How Marriott held on to staffers through tough timesJanuary 24, 2013: 9:46 AM ET
Marriott CEO Arne Sorenson talks about expanding in China, appealing to young travelers, and the business case for being a Best Company to Work For.
FORTUNE -- Arne Sorenson is the first person of non-Marriott lineage to lead this global hotel franchise. He became CEO of Marriott (No. 64 on this year's Best Companies to Work For list) in March 2012, but had been working for the company since the spring of 1996. Before joining Marriott, he was a partner at a law firm.
Sorenson has some big, family-owned shoes to fill. But the 54-year-old executive says he's ready to take on future challenges for the company, in part, because Marriott (MAR) has worked hard to hold on to loyal employees through tough times. He spoke with Fortune about expanding in China, appealing to young travelers, and the business case for being a Best Company to Work For.
The culture at your hotels is supposed to be special. When was the first moment you saw it in action?
The first summer I was here, there was an announcement that came around for the J.W. Marriott Awards of Excellence, which is an annual event where we recognize about a dozen line-level associates from around the globe.
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That was the thing that was the most powerful. The people who came in ranged from bellmen to housekeepers to reservation agents, most of whom had worked for Marriott for decades, and most of whom had never been in an airplane before flying to Washington for that event. Other places, I think, tend to celebrate the success of the senior people, but here, we put much more focus on the people who are delivering the services to the guest.
It's easy to take care of employees when times are good. But what about when you're going through a recession?
Look at the last recession we had; 2009 would have been the nadir, obviously. Brutal times, with same-store sales down in the lodging business by 20% in most markets around the globe. That is a massive decline. It would be wrong to say that didn't have an impact on our people. It had an impact on people throughout, from the very top of the company all the way through many associates.
But we tried to make decisions for the long term, if we could. One example is that, typically, you would have to have a certain number of hours required to qualify for employer-paid health insurance. When we hit 2009, we basically said we're going to grandfather in those who have already qualified so that if their hours get cut because of the recession, we'll continue to treat them as if they qualified.
That is a big deal.
It is a big deal. But you go back to the Great Depression and Bill Marriott Sr. put a doctor on staff because he knew that his people were under severe pressure because of that depression -- that's 80 years ago.
How do you justify choices like that in a business world that primarily rewards short-term gains?
If we had been maniacally focused on delivering better financial results for one quarter in the second quarter of 2009, the simplest way to do that would have been to cut expenses like health care and post better results. And that may well have given us a few pennies' higher stock price that quarter. But there would have been a real expense associated with that in terms of a less satisfied workforce, higher turnover, and therefore reduced financial results some time in 2011 and 2012, when we would have had to rehire the folks we had lost.
Beyond that, long-term, you wind up with something that is incalculable. If we had ended up with a group of associates that maybe didn't leave but were less positive about their jobs that would have impacted the experience in the hotel.
Especially since now you face tough competition to get the best hires, right?
China is the place that probably puts the biggest pressure on us, simply because we need to hire tens of thousands of people there. If we can keep people and reduce turnover and make them recruiters for us as well, where they're telling their friends about what a great place this is to work, that's a great place to start.
It sounds like there's a strong business case for being a nice place to work.
Oh absolutely. This is doing something that is good and right but it's not entirely altruistic. I think back to that decades-old formulation we started with: take care of the associates and they'll take care of the guests, and the guests will come back again and again.
Do you ever have tough conversations with governments of countries in emerging markets about your standards for treating employees?
I cannot think of a single instance in which government has told us to take poorer care of our employees, or anything like it. Now, to be sure, there are cultural differences all around the world. They tend to be more around gender than anything else.
Any new exciting projects underway?
We are dramatically growing the gen-X and gen-Y share of our customer base. We have to cater to the demands of that group, which are similar to older travelers like me. But they include a greater interest in design and high-quality food and beverage.
We do like pretty things.
We like our senses engaged. I think as people get used to the comfort and security and cleanliness of a room, they begin to take that for granted and say, "Okay, now I want to be turned on."