This document contains a transcript of a keynote speech given by Bob Kharazmi, Global Operations Manager of The Ritz-Carlton Hotel Company, at the 2015 Customer Care Leadership Forum in Atlanta. In his speech, Kharazmi discusses the importance of authentic customer service and creating guests for life through a focus on emotional connections with customers rather than just functional transactions. He provides examples from his experience on airlines to illustrate the difference between transactional service and service that connects with customers emotionally. Kharazmi emphasizes selecting engaged employees who believe in the company's values and purpose over those just doing a job for money. He outlines the five Ps that research shows are key to loyalty and repeat business: people, presentation,

1. 2015 Customer Care Leadership Forum
(Atlanta)
November 3, 1015
Session Transcript:
Keynote Speaker
“Creating Guests for Life”
Bob Kharazmi
Global Operations Manager
The Ritz-Carlton Hotel Company
The contents of this session transcript remain the sole property of Argyle Executive Forum, and may not be
rented, sold, reproduced or distributed to any outside party. Any unauthorized use represents theft of property
for which Argyle Executive Forum will pursue any and all appropriate legal remedies.
Session Transcript: Bob Kharazmi, Global Operations Manager, The Ritz-Carlton Hotel
Company

2. [Bob Kharazmi]: Thank you very much. The toughest job is to speak to our colleagues after lunch.
It’s the toughest job, but I try to do my best and to really convey within 30 minutes what we really
believe and what customer service is all about and how we can truly gain customers for life.
It’s interesting that Jim talked about Delta and the experience, but let me use the experience that I
have with the airlines. I think that’s the best way to start talking about customer service.
I will not mention the name of the airline, but generally speaking, the majority of us travel, and once
we get in the airplane what do we see? Welcome. Welcome. Welcome. Ladies and gentlemen
stand up front and welcome us, but that welcome is not truly authentic. If you pay attention, as I was
traveling from Washington to Tokyo, you can see the welcome that they’re giving to you, but
meanwhile, they’re not looking at you. Their eyes are not in connection with yours. Their mind is not
with you. They really, truly are not present. They’ve been told to say “welcome.” So the welcome is
not authentic and it doesn’t really sit and impact you in your heart.
Anyway, we’re flying to Tokyo and we get in the airplane. We have this unauthentic welcome. We
get in the airplane, we get to cruising altitude. They start serving food right away. After serving the
food they turn the light off. It’s a long flight, a 10 to 12 hours flight. They turn the light off and then
they sit down in the corner and start talking to each other. They look at magazines. They look at the
histories of what’s been going on, shopping, this and that. The travelers, guests, customers, are
totally ignored. When you get two hours from your landing they turn the light on and then give you
breakfast. Then you land and you’re gone.
So we made it to Tokyo. This was my flight to Tokyo from Washington. I did my business and
interesting enough, I had to change flights because of the business need. This time I was flying back
with a different airline. Now, going to Tokyo was 777 and coming back was 777, but a different airline.
The lady in the front end when we were entering the airplane, she was welcoming us. They were a
totally different crew, a different company. There was eye contact. They were present. You know,
when a person is present their heart, their mind, their soul, everything they have is with you. But

3. when they’re not present they’re in a different place. Their mind is somewhere else. This lady was
welcoming us with her heart. It meant a lot.
So we get in the airplane, again get to cruising altitude, and they start serving. I have a habit that I
take a nap. I call it a power nap. I take a nap between the time I sit and the time we get to cruising
altitude. I opened my eyes up and there was a blanket on me. If I sit down in front of the TV at home
and watch a football game my wife will come wake me up and say, “You have to clean the garage.”
She was nicer than my wife to me. Now, don’t get it wrong. That blanket on me meant a lot.
Then they started serving us. They started serving us with their heart and with their soul. They
started serving us, caring for us. They’re serving multiple different drinks—water, juice, anything we
wanted. They saw their role to be there to serve. They saw their role to be a professional service
provider, this crew.
However, the first crew did not see themselves as a professional service provider. They believe they
are in the transportation business. That’s the first crew. They thought their job was to take you from
point A to point B. Yet, the second group, they saw their job as being in the service business, not
necessarily the transportation business.
In the industry that I work, amazingly, [indiscernible] University study shows 60% of our business in
my industry, the hardly survive the first year. That doesn’t mean they close a door. Ownership
changes. They buy it for $0.80 on a dollar, $0.60 on a dollar, depending on the business. Is it a
restaurant? Is it a hotel?
Also, the same study from Ohio University shows that 80% make it within the five years. Making it
doesn’t mean they make good profits. It means that they can survive. The question is, why? Why is
it that some businesses survive and in our industry, some don’t? The simple answer to it is a
consumer mindset. A consumer mindset is the key to success and engaged employees are the key
to success.

4. I talk about engaged employees and I talk about customer mindset. All of us in this room, we are
customers. No matter what we do, we are customers. One of the mentalities we have is a
transactional mindset. A transactional mindset basically is a consumer decides to buy for the best
price. For example, gas for your car. I don’t think any one of us drives in order to find the highest and
the most expensive gas to put in our cars. That’s a transactional mindset. We always look for a gas
station in a neighborhood that has the right price, a good price, and we go there.
The second mindset that we have as a consumer is a relationship mindset. We go to a certain store,
we buy a bottle of their water because we know a few cents of this water that we buy will help some
young kids in Africa so they don’t have water and will provide some funding for getting them clean
water. That’s a relationship. We believe we’re helping. We go to the store and we buy that water. Or
any other different products.
The third mindset that you and I have is a loyalty mindset. This is the key for success. The loyalty
mindset is when we believe in the value of an organization, when we believe in the consistency of the
delivery, when we rely on a consistent delivery of the company. A lot of us choose certain cars and
buy one after five, six, ten years, then buy another one, the same car, higher model. We choose the
same hotel. We select the same restaurant to go to because we have loyalty.
Now, why do we have loyalty? Because we believe in their value system, because we trust that
they’re authentic, because we believe that they know they are in the service business. We have three
mindsets and there’s no fourth one.
Let me talk about service for a second. This is a very big topic and usually takes me hours to explain
in our company for our new employees, but I’ll try to get how I feel about the service within the short
period of time I have. Every organization, when they deliver in service, there are two aspects of
service which ultimately end up having a guest for life, meaning that the guest has a mindset which is
loyal to the brand, whatever that brand is—car, clothing, hotel, whatever.

5. When you look at the service, there’s a transactional part and there is an emotional part. Any
service—transactional, functional—an emotional part. In both cases, both the transactional and
functional parts have to be done right. That’s the entry level to any business.
Now, the emotional part of a service delivery is the one that creates guests for life. It creates guests
that keep coming back to your store. It creates the guests that keep coming back to your businesses.
Now, let me give you an example. If you go to a bank and let’s say you want to change $50—you
want to get $50 in change and good luck with that. These days banks ask you a million questions
before they give you $50 in change. Let’s assume you go to the bank and the teller looks you in the
eyes, greets you and asks for I.D. They see your name and says, “Mr. Kharazmi, you’re asking for
change for $50. How would you like it?” She’s very pleasant and she gives the change.
You come outside and you look at your money. You see it’s only $45. What did she do? She did the
emotional part right. She greeted you, she looked you in the eyes, she used your name. She made
you feel good. But she shorted you five bucks. That’s the transactional part. You see, if you don’t do
the transactional part right the emotional part is not going to work.
However, if you go to the same bank and say, “I need $50 in change” and the teller doesn’t even look
at you in your face, her head or his head is down in the computer, they don’t greet you, doesn’t use
your name and extends you $50 in change and the next thing he or she says is, “Next!” meaning next
customer to come from the maze—we say “maze” in the banks—you come out, you got the 50 bucks,
but how do you feel? You don’t feel good. You’re not respected. Your heart is not touched. You’re
not greeted, your name was not used. They didn’t win the emotional part of you.
So one completes the other. The functional part has to be right. The emotional part on the top of that
wins a guest for life. Wins a guest for life, and you have the guest forever. You have the customer
forever.
Unfortunately, in our business, most of the time we only focus on the functional part and we pay less
attention to the emotional part. I’ll give you an example of how we select employees. No matter when

6. we sit in the corporate of our companies and we come up with the strategy, that strategy means
nothing unless the ladies and gentlemen who they work for us on the floor, facing the guest, delivering
that strategy. They’re executing that strategy in a way we want.
So selecting employees is the key. If we select an employee that is coming to do what we do in our
business—let’s say it’s transportation, let’s say it’s an airplane, let’s say it’s a cab, let’s say it’s a
hotel—they can check you in, check you out. They can deliver your room service. If they’re joining
you as a transactional part of your business they are coming to join you for money. They’re coming to
join you for money. They are not engaged employees. They are not [indiscernible] employees.
But if they join you, if you select your employees in a way that they believe in what you believe as the
owner of the company, as a leader of the company, you have a belief system, you have a purpose,
there’s a reason you opened that business. If they believe in what you believe, they don’t work for
your money because they have the same belief. Because of that, the productivity goes up.
Profitability goes up. Turnover goes down. Guest engagement goes up. You gain guests for life. It
really, truly starts with the guest. It really, truly starts with the guests and in the service and trying to
make sure that on a daily basis we emphasize our DNA, we emphasize who we are as a company.
It’s always explaining. It’s easy to explain what we do, how we do it, but it is difficult to explain what,
why we do it. It’s not what we do. Why we established a company. There was a need to establish
that company. There was a gap that we saw in the business and we established the company. We
have to focus and we have to make sure that the employees know why the company was put
together. The why is the key. The belief is the key. That is missing in the majority of our businesses.
If you look at J.D. Power, we all get the J.D. Power. J.D. Power does so many studies. They study
so many industries. And they ask so many questions and grade you all the way, I believe, through
1,000. They do this under five categories. J.D. Power calls it the five Ps. They say if you can get
these five Ps right you’re going to have a service that is going to create loyalty and that’s going to
create guests that will keep coming back.

7. I’ll tell you what those five Ps are, if I have time. One is people. They said select the people that
believe in what you believe. That’s what I was talking about. I have seen a lot of companies that
haven’t even met the leaders. They haven’t met the employees, and the employees have been there
for months. How would you expect the employee to know why the company is put together?
The second P that J.D. Power looked at is presentation. Presentation is extremely important.
Nowadays, it’s extremely, extremely important. Don’t let [indiscernible] tell you something else. If you
enter an attorney’s office and see very nice furnishings, newspapers are daily newspapers,
magazines are not two months old, then everything is right. You meet this attorney and they ask you
for $500, you don’t have a hard time negotiating the rate. Presentation is important.
But if you enter an attorney’s office where the magazines are five months old, newspapers are one
week old, and there’s dust and plastic flowers, you’re going to be more aggressive in saying, “Why do
you want to charge me $500? Why not start with $100?” You see? Presentation is important in the
business. Personal life as well.
The other P that J.D. Power looks at is process. The process, the way they define process is that of
course, it has to be some system, how you run your company, but the process should not be
designed in a way that overrides guests. Ultimately, guests are the [indiscernible].
You heard the story—this is a real story that has been published multiple places. A gentleman buys
Ray-Ban sunglasses and after a while, the sunglasses frame gets to be discolored. He takes them to
the store and says, “This is discolored. I’m a little surprised why this is discolored.” The employee,
the clerk says, “Well, sir, I don’t know why it’s discolored. I’m so sorry, but it’s discolored,” meaning,
just take it.
So he takes it and again, you might be familiar with it. I don’t want to name the company, but I’ll say it
anyway. He goes to Nordstrom. He goes to Nordstrom because he wanted to buy a few shirts or
whatever and meanwhile, he sees they carry Ray-Ban. He says, “Let me ask this gentleman.” He
says, “Listen, I bought these Ray-Ban’s six months ago and the frame is discolored.” The answer

8. from the clerk is, “Give them to me. I’ll give you new ones. We carry [indiscernible].” He says, “No, I
didn’t buy from here. I bought them from a different store.” He says, “It doesn’t matter.”
Do you know the loyalty that guests, that person now has towards Nordstrom? It’s incredible. What’s
it going to cost Nordstrom? I guarantee you if nothing, maybe a few dollars shipping because they
buy so many glasses they can send them to the manufacture and it costs really nothing. It is the
belief that they have, the Nordstrom belief that you have to create that environment that the service,
the process is dictated by guests, not by you.
How many times when you face a problem you ask an employee, “Listen, I have this problem,” and
they say, “Let me get my supervisor,” or, “Let me get my manager.” The manager comes, the
supervisor comes, the GM comes. It becomes a massive issue. The more people that come the
more pissed you get. Then, at the end, they send something to your room, if it’s a hotel. It’s like
you’re toilet doesn’t work and they send you flowers. It doesn’t help.
The internal process cannot dictate what guests want. If you want loyalty from your customers, if you
want to have a customer base that is so large when the recession comes, which will come, as we
have seen in our age, you still have so much loyalty that they stick with you no matter what business
you are. That’s the J.D. Powers process.
They talk about presentation. Then they talk about price. I talk to my leaders in my company. I say
charge more. Why are you charging less? Charge more. Price is nothing but a value proposition.
We all love to pay more if we get value. As long as you get value you can charge. Where we think
we get ripped off is when the price is there but the value is missing. That’s where we don’t want to
spend. If you buy a suit, an expensive suit, but it lasts you years and still holds itself, you’re not going
to be worried about how much you paid.
The other P that J.D. Powers focuses on is product. They talk about product in multiple different
ways. First of all, they define product in two ways. One, they say product is a service. The whole
idea of service is to aim to the heart of guests. If you win the guests hearts you have the emotional
part under control. You got them.

9. They talk about engagement, not satisfaction. You don’t get married with someone because you’re
just satisfied with your relationship. If you do, I have news for you. No, I’m not going to say it. But if
you get engaged from the heart, that’s going to be life-lasting marriage. Now, some of you say, “Is
this good or bad?” I would say it’s good because it is coming from your heart.
It’s like this. When we talk about service and aiming for emotion, the heart is like this. You remember
your loved ones anniversary, okay, which most of the guys don’t. Thanks to iPads and technology,
they keep reminding us. If you buy a gift and go home, and this is the transactional part of service,
you remembered the anniversary. You bought the gift, more likely an expensive gift, but you give it to
the loved one and okay, this is an anniversary, and you go to watch TV, to eat, you’re hungry, to drink
something. It’s going to have zero impact.
I’m trying to use the personal side to get to the business side. I imagine you buy not an expensive
gift—just one stick of roses and you spend two dollars—but you get home and you give it to your
loved one with your heart. I’ve been thinking of you. This means a lot to me. Ten years we’ve been
together. Wow, I look forward to the next 20 years. You give them one single rose. I promise you
they will be very happy.
I said this example one time in one of the talks I had. One of the ladies said, “We prefer not roses.
We prefer diamonds.” I understand that, but if there’s no diamond and if there’s something that
comes from your heart, it’s a lot.
How many times do your kids prepare you a card themselves? They write it themselves? That card
means a lot. You try to save that someplace because it’s coming from the heart.
People, presentation, product, process, price. These are the keys to be in the service business in
order to have guests that will come back to you. No matter what business we are, there is a cycle to
it. It’s going to be up and down. Hopefully, most of the businesses’ cycle has been good.

10. You’re going to survive if you have a high percentage of guests that believe what you believe. They
rely on you. They are proud to be associated with your organization. You’re reliable and you’re
consistent.
The gentleman that spoke before me works for the company that we use in order to understand our
customers better. Why? Why do we want to understand our customers better? Because people
know that you don’t want to be part of the crowd. Nobody wants to be just part of the crowd. They
like to be recognized individually.
Allow me to give you an example that we have in my industry. I’ve worked for the hotel industry.
Guest complains, we send a bottle of wine. Guest complains, we send a fruit basket. Guest
complains, we send something else. And the guest doesn’t even drink wine. So how does that solve
the guests problem? You have to get up there and say, “Forgive me. We made a mistake because
our business is a human touch business. How is it that I can help you?” If you have a [indiscernible]
later on, if you want to send something, absolutely, go and do it. It takes little gestures to win the
guest forever.
I received a letter in my office. I work in [indiscernible] office. I received a letter. “Mr. Kharazmi, I
entered your hotel in Washington, D.C. [indiscernible]. It was a long flight to Washington. Guest
services welcomed me and said, ‘I hope your flight was good,’ and I said it was wonderful. I would
love to have a Starbuck’s cup of coffee.”
You know, in our business in a hotel we’ve gotten to know so many different coffees, we have every
coffee you can imagine. But we didn’t have Starbuck’s. [Indiscernible] Starbuck’s up there. We didn’t
have a Starbuck’s.
This employee gets out there, and I believe it was a rainy day, runs out, gets a Starbuck’s coffee,
comes back to the hotel, finds out which room this lady was in, goes upstairs, knocks on the door and
delivers this $2 coffee. For $2 we got a guest for life. She says in the e-mail to me that, “I will not go
anyplace but your place.” She didn’t mean my place, my home.

11. So it takes function and it takes purpose. It has to be balanced. You cannot short people $5, you
cannot ignore people giving them $50 as if you’re doing them a favor. You’re doing them no favor.
You’re just a professional service provider. As long as we see ourselves in that way, trust me, you will
have a higher percentage of guests that will come back to you. They will definitely be your advocate
for life.
We talk about technology today a lot. I’ll just close with technology. A lot of people go to site views to
take a look at where to go next. You know what? Billions of dollars gets spent in marketing, search
engines, this, that, all these things. Site views, what your friends and families tell you is much, much
more powerful than all those promotions that they do and advertisements that they do.
Thank you very much. I’ve been told my time is up. I generally expand this very long, but we don’t
have time, but I’m open for any questions you have. Please feel free to ask. I’d be delighted to
answer.
[Question]: Can you elaborate a little bit on your employee selection process or tools, behavioral
interviewing, psychometric testing?
[Bob Kharazmi]: Absolutely. Thank you. Great question. What we do is we take a look at an
individual. Me, yourself. We have knowledge. It comes from the past. We have skill. We have
learned. We have talent. Talent is not something that you go get. Talent is something that’s been
given to you. You have it. It is within you. You cannot put [indiscernible]. You.
I’ll give you an example. If I need someone for my front office or I need someone for guest-facing
activities I like to have someone that is an extrovert, that has that talent, that can smile. I cannot
teach my employees how to [indiscernible], how to smile. I cannot tell your [indiscernible] ten degrees
to this side and upper left go ten degrees to the other side. That smile is going to be artificial.
So we try, through the organization that we work in, to select the talent that fits the job. We do make
mistakes. Sometimes we promote people because they have done a fantastic job. We promote
them, which involves some jobs, some activities that they’re not talented at. We make sure that they

12. fail. We [indiscernible] them to fail, not them. It’s not people. We have to always find when our
employees do right and magnify that, magnify when they do right, and manage their weaknesses.
I do believe I might be naïve. You might be sitting there saying, “This gentleman is naïve,” but I
oversee 40,000 ladies and gentlemen, 40,000 employees. I do believe they do not leave their home
to say, “I’m going to do a bad job today.” No way. Unless you take a good employee and put them in
the wrong environment. Then the same thing can happen. You take someone that’s not good and
you put them in a good environment and you will see he or she performs much better. The
environment we create is extremely important.
So focus on talent. Thank you. Anything else?
[Question]: Do you ever experience service professional fatigue, and if you do, do you ever refocus,
whether it’s a group of folks, whether it’s a hotel, or whether it’s a region, back to your central
strategy?
[Bob Kharazmi]: I’m going to say something here that you really, truly need to think about. What
makes us successful is selecting the right employees, but what makes us fail is the one that we
cannot get rid of. It’s the toughest job. This is a challenge that we have. Keep in mind the failure that
we could have or the weakness that we could have in the division is because we cannot get rid of the
person who leads that division. It’s never a person. It is the environment and it is the leadership.
I can walk into my office and create energy by saying, “Good morning. How’s everyone?” and have
energy or I can walk into my office like this, “How’s everybody?” and really, truly get the energy to
zero.
So yes, I do face divisions in my business as I work for Ritz-Carlton. I do face hotels that don’t
operate. I see them through the metrics, but I don’t make the decision through the metrics. I take the
metrics, I visit the property, and that’s why I fly five million miles, god knows how many miles, and I
probably have the same status my friend has here because we work together to see what is going on.
The first one I focus on is the leaders.

13. Trust me, people join companies. They leave their leaders. They do not leave the company. They
leave their leaders. You want to know where the weakness is? Take a look at the leaders.
Thank you very much. All the best.
[End of Transcript]