Schafer: 'Customer' gives way to 'guest' at Regis Corp.

Dan Hanrahan has been chief executive of Regis Corp. for just six weeks, but the biggest change he may ever bring to the Edina-based company happened on his first day.

He stood in front of a room of 700 folks from the field and called Regis customers "guests," and asked that everyone else at the company start doing that, too.

"I got a great reaction," Hanrahan said in an interview this week. "Sometimes, the best solutions are the ones that are right in front of you."

He said he was lucky to see 700 employees his first day, as the meeting had long been scheduled for other reasons. He said the term "guest" has since caught on in the Edina headquarters and he hears it when he visits the company's more than 7,500 company-owned salons, although some staff tell him that they still occasionally trip and say "client."

Hanrahan resisted calling Regis a turnaround candidate, even though the company has reported 16 straight quarters of same-store sales declines. He said he was not ready to talk at length about his strategy, but it was clear from the conversation that much of his plan to improve results will revolve around enhancing the experience of visiting a Regis salon.

For Hanrahan, a client or customer means a person in a transaction -- the company delivers a service and the customer pays.

A guest, in Hanrahan's view, gets treated differently. A dissatisfied customer can be thought of as a thorn in the side, but there is really no such thing as a difficult guest.

"He wants to change the language, and that absolutely can matter," said Mary Zellmer-Bruhn, a professor of organizational behavior at the University of Minnesota's Carlson School of Management. Zellmer-Bruhn said "it's a signal, and maybe gets people's attention," and that he will need to follow up with other changes as well.

She observed that the managers who do best at leading a culture change are "very effective at telling stories, at giving vivid pictures of how the organization must change. What does it really mean that we are now calling people guests?"

Hanrahan's stories come from what he called "spending a lot of time on cruise ships." He said the last time he heard the word "customer" at work was the day before he started at Royal Caribbean Cruises, in 1999.

He later served as CEO of Royal Caribbean's Celebrity Cruises unit. While on board the ships he saw waiters chat with passing guests in the corridor, and they seemed to remember each guest's name.

He saw other waiters run to another dining room to fetch a favorite food when it would have been far easier to just explain that an item wasn't on the menu at that location.

At Celebrity Cruises he and his team closely examined the countless interactions with guests the staff had over the course of a cruise, and they put in place training and structure to ensure the best result in four or five key interactions, what Hanrahan called "touch points."

He said that he found that if those handful of touch points went perfectly, the rest of the trip tended to go very well.

The Regis hair salon business is far simpler than cruises, not least because customers in for a cut or coloring don't literally live in a salon for a week.

But Hanrahan said he is sure there are similarly a handful of key touch points in the salon that will shape a great guest experience.

"We have yet to determine what those are, and we have to be careful not to do 70 or 80, but the four or five that really drive guest satisfaction," he said. "We get those right and the rest of them will follow along."

He said he has used a couple of proven guest measurement models, including one he called "SGI," saying it as if a columnist should know what that is.

Don't bother launching a Google search on SGI, as it turns out to mean something only at Royal Caribbean. It is a version of a model that dates from the mid-1990s that combines satisfaction with a consumer's experience with whether the customer would come back and whether the customer would recommend the service to friends or family.

Other companies know it as the secure customer index, but Royal Caribbean promptly renamed it a "secure guest index."

"It's something that has caught on here," Hanrahan said, of the use of the word guest. "But it doesn't count until we have shifted the culture, and people walk out of our salons and go, 'Wow, that was an amazing experience and I am going to tell other people about it.'"