9. Misperceptions with Chip Conley

New York Times bestselling author Chip Conley is the hospitality maverick who helped Airbnb's founders turn their fast-growing tech start-up into a global hospitality brand. In this episode of HiPERleadership, Chip shares his techniques for overcoming misperceptions by leveraging diverse minds, creating psychological safety, and empowering his employees to make decisions. As a result, Chip successfully led Joie de Vivre Hotels, the second-largest boutique hotel chain in the United States, through 9/11, SARS, and the 2000’s recession.

Transcript

David Morris  00:09

Welcome to the final episode of season one of the HiPER Leadership Podcast. I am your host, David Morris, CEO and founder of HiPER Solutions. At HiPER Solutions, our mission is to bring positive change to the world. Leaders today are faced with unprecedented change, and yet even the best leaders have had to toss out their standard playbook and think outside the box. It was with this in mind that we started the HiPER Leadership podcast earlier this year, where we bring you the key attributes that make someone uniquely wired to drive breakthrough change and showcase their success in struggles so you, our listeners, can more quickly identify your next game-changing leader and set them up for success. Today, my guest is the legendary Chip Conley. Good morning, Chip.

Chip Conley 00:59

Morning, David, how are you?

David Morris  01:01

I'm good. What was it, eight years ago or something that George Zimmer, Men's Warehouse introduced us?

Chip Conley  01:08

The gravelly-voiced guy behind the commercials?

David Morris  01:11

Exactly. Exactly. Now, it's really been amazing to watch you over the years. I know in 2010, you sold Joie de Vivre, America's second largest boutique hotel company. And then in 2013, joined the founders of Airbnb as their Global Head of Hospitality and Strategy to help transform the company. And then in 2018, the Modern Elder Academy, and all these books in your three-acre oceanfront campus in Baja, Mexico, I mean, you just keep going and going.

Chip Conley  01:44

I get inspired by whatever's the new curiosity I have. And it's allowed me to experience a lot of different industries, and I like to call it same seed, different soil.

David Morris  01:57

...that almost consistent pattern of inconsistency.

Chip Conley  02:01

And how does leadership show up in different habitats? I think that's what I'm curious about.

David Morris  02:08

One of the things I've really been struck by, with you, is the type of diversity that you've really put to work in terms of perspective, people from all walks of life, to pull off the impossible. I'd like to start out with that just amazing story back in 2001, in San Francisco. You've 21 hotels in total in the Bay Area, but almost all your eggs essentially in one basket right in town, and there it comes, the .com bust. Tell me about this and how you formed the team that ultimately addressed it.

Chip Conley  02:42

I'd started the company about 15 years earlier when I was 26. So, it was in my early 40s at this time. We had not just the .com bust, we also had 9/11, we had SARS, we had the Iraq War, we had a lot of stuff going on, and a recession. And what was very apparent to me was that we were probably the most vulnerable hotel company in the Bay Area, we were the largest operator of hotels in the Bay Area at the time and only having hotels in the Bay Area. What I had to look at with my existing team, our leadership team, who had been really surfing big waves during the .com boom, is this the team that actually is going to help us get through this exceptionally difficult time? Where no hotel market in the US, other than through natural disaster, had seen as large of a revenue drop to their hotels as we saw in the San Francisco Bay Area between 2001 and 2005, at least since World War Two. I basically decided that the team I had, other than one or two people, [there] had been 12 of us in the core team. Really, I bet on all of them, except for one, one person just clearly needed to move on, and they needed to move on six months or a year earlier, and I hadn't taken that step. But, the difficult times meant that I just needed to work on a performance review that that would lead to that person leaving, but the rest of the team, and  we substituted [the one who left with] somebody else from within. And we had 12 of us at our weekly meetings. It was a very diverse group. It was six and six, men and women, mixture of races and ethnicities, different ages, 3 of the 12 gay or lesbians. It was a pretty demographically diverse group. But it was also a psychologically diverse group: introverts, extroverts, people who are sort of conceptual thinkers, others who are very process minded. So, what we really needed to do was the following: we needed to figure out what was our North Star. The good news is we'd started the company called it Joie de Vivre, which means joy of life in French. We had an organizing principle of our mission, which was to create joy for our employees and our customers. That can be a platitude without something holding it up. What we looked at doing was actually getting clear on what were the most important goals we had, and how could we operate almost like a rowing crew. David, in rowing, you have a coxswain and you have eight people rowing. And if you get it right in, in crew, the coxswain gets people so in unity of their rowing, that the boat actually starts to lift out of the water; they call this swing. And when a boat swings, it means it actually levitates in the water a little bit, because everybody's in unison. And what that does is it means the boat has less friction. And by having less friction, it moves more quickly. We needed our own version of swing. And we did that by getting clear on what were the most essential things that we needed to be agreed upon. Even though we had a diverse group of people in the room, how do we create an environment where everybody feels like their voice is going to be valued? Google did a study called Project Aristotle, because they wanted to look at what were the qualities of the most effective teams in the Google world. And there were five predominant qualities, but there was one that actually stood out beyond the other four. And it was psychological safety. And I actually think great leaders of great diverse teams know how to create psychological safety. So, what does that mean? Psychological safety means everybody feels like their voice is going to be heard. It means that whoever's running the meeting, knows how to amplify the introverts’ voices. How do you amplify the voices of those who need processing time? For me what that meant is, there was a woman who was exceptionally wise in the group, but she spoke very little, she's an introvert. She's also somebody who doesn't process well in the moment, she processes best if she has time to think about it. My way is usually very extemporaneous. Historically, the way I run meetings is, I'd bring something to the meeting, we present something, and then we'd have a conversation about it, and the extroverts would win. And those who needed time to actually do some research before and to have a point of view based upon feeling like they analyze something they felt left out, or they would actually come to the next meeting not aligned and say, “Hey, I've done some research, and we made a bad decision last meeting,” what we started doing is actually, even though it wasn't my natural way, was to start doing a prep package that we send out to people, now that some of the people wouldn't read it, because they're the ones who just wanted to talk in the meeting. But the people who would naturally have some analytical value to the group had some time to spend preparing. And so, I would usually start a meeting, presenting something again, PowerPoint, and then I would call on this one woman sometimes, but there were actually two or three others who fit this profile too, to actually have the first comment, because they weren't naturally the person who's going to raise their hand. And because frankly, they're going to actually help set the stage for some of the analysis that others probably didn't do. So, does that make sense, David?

David Morris  08:06

 It does make sense, and it's not easy. I think some Stanford Research talked about the ideal team size being four or five people, so very ambitious having 10-11 people, I'm curious as we go back to the North Star, so you had the vision and all. At the end of the day, we have four years here of really grueling years and you know, you have I'm sure mortgages and debt and all of this. What did the team sort of decide that you needed to pull off? Like what was the single biggest challenge in that first year or two to even survive? What was that win that had to occur?

Chip Conley  08:43

Well, first of all, we had...we believed...so these are some key principles. Number one is, we needed to improve our psycho-hygiene. So, what does that mean? Psycho-hygiene is a Maslovian word, it comes from A. Maslow, but never appeared in any of his books, it only appeared in his diaries. Psycho-hygiene means the company knows how to cleanse itself, from the things, the dirt that's not working. And what it meant in a senior leadership team, was it meant that we gave ourselves the opportunity at the start of the meeting, to make sure there's not any unfinished business from the last meeting. Not agenda items, not like parliamentary procedure, but more like something that doesn't sit well. So, from a policy perspective, we did that. The other thing we did is we ended our meetings with recognition. Because one of the things that we believe from a psycho-hygiene perspective was, in difficult times, our emotions are more contagious. And leaders are the emotional thermostats of those they lead, they set the climate, and most of our employees aren't getting recognized for the positive things are doing because we tend to be focused on the negative, because there's a lot of negative stuff going on. So, we would finish our meetings with recognition, where one of the leaders in the group could actually recognize someone in the company. Then, another person from a different team, the person who's being recognized would go out and say thank you to that person, either by email or in person or by phone. Those are sort of the bookends of how we did our meetings, then we would look at “Okay, what is what are the things we need to most focus on?” Number one was, okay, what defines success? Our definition of success for the prior few years have been, year-over-year revenue growth, year-over-year net income growth. But, our new definition of success became twofold. Number one was, how happy our employees? Now that sounds crazy in the recession, but what we had, we have a lot of evidence from the Service-Profit chain theory out of Harvard Business School from the 1980s was that if you create a great company and a culture that leads to happy employees, it leads them to customers who will be more loyal, growing market share, and then sustained profitability, and with that sustained profitability, you invest back in culture. It's a virtuous circle, we called it the Joie de Vivre heart, with the  blood flowing through the heart in circular fashion. So, we looked at two metrics that were not most important to us before to become our two most important metrics. Number one is, let's do employee satisfaction surveys more frequently than we normally would. We were doing them twice a year, we actually moved it to quarterly. And let's look at our benchmark of how employee satisfaction is growing. And, I'll come back to that in a moment, because I'll tell you a couple of things we did on that. And then the second piece was market share. And how is our market share growing, because if the pie is shrinking for all the companies I want to focus on is our slice of the pie getting bigger. And as it turned out, that between 2001 and 2005, we tripled in size in actual revenues. And our market share just went through the roof. 

David Morris  11:51 

How? 

Chip Conley  11:54

How, exactly, how did that happen? How did we create a culture that actually in a time of anxiety, could feel empowered and included? Number one, is we made a conscious decision to actually do a 20% pay cut for many of our senior leaders and a 10% pay cut for almost all of our salaried people in the whole company. We also moved from health insurance over to Kaiser which is an HMO from a PPO structure. People still could opt in for PPO, but they had to pay extra for it. And we went to Kaiser because we could save about 20% of our health care costs. So, what did that buy us? We were the only hospitality company, the only hotel company in the Bay Area, that had no economic layoffs. We had zero. No one in the company, in this huge downturn, got laid off because of economic reasons. If it was performance driven? Yes. And there was some of that, but not a lot. And so, what it did is it secured the base of our employee Hierarchy of Needs pyramid, which is job security and compensation. Yes, the senior levels of the company took 10 and 20% pay cuts. But that, and the health insurance change we made, allowed us to make no economic layoffs because economic layoffs create anxiety. What that allowed us to do is focus on the base of the pyramid.

David Morris  13:15

What's so interesting about this, Chip, is on one hand, you say we doubled down on employee satisfaction, experience all of that, and literally in the same breath, you talk about 20% pay 10% pay cut, health insurance, all of this, and that ability to take two literally opposing thoughts, but yet to achieve what you're saying is the base of Maslow, which is everyone's felt safe, because the most important thing was no layoffs, the moment or even one layoff that was what would disrupt the Maslow hierarchy in your mind.

Chip Conley  13:52

It would, and you know, we certainly, before we made these decisions, we did some surveying of our employees as well. So, we didn't just sort of like say, “Okay, this is a great idea.” And based on the surveys, we felt like okay, people at senior levels felt like they could take 20%, managers felt like they could take 10%, if they couldn't, we didn't impose it. It was something we expected people to do, but it was also voluntary in the sense that we didn't impose it. And people could choose their PPO, but they're gonna have to have to pay something additional for that. So, long story short is, what we recognized is, number one is job security was essential. Number two is we need to focus on the culture and do a bunch of other things. We had a bunch of empty hotel rooms. Prior to that we didn't ever have any program that allowed our employees to stay for free in any of our hotels. So, once a quarter you got two nights for free at any of our hotels. And starting at that point, every quarter, you could go take a vacation up in Napa, or in in San Francisco, if you didn't live in San Francisco, with your family and have a free vacation. We had a spa, that Kabuki Springs & Spa, the largest spa in San Francisco, you can get free going to the communal bath, the Japanese communal baths, or a half price massage there. We started a sabbatical program. If you've been in the company for three years, you get a one month paid sabbatical. In essence, we'd started doing a lot of things. We did a lot of cultural events, we amped up something called Joie de Vivre University, which was a basically a program that cost us almost nothing as a company, but it allowed our...anybody in the company to teach a class and do a skill share with other people. So, we did a lot of things to actually enhance the life experience of our people, while also figuring out how to reduce our costs, but most importantly, you know, create that job security. And it had a huge effect. And we ultimately got the word of the second-best place to work after Google, second best place to work in the Bay Area. You know, at the end of that recession.

David Morris  15:54

There's a piece that feels anti-climactic in the story, in that you went to the fundamentals: culture, the people, locus of control, basic needs, you know, you leaned in, all of a sudden the revenues triple and although it was real...

Chip Conley  16:09

...not all of a sudden, it was over the course of about four to five years. But yes.

David Morris  16:14

What was the biggest inflection point, I guess, across those four or five years? Was there ones, particularly where diversity of thought came into play as we go back to those individuals around the table? Was it the introvert that had an idea? Like, was there something that all of a sudden happened because of the diversity of thought that led to the ultimate inflection point?

Chip Conley  16:34

Here's where what happened, there was someone in the room who is not in the HR department, but they're a big believer in culture. And what they said was, “We need to democratize culture in this time” they're not someone who usually spoke up much. When they first said democratize culture, what do you mean, ultimately, what they said is, we can't, from headquarters, sort of remote control this, we need to sort of create people at the line level, at each of our properties, whether they're hotels, restaurants, or spas, who maybe have a one-year period of being elected by their fellow employees, as the ambassador, cultural ambassador for their property. They have their normal job and they just do this on the side, and they get paid a little extra for it. And that person was in charge of how to stabilize and improve and evolve the culture. How do we create recognition programs within their hotel? And how does that hotel act as a fountain of philanthropy in their local neighborhood or community? And that's an idea that was pretty contrarian, because in some ways, what happens in a recession is command and control takes hold, and everybody wants to, you sort of feel like you're going to war, and when you're going to work, you want General Patton in charge. And the idea of democratizing culture felt sort of at odds with what a lot of the people around the table were saying is, “What if we have people like someone running as a cultural ambassador, who's just sort of a dissident person, and their role is to just stir things up?” it's like, “Okay, well, let's have that” rather have that and harness that through a cultural ambassador program, where we can maybe get some great suggestions out of it, than to have it just be happening underneath the surface. That was an idea that I initially completely rejected. And then over time, was open to and it turned out to be a hugely successful. As we came out of the recession, it was one of those sort of foundational elements of our culture that really differentiated us versus any other company we could see, and we learned it from Southwest Airlines. Southwest Airlines had a Culture Club. They didn't do exactly what we did. But we had some Southwest Airlines execs come in and talk to us before the recession started. And the guy, the guy who actually brought this up in the meeting, he didn't talk a lot, sort of a quieter person. He said, “Don't you remember two years ago when we heard from Southwest Airlines about how they had their culture club” and so we evolved Southwest Airlines idea into our own, and it was very successful.

David Morris  19:14

It's just remarkable where these ideas come from, and it was the non-obvious spot on the team. As we transition and think about some of the other companies you've been involved with: Airbnb, other boards you've been on etc. What may just be a few pieces of advice you have for that exemplar HiPER leader forming a diverse team? What components of diversity are most important in your mind in setting up a team that really is diverse? Let's think about a team five, six people core leadership team, just some thoughts that come to mind.

Chip Conley  19:44

I've already talked about psychological safety, that would be one. Secondly, someone who's just naturally curious. Curious people create the space for other people to be curious. And so curiosity I look for people who are not the smartest people in the room, but the most curious people in the room. And, often because curiosity, to me, leads to wisdom. Someone who's smart isn't necessarily wise. So, what's a curious person? It means that someone who actually has maybe even learned something called appreciative inquiry, which is a method it's often taught in coaching schools. And it's a way of leading with questions as opposed to answers, and leading with almost an empathetic perspective of how do we open up possibilities, as someone who's curious in creating a curiosity, point of view for the team would be great. I'm a big fan of Pat Lencioni, his book, Five Dysfunctions of Teams. And when I joined Airbnb in early 2013, and sort of helped Brian as I became his mentor in-house at Airbnb, I helped use that book as a means for us to create a more curious and aligned team, where we actually were very open to disagreeing until we got alignment. And then we got alignment, then we were all on the same page, because it was back to rowing that boat, I would say, finally, the last thing is, I would like somebody who knows what it means to be the other. I wrote a blog post, I have a blog called wisdom well, it's on our modern elder academy website, and it's a daily blog, and I wrote a blog post a few months ago called BTO. Not Bachman Turner Overdrive, for those of you who are my age, who like music. No, BTO is Be the Other. And when I have found a leader who knows what it means to be the other, meaning not part of the demographic dominant group, then I appreciate those people, often, not always, because they have an empathy for what it means to not be in the dominant group. Whether that's being an introvert, whether that's having a different set of political views, whether that's in the normal tech world, being a family member with kids, which often was at Airbnb was not the case, because most people were, the average age was 26. I really appreciate that. And especially when it comes to demographics, how do you amplify the voice, the voices of women, people of color, if you have a disability, LGBTQ folks, that kind of person can bring out, like a conductor in an orchestra, not the horns, because the horns are the extroverts, but the strings, because the strings actually create some lyrical sense of beauty. But you have to listen for the strings, because the horns will actually overwhelm them.

David Morris  22:31

Really remarkable. Now, as we go to the final part of this, what I'm curious about is putting on the cap of partner to a private equity firm, chairman of a board, an investor, and all of a sudden, you're looking to recruit a CEO that has the ability to be that conductor, that not only can recruit people with this diversity of perspective, all forms of diversity, but really can bring it all together and you did it, and it's in your profile, you have this ability to relate to each of these types, and then bring it together around principles. It's a gift, again, as you try to is you think about you not being that person, but you have to hire that person. What are some tips you would give to those board members looking for a CEO that has the ability to be this conductor in 2020? With all the change going on in this world, so many divides? What are some of the traits that leader that can bring this level of diversity of thought to life?

Chip Conley  23:29

Well, I will start by taking a page out of Jim Collins’ book and amplifying the idea of humbition, someone who's humble and ambitious at the same time, I think it's a great mixture. The humility actually right-sizes the ego, the ambition creates stretch goals for an organization and for yourself. My favorite question that I like to ask anybody who's a direct report of mine is, “How can I support you to do the best work of your life here at Airbnb, Modern Elder Academy, Joie de Vivre, and I think a leader who has that servant-leadership mentality, of saying, “I'm here to serve you, to help you be your best” is also important. A comfort with ambiguity is a basic tenet of entrepreneurship, but particularly in uncertain times, like we're in right now. That would be somebody who is nimble on their feet, I would be very cautious of someone who's overly analytical, because analysis is past tense. Sometimes it's present tense if you have a great data team and your information is in real time. But often it's past tense. And frankly, today, past tense may have some relevance, but with something new that comes along, you better be good at seeing the future. I'd want somebody who has a bit of a visionary perspective. That means they can sort of see what it looks like two years from now, three years from now, is persuasive enough with their team to see it as well. Because if you're a leader who can actually can persuade your team of what that future looks like, not only does that create your North Star, but it creates the organizing principle that allows diverse voices to fall into line, even though they may disagree on specific tactics.

David Morris  25:11

So, if you're if you're on the hiring committee for a CEO of a Fortune 100, that is going to need to transform this company, beyond the interviewing questions and the reference check questions. Just any other practical tips on how to really qualify if that leader has everything we just talked about?

Chip Conley  25:31

I will give you an interviewing question, because it's my favorite interviewing question I always ask and it comes out of left field because nobody who I asked it to has ever heard it before. If I start socializing it more, they probably will. Here it is. I ask the person, not as the first question because it's a bit of an awkward question. So, you want to build some rapport first. 

David Morris  25:54

We’re afraid of this, Chip, no idea where you're going with this one!

Chip Conley  25:57

Yeah. So, I what I ask is, “What's the number one way you're misperceived in the workplace?” And it's a fascinating question. And I've seen so many different reactions to it. But the question is really asking the candidate to go off script. So, it's sort of saying, “Okay, I'm misperceived. Does that mean people perceive me as angry, but I'm really nice?” Now that goes down a path of questions after that, or the opposite, “Everybody seems to think of me as pretty nice, but I'm sort of angry, I'm sort of an asshole.” I mean, those are...that's one element of two different levels of the spectrum. But it could go...you know what people see me...if someone were to ask me the question, if someone's struggling with the answer, it usually means they are off script, and they don't know what to do. That means they're actually often completely unself-aware, in terms of like, how, who, what's going on inside of them versus like how people perceive them. Sometimes it means that they're just like they, there's something to it, the question actually has, they're trying to camouflage an answer. And so, we end up in a pretty deep conversation. So, I sometimes go with my answer. And I say, “Here's my answer” If you're struggling, this gives you a moment to think through your answer, because I can see you're struggling with this. “People think of Chip as the guy who started Joie de Vivre, who's fascinated by Maslow and wrote a book on self-actualization, and grew up in Southern California on the beach, as being a laid back kind of guy, and my personality comes across that way. I'm generally a jovial person. So people think, okay, Chip is a laid-back leader. But the closer you get to Chip in the organization, the more you actually get Chip’s nature of how he treats himself, [I]'ll treat my direct reports like I treat myself. I'm driven, I'm ambitious, I am unrelenting. And so, I sort of expect that, organizationally, from the people who are closest to me. And I expect as a company that we're going to be all of those things as well. Although, frankly, as routes out to people further out in the field, I don't want that to come across as you know, being driven and therefore we drive people, you know, insane.” So, that would be my answer. Now, I come back to this person who I'm interviewing and say, “Okay, what's your answer?” In essence, what a person can say is, “Chip’s a nice...Chip comes across as nice guy, but he's sort of an asshole,” that that's not true. What I just said is not true. But that could be how someone would perceive it. I don't think that anybody would call me an asshole who works with me. But I think what they would say is Chip is definitely driven, even though he comes across as laid-back. So that question is important, because it forces someone to actually do the deep dive in real time about who they are.

David Morris  28:49

Yeah, and that’s self-awareness. And it doesn't even matter that the way you're coming across might be different than how you are under the surface, but it's your awareness of that. Correct.

Chip Conley 28:59

Correct.

David Morris  29:00

Really critical. Chip, this was terrific. Really appreciate you sharing your story. Chip is such an exemplar HiPER leader, and we appreciate you joining us.

Chip Conley  29:09

Thank you, David.

David Morris  29:12

And to all of our HiPER Leadership listeners, thank you for your continued support and feedback. Stay tuned for many more HiPER Leadership achievements. If you haven't done so already, please subscribe to the HiPER Leadership podcast on Apple podcasts. And if you have a big program you're dealing with, a big transformation, visit our website to learn more about how we help optimize teams in the private and public sectors.