Leadership – Page 319

A swing and a miss for BIG/GAS (first appeared in InfoWorld)

Bad news for BIG/GAS.

BIG/GAS (Business Is Great/Government and Academics are Stupid) is a ridiculous but popular theory of How Things Work. The bad news: According to the University of Michigan’s American Customer Satisfaction Index (ACSI), not only are consumers just as satisfied with the federal government as they are with the private sector, but the federal government is improving, while private sector scores are in decline.

Your response to my recent column describing my broadband ISP’s approach to Customer Elimination Management (CEM) — customer relationship management’s evil twin — bears out this wretched state of affairs. In fact, readers accused every broadband ISP in America of the same behavior. You have to wonder if these guys all went to the same customer disservice school.

The ACSI shows a clear positive correlation between customer satisfaction and business results. Sure, correlation doesn’t prove causality, but business decisions are driven by best available evidence, not rigorous proof. They have to be, because rigorous proof always arrives after opportunity has passed.

Which is what makes this sorry situation bizarre: Business, which is supposed to care about profits, return on investment and shareholder value, is shrewdly marching in exactly the wrong direction. How can that be?

We all know the answer. A colossal accumulation of evidence shows that trying to please Wall Street analysts gains a few years of improved stock prices, after which the company crashes and burns. Many business leaders don’t care about the crashing and burning. They focus on this year’s bonus, which is pegged to stock performance, so they naturally consider Wall Street analysts to be more important than the customers who buy their company’s products and services.

Not too many years ago, readers of this column would have had this reaction: “Gee, what a shame!” Now, CIOs and CTOs actively participate in strategic planning. You help shape the dialog. To the extent you do, suggest this highly innovative, post-new-economy strategy: Increase profits by retaining customers, which you can do by treating customers like they’re important to you while offering them excellent products at competitive prices’.

The evidence favors this approach. It also suggests your competitors aren’t using it, giving you an advantage.

Follow the federal government’s lead. While we’re told it’s run by faceless bureaucrats who know nothing about what we citizens need, it’s acting like it really is of the people, by the people, and for the people.

Imagine that.

A common thread (first appeared in InfoWorld)

A bunch of stuff has hit my desk recently. It all seems related somehow. See if you can find the thread that connects them:

While cleaning out old magazines I found the October issue of Darwin magazine, which published its “Fittest 50” list. Yup — there was Enron. Still, Darwin is a fine publication. Lots of others fell for Enron’s buzz, too.

Speaking of magazine articles, one in Twin Cities Business Monthly by Burt Cohen caught my eye. It wasn’t the first article I’ve seen excoriating the common business practice of placating Wall Street by focusing solely on this quarter’s results no matter how much you mortgage your future, but Cohen did say it well.

Which leads us back to Enron. How? Among the many guilty parties identified in the ongoing blamefest is Wall Street. Turns out that many of those analysts who insist on great this-quarter results looked at Enron in more friendly terms. Why? Their employers wanted Enron’s investment banking business, that’s why. With luck, Wall Street’s analysts will lose some of their clout and we can all stop being deliberately stupid just to please these geniuses.

USA Today printed something useful, too: A piece by Stephanie Armour about companies that refuse to lay off employees just to make the numbers. In it she cites a study by Watson Wyatt (www.watsonwyatt.com) showing, among other happy conclusions, that excellence in recruiting and retention results in increased shareholder value – nearly 8% more, in fact.

Back to Twin Cities Business Monthly, which profiled Joel and John Schwieters, who own eight local companies in the home construction industry. They frame and finish houses twice as fast as most construction companies; their projects lack the debris that usually litters construction sites, they’re known for exceptional quality, and they’re growing by more than 20% per year.

How do they achieve these results? Unlike nearly every other construction company, they don’t subcontract their workforce — they employ their builders, paying them a regular salary, excellent benefits, and a shared bonus pool. Even more interesting is that they’re expanding into their supply chain. Where the popular core/context theory applauds companies that prefer outsourcing any activity that’s “non-core,” (that is, not a marketplace differentiator) the Schwieters understand that controlling the supply and delivery of doors, trim, pre-built staircases and such will improve their margins.

I suppose I should mention — they’re innovative in their use of information technology, too.