At age 26, Chip Conley transformed a seedy 1950s motel in San Francisco into what became the famous Phoenix Hotel, where rock legends such as David Bowie, Little Richard and Linda Ronstadt liked to stay. His company, Joie de Vivre Hotels, eventually grew into a $230 million chain, but not before nearly being ruined by the dot-com bust and the post-9/11 recession. What saved Joie de Vivre, Conley says, was his rediscovery of the work of psychologist Abraham Maslow, creator of the famous “Hierarchy of Needs Pyramid.” Maslow believed that as we fulfill our basic physiological needs (sleep, water, and food), we begin to move up to higher needs of physical safety, social connections and esteem until we reach an enlightened state that produces what he called “peak experiences,” powerful moments of joy and well-being that Maslow argued can help unlock a person’s true potential.In his book PEAK: How Great Companies Get Their Mojo From Maslow, Conley shows how serving higher human needs has allowed his own firm, as well as famous brands like Apple, Google and Harley-Davidson, to flourish despite economic upheavals. Conley is the executive chairman of Joie de Vivre and a business speaker; his next book, Emotional Equations, is scheduled for publication early next year.
How can a company behave responsibly during difficult economic times?
Responsibility is an interesting word; it literally means the ability to respond. Most of us have a good ability to react – the fight or flight mentality – but our ability to respond is not as good. That requires an ability to pause, use some reasoning and have a thoughtful perspective. In the context of a bad economy, we tend to go into survival mode. But great leaders learn how to respond quickly yet deliberately, as opposed to reactively. And the best companies use an economic downturn as a means to not just run the 100-yarddash, but to build a stronger culture and organization over the long term.
How did you accomplish that at Joie de Vivre?
When the dot-com boom turned to bust, we had 20 hotels in San Francisco and Silicon Valley, the worst hotel markets in the country. In two or three months we were going to run out of money for payroll. So I went into a bookstore, hoping to find a book that would help me, but I couldn’t find anything in the business section. I wandered over to the self-help psychology section, a bit sheepishly, and saw Toward a Psychology of Being, by Maslow. The idea that humans can aspire to self-actualization and their full potential seemed like a great message about what a company can do. Eventually, I distilled Maslow’s pyramid, his Hierarchy of Needs, into three levels: Survival at the bottom, above that Success, and then Transformation at the top. We were having a terrible time: revenues were down by 30 percent. Employees feared losing their jobs, which made it hard to provide great service. So we announced that we wouldn’t do any layoffs, and instead would cut salaries of salaried workers. People were no longer fearful of losing their jobs, so we could build a culture with a sense of teamwork. Our company name means “joy of life” and we were able to create that joy on a daily basis. We got a huge response from customers. From 2001 to 2004, when there was a big downturn in the hotel industry, we doubled revenues and grew market share by 20 percent – all because our employees and customers were in a positive place.
How have other companies interpreted Maslow ideas?
The problem for a successful company during a downturn is that if you starve an organization, you might produce two or three quarters of stellar profits, but you can kill the company in the process. You continue to feed the beast of investors, but you do it on the backs of employees and customers. You’re no longer innovative, quality of service drops, and nobody cares about the brand anymore. But take a company like Apple; when Ron Johnson came in as senior vice president, in 2000, he built Apple’s retail operations on Maslow’s Hierarchy of Needs to give customers what they were looking for. His approach was to tell customers, “We will help you get more out of your Mac so you can get more out of yourself.” That’s appealing to a person’s higher needs. Harley Davidson was about to go bankrupt in the 80s when they hired Lee Ozley as a consultant. Ozley had studied Maslow as a graduate student at the University of Wisconsin and used Maslow to help Harley align employees’ motivations with the mission of the company. What fascinated me was that nobody had ever gathered into one book all these great examples of CEOs using Maslow. Even the U.S. Army’s “Be all that you can be” was adapted from Maslow, who said, “What man can be, he must be.”
How did you move from Maslow to studying human emotions?
What I learned doing research on Maslow is that the intersection of psychology and business is very powerful. It can help us understand our emotions, and be emotionally intelligent, which to me is the ripest area for growth in terms of how we run organizations. Our emotions are quite a mystery to us. We like to say, “My emotions got the best of me.” Think about that phrase! It’s like your emotions are an evil twin that live inside you. About three years ago, I was very depressed. Difficult things were going on in my own life, so I needed to understand the existential crisis I was gong through. I did that by turning my emotions into an equation: “Despair = suffering minus meaning.” That equation works. One of the Noble Truths of Buddhism is that suffering is a constant. So what do we do with it? I realized meaning was the variable. The more meaning you give something, the less despair you feel. That was my mantra for this latest economic downturn. At some point, we introduced it to our senior executives, and they loved it. So I did other equations, like “Joy = love minus fear,” and people at the company began texting and tweeting them. A publisher asked me to write a book about it, so we called it Emotional Equations.
It sounds like you have a lot of competing responsibilities yourself – to your company and to your ambitions as a writer and speaker.
I love the introversion of being a writer and the extroversion of being a speaker in a public forum. I’m a curious person by nature, and the idea of just maximizing profits is boring to me after awhile. More interesting is who we are as humans, and how we perform in the most dominant activity, which is work. The more senior you are in an organization, the more responsibility you have. We think of responsibility as having more things to do, more oversight, and that’s true. But the most important part of responsibility is that you are an emotional thermostat and role model for behavior. Our emotions tend to be reactive, like an angry dog. But emotionally intelligent leaders can see the patterns of their emotions, and respond to events thoughtfully, rather than simply react. That’s responsibility.
Paul Keegan is a contributing writer for Fortune and Money magazines and has written for The New York Times Magazine, Esquire, GQ, and other publications.