Reference no: EM131446486

Enterprise Rent-A-Car Focuses on Its People

Enterprise Rent-A-Car, with annual sales of more than $13 billion, is the largest and most profitable car-rental business in North America. The company runs more than 6000 locations that fall within 15 miles of 90 percent of the U.S. population. Enterprise also operates in Canada, Germany, Ireland, and the United Kingdom.

When Jack Taylor started Enterprise in 1957, he adopted a unique strategy. Most car-rental firms targeted business and leisure travel customers who arrived at an airport and needed to rent a car for local transportation. Taylor decided to target a different segment-drivers whose own cars were being repaired or who were driving on vacation, hauling home improvement materials, or in need of an extra vehicle for an out-of-town guest, or who, for some other reason, simply needed an extra car for a few days.

Traditional car rental companies must charge relatively high daily rates because their locations in or near airports are expensive. In addition, their business customers are price-insensitive because their companies pay for the rental expenses. While the airport locations are convenient for business customers, these locations are inconvenient for people seeking a replacement car while their car is in the shop. Although Enterprise has airport locations, it also maintains rental offices in downtown and suburban areas, near where its target market lives and works. The firm provides local pickup and delivery service in most areas.

Enterprise also rewards entrepreneurship at a local level. The company fosters a sense of ownership among its employees. For example, its management training program starts by defining a clear career path for each management trainee. Then it teaches employees how to build their own business. Their compensation is tied directly to the financial results of the local operation. Employees from the rental branch offices often advance to the highest levels of operating management.

The firm hires college graduates-8000 each year from 1000 campuses-for its management trainee positions because it believes a college degree demonstrates intelligence and motivation. Rather than recruiting students with the highest GPA, it focuses on hiring people who were athletes or officers of social organizations, such as fraternities, sororities, and clubs, because they typically have the good interpersonal skills needed to deal effectively with Enterprise's varied customers.

Jack Taylor's growth strategy is based on providing high-quality, personalized service so that customers will return to Enterprise when they need to rent a car again. One of his often-quoted sayings summarizes his philosophy: "If you take care of your customers and employees, the bottom line will take care of itself." But because operating managers initially were compensated on the basis of sales growth, not customer satisfaction, service quality declined.

The first step Enterprise took to improve customer service was to develop a customer satisfaction measure, called the Enterprise Service Quality Index. The questionnaire that customers complete to assess ESQI was developed on the basis of input from operating managers, which in turn gave those managers a sense of ownership of the measurement tool. As ESQI gained legitimacy, Enterprise made a bigger deal of it. It posted the scores for each location prominently in its monthly operating reports-right next to the net profit numbers that determined managers' pay. The operating managers were able to track how they were doing and how all their peers were doing because all of the locations were ranked.

Feedback is also provided to service providers. If a customer mentions in the questionnaire that "I really liked Jill behind the counter; she just was terrific," that comment gets sent the very next morning to the local branch so that Jill knows that she did a great job and that a customer said something nice about her. Likewise, if somebody said that a car was dirty, the next day the local manager knows it and can determine why it happened.

To increase motivation among managers and improve service at their locations, Enterprise also announced that managers could be promoted only if their customer satisfaction scores were above the company average. Then it demonstrated that it would abide by this policy by failing to promote some star performers who had achieved good growth and profit numbers but had below-average satisfaction scores.

To provide a high level of service, new employees generally work long, grueling hours for what many see as relatively low pay. Before they are put in a branch and learn how to rent a car, Enterprise tells new hires about what the company means, what is important to customers, and what it deems important in terms of being a good team member. The company operates like a confederation of small businesses. New employees, like all Enterprise managers, are expected to jump in and help wash or vacuum cars when the location gets backed up. But all this hard work can pay off. The firm does not hire outsiders for other than entry-level jobs. At Enterprise, every position is filled by promoting someone already inside the company. Thus, Enterprise employees know that if they work hard and do their best, they may very well succeed in moving up the corporate ladder and earning a significant income.

DISCUSSION QUESTIONS

1. What are the pros and cons of Enterprise's human resource management strategy?

2. Would you want to work for Enterprise? Why or why not?

3. How does its human resource strategy complement the quality of customer service delivered by its representatives