumer brand but also a firm that moves into the catering business and concessions inside office buildings and public spaces. A push into supermarkets might be in the cards in the mid- to long-term future. It may sound a very long shot, but I believe that the versatility of our products will allow us, further down the line, to develop a quality offering, even from automatic self-service machines. Although, the market viability of this is to be proven: call it a gut feeling! Follow us on the various social platforms to stay tuned!

To contact Corrado Accardi, please connect with him at [email protected]

Clara Stilwell_AETHOS Consulting Group_New York_web

Nominee for “2016 Hospitality Leader of the Year”

The past year was full of compelling events and personalities within the hospitality industry, and looking back, many leaders stand out as strong contenders for the title of “Leader of the Year.” To our way of thinking, anyone receiving this designation must exhibit true “servant leadership” by aligning people practices to business practices, and in so doing, bring about tremendous quantifiable results and return on investment (ROI) for all shareholders.

For example, arguably the most obvious and easily defendable choice is Arne Sorenson at Marriott. He pulled off the biggest deal in the history of the hotel business, has been fighting for LGTB rights and personally intervened when the daughter of AETHOS CEO Keith Kefgen was having difficulty with her hotel reservation at the Cancun Marriott. Now that’s service orientation at every level – from individual customers to society at large – and Marriott is certainly to be envied for this and many other business reasons.

That said, there’s another candidate who also unquestionably deserves the title… Sebastien Bazin at Accor. He’s taken what was a fairly unexciting, France-centric and principally budget-focused hotel group and turned it into an exciting industry disruptor. He has demonstrated leadership that is bold, embraces innovation, is inclusive and inspires. Bazin’s highlights include:

  • Moving into AirBnB’s home rental space with the acquisition of Onefinestay;
  • Spinning off from ownership arm Hotelinvest into a separate subsidiary;
  • Moving into lifestyle space with 25Hours partnership and rolling out the Mama Shelter brand;
  • Acquiring premium concierge/loyalty player John Paul;
  • Strengthening luxury offerings with the acquisition of Fairmont/Raffles;
  • Creating new “social” brand Jo & Joe;
  • Opening Accor’s own booking platform to independent hotels.

His leadership has made Accor a company people now want to work for and one that is more global in outlook. If that is not enough, Bazin is similar to Arne Sorenson in that he cares about results as well as how those results are achieved. Core values, mission and vision define individual and team actions. Case in point, the day before every board meeting Bazin apparently meets with a group of younger, up-and-comer/millennial employees to discuss the board agenda and to gain their perspective and input. He has the confidence to welcome opposing views that challenge his assumptions and round out his own thinking; so, in the end, decisions and actions are based as much as possible on measured, balanced and forward-thinking evaluations.

Culture + Innovation + Refreshed Branding + Talent Focus = Sebastien Bazin, our nominee for “2016 Hospitality Leader of the Year.”

Clara Stilwell_AETHOS Consulting Group_New York_web

Corporate Governance in a Trump Presidency

Access the article as published on Hotel Interactive here or continue reading:

Like it or not, corporate governance is about to change in a big way. President-elect Donald Trump has already been talking tough about “dismantling” the Dodd-Frank Act. Many of the Dodd-Frank policies were put in place to curb banks from causing another financial crisis, but others like “Say on Pay” make little sense. While the U.S. Congress and Trump battle it out in 2017, there are a number of trends and actions in corporate governance that public boards should be thinking about in the New Year:

  • Succession plan. One of the primary responsibilities of a board is to ensure that a thoughtful and comprehensive succession plan is in place. According to a recent survey by Robert Half, nearly one-third of respondents did not have a formal plan. Every reason I have heard for not having one is simply an excuse. Best practice companies do this routinely throughout their organization. Leadership, “Stop the nonsense and start doing your job.”
  • Board diversity. We live in a diverse world and boards should reflect that diversity of thought, gender, color and creed. Having completed several board searches recently, I have seen plenty of highly qualified, diverse candidates, albeit they might be first-timers. Don’t use that as an excuse for keeping the status quo. First-time board members can be some of the most engaged and active members.
  • Influence of ISS. Institutional Shareholder Services Inc. (ISS) has become too big, influential and political. Most investors think ISS is a non-profit — not so. Their own “conflicts of interest” have gotten so significant, I believe they have lost their objectivity. Their original mission might have been noble, but that is in the past.
  • Board refreshment. Boards should be thinking about cycling old members off their boards and recruiting new talent. Like any other leadership position, directors can get stale. Term limits might make sense in this regard.
  • Data security. Boards are increasingly becoming involved in data and cyber security. Today, many Fortune 500 companies have a “cyber committee” on the board. Data breaches at Amazon, Yahoo and Verizon are costing millions of dollars and untold havoc on internet commerce. I believe it will start costing executives and directors their jobs.
  • Shareholder activism. This is one of the most influential trends in board governance. Proxy access proposals are beginning to receive shareholder approval. More importantly, activist investors are using this as a strategy for gaining board seats, and in some cases, control of companies. Understanding and dealing with activist investors is a reality of board responsibility. Doing right by all shareholders, and not just for a few vocal or hostile investors, will be crucial.
  • Innovation/R&D. Regardless of the industry, innovation or research and development (R&D) must be on the minds of board members. Encouraging management to invest time and money into future technologies, innovations and new ways of thinking are now the board’s new mandate. Forget what Senator Elizabeth Warren and others are demanding; this should be a standard part of long-term business planning.
  • Transparency. A rule of thumb for board directors: If it is not a trade secret, let shareholders in on it. Transparency is the bedrock of any good relationship. After all, shareholders are owners and deserve an open door policy.
  • Talent is king. Don’t forget that talent drives the free market system. Like all other supply and demand issues, you must pay a premium for scarce resources, and talent is one of them. If you want top 10% talent, you have to pay for it. Having governments dictate what is “appropriate” when it comes to executive pay is silliness.
  • Say on Pay. This is a goner in the Trump presidency. It is a massive waste of time and resources and is based on optics and guilt. A thoughtful and thorough approach to executive pay is the answer, not a “non-binding” vote that has little impact on reality.
  • Performance reviews. Like management, board directors should go through a performance review process. These reviews should be available to shareholders upon request. More transparency in director performance would go a long way to shutting up activists with an axe to grind.
  • Trust. In the end, every good relationship grows and prospers with trust. Board directors need to keep this in mind during their stewardship as a director. Make it a point to develop trust with the constituencies that govern the business. Directors may have disagreements but trust and respect should never be breached.
Clara Stilwell_AETHOS Consulting Group_New York_web

Reflecting On The Year

This time of year, I find myself reflecting upon the past 12 months, what I’ve accomplished, what I could’ve done differently, and what I’m planning on doing in the new year. Along with reflection comes gratefulness, and this year I am extremely grateful for my family and young son. As I thought back over the year, and as my brain began to mix business and personal events, it dawned on me, “There are a lot of parallels between my son and my work.” I’m sure there are many more than those below, and even if you don’t have children, I think you will find some of these skills and habits interesting.

Communicate – Even if your Mandarin isn’t perfect, or you think someone knows what you’re thinking (or should know), make an effort. The other party may not be thinking in-line with you and/or they will be grateful for the effort. At home, it’s amazing how many of my son’s words and sentences I actually understand. He may not be enunciating with the skills of a news anchor, but he’s making a concerted effort and I can pull the words from the sounds and context. When I travel, I make a point to try and learn a new phrase or learn how to greet people in their native tongue. I may not say it properly, but the effort goes a long way. I’ve also learned that I don’t stand a chance with Mandarin, so I always have the concierge write down directions and the hotel address. That way, even when I’m lost, I can get home.

Fall – It’s going to happen. It’s about how quickly you get up and brush yourself off. In today’s fast-paced world we cannot succeed 100% of the time. Just make sure you learn from your choices and it’ll make you more successful down the road. This is an hourly occurrence around the house. He’s always trying to move too fast or trying to climb something he’s never climbed before. He is constantly growing and strengthening his mind and body. I once interviewed a gentleman for a top Sales role with a hotel company. He said, “Matt, I’d rather make 100 decisions in a week and be right 80% of the time, than make 20 decisions a week and be right 95% of the time.” His point was that we work in a fast-paced world and some decisions need to be made with less-than-optimal data. Spend the time on the big decisions, and move the smaller ones off your desk or delegate them to someone else. You can afford to correct small mistakes, but the big ones will stay with you for a long time.

Observe – We live in an amazing world, surrounded by unique and interesting people and things. There is nothing that stops me in my tracks quicker than my son saying, “Whoa!”. Right now, it’s the airplanes and helicopters that amaze him, and it’s great to stop what we’re doing and watch them pass overhead. Look around the next time you’re on the train or (gasp) at a stop light. Everyone is on their phones. If it’s not email, it’s sports scores. If not sports, it’s social media. If aliens landed tomorrow, I’m sure they’d believe we are controlled by our phones.

Explore… literally and figuratively – Not all of us are interested in the great outdoors. “Exploring” could be traveling to a new place, taking a different route to work, or even stimulating your mind with a new book. Our latest exploration involves pill bugs, or what we out on the West Coast call roly polies. We cannot find and touch enough of them at the park. In life, I’ve started taking different streets when I take my dog for a walk. It never ceases to amaze me what new house is being built or what was there last year is now changed this year.

Read – Knowledge is the key for development, at any age. If you don’t like to read, buy audio books. Earphones and a charged phone will get you through the worse rush-hour traffic or a long commute. With the holidays, most of our bedtime books involve Santa and his reindeer, but we also have a steady stream of colors, shapes and animal books. Every day, our son seems to absorb more information from these books.. This upcoming year I’ve made a pact with myself to read one outside-of-the-box book a quarter. It could be anything from business to travel to self-improvement. My goal is to explore more internally.

Share – Similar to communications, we need to be conscious of those around us and how our style and interactions impact them. It’s important not to just share the coffee and Friday donuts, but also to collaborate with thoughts and ideas to better ourselves, both personally and professionally. We constantly work on this at home! Right now, we’re working on “ours” instead of “mine”. The progress is slow but steady. In business, I have a goal to set up quarterly meetings with a few key relationships next year. The goal will be to collaborate and share my thoughts and direction with the hopes of getting their feedback and thoughts. We’re not in this world alone, so we might as well ask and get the advice from those we trust.

Laugh – We can never take ourselves too seriously. Isn’t this the truth!

Clara Stilwell_AETHOS Consulting Group_New York_web

Communication – Key To Avoiding The HR Domino Effect

At the beginning of the year, AETHOS conducted an industry-wide survey, intending to shed light on the alignment between the HR function and senior leadership (click here to review the findings). Sixty-eight (68) senior corporate HR professionals, working predominantly in the hotel and restaurant industry in Europe, Asia and North America, participated. Sharing their views on performance-level expectations set by their respective company’s senior leadership teams, they rated the adequateness of resources and support provided. The survey concluded that there was a substantial misalignment between departmental success metrics and allocated resources required to achieve such metrics. The findings indicated that poor support in any one specific HR function could potentially start a negative ‘domino effect,’ threatening the HR department’s strategic value-add to any organization.

To understand how to potentially avoid this dreaded ‘domino effect,’ and to obtain a more balanced picture, AETHOS invited senior leadership teams to share their own views on this subject. A total of 88 executives responded (88.6% men, 11.4% women, working with major hotel [87.5%], restaurant [6.8%], casino-gaming [3.4%], and travel-tourism companies [2.4%]) from the Americas (29.9%), EMEA (51.7%) and Asia-Pacific (18.4%). Participants were asked the same questions as the surveyed HR executives and they provided candid feedback on alignment, resource allocation and performance expectations. Here are the observations:

Talking ‘priorities’ and adequateness of ‘resources’
Company leadership agrees with the findings of the previous study in that administrative aspects of the job should not take up the majority of the HR agenda. In fact, on average, senior executives believe that only a third (32%) of HR’s time should be spent handling administrative aspects, fixing problems and/or maintaining the status quo. Strategic aspects, on the other hand, such as succession planning, proactive and solution-orientated thinking and ‘innovation’, should take up, on average, approximately 49% of HR’s time.

However, opinions are divided when it comes to how well HR is resourced to deliver on its targets. For example, leadership believes staffing and funding are much less of an issue than they actually are:

  • In terms of staffing, 80.9% of leadership believes HR is appropriately staffed, a stark contrast to what HR executives felt (only 70.9% of HR executives agreed).
  • In terms of funding, 82.5% of leadership believed HR has enough monetary resources (only 72.7% of HR executives agreed).

In contrast, leadership is worried about HR not receiving enough peer support or that unrealistic deadlines are pressuring HR when, in fact, HR is not too concerned about those aspects:

  • In terms of peer support, 82.5% of leadership thought that HR is ‘backed-up’ by their counterparts in other departments (versus 89.1% of HR executives).
  • In terms of time pressure, 71.4% of leadership believed that HR has sufficient time to achieve their key performance indicators (KPIs) (versus 98.2% of HR executives).

Identifying the disconnects
The leadership survey reveals that senior management is not aware of the true pressure points HR is facing in its daily struggle to achieve set targets. The above-mentioned contrasting views on the adequateness of resources are just one example. Analysing the results of both the HR and the leadership questionnaires exposes further misalignment between senior management and HR.

For example, the earlier HR survey revealed that leadership seemingly sets goals that cannot be fulfilled given HR’s lack of resources. Consequently, the daily realities of the HR department mean that other tasks require more urgent attention (causing the ‘domino effect’). Yet, juxtaposing the responses from senior management and HR professionals paints an even more complex picture – ultimately telling us that one hand might not necessarily know what the other hand is doing. The table below highlights those contrasting views and opinions. It shows that there is a clear disconnect between what HR executives think they are expected to do and what they are actually capable of doing with the resources available. It also indicates that there is misalignment regarding what HR executives think they are expected to do and what leadership actually asks HR executives to do. Lastly, it highlights that there is a discrepancy between what HR executives actually manage to do and what leadership thinks HR manages to get done.

Communication Key To Avoiding The HR Domino Effect_MIELKE, FSADNI, HAZELTON

Recognising the true culprit: Communication, or lack thereof
The HR survey hinted at the fact that ‘communication’ might be at the heart of the problem. The leadership survey now seems to have confirmed this, and there has been no better way to corroborate this than by asking a set of straightforward questions:

  • ‘Is HR well equipped and resourced to achieve its KPIs?’ 53.9% of senior management believes (despite stating that it is aware of the lack of resources) that HR does not have to ‘fight’ internal battles to secure necessary resources, but 67% of HR executives actually feel that they do.
  • ‘Is the HR function vital to your firm’s success?’ 98.7% of leadership agrees or strongly agrees that the HR department indeed plays a key role in ensuring success; yet, HR executives thought this number to be lower (93%).
  • ‘Is HR’s voice being heard at the board table?’ 87.7% of senior management agrees or strongly agrees when asked if they sufficiently hear about HR’s opinions and views on business matters. Remarkably, when HR executives were asked, this number was significantly higher (94%).

The findings are telling. They indicate that leadership actually would be happy to provide more resources but that HR is not sufficiently speaking up and making its case (or perhaps, leadership is just not hearing HR’s cry for help). The results also pinpoint an age-old problem: leadership needs to make sure to not only commit to and communicate its support of the HR function but also to act upon it. After all, actions speak louder than words. The findings are also telling us that HR could do a better job in communicating and expressing its own thoughts and concerns. Leadership is certainly open to hearing more from HR professionals and valuing its opinion, but it also believes that HR needs to be more point blank in articulating its needs.

The way forward
The greatest return on investment lies in bridging the gap between performance expectations and the daily realities of the job. The very best way to ensure this is happening is by aligning leadership and the HR department. The plan of attack? Back to the basics. Candid and open communication is the best way forward. If leadership is truly welcoming HR to have a seat at the board table, HR executives must step up and secure their place. Leadership must proactively encourage HR to speak up and seek input, and HR must clearly communicate what is needed to be successful (‘if you don’t ask, you don’t get’).

Clara Stilwell_AETHOS Consulting Group_New York_web

AETHOS Talks Talent – The Human Factor

AETHOS frequently advises clients on the considerable nuances involved in finding and developing talent. Recently, much has been published about today’s sourcing and hiring processes, which seem to have become dramatically “technologized” for efficiency. However, speedy and transactional processes do not automatically equal quality outcomes. Until AI (artificial intelligence) can accurately and consistently mimic or perfect what human interaction can discern, technology can only assist in the match-making. The ultimate decision takes a bit more finesse. Let’s revisit the basic challenges hiring managers continually face, and then consider our thoughts on how to best tackle each.

Challenge 1: When looking to fill a specific role, how can you ensure a candidate is the right fit for your organization?

“The recipe for fit is simple in principle but tough for pressured hiring managers to put into practice – 50% technical skills and 50% cultural compatibility.” An organization must fully understand the context of the specific role and what will drive the role’s success. Although they may have an idea of who the perfect candidate is, the culture of the organization or the leadership style of the senior report may necessitate a different type of candidate. For example, the job description for a VP of Sales and Marketing for a small hotel management company with a new brand may describe an individual who can work in an autonomous environment, make quick decisions and not require hand-holding. The CEO or COO may think that s/he wants that type of individual but, in reality, s/he is more of a micromanager and wants an individual who will be able to balance this work style.

Taking the time to understand all the positions with which the role will interact up and down the organizational chart, what types of people are holding those existing positions, what were the successes and failures of the predecessor, and what measures will define the success of the role is paramount for finding the right “fit.”

It is best to be as prepared as possible—examine all aspects of the role so that you are targeting the appropriate talent pool. Regardless of the role, it is important to understand 1) the culture of your organization, 2) the leadership style of the senior reports, 3) the strength and weaknesses of the bench, 4) the technical requirements of the role and 5) the success measures for the role.

Challenge 2: How much thought should go into a candidate’s potential rather than existing skills?

“The best performing organizations always hire for tomorrow and not just today.” We advise our clients to consider potential, in addition to the present skill set; however, it is a trait that should be assessed carefully. An example of this would be in the case of hiring a VP of Operations for a brand company on a strong growth path. There may be excellent, however potentially pricey, candidates who have done this exact role for other companies. They may be able to jump in and be effective immediately. They may also be less nimble and flexible to adapt to the culture of the new organization if they are coming from a very structured background. Talent could also be approached from the regional or cluster general management bucket – plucking candidates from this pool could be quite rewarding. Finding someone who demonstrates strong potential with a balance of the right competencies – knowledge of how to run multiple properties, exposure to standard operating procedures, nimble and flexible, motivational yet hands-on, tactical yet strategic – can produce a candidate who can truly make their mark and take the organization to the next level.

Hiring for potential can happen at all levels of regional management and the C-Suite. Can a VP of Asset Management move into a development role or an operations role? Can someone with no hospitality experience step into a hospitality role? This happens quite a bit now, particularly in branding and digital marketing positions. We also see this at the CEO level – a great number of CEOs in our industry are from other industries – never worked a day in a hotel. The Boards are clearly hiring them based on their functional skill – ability to trail blaze, manage disruption, and move the organization in a different direction.

Challenge 3: Once a new employee is in place, how can you help that person develop her career and contribute in a meaningful way?

“Communicating clear expectations for the role and encouraging the new hire to think and act like a business owner is a permission slip for high performance.” We encourage companies to take very seriously the onboarding and professional development of their new employees. Often new hires leave due to a lack of alignment from the induction phase, resulting in a huge cost to the employer. It is important that communication from the get-go is clear – that the job description is as finely tuned as necessary, the performance metrics are agreed upon, the appropriate tools and authority are provided, and a schedule for performance reviews is created. On an on-going basis, particularly in that first year, regular meetings on performance development should be held. This can be accompanied with standardized testing to ensure appropriate competencies and action plans are discussed. Moreover, employee engagement or opinion surveys are an underutilized tool to understand spoken and unspoken cultural factors of an organization that affect both compatibility with candidates and the needs of the onboarding process.

Challenge 4: How do you build and keep a team that drives innovation?

“Actively building a team with both high curiosity and intellectual diversity, and allowing them the fun and freedom to fail, will drive both innovation and engagement.” The theme of “innovation” is one that is becoming a focus in our industry. With 115 brands offered by the top ten hospitality chains, how does the hotel industry differentiate one brand from the other? Is the brand unique in the physical structure, design, technology, clever marketing, bespoke food and beverage options, unique amenities or service? Wherever you chose to differentiate, the ideas start with your people.

Creating innovation within your organization requires humility and self-awareness at the leadership level. Whether it is at the C-Suite level or at the property level, how do you balance and incorporate for the skills that you or executive team may not have? If everyone is a creative visionary and no one has a financial pragmatic side, the results may not be so kind.

To encourage innovation, you must create an environment that supports creative thinking – allow team members to think out of the box, have fun, test ideas – without detrimental recourse. Performance metrics must be aligned, as well, to continue to have engagement from your team. Give them the wiggle room and ability to flex their minds, and reward them accordingly.

When hiring new team members, you must assess for curiosity and intellectual diversity. You can also hire based on previous creative accomplishments – for example, a VP Food and Beverage who has a track record of developing interesting culinary concepts. However, by asking the right questions through behavioral interviewing and standardized testing, you can uncover creative tendencies where it might not be plainly visible.

Challenge 5: What advice do you have for hoteliers looking to build an innovative team?

“Invest in the people and tools necessary to assess for talent and then properly resource that talent.” As discussed, it all starts at the top – with the ability to fully understand capability. The first step is to take a step back. Conduct a critical review of your bench as it relates to your strategic plan. What have your successes been? Where are your challenges? Where do you want to see innovation?

Look at the people you have in both the successful and unsuccessful parts of your organization. Get an in-depth understanding of their weaknesses, capabilities and potential. Then you can determine if the innovation capability is present, but potentially misaligned. Depending on where these gaps in innovative performance are, take very measured steps to get organizational alignment – restructure, train, redefine performance metrics and fill the gaps as necessary with new talent.

Let us know on Twitter if these perspectives resonate with you and what other approaches or solutions have worked successfully in your organization. What the industry needs more than ever is the sharing of best practices and the encouragement to hire talent that is intellectually curious and willing to change the status quo.

Clara Stilwell_AETHOS Consulting Group_New York_web

Putting Politics Aside: Hospitality Industry Remains Positive And Says “Let’s Start Implementing Plans for Dealing with Brexit”

AETHOS Consulting Group_GRIF London Briefing_Thomas MielkeThis week’s briefing jointly organised by Dentons, Horizons and the Global Restaurant Investment Forum/Bench Events proved to be as insightful as expected. It was a mix of market updates and intelligence, news on up-and-coming restaurant concepts as well as a talk on the do’s and dont’s when expanding internationally and an earnest discourse on Brexit.

Here are some of my personal highlights as it relates to the general market commentaries / industry sentiment:

  • The UK Is Open for Business: Kick-starting the event was John Quilter, co-founder of Cru Kafe. John’s very engaging presentation focused on one key message – the barriers to entry within the UK Food & Beverage sector are lower than before. Consequently, industry disruptors are shaking-up the sector. But what has lowered the barriers to entry? Firstly, social media: plugging into the social economy has provided a direct link to the consumer and allowed for companies to build a solid customer base at a relatively low cost (and get “free” marketing and branding in return!). Secondly, short-term leases: yes, although property and access to sites are still major problems across key gateway cities, street markets and savvy investors with large property portfolios have helped to alleviate some of the pain. Flexible terms are allowing for entrepreneurs to “try and test” the market. John did however also issue words of warning: you cannot ignore the delivery companies and you better “put on a show” and “entertain” your customers – because let’s not forget, authentic experience-led concepts trump it all!
  • The UK Consumer Wants Diversity: Nicola Knight, Director of Services at Horizons, gave an overview of the UK’s fastest growing small brands. It was interesting to see that out of the “Top 10”, five brands are targeting the casual dining sector: Cau (Steak), The Stable (Pizza), Wahaca (Mexican), Coast to Coast (American) and Chozen Noodle (Asian). It seemingly proves that we as consumers continue to value convenience and a down-to-earth environment. However, those five brands also represent an eclectic mix of food from all over the world – gone are the days where consumers were looking for a “plain vanilla” experience.
  • The UK Businesses Want to Grow Internationally – in the Right Way and with the Right Partners: Dentons’ very own Babette Marzheuser-Wood (Partner and Franchise specialist), Jamie Oliver’s Nick Shapira (Director International Strategy & Development) and Busaba Eathai’s Jason Myers (Chief Executive Officer) talked about the potential pitfalls of a too rapid expansion strategy. They highlighted that when looking to roll-out a restaurant portfolio through franchising, companies better focus on finding the right partners. Preferably those with an ability to provide local expertise, an established reputation and an ability to handle a speedy go-to-market strategy. Yet, Nick specifically cautioned not to focus too much on a set development schedule as it would focus everyone on the wrong elements (“grow fast” instead of “grow in the right way”). Jason and Babette agreed and warned not to be persuaded by “the guy writing a big fat cheque”. More important matters include aspects such as knowledge of and access to the supply chain in the respective markets as well as an ability to handle (and understand the significance of) recruitment. What it all boiled down to was achieving international growth through localisation and adaptation without compromising brand integrity and losing the human touch.

As it relates to the “Brexit”-discussion, it seems most parties agreed that presently there is a conflict between politics and economics. Nicola Knight, like many other, highlighted the current concerns of operators: managing staffing, food costs and property. But what were some of the other snippets from the Brexit-discussion picked-up on during the event?

  • Conservative estimates put the number of foreign workers within the hospitality industry at up to 30% – half of those are EU foreign workers, representing a staggering 700,000 people.
  • Given current unfavourable exchange rates and the relative weakness of the pound, imports are getting more expensive and are really starting to hurt the bottom line. For some foreign workers, the weakness of the pound has also made it financially less attractive to come to the UK for jobs in the hospitality sector.
  • Given the legal “untangling” needed from the EU, protecting one’s IP might become harder and more expensive and require additional filing.

So, should curbs on unskilled labour be implemented by the government, all signs indicate that the hospitality industry will have to face a future shortage of talent as well as potentially higher operating costs. What are some of the measures suggested by delegates to alleviate the pain? Babette Marzheuser suggested to consider the “Domino’s Pizza”-model where employees are encouraged to become franchisees and thus become owners of the business – making the profession more rewarding from a financial point of view and thus hopefully also attracting more “local” talent into the industry. Ufi Ibrahim, Chief Executive of the British Hospitality Association, has equally been quite outspoken about the key priorities to help cope with the current situation: (1) provide clarity to the legal status of all EU foreign workers currently in the UK (after all, they are right now the backbone of the industry), (2) developing and running a campaign targeted at changing the poor perception of the hospitality sector and attracting more “local” talent into the industry (highlighting that there is in fact a career in hospitality) and (c) securing a ten-year “grace period” for the campaign to take affect and for the industry to train, develop and build a new “local” workforce.

With all being said, people remain very positive about the industry and its growth potential – but it seems that there is still a long way to go to figure out the Brexit “situation”. Good for all of us then that the top two spots of Horizons’ fastest growing small brands are occupied by Kaspa’s and the Red Kiosk Company – coffee shops which will provide us with the energy/fuel to continue pushing ahead with our plans to grow, improve and future-proof the industry and sector.


Clara Stilwell_AETHOS Consulting Group_New York_web

Avoiding Tribe-dom Warfare When Merging Corporate Cultures

Successfully merging corporate cultures in today’s environment of consolidation takes more of a social science degree than a business degree. Fields like cultural anthology, social psychology, and sociology have long studied and described the way groups – and members within them – think and behave. Insights from traditional and well-validated social models are invaluable tools for navigating both the expected and unanticipated consequences of bringing new teams, cultures and brands together.

Fundamentally, teams and companies are complex and political “mini-societies” versus mere collections of employees working together. Knowing this is 80% of the battle. And all societies have rules and norms, although the nature of norms changes according to the type of society in question. Rules and norms follow from a collectively-understood tenet or “purpose or values” of the society, and, as such, they regulate societal behaviour. But all societies are not created equal, and nuances in social complexity introduces subtle and not so subtle challenges for leaders.

Merging Cultures is Merging “Tribe-doms”
Bands, tribes, chiefdoms and states… these are social typologies coined by anthropologist Elman Service. A band is usually a very small, often times nomadic, egalitarian group with little to no formal leadership. A collection of multiple bands is called a tribe, which function quite unlike old cowboy movies depicting warriors surrounding a chief. Most tribes have no formal leadership, as they, too, are egalitarian societies. A chiefdom is a political unit headed by a chief, who holds power over more than one community group. As the name chief implies, chiefdoms are not egalitarian but instead involve social rank, with the chief and his family holding power. Finally, international law and relations define a state (or country) as a geographic political entity possessing political sovereignty, i.e., the society is not subject to a higher political authority.

Companies are inherently fragmented or compartmentalized by function, although separate functions strive to operate as an integrated whole given shared or collective interests. In anthropological speak, companies are arguably akin to “chiefdoms,” with its various corporate, regional and asset level functions and teams functioning as highly vocal “tribes.” In practice, this means that merging company cultures is really an exercise in dealing with “tribe-doms,” and the trick is to avoid the predictable and dangerous tribe-dom warfare that ensues when different and competing societies, err companies, clash for status, power and survival.

The Best Defense is a Good Offense
Sun Tsu’s classic treatise, Art of War, noted that, “The supreme art of war is to subdue the enemy without fighting.” In other words, preparing for confrontation by knowing your opponent well can bring victory without a painful battle. In this context, your “opponent” is not the other company being acquired; rather it is the clear and present obstacles to integration. Loyalty, cooperation and rapport are strongest within a group than between groups. This is a critical truism of social interaction at any scale, as well as the opponent leaders must battle in corporate mergers. On a global scale, states often maintain diplomacy and accommodation among each other due to shared business or economic partnerships or interests, even though their value and belief systems may significantly contrast. Business is indeed a great peace-maker and -keeper. But corporate mergers must go beyond shared economic interests in order to be successful, since organizations need to integrate internal systems and cultures. This is drastically different and perhaps more complex and risk-prone than states working together.

Joint goal-setting and goal-realization are among the most effective strategies for building bonds between adversaries, or rival groups. With this mind, four steps grounded in organizational-psychological theory can help avoid the inevitable chaos and “tribe-dom” warfare that results from unprepared corporate mergers left unchecked. Cautious work must be done before, during and after a business and cultural merger:

  • Only square pegs in square holes: Mergers and acquisitions are substantially comprised when motivated purely by financial metrics. For example, companies will not align and perform effectively as a collective if they are metaphorically going different directions, at different speeds, using different modes of transportation and obeying different rules of the road. Instead, the smoothest mergers occur when tribe-doms have in advance of a merger a good deal of collectively-shared business and people practices. Therefore, leaders should look beyond P&Ls to proactively and comprehensively vet acquisition targets in terms of overlapping or complementary missions, visions and core values.
  • Remove the apprehension that ambiguity brings: Managing expectations alleviates much of the anxiety and uncertainty that is inherent to marked change. Groups splinter, factions erupt and people invent counterproductive stories and explanations in the absence of timely and credible information that speaks to the well-being and self-interests of a tribe-dom. Therefore, once a merger is planned, leaders must inform members of the tribe-doms of the purposes of the merger and any plans of action that follow from the intent. This includes articulating how the merger will build on collective values, strengthen or protect the survival of the tribe-dom, as well as how it benefits individual members of each tribe-dom.
  • Have tribe-dom members change perspective: Social science has long known that closer bonds form among individuals who share similarities based on their identity – such as the department (or tribe) in which they work, and the company (or chiefdom) that employs them. Therefore, diversity for its own sake complicates cultural mergers. Therefore, leaders need to know that research shows the secret to unlocking the positive effects of diversity is to promote perspective-taking. When diverse competing teams or functions take each other’s perspective, they performed more creatively and effectively than teams whose members were similar. Perspective-taking is critical when introducing previously rival tribe-doms together, since it helps to reduce individuals’ tendencies to think primarily in their own self-interests, and instead, to think about the well-being of the respective tribe-doms. The idea is to frame messaging consistently in terms of collaboration, exploration and expansion, versus messaging that is oppositional, competitive and argumentative.
  • Introduce a common “enemy”: Lastly, aspirational and motivational lingo and approaches are commonly espoused in business books, but the reality is that the most effective and quickest way to foment and sustain a collective and positive company (chiefdom) spirit among a group of self-interested tribes is by introducing a new, rival group or entity. Maybe it’s a specific competitor or a new market – leaders can be flexible and creative when choosing an enemy be it real or symbolic. But, fighting an enemy forces alignment and cooperation among previously disconnected tribe-doms to a common cause. This is the epitome of joint goal-setting and realization.

Ultimately, the chiefdoms that we call companies need servant leaders to successfully plan and execute corporate mergers. These are the chiefs who put self-interest aside to give members of each tribe-dom support, collective mission and a voice. Tactically it looks like the management of the economics underlying a P&L, but strategically it is about thinking and acting consistently and proactively as a cultural steward of a mini-society. What a tremendous responsibility that is.

Clara Stilwell_AETHOS Consulting Group_New York_web

Corporate Governance And M&A Activity in Hospitality: Boards, Shareholders And (Potential) Conflicts of Interest

Consequences of M&A activity in the hospitality industry are increasingly making headlines, fuelled by a greater complexity of owning- and operating structures and an ever larger number of international stakeholders… What are the best practices to protect oneself from unwanted consequences? Continue reading or click here to view the article as published in Hotels Magazine.

Earlier in the year, third party owners and franchisees raised their voices about the Starwood-Marriott USD $12.2 billion merger. They challenged the firms on the potential violation of their exclusivity agreements (prohibiting the brand-partner to own, manage, operate or franchise other hotels within a certain geographic parameter). M&A activity will not be phased by such temporary “set-backs” as evident by the continued consolidation that the industry is witnessing. Yet, there will always be parties that feel they “drew the short straw”… Merger challenge litigation is thus likely to increase – so what is the Board of Directors to do to protect their businesses and shareholder value?

The “Case Files”
In the recent past, the hospitality industry has witnessed very public shareholder disagreements concerning M&A activity involving global players in the sector – let’s look at some “case files”:

  • Morton’s Restaurant Group: In 2013, the firm’s ownership was looking to sell the business. Following the appropriate time and due diligence process, Morton’s ended up merging with a subsidiary of Landry’s Inc. Whilst most would consider the transaction to have been a successful one, generating solid returns for investors, some shareholders raised concerns and sued. It was claimed that one of the firm’s shareholders, Castle Harlan, exploited its controlling position and acted in self-interest – wanting to speed up the sales process to free up cash for another acquisition. The court, though, ruled no wrong-doing. Firstly, it challenged the statement that Castle Harlan (owning approx. 28% of the stock) was a controlling shareholder – the justification for this was based on the set-up and make-up of the company’s board. Whilst Castle Harlan held two board seats, there were also seven Independent Directors as well as the firm’s CEO governing Morton’s. Secondly, the court ruled that the board had in fact gone through the appropriate due diligence during the sales process by not only contacting all potential (and likely) investors, reaching out to well over 100 bidders, but also by using not one but two investment firms to test the market. The court also reminded the suing party of the fact that the transaction had actually benefitted all shareholders equally… Lastly, the court decided that a potential related party conflict of interest that could have arisen by the fact that the firm’s financial advisor was subsequently also providing the deal financing for the acquiring party was appropriately dealt with and extinguished in its root – the Morton’s Board required its financial advisory firm to recuse itself from further negotiations and to reduce its final fee so that the firm could hire a second expert to advise Morton’s on the transaction.

  • Accor: In 2016, Accor finalised its USD $2.9 billion acquisition of FRHI and is now amidst the process of integrating the firm into the existing infrastructure. One might say that this transaction went off without a glitch – yet, Accor is reportedly having to “fight” at another front. Jin Jiang, which currently holds approximately 16% in Accor, is reportedly courting fellow shareholders Colony Capital and Eurazeo to buy their stake in the business. As Jin Jiang already owns other (rival) hospitality businesses – including Louvre Hotels – Accor is said to be keen to try and avoid for Jin Jiang to increase its share. In a recent article by Hotel Analyst, it was reported that Accor is therefore eying HNA Group to try and diversity its shareholder base. However, will this really prove to be a prudent solution? Given Jin Jiang’s ownership stake in Accor, the Chinese firm is obviously keen to have a certain representation at board level. Surely, should a transaction with HNA come to fruition, HNA would also insist on gaining a seat at the board table. Problem is – HNA now owns Accor rival Carlson and also holds a major stake in Accor competitor NH Hotels… Is the Accor board therefore acting in the shareholders’ best interest wanting to protect itself from a potential takeover by Jin Jiang and/or from a potential conflict of interest (that would occur if Jin Jiang were to increase its stake in the business) by bringing on board a firm like HNA? Is it not fair to say that this would only create another potential conflict of interest as it would bring yet another shareholder into the firm which would be conflicted by owning and co-investing into rival companies?

  • NH Hotels: 2016 also saw a major “shake down” at Spanish NH Hotels. The firm has, up until recently, been spearheaded by Federico Gonzalez Tejera who – as most would agree – did a stellar job in turning around the business. Supported by its major shareholder HNA Group and the financial prowess of that firm, Tejera was able to invest into the brand and its physical assets. Throughout the past few years, he was able to increase profitability and improve the cost-base. Yet, he was ousted by NH shareholders – Reuters, amongst others, reported on the case. Apparently, a group of shareholders saw a potential conflict of interest for ownership representatives sitting on the board and who were appointed by China’s HNA Group – HNA is, as said, one of NH Hotels’ largest shareholder (approx. 30%) who also announced its plans to acquire Carlson Hotels in April of this year. Carlson, of course, owns brands that are in direct competition with NH Hotels. June 2016 saw the removal of four NH Hotels board members and subsequently the firm’s CEO (despite the fact that the board’ Independent Directors were all in favour of Tejera staying). In return, HNA responded and took action itself: It stated that it has always acted in NH’s best interest – unlike some of the other shareholders, including hedge fund Oceanwood. It states that such shareholders would have financial interests that are aligned with their own investment cycles and return requirements, not necessarily with those of NH. HNA went on to declare that it would not let itself being pushed to acquire the remaining stake in NH from those private equity firms / hedge funds and that the actions of such firms, resulting in drastic changes in the management and governance of NH Hotels, had destabilised the firm. It challenged the wider shareholder base that a firm like Oceanwood would only want to sell-off the firm’s trophy assets and cut the asset improvement plan for short-term gains and that Oceanwood’s representatives should recuse themselves when it came to refinancing discussions in order to avoid a potential conflict of interest (as Oceanwood holds unsecured convertible bonds and senior secured high yield notes). Lastly, it also pointed to the fact that even Jose Antonio Casto, Vice Chairman (and former Director at Hesperia), might have a potential conflict of interest as he is reportedly keen to give “his” Hesperia management contracts to a NH competitor.

Protective Actions by the Board of Directors
The world is an increasingly smaller place to conduct business in – hospitality organizations are (becoming) global players and their development and investment partners are continuing to geographically diversify their interests. It is therefore not surprising that there is a greater number of potential conflicts of interest to arise. Yet, the at times Hollywood-esque and very public “shareholder fights” certainly do no good to any party involved in a take-over or potential merger situation. It is the board’s responsibility to ensure a “smooth transition” from a corporate governance point of view – one should make sure to have those boxes checked. A reminder on sound corporate governance best practices and appropriate board structures can be found here whilst the below bullet points highlight some of the obvious but often forgotten facts to:

  • Avoid conflicts of interest. This means the company always come first – one should not interfere with the performance or interests of the business, one must take decision based purely on the best interests of the business and one must avoid personal interests or gains interfering with the business. That means that one must also not have an interest in a transaction that involves a competitor, customer or supplier and that one must not direct business elsewhere. There should thus be a solid “Code of Ethics” or comparable policies in place governing this (e.g competition or antitrust law, trading/insider information etc…). It is hereby important to remember that the appearance of a conflict of interest can be as damaging to the company as an actual breach of it. Early disclosure is thus key and highlights the importance of a firm’s General Counsel, Independent Director(s), Secretary and Committees.

  • Be in control of your message. Be Transparent. Once shareholders reach a certain ownership threshold, they are obliged to declare their intentions. This will help to avoid confusion or for any appearance of a conflict of interest to arise. Communicating loud and clearly one’s intent and strategy will provide a clear view of everyone’s respective role pre- and post- the transaction. IHG’s acquisition of Kimpton in 2015 is a positive example of this: CEO Richard Solomons made a clear statement of IHG’s intention to keep Kimpton as a separate entity and to maintain its autonomy, keeping its own CEO Mike DeFrino.

  • Avoid engaging in a “public fight” as those create uncertainty and might destabilise the firm and/or decrease shareholder value. Rumours about take-overs or mergers typically also impact a firm’s share price – for the better or worse. This is not to say that shareholders should stay quiet – on the contrary, they should not be afraid to ask tough questions and hold the board and management team accountable. Yet, if proper contractual due diligence and risk assessments are done, and if the individual strengths and weaknesses of each party involved are known, then there should be no need for “airing one’s dirty laundry in public”.

  • Proactively manage relationships as, if all goes well, you will still need to work together post-signature to integrate the different business units and corporate cultures. Yet, certain relationships are best kept at arms-length: For example, whilst it is good to engage in an open dialogue pre-merger in order to identify potential synergies one also needs to be careful in not disclosing too much information upfront or providing access to strategy if the negotiating partner has conflicting ownership interests with a competitor! Furthermore, post-merger, board interlocks (“you sit on my board and I sit on yours”) are to be avoided as they may “cloud” objectivity and negatively affect the efficiency of the board. Lastly, the Morton’s case highlights that relationships with external third parties will equally need to be managed in the right way.
Clara Stilwell_AETHOS Consulting Group_New York_web

Thomas Mielke comments on the Restaurant Conference, London

AETHOS Consulting Group Managing Director Thomas Mielke summarises the news, snippets and key takeaways from having attended this year’s Restaurant Conference in London, hosted by M&C Allegra Foodservice and featuring speakers including: Richard Hodgson, CEO/Pizza Express, Simon Blagden, CEO/Jamie Oliver Restaurant Group and Steve Richards, CEO/Casual Dining Group.

  • Talking consumer profiling based on frequency and spend: “Younger generations are the beating heart of the industry.”, said Simon Stenning, Executive Director/M&C Allegra Foodservice.
  • Talking about transaction volume and deal financing: “The bigger deals are back!” […] “Whilst crowd-funding certainly does plays an important part in supporting younger companies to build-up a platform to grow, the multiples offered are ludicrous.”, said Paul Hemming, Managing Director/AlixPartners.
  • Talking about development and future growth plans: “We need to get better at marketing ourselves.”, said Simon Blagden, Managing Director/Jamie Oliver Restaurants. He also stated that for a successful international expansion it remains crucial for the firm to ensure that its franchise-partners care as much about the business as they do. In the US, though, Jamie Oliver Restaurants will be company-owned – a risk worth taking. John Eckbert, Managing Director/Five Guys UK, said that “Spain, Germany and France are on our radar and represent attractive growth markets for us!”. Steve Richards, CEO/Casual Dining Group, focused on the transformation of the multi-brand company he spearheads. Steve is planning to double the size, talked about new grab and go concepts and new business models.
  • On growing award-winning F&B Concepts: You thought it is all about fine-dining? About casual dining? Or premiumisation and gastro-pubs? Think again – those were the trends from the 80s through to the mid ’00s. According to Jason Danciger, F&B Director/The Garden Centre Group, people should become creative. He has successfully developed F&B offerings in garden centres!
  • Talking about ways to stand out from the crowd: “It is all about property, people and execution.”, said Alex Scrimgeour and Harald Samuelsson, Joint Managing Directors/Côte Restaurants. “Tech, IT and data governs our operations and decisions.”, said David Abramovich, Founder/Grind. Richard Hodgson, CEO/Pizza Express, just hired a Head of Social Media.
  • Listening to the property panel discussion: “Landlords should be more open-minded and flexible.” […] “They should consider flexible rents with upside potential.”, said Steve Seager, Property Director/Côte Restaurants. “We are seen as the solution to many shops and retailers.”, added Kieran Pitcher, Property Director/Azzurri Group. On that same note, Rob Wickenden (Property Director/Vapiano) said that “the honeypot effect holds [still] true.”
  • Taking about the difficulty to break into the London market: “Preopening expenses for London are prohibitive [referring to rents to house staff] and are a real barrier to entry for some of us.”, said Scott Munro, Co-Founder/Red’s True Barbecue. He also stressed the added value the firm’s Board brings to the table (predominantly by asking the right questions) – however, whilst he listens, he does not always do what the Board recommends.
  • Talking about people and culture: “We have to do a better job as an industry at attracting and retaining talent and positioning this as a career option, not a transitionary job!”, said Richard Hodgson, CEO/Pizza Express. “Staff-up early in order to begin with the process to prep and prepare your people; communicate to them the brand message.”, said Graham Hall, Managing Director/Cau Restaurants. To ensure a true understanding of the corporate culture and what Brazilian cuisine is all about, Cabana is considering sending staff members on a culinary excursion course to Brazil said Jamie Barber, Co-Founder/Cabana. Mark Selby, Wahaca Co-Founder added to the conversation by stating that it is important to “give yourself the opportunity to impress your customers, ignore the P&L in the first year and instead focus on bringing everyone [front line employees and management staff] in line to ensure a smooth operation and rewarding dining experience.”
  • Talking about sustainable, long-term success: “The biggest challenge is to remain relevant” […] “You have to continuously fight brand fatigue!”, said Richard Hodgson, CEO/Pizza Express. He also talked about the firm’s (somewhat controversial) use of promotions to lure customers in – however, it works and Pizza Express has still one of the best margins in the industry. The plan now is to move into delivery and Richard sees growth in the chicken-market.
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    Three Steps for Using Leadership Assessments to Pinpoint Personal Strengths and Weaknesses

    “If you compare yourself with others, you may become vain and bitter; for always there will be greater and lesser persons than yourself.”
    Max Ehrmann (1927) from the classic prose poem, Desiderata

    The sobering truth is that personal and professional development hinges on the ability to be self-critical. Some might use softer language like “contemplative, introspective, and reflective,” but that undermines the rather raw and unforgiving nature of the task itself. Frankly put, when you’re not self-critical — when you do not honestly examine yourself — you’ll never be aware of performance blind-spots, much less improve your efficiency and effectiveness over time. Those two elements are the heart of competency.

    For leaders in hospitality or in any industry for that matter, performance feedback – if given at all – typically consists of summarized or edited comments in a traditional 360-degree appraisal. This can be a valuable approach to gain insight, but it’s incomplete as the perspectives of raters are limited and highly subjective. A standardized assessment is a best practice supplement for a critical reason – it provides objective feedback on your skills, attitudes, and knowledge areas compared to rigorous benchmarks of high performers.

    Drawing on a collective expertise in psychometrics, workplace psychology, and the hospitality industry, this article presents candid, insider information that walks you through three fundamental issues on how to use the right type of assessments to yield a personal SWOT analysis (strengths-weaknesses-opportunities-threats):

    First, Choose a Performance, Not Personality, Based Assessment

    For decades personality tests have been popular for employee screening and development, although personality traits have serious limitations when applied to workplace psychology. Research shows that personality tests are poor predictors of workplace performance, whereas measures of General Mental Ability (reasoning, planning, abstract thinking, comprehending complex ideas and learning quickly) and role-specific skills are stronger and more consistent predictors of performance. In fact, the popular O*net database of job classifications and corresponding requirements ( describes positions in terms of trainable and malleable skills and competencies rather than broad and rigid personality traits.

    Simply stated, personality tests do not provide sufficient measurements or insights to give you an accurate understanding of your current capabilities and future potential. Moreover, it is questionable whether most of them yield valid and legally-defensible information. Measuring “how” people prefer to express themselves in general circumstances is good information, but it is markedly inadequate. Relying on a personality test to guide your development is much like relying on a road map to guide your vacation choices – it is interesting but terribly incomplete information. As one reasonable critic of personality testing put it, “Without weather forecasts, resort reviews, activity guides and price data, a long-planned, restful excursion could end up at a wilderness boot camp.”


    A well-designed and validated skills assessment, on the other hand, is a specialized tool that reveals constructive and adverse nuances in your competencies, attitudes, and knowledge areas. A comprehensive assessment or mixture of assessments is strongly recommended that will gauge three critical performance areas: Execution skills (how effective you are setting and accomplishing tasks and goals), People skills (how effective you are in your interpersonal actions up and down the organizational chart), and Cognitive skills (creative strategic orientation balanced with analytical, critical thinking).

    Next, Ensure the Competency Assessment Gives Valid Measurements

    Different assessments may share similar psychological theories, but products vary greatly in their reliability and validity due to their methodological and mathematical approaches. There are two common approaches – self-referential versus inter-individual. Some of the and most popular and traditional assessments like the Myers-Briggs Type Indicator and the DISC assessment are actually the least sophisticated, because such instruments describe individuals only in a self-referential way, i.e., against themselves. Avoid these approaches, as the feedback from these assessments is limited to what the test-taker wants that measure to say. Normative instruments (or norm-referenced testing), by comparison, are inter-individual. This means they describe test-takers against a reference group. Normative assessments are crucial development tools.

    But meaningful “norms” are not enough to ensure reliability and validity of an assessment; instruments must also have a mathematical basis in modern test theory, such as Item Response Theory (IRT) or one of its variants like Rasch scaling. Wikipedia even offers interested readers clear overviews of these statistics, which are the gold standard foundations used in well-known assessments like the GRE, MCAT and LSAT. Unlike outdated methods many assessment vendors rely on, true scaling approaches generate proper normative instruments that take into account hidden response biases related to age, gender, cultural background and employment level of the test-taker. Without this level of validity, scores can be substantially distorted and misleading. Besides greater technical precision and the protection of meeting legal requirements against unwitting discrimination, modern testing theory also elicits richer information about test takers. Stated simply, high-quality feedback means unbiased, accurate, and detailed information on how your abilities compare to professionals within the global hospitality industry.

    Finally, Ask a Specialist to Help You Understand the Assessment Results in the Context of Your Professional Goals

    Would you trust an individual to make key business decisions based on a P&L statement if that person lacks the knowledge to interpret a P&L? Of course not. Likewise, trained professionals are indeed required to interpret statistical findings accurately and in a relatable way, but not all HR professionals, consultants, leadership coaches, assessment vendors, or social scientists have adequate training in statistics – much less tests and measurements, i.e., psychometrics. Furthermore, individuals repeatedly report that they find the most useful employee assessment reports to be ones that avoid psychological and statistical jargon and instead explain results in terms of applied contexts and business related goals.

    The psychometric quality of an assessment – its reliability and validity – may be excellent, but this does not guarantee that the feedback generated by that assessment is also high in quality. In the service-hospitality industry and beyond we frequently hear criticisms that the feedback from surveys and assessments is often too general or “cookie cutter” to be useful and actionable. That is a reasonable objection to some products. What makes matters worse is that illegitimate or useless feedback can appear specific, meaningful, and legitimate. This is explained by what social scientists call ”Barnum and Forer Effects.” Unfortunately, professionals sometimes do not realize that the assessment on which they depend for recruitment, employee training, and professional development suffers from these limitations.

    The Barnum Effect is the name given to a type of subjective validation in which a person finds personal meaning in statements that could actually apply to many people. Psychologist Paul Meehl is credited with coining the expression, which apparently is in deference to circus man P. T. Barnum’s reputation as a master psychological manipulator who often claimed that “we have something for everybody” and “there’s a sucker born every minute.” It is not difficult to see why assessments with illegitimate or useless feedback might be perceived as valid instruments. Specifically, if Barnum statements appear on a feedback report that a person believes has been specially prepared for him or her based on a realistic looking assessment, recipients often agree with such statements thereby giving validity to the assessment itself.

    Related to the Barnum effect is the Forer Effect. Psychologist Bertram R. Forer found that people tend to accept vague or overly general personality descriptions as uniquely applicable to them, without realizing that the same description could be applicable to nearly everyone. Thus, the Forer Effect refers to the tendency for people to rate sets of statements as highly accurate for them personally even though the statements could apply to many people. The difference between the Barnum and Forer Effects is that the former describes a vague statement, whereas the latter describes how people react psychologically to Barnum (or vague) statements.

    In his now classic 1940s study, Dr. Forer administered a “personality test” to his students, ignored their answers, and gave each student the same profile that was borrowed from a newsstand astrology column. He then asked these students to assess the accuracy of “their” profile on a scale from 0 to 5, with “5” meaning “excellent”, “4” meaning “good,” and so on. The class average evaluation was a striking 4.26! Forer’s classic experiment has been replicated hundreds of time with psychology students and the average is still around 4.2 out of 5, or 84% accurate.

    Type: Strong Perceiver/Deep Feeler

    Profile: You have a strong need for other people to like you and for them to admire you. You have a tendency to be critical of yourself. You have a great deal of unused capacity which you have not turned to your advantage. While you have some personality weaknesses, you are generally able to compensate for them. Disciplined and controlled on the outside, you tend to be worrisome and insecure inside. At times you have serious doubts as to whether you have made the right decision or done the right thing. You prefer a certain amount of change and variety and become dissatisfied when hemmed in by restrictions and limitations. You pride yourself as being an independent thinker and do not accept others’ opinions without satisfactory proof. You have found it unwise to be too frank in revealing yourself to others. At times you are extroverted, affable, sociable while at other times you are introverted, wary and reserved. Some of your aspirations tend to be pretty unrealistic. 

    Personnel managers are also known to be susceptible to Barnum and Forer effects, even though these professionals should recognize these effects by training. This explains why organizational assessments may be seen as highly accurate and contributing to a company’s bottom line when in reality that feedback might be illegitimate, useless, or even completely misleading.

    For all of these reasons, the use of assessments for personal and professional development should never be done in a vacuum. Rather, enlist the support of an expert who understands psychometrics, is familiar with the assessment you are using to gauge your competency set, can relate the results to your current role and future goals, and help you formulate an Action or Individual Development Plan (IDP). The most effective support for your development will come from an expert who can help you to maintain authenticity and behavioral integrity as you learn to integrate the good and the bad.

    The hospitality industry is a unique mixture of complexities, ambiguities, and pressures and market forces in constant flux. Therefore, executives often have difficulty matching their good intentions for self-development with the limited time available to them. With this in mind, building and capitalizing on personal strengths arguably offers the biggest ROI with the path of least resistance. For those individuals who are highly motivated and disciplined with time management; however, a great specialist can use the unique insights from a performance-based assessment to help guide a person beyond the poetic thought in the Desiderata prose. Given enough courage, humility, and dedication… individuals paired with seasoned specialists can indeed learn also to overcome ineffective habits, poorly developed skills, and outright shortcomings.


    Restaurant CEO Pay for Performance: Accountability is on the Rise

    The Restaurant Finance Monitor, a monthly publication providing readers with an in-depth analysis of the restaurant-financing marketplace, publishes David Mansbach’s 2014 Restaurant CEO Pay-for-Performance article. Click here to view the pdf or continue reading.

    When it comes to CEO pay for performance, an effective compensation program should be transparent in nature, hold an executive accountable and properly align with stakeholder interest and corporate strategy. I really don’t care about the size of the paycheck as long as he or she earns it.

    At first glance, when you look at my most recent analysis, you may question Patrick Doyle’s pay package of $9,548,617. However, when you dig deeper into his performance, and the value creation he provided for his shareholders, you will appreciate how he can justify every penny he received.

    This year’s CEO pay-for-performance analysis covers 37 public restaurant companies and quantifies results of a CEO relative to that of the total peer group. An AETHOS Value Index (AVI) of 100 means that performance was on par with their pay, an AVI higher than 100 suggests a CEO outperformed their paycheck, and an AVI lower than 100 translates to underperformance. Data points utilized in the value index formula include annual compensation, market complexity, stock appreciation and EBITDA growth. While the analysis below focuses on public companies, this model can be applied easily to private organizations.

    A value index above 100 indicates the CEO has been underpaid compared to his peers. In a review of almost all cases, this occurs when an incumbent provides superior results. Steve Hislop of Chuy’s achieved the highest AVI of 213.0 suggesting that he was underpaid by 113%. Hislop and the other CEOs in our study who achieved an index score greater than 100 should be recognized for their great work. On the contrary, a rating less than 100 suggests poor goal setting by the compensation committee and/or underperformance by the CEO.

    Click here to view the table of the Top10 Underpaid CEOs.

    For example, Sadar Biglari of Biglari Holdings received a index rating of 12.3%, suggesting he should have been paid approximately $2 million. Based on his performance relative to his peers, he was overpaid by $9,592,000. Biglari’s compensation included a $10 million bonus. His bonus is calculated on 25% of the company’s increase in book value above a 6% hurdle with a $10 million cap. The shareholders of this organization have every right to be concerned and should demand more accountability of the board and CEO moving forward.

    Click here to view the table of the Top10 Overpaid CEOs.

    As I mentioned earlier, the concept of monitoring pay for performance can be applied to private organizations. In the simplest form, you need two types of data to analyze results: performance metrics and compensation data. As long as it is consistent from company to company, performance metrics can be any objective measurement such as enterprise value, return on investment, same store sales or unit growth. Best practice companies are digging even deeper, incorporating metrics addressing real-time industry problems such as employee turnover, customer retention, menu pricing strategies and market share.

    In the past, it was easy for underperforming private company CEOs to hide behind not having to share data, but in case you haven’t noticed there has been a new sheriff in town: private equity. They are a sophisticated group of individuals and desire real-time information to ensure their portfolio companies are performing. I can assure you they are very willing to share necessary data to understand how their CEOs are performing and are holding these executives accountable for results.

    Clara Stilwell_AETHOS Consulting Group_New York_web

    The Importance of Relationships in Sales, August 2014

    Kevin Price, Host of the Price of Business on Business Talk 1110 AM KTEK (on Bloomberg’s home in Houston) interviews Keith Kefgen, Managing Director and CEO of AETHOS Consulting Group.

    “Relationships are the bedrock of any successful business”, says Keith Kefgen. He continues to say that “sales is about finding common ground” and stresses that networking is key to succeed in business.

    Read the full article here or watch the video.


    Three things to know before conducting your own surveys

    For many organizations, questionnaires in their various forms are effective and efficient tools for gauging internal and external performance – particularly with the current ease and access to data like never before thanks to new forums such as social media.

    It is understandable that organizations aim to save money on survey initiatives, but collecting employee and market data with poorly designed tools wastes money in the short- and long- terms. In the short-term, poor questionnaires are a waste of development time and money. In the long-term, organizations risk making incorrect and costly business decisions based on corrupted data from poorly designed questionnaires. It is unfortunate that many organizations create, conduct and analyse questionnaires on their own – without any guidance from specialists. This can be a costly business mistake.

    Readers here are being privileged to a rare insider conversation with one of the world’s most prominent experts in psychological testing, measurement and questionnaire research, who also happens to be an exclusive consultant to the AETHOS team. Meet Dr. Rense Lange, a pioneer and highly sought-after expert in applying modern testing and statistical methods to business analytics. In addition to serving on the faculty of the University of Illinois, the Southern Illinois University School of Medicine, and Central Michigan University, Dr. Lange worked for 15 plus years as the lead psychometrician at the Illinois State Board of Education. Now he heads the Psychometrics and Statistics Laboratory at the Lusofona University of Humanities and Technologies, In addition to consulting with governmental clients world-wide.

    Being an exclusive part of the 20|20 Assess℠ survey and assessment team (, Dr. Lange recently fielded some pointed questions from AETHOS Consulting Group about the pitfalls of questionnaire studies of which organizations should be aware in order to ensure optimal outcomes.

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