BEST PRACTICE

Creating the Living Brandby Neeli Bendapudi and Venkat Bendapudi

Any company can deliver

outstanding custonner

service-even convenience

stores, where low pay and

high turnover supposedly

make service a problem.

The secret:generating a

bond between employees

and the brand.

W HAT COMPANY first comes tomind when you think about

outstanding customer service? Most ofus would single out Nordstrom or Ritz-Carlton or one of the other luxury com-panies so often showcased in articles onthe subject. In fact, it's easy to concludefrom the literature and the lore that top-notch service is the exclusive province ofa select few and that any retailer outsidethat rarefied atmosphere is condemnedto offer mediocre service at best.

But even companies that positionthemselves for the mass market can pro-vide outstanding customer-employeeinteractions and profit from them. Theirsecret? They consider employees theirliving brand and devote a great dealof time and energy to training and de-veloping them so that they reflect thebrand's core values. In fact, these com-panies make as much effort to groom

employees as they do to develop pithymessages about what the brand is anddoes. Look at two companies in theconvenience store industry: QuikTrip(QT), a %4 billion privately held firmbased in Tulsa, Oklahoma, that oper-ates 462 stores in nine central, western,and southern states, and the $2.8 bil-lion Wawa, a privately held companybased in Wawa, Pennsylvania, that op-erates more than 500 stores in five east-em states. QT has been listed as oneof Fortune's 100 best places to workthree years in a row; in 2005 it wasranked number 19- Turnover rates atQT and Wawa are 14% and 22% respec-tively, a small fraction ofthe triple-digitaverage turnover in the retail sector.Wawa gets a couple of hundred appli-cations for each position, and in 2004QT received close to 118,580 applica-tions for just 284 new jobs. Customers

124 HARVARD BUSINESS REVifiW

are raving fans. There are even blogsand Web sites dedicated to these com-panies. The "We love Wawa" commu-nity on Livejoumal has more than 700members.

But this is not just a feel-good story.Both companies routinely outperformthe market. From 1977 through 2003,Wawa stock has grown at an averageannual compounded rate of 17%, nearlytwice that of the S&P 500. QT's stockvalue has risen 19.2% in the past three-year period, more than four times theS&P's rate. (Stock values are determinedthrough an indeF>endent appraisal.)

We have studied the conveniencestore industry in depth during the pasttwo years in conjunction with the Na-tional Association of Convenience Storesand conducted detailed case studies ofthese two companies. We uncovered sixprinciples that both companies embraceto instill the brand and its meaning intheir empioyees-and to create a strongculture of customer service. Both Wawaand QT demonstrate the power, even inminimum-wage businesses, of invest-ment in employees to create a positivecustomer experience.

Six Lessonsofthe Living BrandKnow what you're looking for. It mayseem a truism that every organizationmust have a clear vision of the skillsand characteristics it wants in its work-force and a plan for getting them. Butfew companies that hire in the massmarket have the discipline to go aboutdoing that rationally and systematicallyor to think past such vague qualities as"service orientation" and "good workethic." Even if a company does have aclear wish list of employee behaviors, itneeds to go one step further and decidewhether to "make or buy." It must de-cide which skills and qualities can betaught and which must be hired.

QT insists on hiring "nice" people wholike people, because that's a tough qual-ity to teach; it's either present or not.Other key qualities for QT hires includethe ability to work in teams, the humil-ity to learn from others, and an appre-ciation for diversity. But while it focuseson these intangibles, QT does not takea subjective approach to hiring. On thecontrary. It puts applicants through arigorous, structured process that includesa personality assessment designed to re-veal specifics such as how patient or ex-troverted candidates are. The personal-ity profiles are based on the quaJities ofQT's most successful performers acrossthe company and are continually up-dated and refined.

It's hard for an applicant to game thetest, because each question is asked sev-eral ways-and recruiters reviewing theanswers wi 11 notice any results that looktoo perfect and will flag the applicantfor an especially careful follow-up, in-terviewers probe for stories to com-plete the picture. One manager might

ask about past experiences with difficultcustomers and listen for clues about thecandidate's service orientation. Did heblame the customer? Did he find a cre-ative solution? Another might ask whatlife experience the candidate would liketo do over and what he or she woulddo differently. All of the interviewershave served in the positions for whichthey're hiring, so they can bring first-hand knowledge to choosing a success-ful candidate.

Hiring decisions at QT aren't left tostore managers, a departure for the in-dustry. Instead, managers in each ofthe company's eight geographic divi-sions do all the recruiting and hiringfor their regions. There are two reasonsfor this. First, centralized hiring allowsthe company to maintain a consistentemployee profile so that it can assignworkers to positions and locations asneeded, though the company makesevery effort to place people in the storesclosest to their homes. Second, central-ized hiring reduces the risk that a storemanager who is pressured for time ornot skilled in identifying talent will hireweak employees who will bring downa store's brand equity and, by extension,the company's.

A focus on intrinsic traits, rather thanon a particular set of work experiences,allows these companies to look past atypical retail background to find peoplewho will naturally bring the right qual-ities to the job. At Wawa, the must-haveis passion, for work and life. Since thelate 1980s, Wawa has been "importing"teenagers from Ireland and the UKevery year to fill the demand for sum-mer labor on the New Jersey shore. Col-leges in Europe break in June and don'tstart up again until October (many U.S.

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BEST PRACTICE • Creating the Living Brand

colleges break in May and resume inlate August). On the Jersey shore, therush continues well past Labor Day,and the competition for employees issteep, so Wawa hires American studentsfor the start of the season, then bringsin the English and Irish recruits to over-lap with the Americans and finish outthe season. The company has relation-ships with several schools in Ireland thathave food-service programs, so these stu-dents view the job not only as an oppor-tunity to spend some time in the UnitedStates but also as relevant work experi-ence that will beef up their r^sum^s.And because the recruitment programis more than 20 years old, each newbatch of students has heard things aboutworking at Wawa from those who camepreviously. Their abundant enthusiasmmakes them good brand ambassadors.

Make the most of talent. In mass-market retail environments, talent isgenerally viewed as a commodity, andemployees are basically interchange-able. But that outlook becomes a self-fulfilling prophesy. Studies have repeat-edly shown that people rise or stoop tothe expectations set for them, whetherit be schoolchildren achieving morewhen their teachers are told they'reespecially bright or employees outper-forming their colleagues after being la-beled as fast-trackers. Wawa and QT getmore from their people because they ex-pect more. One way they communicateexpectations is through training.

In most retail environments, trainingis minimal - seven hours, on average.Training is typically conducted off-site,and if it's done inside a store, it's usuallyin a low-volume outlet, where the newemployee is less likely to be in the way.At QT, the process looks very different.Each new fuH-time employee is part-

Neeli Bendapudi (bendapudij@cob.osu.edu) is a member ofthe marketing fac-ulty at Ohio State University's Fisher Col-lege of Business in Colutnbus, where shedirects the Initiative for Managing Ser-vices. Venkat Bendapudi (bendapudi^^@cob.osu.edu) is a member of Fisher Col-lege's management and human resourcefaculty.

nered with a personal trainer who haspreviously held the same position (thetrainer is, in fact, the person fTom the re-gional hiring office who recruited andhired that employee).The two work thesame shifts-in the store where the newhire will work - and the trainer acts asa buddy and mentor for two weeks. Thisallows the new employee to interactwith his colleagues and provides thebest preview of life after training. Thatway, the pace of work in a bustling storewon't come as a shock.

Such investment in people continueswell beyond the initial hire. Wawa en-courages its people to pursue degreesin any field of study - philosophy, biol-ogy, history - and reimburses tuition atthree colleges with which it has rela-tionships. Executives reason that higher

up. The culture fosters teamwork, too-managers have empathy for their em-ployees, and frontline workers haverole models to emulate. It is harder forthe rank and file to think in terms of"us" versus "them" than it is at othercompanies.

Another way QT maintains loyalty iswith its tailored benefits packages. Full-time employees get regular coveragefrom day one, and part-time employeesare offered a scaled-back plan. The com-pany also has a medical reimbursementplan to allow employees to save for theexpenses the plan doesn't cover, such asdeductibles and copayments. Flexibilityis a hallmark of QT's time-off program.Depending on tenure, employees re-ceive ten to 25 days of vacation, plus tendays of sick pay, and they can purchase

A focus on intrinsic traits, rather thanparticular work experiences, allows thesecompanies to hire people who will naturallybring the right qualities to the job.

education benefits individuals, the com-munity, and Wawa by boosting employ-ees' confidence and critical-thinkingskills. This is a clear differentiator in theindustry. In addition, the company hasan in-house curriculum that offers morethan too courses, in a central trainingfacility, on topics as diverse as safety, in-ventory management, and people skills.Sometimes a store manager will decidethat his entire staff needs education ona particular topic, and Wawa will sendthe store either internal trainers or teach-ers from the colleges. The emphasis onlearning helps Wawa to be an employerof choice (witness its low turnover),even though its pay is on a par withother companies in its labor market.

People perform at their best if theysee a future for themselves at a com-pany. Employees know they can have acareer at QT, due to its strong cultureof promoting from within. All of itsmore than 400 store managers and verynearly al! of its top executives startedat the bottom and worked their way

an extra two weeks of vacation. All full-time employees may request ten addi-tional days off without pay for personalactivities such as school plays and grad-uations. Nearly every employee takesadvantage of this benefit, an unusualperk in the retail industry. The arrange-ment works well for the company, be-cause employees needing to take a dayhere and there would otherwise call insick on the morning of the absence, andservice would suffer. QT's policy allowsmanagers to get advance notice of suchabsences and staff accordingly.

Finally, these companies ensure thatemployees have the support they need,both externally and internally, to dotheir jobs well. Wawa involves storemanagers, who have the best informa-tion on store operations, in improvingthe performance of vendors. Twice ayear, the managers formally assess se-lected vendors' delivery accuracy, cus-tomer service, and other attributes. Thevendors are then given an opportunityto discuss the feedback and determine

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BEST PRACTICE • Creating the Living Brand

what steps should be taken to improveperformance.

The company takes the same hard-nosed approach to analyzing the qual-ity of internal support processes suchas marketing and human resources,with the same expectation that perfor-mance will be improved. When a sur-vey showed that store managers foundit frustrating to get stuck in voice mailwhen they phoned the marketing peo-ple, for example, the department setup a call center so that store managerswould always be immediately connectedto a live contact. In year-end reviews,Wawa's marketing department wonmost improved, beating out even itsexternal vendors.

Create pride in the brand. In retail,service is the manifestation of the brand,and service quality depends directly onemployees' attachment to the brand. QTand Wawa constantly and consciouslyinvest in maintaining brands that em-ployees can take pride in. Wawa has adevoted following for its private-labelofferings, with a brand identity rare inthe convenience store industry. Its focusis on simplifying customers' lives, whichcan mean sacrifices when it comes to

profits. ATMs in the stores carry no sur-charge, a benefit prominently labeledon the machines. And when lottery jack-pots are huge, there are no long lines ofbettors to inconvenience regular cus-tomers, because Wawa doesn't carry lot-tery tickets. QT was the leader in remov-ing adult magazines from its stores - itdid so in 1986, resulting in an annualloss of more than $1 million in profit.

Such is the attachment to Wawabrands that the company's ig94 moveto put Taco Bell and Pizza Hut outletsin more than 100 stores, and Dunkin'Donuts outlets in all stores, was metwith opposition from customers andemployees alike. Wawa had invested agreat deal in franchise fees, trainingcosts, facility redesign, and so forth inthis effort to meet customers'expresseddesire for more variety. But the prod-ucts didn't sell; customers were used toseeing Wawa-branded items. And asso-ciates grumbled about working hard tobuild other companies' brands - theywanted people to come into the storefor Wawa, not for Pizza Hut. In 19961Wawa began to phase out the brands tomake more room for Wawa products.The company openly discussed with as-

sociates the error of the earlier deci-sion and acknowledged the value ofemployee input.

Build community. While many con-venience store chains have focused onspeed of transactions and sales volumeper store, Wawa and QT have made con-certed efforts to build customer loyaltythrough a sense of community. We in-terviewed 80 customers, and almost allof them mentioned employee friendli-ness as one of the reasons they comeback to the stores. A Wawa coffee hostwe observed in Richmond, Virginia,greeted most people by name whenthey came in and knew their coffee pref-erences. One Wawa we visited closed itsdoors for 45 minutes to allow a couple-who had met and become acquaintedover daily coffee at the store - to getmarried at "their" Wawa. We went tothe ceremony; the store was decked outlike a chapel. Wawa provided coffee andcake, and all the store associates werein attendance.

QT customers reported similar sen-timents."! feel better when I am in QTland," said one."l can't imagine my lifewithout QT,"said another. At both stores,customers remarked upon two thingsthey believed were unique: The peoplewho worked at the stores seemed to beglad to be there, and they seemed tolike one another. The perceived senseof community among store associatesappears to spill over into a sense of com-munity with customers.

Both companies have strong com-mitments to local charities and causes.Customers in one area mentioned thatWawa provides coffee and other bever-ages to families of patients at a localchildren's hospital. QT allocates 5% of itsannual net profits to charity (the samepercentage donated by Target, which issometimes held up as a community-investment model). QT has partneredwith Safe Place, a nonprofit that helpsget runaways and other troubled youthsoff the streets. QT's stores are ubiquitousin its market area, so they make greathavens. A store employee will offer ayoung person seeking help somethingto eat and drink while a Safe Place vol-unteer is called to pick up the person

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BEST PRACTICE • Creating the Living Brand

and take him or her to a place to stay orget professional help.

The community spirit is evident in-ternally, too. At Wawa, when a storefaces a natural disaster or a personneldifficulty,the manager can count on theWawa fiock to provide support untilthe store is fully functional. Managerscame from hundreds of miles away tohelp clean storefronts and do whateverelse was necessary after Hurricane Isa-bel smashed into the Virginia area In2003. ("Wawa" is a Native Americanword for Canada goose, and employeesoften point to the cooperative migra-tory habits of geese as an inspiration fortheir sense of community.)

At QT, the community feeling extendsto the customer-service appraisal systemand the reward structure. The emphasisis on the team's performance in satisfy-ing and delighting customers. If a mys-tery shopper-someone who visits a storeanonymously and reports on service-isespecially impressed with a particularemployee, everyone on staff at the store

While many convenience store chains havefocused on speed of transactions and volumeof sales per store,Wawa and QT have madea concerted effort to build customer loyaltythrough a sense of community.

during that shift receives a bonus, be-cause the company believes that indi-vidual rewards would undermine themessage that all employees contribute tothe customer's experience. Outstandingindividual contributions are recognizedwith a note from the CEO.

Share the business context. Employ-ees need a clear understanding of howtheir company operates - particularly,how it defines success. Wawa considersan employee successful if he or she actsto preserve the level of trust that thecompany has built up over many years.(In the 1950S and 1960s, when womenwere entering the workforce and leav-

ing their homes empty during the day,Wawa milkmen were commonly trustedto use hidden keys so they could put de-liveries in refrigerators.) Because theyunderstand the company's values, em-ployees don't have to follow a rigid set ofrules-they just have to behave in waysthat meet customer needs.

Employees also need to know howtheir work affects companywide finan-cial performance and how the companyarrives at its targets. Armed with this m-formation, workers can better under-stand the decisions of upper manage-ment and improve job performance.Both QT and Wawa show a remarkable

speak louder than words, whi yal Bank of Scotland Group became one of the largest banks in the wort

Make it happen

Creating the Living Brand • BEST PRACTICE

openness in discussing company perfor-mance and strategy with associates. AtQT, every full-time associate is trainedto read the store's monthly financialstatements and earns a bonus that isbased on the store's operating profit.

QT executives are quick to dissecttheir mistakes, from the installation ofindividual gasoline pumps along thesidewalk for drivers' convenience (cus-tomers didn't like the arrangement, soQT switched to a more typical pump

setup) to failed products and catego-ries. One of the purposes of this policyof openness is to encourage innovationby conveying the company's tolerancefor well-meant mistakes. Chet Cadieux,the CEO, tells employees that as longas the company hires smart and caringpeople, no employee can make an errorthat the company cannot recover from.In a recent meeting introducing a newproduct category, he told employeesthat there might be missteps along the

Our StudyTo learn how Wawa and QT have becotne known as both employers of choice and

retail stores that are an integral partof customers'lives, we conducted an in-depth

study involving observation and interviews with top managers, store associates,

and customers. The companies coordinated about half of our visits and informed

the store managers that we were coming. During those visits, we got permission

from the store teams to talk witb customers. The companies gave us store coupons

that we offered shoppers to thank them for participating in the study, The rest of

the time, we went unannounced so that we could quietly observe such things as the

upkeep ofthe stores and interactions between customers and employees.

way. The point, he emphasized, was totry to minimize them but not to let thefear of a mistake stifle innovation amongassociates, an important source of newproduct ideas. Wawa coffee, which hasa devoted following, was introduced be-cause a lone employee decided to offerbrewed coffee in a store. And as we writethis, the company has a contest on itsintranet for the best recipe for mixingfountain drinks. The winner will get$100, and the recipe will be posted inthe store.

Satisfy the soul. Researchers suggestthat to truly harness an individual's cre-ativity, to get her full passion and en-gagement, a company must meet herneeds for security, esteem, and justice.

Security. QT's employees know thattheir safety and well-being are of para-mount importance to top management,which deploys technology and staffingmodels to create a sense of security.No employee ever works alone. Thestores are brightly lit both inside andout. Every store has a raised checkout

less. Matter more.

The Royal Bank of Scotland Group

BEST PRACTICE • Creating the Living Brand

stand and uncluttered front windows toensure visibility from the street. Thecompany sets the industry standard inthe number of sophisticated alarm andvideo monitoring devices in every store.For several decades, Wawa has staffedstores with more than two associatesat a time to increase safety.

Esteem. The emotional and physicaldemands of a service job can be wear-ing, so Wawa provides rejuvenation bycelebrating successes and milestones.Employees are informed about storeperformance every month, and eachyear, the top 20% of store managers andstore supervisors, determined by finan-cial performance and Improvementover the previous year, are inducted intothe President's Club. Induction means athree-night trip with a guest to a resortlocation for a series of events that cul-minates in the President's Club ring cer-emony, held in some dramatic settingsuch as a major-league baseball park orancient ruins. The choreographed ex-travaganza carries a motivational mes-

sage and is designed to inspire managersto create an atmosphere of excellence attheir stores. The President's Club is animportant part of a corporate culturethat emphasizes celebration and the im-portance of employees' taking the timeto support one another.

Every month, mystery shoppers eval-uate Wawa stores along the company'sbrand standards, which detail expecta-tions for every element ofthe store ex-perience, from waiting time to the fresh-ness ofthe food to the cleanliness oftherestrooms. High-scoring teams are vis-ited by the "prize patrol," which brings re-wards and a party. Every quarter, associ-ates from the prize patrol stores areentered into a drawing for trips to Dis-ney. Even part-timers from the teams geta chance to win vacation trips-one gota trip around the world.

Justice. So that workers will feel theyare being treated fairly, Wawa gives el-igible employees (people who havebeen at the company for more than ayear and work more than 1,000 hours

a year) a share in about 10% of the com-pany's base profits. It has expanded itsemployee stock-ownership plan and isoffering associates an opportunity topurchase additional shares. A mark ofemployee confidence in the company:Some 29% of company shares are heldby associates.

At first glance, the investments thatWawa and QT make in their livingbrands may seem excessive. Executivesare quick to agree that both organiza-tions spend more than their competi-tors, though as private companies theykeep the numbers close to the vest."How can they afford to do that?" is aquestion we have heard as we haveshared these stories of uncommon ser-vice quality in a commonplace industry.The leaders of Wawa and QT wouldmost likely reply: "How can you affordnot to?" ^

Reprint R0505C.To order, see page 155-

"I just found the first Post-it note you ever wrote me."

132 HARVARD BUSINESS REVIEW

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