Sunday, November 24, 2013

Company principles and success

A recent conversation with a friend has reminded me of something that often leaves me scratching my head in amazement.  His story concerned his transfer to a different part of the company he works for, triggered by a clash he was having with his immediate supervisor.  From his perspective (obviously, I didn't hear the other side), he was being badgered constantly for no good reason, despite his work performance being consistently good enough to earn him high performance evaluation.  He was telling me that his company (apart from his obnoxious supervisor) was very generous with holiday season bonuses and various other ways to reward their employees.  Supervisors who harass loyal and competent employees should be the ones who lose their jobs, but for reasons that escape me, they often don't.

Many years ago, I read a book - In Search of Excellence - that told of what the authors had discovered by investigating successful companies.  In a nutshell, long-term profitable companies prospered by (1) treating their customers well, and (2) treating their employees well.  This makes perfect sense, and has some significanceto current events in light of the recent push to increase the minimum wage.  Employees who are respected and rewarded when the company prospers will have a clear incentive to do what they can to help make the company successful.  If the employees are given a good reason to help the company make money, there's no reason to do anything else.  Employees treated badly find ways to pay the company back for a lack of respect.  And if the customers are given a reason to trust the company that makes products and/or provides a service, they'll continue to patronize that business, and will tell their friends about their experiences.  A dissatisfied customer may go to great lengths to get back at the business that failed to respond properly.

Yet, we find companies cutting costs by paying niggardly wages, even as company management pockets record profits.  This is precisely the wrong formula for long-term business success.  And we find companies who have an adversarial relationship with customers who buy a defective product from them.   Many businesses exhibit a blatant disregard for customer service and making good on defective products and/or inadequate or incompetent service.  How common is it these days when you have a problem with a product or service, you get into these seemingly endless conversations with robotic phone systems, to the point of complete and total frustration?  And their online customer service is equally worthless?  If you wind up speaking to a real person, that person isn't even in the USA, that service having been "outsourced" to save the business the cost of paying an American to provide such service.  Often, those foreign customer service people speak English with a nearly unintelligible foreign accent, making interacting with them frustrating and difficult.

Do businesses actually think such cost-cutting practices are helping to make them profitable?  The only way customers stick with such companies is when that business is in a near monopoly position - our way or the highway - or they have competitors that are equally thoughtless.  The only way good employees stay with such a business is when they have nowhere else to go.  The path to success in business isn't restricted to cutting costs - it's often associated with taking some of the profits and sharing them with the folks who made those profits possible:  the customers and the employees.

I can hear the right-wing pundits now.  "Sounds like socialism to me!"  Most such folks making comparisons to socialism have no clue what socialism really is.  What I'm talking about is pure free-market capitalism.  If, instead of being absurdly frugal, companies were lavish in sharing their profits with customers and employees, then they're likely to be more successful in a free market than their austere competitors.  They would have fewer clashes with unions and in many cases, their workers might even decline to be unionized because the company treats them so well.  Customers would gladly return again and again, and encourage everyone they know to patronize that business.

Much of the backlash against companies like Wal-Mart and McDonalds is driven by the disparity between their treatment of customers and employees, and the lavishly-paid managers of such businesses.  If there's any welfare associated with American business these days that's hurting this nation, it's corporate welfare for the rich.  The gap between the workers and the managers is widening and the consequences of that could easily become unpleasant.

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