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|In: Industry Commentary|Last Updated:

When Bad Things Happen to Good People was a popular book once upon a time (1983, to be precise). But it was based on a false premise — that bad things happening to good people is somehow puzzling or unusual.

It is, of course, neither. As I pointed out a few years later, it’s When Good Things Happen to Bad People“ we find seriously annoying, and stupidly common.

Last week’s missive asked about the commercial version of this — how so many businesses that are, according to the dictates of evidence, logic, and standard formulations of what constitutes a well-run business, poorly run, do so well. And continue to do so well, not only for short bubble-like periods but for decades at a time.

I’ve run across a few theories regarding this distressing phenomenon over the years. Isaac Asimov proposed, for example, that “The lesson of history is that it isn’t who outsmarts whom that matters. It’s who out-stupids whom.”

Another, which I don’t like at all but that seems to fit the evidence well enough that we can’t just discard it out of hand, is that businesses only need to do one or two things really well. The rest they just need to be good enough at to muddle through.

This isn’t as preposterous as it might seem. To understand why, consider the Case of the Perturbed Perfectionist.

As pointed out in this space once upon a time, to the perfectionist the world is an infinite pile of flaws, each and every one of which must be ferreted out and fixed.

It isn’t that flaws are good things. It’s that, to put it in automotive terms, no matter how repairs you make, you won’t turn a Gremlin into a Bentley. Which is why, I think, Six Sigma is so often disappointing: Minimizing variation results in better Gremlins, not better cars.

Which in business leads to the only question that matters: What customers care about when deciding between your product, a competing product, and not buying anything at all.

The list of what customers care about isn’t all that long. Customers, defined as people who make or strongly influence the buying decision, care about:

  • Product assortment
  • Price
  • Convenience, which includes support and service
  • Features
  • Aesthetics
  • Quality (that is, absence of defects)
  • Image (visibility, perceived coolness, brand, liking the sales rep …)

This list isn’t comprehensive, but it’s close enough, because what matters is that different customers in different markets will rank these differently. In most markets only a few matter very much, but it’s a different few for different markets.

Take, for example, the benefits manager responsible for choosing her company’s group health insurance provider. Price and convenience will matter a lot. The rest will range from mattering a little to who cares?

For an insurer, great pricing comes from the actuarial and underwriting functions, accurate provider scoring and negotiated discounts, and ferociously efficient claims processing. Convenience mostly translates to customer service … at the benefits manager level, that is. Business functions that don’t contribute to these are business functions where being good enough is probably good enough.

Which is different from say, a company that retails consumer electronics on line.

For e-tailers, like health insurers success depends on price and convenience, and price does depends in part on how effectively merchants negotiate with vendors, and how well procurement negotiates shipping rates. In place of claims processing, e-tailers need ferociously efficient warehouse fulfillment operations (pick, pack, and ship).

Convenience comes mostly from merchandising, only it’s web merchandising. Image depends on advertising.

For e-tailers, unlike health insurers, their product assortment matters a lot. For some but not all, so does image. The former? Merchandizing again — how accurately merchants predict which products will be most interesting to customers. The latter usually belongs to an ad agency.

So for e-tailers, anything that doesn’t improve merchandising and warehouse operations falls into the just-good-enough pile.

Here’s what this means to you.

Unlike flaws, the pile of money and executive attention available for investing in business success is far from infinite. Where you can convincingly connect the dots between what your organization does within the business to one of the short-listed success factors, you can argue for more of this pile.

That’s quite different from anything else you do. If you want some of the pile for those responsibilities, you have a harder case to make:

That without more budget you can’t achieve the exalted state of good enough.

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|In: Leadership|Last Updated:

“American managers are stupid,” my correspondent offered, by way of explaining why so many ignore his perspectives.

I decided not to ask whether he meant that (1) all Americans are stupid and, by the laws of object inheritance and the transitive law of algebra, American managers, being Americans, are stupid; (2) American managers are stupider than the average American; or (3) it’s Sturgeon’s Law in action: 90% of everyone are stupid and that includes American managers.

To the best of my knowledge nobody has ever surveyed American managerial IQs to determine whether the mean is less than, greater than, or equal to 100 — IQ’s definitional IQ average. Also, IQ is a badly flawed metric.

Meanwhile, the American managers I’ve personally worked with have in general been a brighter than average lot. While employee dissatisfaction with management is both widespread and deserved, I’m pretty sure it isn’t because they are, as a class, dopes.

Which somehow or other brings us to this week’s topic.

Many companies conduct employee satisfaction surveys. Some are better than others, but I’ve yet to see any that move beyond warm fuzzies to the only metrics that matter in a market economy.

The KJR alternative: ask employees to express their satisfaction or dissatisfaction financially.

It will take only four questions:

Question #1: What percentage of your total compensation would you be willing to give up in exchange for a better manager?

Question #2: What is it about your manager that led to your answer to Question #1?

Question #3: What percentage of your total compensation would you be willing to give up in exchange for working in a better company?

Question #4: What is it about this company that led to your answer to Question #3?

Yes, yes, I know. The answers to questions 2 and 4 couldn’t be automatically tabulated, at least, not the first time you administer the survey. But which is more important — automated tabulation or useful information?

Even if you only ask questions #1 and #3, just knowing how much money employees would be willing to give up in exchange for a better work environment would give business leaders at all levels a lot to chew on.

Starting with this question: Does it matter?

It ought to matter a lot. It’s widely recognized that the best employees are at least twice as effective as average ones, and the gap is probably much wider than that.

The best employees are also the most mobile. Add to this another general-purpose factoid: Replacing a good employee costs the equivalent of about a year of compensation, counting recruiting costs, the costs of bringing new employees up to speed on their responsibilities, and the overall loss of team effectiveness as teams adjust to changes in their membership.

Do the math and it should be clear that losing your best employees is an expensive proposition.

And yet, I often run into companies whose employees privately tell me are utter meat grinders — horrible places to work. They have high employee turnover, as we’d predict, and yet they make so much money so quickly they have a hard time figuring out what to do with it all, and have over spans of decades.

How is this possible? The short answer is, beats me. The longer answer is nothing but speculation: The same management characteristics that make these companies bad places to work somehow make them resilient in the face of high employee turnover rates.

Take, for example, micromanagement. I’ve yet to hear anyone say they like being micromanaged. But whatever their flaws, micromanagers do know how to do the work they’re micromanaging. If they didn’t they couldn’t micromanage. And because they’re able to do the work, micromanagers can pick up the slack when an employee leaves.

Of course, picking up the slack adds pressure and workload, making the micromanager even less pleasant to work for.

Let the process play out for a few cycles and what you’ll get, I think, is a department staffed by mediocrities who can’t easily find better employment, run by managers for whom micromanagement is integral to how their department’s work gets done.

It’s a stable configuration. As long as the company does something else well enough to make it competitive in its marketplace, there are no forces in play to drive change and plenty in play to keep it as it is.

My guess is that similar dynamics govern other forms of stable, bad management.

If you’re one of the offending managers, please don’t take this as an endorsement of your management style. Explanation doesn’t equal approval.

And in any event, I’m just speculating. Maybe one of KJR’s more enlightened constituents has a better theory?

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