I had an unfortunate episode of dreadful customer service with FedEx yesterday.
Being a marketing student from way back, I admire companies and businesses that get this right. It's so awesome to watch a good salesperson in action, or see someone deliver superior customer service after the sale.
In my case, it could have been the latter, but it wasn't.
Being a quant investment manager, I buy data. My supplier is S&P. Each week they send a data disc full of equity-related data. It is currently delivered via FedEx.
The FedEx label clearly identifies that the contents of the envelope is a DVD.
Yesterday, the FedEx guy left the envelope laying on the porch in front of my door. I've spoken with whomever the guy has been, in the past, about this. If anyone steps on the envelope, I could be out of luck for a week, as a replacement disc is shipped.
So I called FedEx to request a note be sent to the delivery guy. It wasn't super easy to find a phone number, because there's none on the mailing label or envelope.
When I got to a human, and explained my issue, her response was, to closely paraphrase,
'I can send a note to them, but it's all I can do. Don't know if it will matter.'
Gee, thanks.
I specified, as before in my conversations with prior delivery men, to wedge the envelope behind my mailbox.
To this, the customer service rep replied,
'He can't do that, because the mailman will think it's outgoing mail and take it.'
Wrong, sister. I carefully, but rapidly, explained that the area behind the box is neither in the mailbox, nor USPS property. And what mailman would try to take and deliver a FedEx envelope in the first place?
Stupid. Stupid. Stupid.
Not to mention that she annoyed and disappointed me by not simply saying, while composing the note,
'Thanks for contacting us about this. I'll make sure he gets the note. Call me again if this hasn't solved your problem.'
See how effortless that would have been? She would have appeared to care about my problem and its solution. And even shared my hope and belief that the note would work, instead of essentially warning me it probably was a hopeless task.
Talk about lousy customer service and training.
FedEx need to do much, much better.
Showing posts with label Customer Needs. Show all posts
Showing posts with label Customer Needs. Show all posts
Thursday, July 08, 2010
Friday, September 25, 2009
Stop&Shop: A Failure of Customer Service
One of the larger grocery stores in my area is a Super Stop&Shop. I'm uncertain as to the ownership of the chain. It's based in the Boston/Rhode Island area, but I cannot find it as a publicly-listed company.
(Author's note: I have since verified that Stop&Shop is a division of Royal Ahold, the Dutch-based food retailer.)
In recent years, the chain has upgraded stores, adding departments and various services. Recently, it took a giant step to distinguish itself by adding hand-held scanners. This product allows a customer to scan bar codes while shopping, including using custom-printed produce bar codes generated by electronic scales. The result is potentially the quickest possible checkout experience, bar none.
Not only does a customer not have to re-scan each item, but, due to having nothing to scan, s/he may use the express lane. The only significant activity at checkout is paying for the merchandise.
Due to this technology, I had shifted nearly my entire food purchasing activity to Stop&Shop, from a local, smaller chain, Kings. That chain had been owned by British-based Marks&Spencer for years. I'm not sure of its ownership status now, but I believe M&S at least reduced their stake, if they did not succeed in divesting themselves of their entire interest.
The Stop&Shop hand-held scanner is apparently a third-party provided solution, as I learned this summer.
One evening, having successfully sped around the store scanning away, I was checking out in the express lane, when the monitor announced that I "needed help," and suspended checkout. I was the victim of a cart audit.
Understandably, the hand-held scanner system generates "random" audits of shoppers, at which a S&S employee comes over to randomly scan items from the customer's purchases, confirming that each re-scanned item matches an originally-scanned item.
However, this became a problem when I was subjected to this so-called "random" event at least 4 times this summer.
Since the entire purpose of the combination of self-checkout lanes and a hand-held scanner is to deliver a speedy shopping experience to the customer, being stopped for an interaction with a low-paid, low-skilled clerk defeats the entire purpose. A well-designed audit program would balance stopping theft through unscanned items with truly random, or, better, system learning, so that customers who are audited, and not found to be stealing, are rated a lower risk, and subject to fewer random checks over time.
After the third audit this summer, I demanded to see the manager on duty at the time. In a long conversation, I explained that I did effectively all my grocery shopping at that store, because of the self-checkout and hand-held scanners. And that it was difficult for me to believe that I was "randomly" audited 3 times in, at most, as many months. That each audit was, to me, as a customer, a pending accusation of theft.
I told the employee, actually the store's assistant manager, that if I was subjected to one more audit within the next three months, I would stop patronizing his store. I didn't care how he would arrange it, but this was my promise.
Last week, I was stopped again for a cart audit. This time, as I loudly asked if the audit did not mean the store management suspected me of theft, and, when I passed the audit, was I not innocent of said assumption, I demanded to see the on-shift manager. This time, it was the store's manager, and he was standing only a few feet away. With him was the man I recognized, from my earlier conversation, as the store's assistant manager.
That's when the real fun began.
By now, a short line of people were queued up behind me in the express lane. I had a heated conversation with the manager, who tried to excuse the situation by claiming that the system was not under his control. That a third party was managing it.
I retorted that, as a customer, that made no difference to me. I was in a Stop&Shop store, so I had a reasonable expectation that the store's manager was responsible for my treatment. We went on like this for some minutes, with the manager incredibly contending that if I were to contact his corporate management, it would have more impact than his own complaint.
I replied that I had better things to do with my time, and that, if his statement were true, his firm is in more trouble than they probably realize. And that, as promised to the assistant manager, who had not recognized me, I was now returning to Kings to do all of my grocery shopping.
When I tried to check out, after the employee had done the required cart audit, the monitor froze, then came back up blank. The manager was horrified. Because my purchase used the scanner, the hand-held unit was needed to restart the checkout process.
But the audit employee had taken it. She, and it, were nowhere in sight.
I then had the pleasure of an event of which many of us have probably dreamt, but few have done.
I announced loudly that the store's system and management were totally inept, and could not even check out my purchases.
And then, I began to unload my very full canvas shopping bag onto the floor.
Again, clearly and loudly, to the manager, explaining that I did not even want the merchandise I had just selected and tried to buy, I placed various produce items and packaged goods in and around a small hand-basket, then left the store. Again, announcing my next stop- the rival grocery chain store down the street.
This is a store manager's worst nightmare. The cost of reshelving items is pretty high. Basically, with 1% sales margins in grocery stores, it effectively wipes out profit on those items, and then some. Not to mention the produce, which might have to be discarded.
Then there is the visual of a customer dumping items back onto a floor in full view of other customers. It's the ultimate repudiation of a retailer.
Honestly, I'm surprised the manager let me do this, and didn't offer almost anything to prevent it.
Ironically, as I processed what had just happened, with this post in mind, I realized that Stop&Shop's failure in this case was not its use of technology. Or the technology's failure.
No, the real culprit was the store's manager, assistant manager, and staff.
The assistant manager had never taken my name or contact information during our initial conversation in July. I clearly warned of the consequence of my experiencing another cart audit within the next few months.
Had the assistant manager been alert and competent, he would have taken my contact information, and at least begun a communications process that would lead me to believe, and, more importantly, feel that the store's management sympathized with my plight, and was doing something about it.
Even during my second conversation, with the store manager, he, too neglected to take any identification or contact information whatsoever.
Here, he had a disappointed, angry soon-to-be-ex-customer loudly denouncing his store in front of several lines of other customers at the checkout lanes. You'd think he would take the opportunity to exhibit maximal empathy and a show of action calculated to defuse my frustration and demonstrate real concern for his customer.
Instead, he appealed to me to contact his own senior management, though offering no advice as to how to do that, or whom to contact.
If that store manager had taken my contact information, apologized for the occurrence, and promised to 'do something,' he would have kept my business for at least a week or so, and have put on a wonderful show of positive, caring customer service in front of several dozen other customers.
This is, I think, a rather important lesson. Blaming the technology that a firm chooses to provide in its stores for its customers, for a bad shopping experience, is hardly productive or effective.
But almost any bad customer experience can be, at least temporarily, assuaged by genuine attention, collection of the customer's name and contact information, and a promise of imminent contact and communication to remedy the situation.
As I have mulled over this experience for the past week, I become more and more amazed at the lack of training, sophistication and innate instinct for good customer service that was displayed by the store manager of the Stop&Shop. What's sad, of course, is that if this constitutes "leadership" at the store, imagine how inept and ineffective customer service must be among the lower-level employees.
Isn't it ironic that Stop&Shop has invested substantial sums of money to become a leader in allowing very fast shopping trips, with no interaction with the store's staff, only to blunt this potentially important competitive advantage through poor control and oversight, and integration, of the technology with the store's management. And, then, compounding this error with poor customer service.
Customer service really is the first- and last- line of defense for a retailer. It can at least temporarily blunt and offset a poor customer experience with the store. But if this line of defense fails, the retailer is lost.
(Author's note: I have since verified that Stop&Shop is a division of Royal Ahold, the Dutch-based food retailer.)
In recent years, the chain has upgraded stores, adding departments and various services. Recently, it took a giant step to distinguish itself by adding hand-held scanners. This product allows a customer to scan bar codes while shopping, including using custom-printed produce bar codes generated by electronic scales. The result is potentially the quickest possible checkout experience, bar none.
Not only does a customer not have to re-scan each item, but, due to having nothing to scan, s/he may use the express lane. The only significant activity at checkout is paying for the merchandise.
Due to this technology, I had shifted nearly my entire food purchasing activity to Stop&Shop, from a local, smaller chain, Kings. That chain had been owned by British-based Marks&Spencer for years. I'm not sure of its ownership status now, but I believe M&S at least reduced their stake, if they did not succeed in divesting themselves of their entire interest.
The Stop&Shop hand-held scanner is apparently a third-party provided solution, as I learned this summer.
One evening, having successfully sped around the store scanning away, I was checking out in the express lane, when the monitor announced that I "needed help," and suspended checkout. I was the victim of a cart audit.
Understandably, the hand-held scanner system generates "random" audits of shoppers, at which a S&S employee comes over to randomly scan items from the customer's purchases, confirming that each re-scanned item matches an originally-scanned item.
However, this became a problem when I was subjected to this so-called "random" event at least 4 times this summer.
Since the entire purpose of the combination of self-checkout lanes and a hand-held scanner is to deliver a speedy shopping experience to the customer, being stopped for an interaction with a low-paid, low-skilled clerk defeats the entire purpose. A well-designed audit program would balance stopping theft through unscanned items with truly random, or, better, system learning, so that customers who are audited, and not found to be stealing, are rated a lower risk, and subject to fewer random checks over time.
After the third audit this summer, I demanded to see the manager on duty at the time. In a long conversation, I explained that I did effectively all my grocery shopping at that store, because of the self-checkout and hand-held scanners. And that it was difficult for me to believe that I was "randomly" audited 3 times in, at most, as many months. That each audit was, to me, as a customer, a pending accusation of theft.
I told the employee, actually the store's assistant manager, that if I was subjected to one more audit within the next three months, I would stop patronizing his store. I didn't care how he would arrange it, but this was my promise.
Last week, I was stopped again for a cart audit. This time, as I loudly asked if the audit did not mean the store management suspected me of theft, and, when I passed the audit, was I not innocent of said assumption, I demanded to see the on-shift manager. This time, it was the store's manager, and he was standing only a few feet away. With him was the man I recognized, from my earlier conversation, as the store's assistant manager.
That's when the real fun began.
By now, a short line of people were queued up behind me in the express lane. I had a heated conversation with the manager, who tried to excuse the situation by claiming that the system was not under his control. That a third party was managing it.
I retorted that, as a customer, that made no difference to me. I was in a Stop&Shop store, so I had a reasonable expectation that the store's manager was responsible for my treatment. We went on like this for some minutes, with the manager incredibly contending that if I were to contact his corporate management, it would have more impact than his own complaint.
I replied that I had better things to do with my time, and that, if his statement were true, his firm is in more trouble than they probably realize. And that, as promised to the assistant manager, who had not recognized me, I was now returning to Kings to do all of my grocery shopping.
When I tried to check out, after the employee had done the required cart audit, the monitor froze, then came back up blank. The manager was horrified. Because my purchase used the scanner, the hand-held unit was needed to restart the checkout process.
But the audit employee had taken it. She, and it, were nowhere in sight.
I then had the pleasure of an event of which many of us have probably dreamt, but few have done.
I announced loudly that the store's system and management were totally inept, and could not even check out my purchases.
And then, I began to unload my very full canvas shopping bag onto the floor.
Again, clearly and loudly, to the manager, explaining that I did not even want the merchandise I had just selected and tried to buy, I placed various produce items and packaged goods in and around a small hand-basket, then left the store. Again, announcing my next stop- the rival grocery chain store down the street.
This is a store manager's worst nightmare. The cost of reshelving items is pretty high. Basically, with 1% sales margins in grocery stores, it effectively wipes out profit on those items, and then some. Not to mention the produce, which might have to be discarded.
Then there is the visual of a customer dumping items back onto a floor in full view of other customers. It's the ultimate repudiation of a retailer.
Honestly, I'm surprised the manager let me do this, and didn't offer almost anything to prevent it.
Ironically, as I processed what had just happened, with this post in mind, I realized that Stop&Shop's failure in this case was not its use of technology. Or the technology's failure.
No, the real culprit was the store's manager, assistant manager, and staff.
The assistant manager had never taken my name or contact information during our initial conversation in July. I clearly warned of the consequence of my experiencing another cart audit within the next few months.
Had the assistant manager been alert and competent, he would have taken my contact information, and at least begun a communications process that would lead me to believe, and, more importantly, feel that the store's management sympathized with my plight, and was doing something about it.
Even during my second conversation, with the store manager, he, too neglected to take any identification or contact information whatsoever.
Here, he had a disappointed, angry soon-to-be-ex-customer loudly denouncing his store in front of several lines of other customers at the checkout lanes. You'd think he would take the opportunity to exhibit maximal empathy and a show of action calculated to defuse my frustration and demonstrate real concern for his customer.
Instead, he appealed to me to contact his own senior management, though offering no advice as to how to do that, or whom to contact.
If that store manager had taken my contact information, apologized for the occurrence, and promised to 'do something,' he would have kept my business for at least a week or so, and have put on a wonderful show of positive, caring customer service in front of several dozen other customers.
This is, I think, a rather important lesson. Blaming the technology that a firm chooses to provide in its stores for its customers, for a bad shopping experience, is hardly productive or effective.
But almost any bad customer experience can be, at least temporarily, assuaged by genuine attention, collection of the customer's name and contact information, and a promise of imminent contact and communication to remedy the situation.
As I have mulled over this experience for the past week, I become more and more amazed at the lack of training, sophistication and innate instinct for good customer service that was displayed by the store manager of the Stop&Shop. What's sad, of course, is that if this constitutes "leadership" at the store, imagine how inept and ineffective customer service must be among the lower-level employees.
Isn't it ironic that Stop&Shop has invested substantial sums of money to become a leader in allowing very fast shopping trips, with no interaction with the store's staff, only to blunt this potentially important competitive advantage through poor control and oversight, and integration, of the technology with the store's management. And, then, compounding this error with poor customer service.
Customer service really is the first- and last- line of defense for a retailer. It can at least temporarily blunt and offset a poor customer experience with the store. But if this line of defense fails, the retailer is lost.
Thursday, September 24, 2009
Cadbury's Stitzer's Key Customer Insights
Tuesday's Wall Street Journal featured an article detailing a supposed "softening" of Cadbury CEO Todd Stitzer.
However, buried deep within the story were two refreshing and insightful quotes by Mr. Stitzer. The first was,
"I completely respect the fact that we would be attractive to someone else, but the world of large conglomerates has passed," he said. "Shareowners recognize that focused businesses, and focused in an area that has commercial and operational synergies, is a very good space to be."
This is a rare, honest admission for a CEO. Granted, Stitzer's Cadbury is the prey, not the hunter. So it's self-serving. But it's also true. Contrast his candor with both parties' words in the recent Dell-Perot Systems deal.
This was followed by the article's noting,
By buying individual confectionery brands, Mr. Stitzer said Cadbury has tried to grow bigger within the category, rather than by teaming up with a bigger food company.
Stitzer's focus, via that strategy, becomes more evident with the next passage. The piece then quoted Cadbury's CEO again,
"I think scale works to a [point]," he said. "There's a confectionery buyer in retailers and I think you can focus on that buyer, and if you can offer chocolate, gum and candy, I think that's an advantage. What more can you offer to the confectionery buyer in the grocery store? They don't necessarily and are not generally responsible for anything but confectionery."
Putting these two views together, one what seems to be a really non-delusional, focused, in-touch CEO. One that understands his direct customers, the retail food merchant's buyers.
With them in mind, he's built Cadbury out within the scope of his current customers' pervue. But he rightly notes that Kraft primarily markets to other buyers, albeit within the same grocery store.
After the requisite administrative costs are shed, what then? What organic, post-merger accounting growth will be realized?
If anything, Stitzer is really making the case, by omission, for another approach entirely.
Why doesn't Kraft offer to sell its confectionary businesses to Cadbury for stock, and a seat (or however many make valuation sense) on the British firm's board?
That way, Kraft gets the value of scale within confectionary products, but avoids the curse of oversized conglomeration. Irene Rosenfeld's management team can focus on food products, while reaping the benefits of Cadbury's economies of scale within their category. In time, subject to deal terms, Kraft can sell its stake in the market, or to Cadbury, for a premium, while relinquishing board presence.
The nearby price chart for Cadbury, Kraft and the S&P500 Index shows an interesting picture. Over the period, though moving in similar patterns, Cadbury has substantially outperformed Kraft. In fact, Kraft ended down, in absolute terms, about even with the index, while Cadbury managed to have gradually, consistently bested Kraft's performance.
It argues for Cadbury's management to handle the commonly-held confectionary businesses, not for Kraft to get a larger collection of assets to mismanage.
Granted, Irene Rosenfeld has shown promise. But as I noted in this post from early 2007, Kraft has been plagued by management lethargy for years.
Looking at the price chart again, while mystified how Kraft could have a stock price prior to 2007, when it was part of Altria, I can't help but think that my idea would be better for shareholders of both firms than Ms. Rosenfeld's attempt to take over Cadbury.
However, buried deep within the story were two refreshing and insightful quotes by Mr. Stitzer. The first was,
"I completely respect the fact that we would be attractive to someone else, but the world of large conglomerates has passed," he said. "Shareowners recognize that focused businesses, and focused in an area that has commercial and operational synergies, is a very good space to be."
This is a rare, honest admission for a CEO. Granted, Stitzer's Cadbury is the prey, not the hunter. So it's self-serving. But it's also true. Contrast his candor with both parties' words in the recent Dell-Perot Systems deal.
This was followed by the article's noting,
By buying individual confectionery brands, Mr. Stitzer said Cadbury has tried to grow bigger within the category, rather than by teaming up with a bigger food company.
Stitzer's focus, via that strategy, becomes more evident with the next passage. The piece then quoted Cadbury's CEO again,
"I think scale works to a [point]," he said. "There's a confectionery buyer in retailers and I think you can focus on that buyer, and if you can offer chocolate, gum and candy, I think that's an advantage. What more can you offer to the confectionery buyer in the grocery store? They don't necessarily and are not generally responsible for anything but confectionery."
Putting these two views together, one what seems to be a really non-delusional, focused, in-touch CEO. One that understands his direct customers, the retail food merchant's buyers.
With them in mind, he's built Cadbury out within the scope of his current customers' pervue. But he rightly notes that Kraft primarily markets to other buyers, albeit within the same grocery store.
After the requisite administrative costs are shed, what then? What organic, post-merger accounting growth will be realized?
If anything, Stitzer is really making the case, by omission, for another approach entirely.
Why doesn't Kraft offer to sell its confectionary businesses to Cadbury for stock, and a seat (or however many make valuation sense) on the British firm's board?
That way, Kraft gets the value of scale within confectionary products, but avoids the curse of oversized conglomeration. Irene Rosenfeld's management team can focus on food products, while reaping the benefits of Cadbury's economies of scale within their category. In time, subject to deal terms, Kraft can sell its stake in the market, or to Cadbury, for a premium, while relinquishing board presence.The nearby price chart for Cadbury, Kraft and the S&P500 Index shows an interesting picture. Over the period, though moving in similar patterns, Cadbury has substantially outperformed Kraft. In fact, Kraft ended down, in absolute terms, about even with the index, while Cadbury managed to have gradually, consistently bested Kraft's performance.
It argues for Cadbury's management to handle the commonly-held confectionary businesses, not for Kraft to get a larger collection of assets to mismanage.
Granted, Irene Rosenfeld has shown promise. But as I noted in this post from early 2007, Kraft has been plagued by management lethargy for years.
Looking at the price chart again, while mystified how Kraft could have a stock price prior to 2007, when it was part of Altria, I can't help but think that my idea would be better for shareholders of both firms than Ms. Rosenfeld's attempt to take over Cadbury.
Thursday, May 15, 2008
More Bad News From The Trenches of Ken Lewis' Hapless BofA
Due to a seeming nearly-endless succession of mergers, the very small local bank at which I opened a DDA account years ago is now....BankAmerica.
Thus, I am now subject to the operational mishaps of one of the nation's three largest banks. To wit, I recently received a 'letter,' i.e., mass-mailed notice/apology, which begins thusly,
"Dear Valued Customer,
We have learned that some information from certain Bank of America Check Cards may have been compromised. your Check Card number may have been part of this compromise. To ensure that your privacy is protected to the best of our ability we have taken the following steps.
Please know that Bank of America is working hard to keep your financial information secure.
Sincerely,
Gordon Rains
Debit Card Services Executive"
I omitted the detailed middle of the letter, wherein instructions were provided for using the new card, reporting fraudulent use of the old card, and assuring me that BofA will be liable for all fraudulent charges due to their ineptitude. Except, of course, they didn't use that word. I did.
And notice their use of the word 'compromise.' Sounds innocent, doesn't it? Not 'loss,' 'theft,' or 'error.'
This letter is why I like to use what I call "Danforth's Rule." Years ago, a colleague of mine at Chase Manhattan Bank by that name first enunciated the principle thusly,
'Find the smallest bank in your town and open a DDA account there. Chances are, because they are small, they will treat your account, financial information and business much more carefully than the local branch of the largest bank in the area.'
This is why I strode into my town's branch of BofA yesterday morning. Looking for a platform officer, I waited more than ten minutes for one to manage to notice me and offer to help me.
I thereupon showed her the letter and asked for details of BofA's latest 'compromise.' She had no clue. The officer, one Ms. Gonzalez, had no idea to what event the letter referred.
I pointed out that, while I was not angry with her, it didn't look good that some national Debit Card executive down in Charlotte had flooded the bank's customers with this missive without bothering to give the local branches a 'heads up.'
Or coordinated with the branches, so that the letter, or a phone call, or any communication, would come from a local branch officer, rather than some unreachable, unknown name in some unmentioned location.
I explained to Ms. Gonzalez that this 'compromise' seemed, to me, to be a fairly serious breach of one of the most basic functions a bank undertakes- safeguarding my money.
What the letter meant, I went on, was that BofA had effectively left the door to the vault open one day, and let strangers wander in to take money. They promise they'll make good on any losses, but, still, you probably wouldn't want your assets safekept in a bank that lets strangers raid the bank vaults, would you?
Ms. Gonzalez agreed that this is a serious matter. I further noted that one of the smallest local banks around, of which I happened to have been a very satisfied customer years ago, had recently opened a branch in town. Did she want me to transfer my business there, or would she like to arrange a meeting between me, her and her branch manager?
She agreed to take my contact information, a copy of the letter(!), and respond to me with a time and date to meet.
For what it's worth, as I write this on Wednesday afternoon, that has not occurred.
Meanwhile, I read that last line in Mr. Rains' letter, and shake my head when I note that, having already released my DDA account information to strangers, now Ken Lewis' crack troops promise to do a better job, 'working hard to keep (my) financial information secure.'
Why do you suppose they chose not to work so hard before? Wasn't it worthwhile? Was it too expensive? Or just a nuisance?
Ken Lewis, BofA's CEO, has had a lot of challenges in the past year- buying a failing Countrywide Finance at probably too-high a price, experiencing serious capital markets losses, and, now, presiding over a consumer bank and IT function that can't even manage to properly execute one of banking's most fundamental functions- safekeeping customer deposits.
Not too impressive a job Ken's doing, is it?
Thus, I am now subject to the operational mishaps of one of the nation's three largest banks. To wit, I recently received a 'letter,' i.e., mass-mailed notice/apology, which begins thusly,
"Dear Valued Customer,
We have learned that some information from certain Bank of America Check Cards may have been compromised. your Check Card number may have been part of this compromise. To ensure that your privacy is protected to the best of our ability we have taken the following steps.
Please know that Bank of America is working hard to keep your financial information secure.
Sincerely,
Gordon Rains
Debit Card Services Executive"
I omitted the detailed middle of the letter, wherein instructions were provided for using the new card, reporting fraudulent use of the old card, and assuring me that BofA will be liable for all fraudulent charges due to their ineptitude. Except, of course, they didn't use that word. I did.
And notice their use of the word 'compromise.' Sounds innocent, doesn't it? Not 'loss,' 'theft,' or 'error.'
This letter is why I like to use what I call "Danforth's Rule." Years ago, a colleague of mine at Chase Manhattan Bank by that name first enunciated the principle thusly,
'Find the smallest bank in your town and open a DDA account there. Chances are, because they are small, they will treat your account, financial information and business much more carefully than the local branch of the largest bank in the area.'
This is why I strode into my town's branch of BofA yesterday morning. Looking for a platform officer, I waited more than ten minutes for one to manage to notice me and offer to help me.
I thereupon showed her the letter and asked for details of BofA's latest 'compromise.' She had no clue. The officer, one Ms. Gonzalez, had no idea to what event the letter referred.
I pointed out that, while I was not angry with her, it didn't look good that some national Debit Card executive down in Charlotte had flooded the bank's customers with this missive without bothering to give the local branches a 'heads up.'
Or coordinated with the branches, so that the letter, or a phone call, or any communication, would come from a local branch officer, rather than some unreachable, unknown name in some unmentioned location.
I explained to Ms. Gonzalez that this 'compromise' seemed, to me, to be a fairly serious breach of one of the most basic functions a bank undertakes- safeguarding my money.
What the letter meant, I went on, was that BofA had effectively left the door to the vault open one day, and let strangers wander in to take money. They promise they'll make good on any losses, but, still, you probably wouldn't want your assets safekept in a bank that lets strangers raid the bank vaults, would you?
Ms. Gonzalez agreed that this is a serious matter. I further noted that one of the smallest local banks around, of which I happened to have been a very satisfied customer years ago, had recently opened a branch in town. Did she want me to transfer my business there, or would she like to arrange a meeting between me, her and her branch manager?
She agreed to take my contact information, a copy of the letter(!), and respond to me with a time and date to meet.
For what it's worth, as I write this on Wednesday afternoon, that has not occurred.
Meanwhile, I read that last line in Mr. Rains' letter, and shake my head when I note that, having already released my DDA account information to strangers, now Ken Lewis' crack troops promise to do a better job, 'working hard to keep (my) financial information secure.'
Why do you suppose they chose not to work so hard before? Wasn't it worthwhile? Was it too expensive? Or just a nuisance?
Ken Lewis, BofA's CEO, has had a lot of challenges in the past year- buying a failing Countrywide Finance at probably too-high a price, experiencing serious capital markets losses, and, now, presiding over a consumer bank and IT function that can't even manage to properly execute one of banking's most fundamental functions- safekeeping customer deposits.
Not too impressive a job Ken's doing, is it?
Wednesday, April 30, 2008
A Refreshing View of Customer Service
Friday's Wall Street Journal carried an interesting review of the book "The Best Service is No Service," by Bill Price and David Jaffe. The book was reviewed by David A. Price.
I really loved this part of the review. It was very eye-opening, if not completely surprising. I can personally attest to receiving many post-sales or customer service event emails which, by their design, obscure the real issue and will serve no useful purpose, in my opinion, in helping the companies' managements truly understand what went wrong, if it was properly addressed, and how 'satisfied' I now am.
Think about that second italicized paragraph. Only managements which have virtually zero identification with the long term healthy growth of their companies could behave this way. Rather than consider how to use the customer contact to their companies' benefits, these managers look for ways to simply make the contacts go away or appear minimal.
Instead of these inept approaches to customer service, the authors draw on the experiences of one of them, Mr. Price, at Amazon, to suggest at least one better approach,
"The authors contrast these crude metrics with Amazon.com's focus on "CPX" – contacts per order, contacts per unit shipped, contacts per transaction and contacts per customer. In other words: Don't just ask how long it took to help the customer, ask how often the customer needed help and why. The goal is to avoid creating a need for a customer to contact the company in the first place."
I found this hint of the book's meatier parts very encouraging. These sound like great ideas for describing what is actually occurring in the post-sale information-gathering and expectation-management phase of the sale. The authors further describe some Amazon practices,
"In contrast with writers who offer platitudes so general as to be nearly useless ("Listen to the customer!"), Messrs. Price and Jaffe lay out specific recommendations. Among these: Hold weekly operations meetings to go over CPX scores. At Amazon.com, Mr. Price recounts of his tenure there, chief executive Jeff Bezos would often show up and join in the discussion. Teams would then work between meetings to zero in on "root causes" and solve problems. The authors also recommend charging the costs of customer support back to the product teams that created the need for it; make them feel the pain."
These, too, sound very useful. Especially fully-costing customer service back to the product group which engendered the need for the costs. The fact that Bezos would attend and participate in these meetings tells you that he felt, and wanted to communicate, how vital it was to fully understand and make use of customer service events. Not just to minimize them, but to understand what they told Amazon's managers about the actual provision of the initial products, and how to address whatever was going on that caused the need for the post-sales service activity.
I found this to be a thoroughly refreshing approach to customer service that harks back to the original marketing philosophy of creating long term customer value and company profitability. Rather than try to simply minimize the effects of product policies by reducing the cost of customer service, it just makes so much more sense to use the function as the information-rich opportunity it is to provide necessary feedback to a company's operating groups on how their efforts are ultimately perceived by their customers.
Being academically trained in marketing, I was interested in what the authors had to add on this important topic. After-sale experience by the customer is, of course, critically important for a number of reasons- rebuy probabilities and word-of-mouth advertising, to name just two.
Mr. Price begins his review by stating,
"In theory, we should be living in a golden age of customer support. Blogs and Web sites make it easier than ever for consumers to reward good service and punish bad. Companies, for their part, can avail themselves of sophisticated customer-service technology and, thanks to the rise of Indian call centers, less-expensive workers.
But reality hasn't seemed to follow theory. When calling an 800 number, we expect to find ourselves in voice-response hell. We dutifully follow instructions to key in a 10-digit policy number – only to be asked by the customer-service rep for the same darn number. Waiting on hold for 25 minutes? Well, that's what speakerphones are for. A simple email query languishes for days. When it comes to service, entire industries – cable-television operators, cellphone companies, airlines, health insurers – are regarded with the disdain once reserved for used-car dealers."
So true. Already we see that the authors correctly observe that many US companies use automation to cut the costs of customer service, as if it were some unwanted, but necessary function, like garbage removal. Thus, opportunities to use technology to wring more precious customer information from these contacts, as well as leave customers with a positive feeling toward the company and its brands, is irretrievably lost.
Price further reports that the authors define customer service narrowly and pragmatically,
"They consider customer service in its narrow sense of customer assistance – taking orders, answering help-desk questions, resolving complaints, handling billing inquiries. Mr. Price (the author, not the reviewer) is a former senior customer-service executive at Amazon.com, the company from which the book draws many of its most compelling positive examples."
The authors report how most businesses actually perceive and track the function,
Messrs. Price and Jaffe note that three-quarters of chief executives in an Accenture study believed that their firms provided "above average" service. Yet almost 60% of those same firms' customers were upset with their most recent service experience. Senior executives at most companies, the authors believe, are simply in the dark. "The standard across most service operations is to report and track how quickly things were done," they write, "not how well they were done or how often, or why they needed to be done at all.
Thus typical measures like "pickup within three rings" or "email response within 24 hours" hide more about customer service than they reveal. And the measuring is easily gamed. At one company where managers imposed a target "average handle time" (call time) of 12 minutes, phone calls miraculously shortened to just under 12 minutes: As the 12-minute mark approached, agents simply said whatever it took to get the caller off the phone. The call center at another company hit on the idea of reducing the number of phone lines so that excess callers simply got a busy signal – and went unmeasured."I really loved this part of the review. It was very eye-opening, if not completely surprising. I can personally attest to receiving many post-sales or customer service event emails which, by their design, obscure the real issue and will serve no useful purpose, in my opinion, in helping the companies' managements truly understand what went wrong, if it was properly addressed, and how 'satisfied' I now am.
Think about that second italicized paragraph. Only managements which have virtually zero identification with the long term healthy growth of their companies could behave this way. Rather than consider how to use the customer contact to their companies' benefits, these managers look for ways to simply make the contacts go away or appear minimal.
Instead of these inept approaches to customer service, the authors draw on the experiences of one of them, Mr. Price, at Amazon, to suggest at least one better approach,
"The authors contrast these crude metrics with Amazon.com's focus on "CPX" – contacts per order, contacts per unit shipped, contacts per transaction and contacts per customer. In other words: Don't just ask how long it took to help the customer, ask how often the customer needed help and why. The goal is to avoid creating a need for a customer to contact the company in the first place."
I found this hint of the book's meatier parts very encouraging. These sound like great ideas for describing what is actually occurring in the post-sale information-gathering and expectation-management phase of the sale. The authors further describe some Amazon practices,
"In contrast with writers who offer platitudes so general as to be nearly useless ("Listen to the customer!"), Messrs. Price and Jaffe lay out specific recommendations. Among these: Hold weekly operations meetings to go over CPX scores. At Amazon.com, Mr. Price recounts of his tenure there, chief executive Jeff Bezos would often show up and join in the discussion. Teams would then work between meetings to zero in on "root causes" and solve problems. The authors also recommend charging the costs of customer support back to the product teams that created the need for it; make them feel the pain."
These, too, sound very useful. Especially fully-costing customer service back to the product group which engendered the need for the costs. The fact that Bezos would attend and participate in these meetings tells you that he felt, and wanted to communicate, how vital it was to fully understand and make use of customer service events. Not just to minimize them, but to understand what they told Amazon's managers about the actual provision of the initial products, and how to address whatever was going on that caused the need for the post-sales service activity.
I found this to be a thoroughly refreshing approach to customer service that harks back to the original marketing philosophy of creating long term customer value and company profitability. Rather than try to simply minimize the effects of product policies by reducing the cost of customer service, it just makes so much more sense to use the function as the information-rich opportunity it is to provide necessary feedback to a company's operating groups on how their efforts are ultimately perceived by their customers.
Wednesday, August 29, 2007
Economies of Scale in Autos and Computers
Tuesday's Wall Street Journal's Marketplace Section featured two seemingly unrelated articles- Acer's purchase of Gateway, and Chinese auto manufacturers making inroads in Africa.
On closer examination, however, I believe the two share an important link and lesson. They both embody some elements of Schumpeterian dynamics.
In the case of Acer, this Asian computer maker has wisely taken the opportunity to buy market share and brands by scooping up the number three US computer manufacturer, Gateway. By combining supply chains and brands, Acer hopes to, and probably will, gain some margin room while obtaining new branding and price-point flexibility. Clearly, Acer understands that the computer manufacturing game is now largely a commodity one, with a few exceptions, such as HP's recent Pavillion line.
However, for large parts of the market, Acer's ability to provide competitive functionality at lower prices may help it drive Toshiba, Lenovo, and others into less tenable market and profitability positions.
The focus of the other Journal article is the emerging market for new cars in West and Southern Africa. Whereas these areas historically were dumping grounds for used European models, the Chinese have arrived with new cars so affordably priced as to compete favorably with the used car stocks.
What's amazing is that all of the new entrants are Chinese, and no American, or even European names, are to be found. Nary a Ford, Chrysler or GM nameplate.
The article suggested that these auto makers can't really afford to aim so low in price as to compete with the Chinese in Africa. However, at least one Chinese manufacturer warned/promised that they would be moving upmarket, and into richer countries, on the back of the African experience and volumes.
I can't help but think that, a decade hence, we'll read various tomes from the likes of BCG, Bain or McKinsey consultants dissecting the final mistakes of the American auto makers. Can it really be so benign to allow the Chinese to gain a vehicle production foothold, uncontested, in an entire continent? Granted, it's Africa, but, still....
You can just see the Chinese lowering costs along expanding volume curves, gaining manufacturing experience and improving quality, as well as the ability to target small, profitable niches in Africa. Then turning these newly-acquired skills on the low end of the American market.
If you needed fresh reasons to explain the slow, inexorable death of US auto production, here's another one. Complete denial on the part of Detroit that a clutch of rising Chinese vehicle manufacturers can use Africa as a springboard to enter the US with small, efficient, low-priced cars and steal another potential market before American producers can respond.
It's been the way most prior Asian auto producers have entered. Plus, with fuel economy and environmentalism running rampant these days, it would be reasonable to expect the Chinese nameplates to be more than competitive on fuel consumption, weight, size, etc. They've got a large market with which to experiment, getting smaller, less expensive cars 'right' before shipping them to the US.
Alan (Mulally), Rick (Wagoner), Bob (Nardelli)? Anyone looking east to see the source of your next competitor?
Ironically, the three blind mice probably won't take note of Acer's recent move, and consider how scale and creativity, together, can both protect against further share erosion, as well as be the basis for new growth and profitability.
On closer examination, however, I believe the two share an important link and lesson. They both embody some elements of Schumpeterian dynamics.
In the case of Acer, this Asian computer maker has wisely taken the opportunity to buy market share and brands by scooping up the number three US computer manufacturer, Gateway. By combining supply chains and brands, Acer hopes to, and probably will, gain some margin room while obtaining new branding and price-point flexibility. Clearly, Acer understands that the computer manufacturing game is now largely a commodity one, with a few exceptions, such as HP's recent Pavillion line.
However, for large parts of the market, Acer's ability to provide competitive functionality at lower prices may help it drive Toshiba, Lenovo, and others into less tenable market and profitability positions.
The focus of the other Journal article is the emerging market for new cars in West and Southern Africa. Whereas these areas historically were dumping grounds for used European models, the Chinese have arrived with new cars so affordably priced as to compete favorably with the used car stocks.
What's amazing is that all of the new entrants are Chinese, and no American, or even European names, are to be found. Nary a Ford, Chrysler or GM nameplate.
The article suggested that these auto makers can't really afford to aim so low in price as to compete with the Chinese in Africa. However, at least one Chinese manufacturer warned/promised that they would be moving upmarket, and into richer countries, on the back of the African experience and volumes.
I can't help but think that, a decade hence, we'll read various tomes from the likes of BCG, Bain or McKinsey consultants dissecting the final mistakes of the American auto makers. Can it really be so benign to allow the Chinese to gain a vehicle production foothold, uncontested, in an entire continent? Granted, it's Africa, but, still....
You can just see the Chinese lowering costs along expanding volume curves, gaining manufacturing experience and improving quality, as well as the ability to target small, profitable niches in Africa. Then turning these newly-acquired skills on the low end of the American market.
If you needed fresh reasons to explain the slow, inexorable death of US auto production, here's another one. Complete denial on the part of Detroit that a clutch of rising Chinese vehicle manufacturers can use Africa as a springboard to enter the US with small, efficient, low-priced cars and steal another potential market before American producers can respond.
It's been the way most prior Asian auto producers have entered. Plus, with fuel economy and environmentalism running rampant these days, it would be reasonable to expect the Chinese nameplates to be more than competitive on fuel consumption, weight, size, etc. They've got a large market with which to experiment, getting smaller, less expensive cars 'right' before shipping them to the US.
Alan (Mulally), Rick (Wagoner), Bob (Nardelli)? Anyone looking east to see the source of your next competitor?
Ironically, the three blind mice probably won't take note of Acer's recent move, and consider how scale and creativity, together, can both protect against further share erosion, as well as be the basis for new growth and profitability.
Thursday, May 24, 2007
Burberry's New CEO and New Focus
Today's Wall Street Journal featured an article on Burberry's new CEO, Angela Ahrendts, and her retrenchment strategy at the famous brand's company.
I think Ms. Ahrendts is a very bright and decisive CEO. Her corporate pedigree suggests she's ideal for the job.
What really puzzles me, however, is that her predecessor was unable to effect the same strategy, even though it is more than 50 years old.
According to the article, when
"Walking through the Burberry showroom here after becoming chief executive last July, Angela Ahrendts looked at the wealth of apparel and accessories and thought, she recalls, "Way too much stuff."
....On her third day as CEO at Burberry Group PLC, Ms. Ahrendts asked Burberry Chief Financial Officer Stacey Cartwright for a report on what each product contributed to the business. Its findings: 80% of Burberry's sales came from 20% of its wares."
This simple, yet magnificently effective analytical approach was pioneered by Russell Ackoff in the 1950s among America's steel mills.
My manager and mentor at Chase Manhattan Bank, Gerry Weiss, used to say,
"There are hundreds of business aphorisms which we all know. The question is, which three or four apply in this particular instance?"
Few CEOs, it appears, know enough of the business strategy playbook to be able to shift gears and handle different situations, well, differently. So many seem, in effect to be one-trick ponies. Perhaps growth, or cost-cutting, or simply 'steady as she goes.'
Thus, Ms. Ahrendt's predecessor, Rose Marie Bravo, pursued rapid growth at Burberry's, although it eventually plateaued after almost a decade.
What I think this suggests is that boards of directors need to be more sensitive to how a CEO continues to perform over time. Initial successes are fine, and should be compensated. But that does not guarantee an endless honeymoon.
The reality of business seems to be that most CEOs cannot easily transition between environments, such as turnarounds, cost-cutting, or growth.
So at Burberry's, as Ms. Ahrendt reins in the product line, improving profitability, it will probably be worth watching in a few years to see how she does re-igniting profitable growth, when the pruning is finished.
I think Ms. Ahrendts is a very bright and decisive CEO. Her corporate pedigree suggests she's ideal for the job.
What really puzzles me, however, is that her predecessor was unable to effect the same strategy, even though it is more than 50 years old.
According to the article, when
"Walking through the Burberry showroom here after becoming chief executive last July, Angela Ahrendts looked at the wealth of apparel and accessories and thought, she recalls, "Way too much stuff."
....On her third day as CEO at Burberry Group PLC, Ms. Ahrendts asked Burberry Chief Financial Officer Stacey Cartwright for a report on what each product contributed to the business. Its findings: 80% of Burberry's sales came from 20% of its wares."
This simple, yet magnificently effective analytical approach was pioneered by Russell Ackoff in the 1950s among America's steel mills.
My manager and mentor at Chase Manhattan Bank, Gerry Weiss, used to say,
"There are hundreds of business aphorisms which we all know. The question is, which three or four apply in this particular instance?"
Few CEOs, it appears, know enough of the business strategy playbook to be able to shift gears and handle different situations, well, differently. So many seem, in effect to be one-trick ponies. Perhaps growth, or cost-cutting, or simply 'steady as she goes.'
Thus, Ms. Ahrendt's predecessor, Rose Marie Bravo, pursued rapid growth at Burberry's, although it eventually plateaued after almost a decade.
What I think this suggests is that boards of directors need to be more sensitive to how a CEO continues to perform over time. Initial successes are fine, and should be compensated. But that does not guarantee an endless honeymoon.
The reality of business seems to be that most CEOs cannot easily transition between environments, such as turnarounds, cost-cutting, or growth.
So at Burberry's, as Ms. Ahrendt reins in the product line, improving profitability, it will probably be worth watching in a few years to see how she does re-igniting profitable growth, when the pruning is finished.
Saturday, March 31, 2007
Parker Hannifin's CEO Discover's Customer Needs
Tuesday's Wall Street Journal featured a wonderful article on the radical new pricing policies initiated by the new CEO of Parker Hannifin.
It's sort of a good news/bad news story.
The bad news is, PH had actually hard-coded a fixed markup percentage into their pricing management software. Talk about inflexible, stupid, and being insensitive to the uses to which your products are put. I can see using a fixed minimum markup percentage, but not a fixed universal markup.
The good news is that the new CEO, Don Washkewicz, has brought an end to this practice, and instituted a 'willingness to pay' style, application-sensitive approach to markups. The customer's applications of PH's seals is now a paramount input into pricing. Thus, the company's marketing and product people focus more, not less, on customers, and their applications of PH's products. PH added $200MM of revenue and income to its P&L in four years, bringing it up to its current $673MM.
Two interesting things were mentioned in this story. First, how inept external consultants advocated PH develop a greater customer service focus, but neglect to accompany that with segmentation, product differentiation, and pricing strategies to pay for it. Second, PH had a total insensitivity to how its products were used by its customers. They knew next to nothing about the real customer problems, applications, and options for which PH's seals were alternative solutions.
In short, a lack of fundamental marketing skills existed at Parker Hannifin prior to Washkewicz's elevation to CEO. Now, PH has such a focus, and I hope it makes an appearance in my equity portfolios soon.
It's sort of a good news/bad news story.
The bad news is, PH had actually hard-coded a fixed markup percentage into their pricing management software. Talk about inflexible, stupid, and being insensitive to the uses to which your products are put. I can see using a fixed minimum markup percentage, but not a fixed universal markup.
The good news is that the new CEO, Don Washkewicz, has brought an end to this practice, and instituted a 'willingness to pay' style, application-sensitive approach to markups. The customer's applications of PH's seals is now a paramount input into pricing. Thus, the company's marketing and product people focus more, not less, on customers, and their applications of PH's products. PH added $200MM of revenue and income to its P&L in four years, bringing it up to its current $673MM.
Two interesting things were mentioned in this story. First, how inept external consultants advocated PH develop a greater customer service focus, but neglect to accompany that with segmentation, product differentiation, and pricing strategies to pay for it. Second, PH had a total insensitivity to how its products were used by its customers. They knew next to nothing about the real customer problems, applications, and options for which PH's seals were alternative solutions.
In short, a lack of fundamental marketing skills existed at Parker Hannifin prior to Washkewicz's elevation to CEO. Now, PH has such a focus, and I hope it makes an appearance in my equity portfolios soon.
Monday, October 24, 2005
Cendant: Object Lessons In Scale and Creativity
I am truly amazed that Henry Silverman now proposes to spin off the parts of Cendant which he integrated several years ago, and remain the CEO of one of its parts as a reward for this failure.
Where is Carl Icahn when you need him? Too busy over at Blockbuster, I guess.
I recall Silverman articulating the wonderful opportunities for cross-selling among the various travel, subscription, buying club and other businesses he assembled through acquisitions and mergers. So much for that puffery.
Perhaps the object lessons to learn here involve leadership, creativity and scale.
First, it’s really difficult to lead a diverse group of businesses into some sort of group-think that spontaneously generates successful cross-selling the way a producer wants to market it. All too often, as with Time Warner and AOL, or diversified financial services, the cross-selling is in the mind of the producer, not the consumer.
Neither Sandy Weill at Citicorp, nor Henry Silverman at Cendant, could force consumers to behave in ways which provided the predicted integrated revenue and profit growth from their respective acquisition empires.
Second, creative marketing management doesn’t seem to lend itself to scale. Innovative product development and marketing positioning seem to be fleeting instances of genius. It’s not clear you can “best practice” it across a business, let alone across businesses. Empirical evidence on the lethargic total return behavior of most conglomerates seems to bear this out.
If anything, the recent decades of technological advances in computing and communications have lowered the effective size for successful creative management, not raised it.
Finally, this leads to scale. Grandiose visions of imagined consumer buying behaviors changed by conglomerating products and services usually fail to account for the sheer difficulty of managing scale.
One of the oft-missed effects of conglomeration is probably the loss of many of the most talented employees. From my own experiences at AT&T, then the largest private employer on the planet, Chase Manhattan Bank, and Andersen Consulting (NOT Arthur Andersen, thank you very much!), I can vouch for this. Large scale organizations inevitably have to be run by a middle class of talent at most, if not all levels. Innovation is hard to tolerate in a firm of large size. Management is typically routinized into a definable culture, so that the firm is more efficiently run.
When you put all these effects together, you get disasters like Cendant.
I’ll leave you with this little gem. Today, in an interview on CNBC, Silverman solemnly intoned something to the effect that his conglomeration was, ‘an artistic success, but a commercial failure.’ How nice of him to tell his shareholders now that all this time, he was dabbling in art, not commerce.
Where is Carl Icahn when you need him? Too busy over at Blockbuster, I guess.
I recall Silverman articulating the wonderful opportunities for cross-selling among the various travel, subscription, buying club and other businesses he assembled through acquisitions and mergers. So much for that puffery.
Perhaps the object lessons to learn here involve leadership, creativity and scale.
First, it’s really difficult to lead a diverse group of businesses into some sort of group-think that spontaneously generates successful cross-selling the way a producer wants to market it. All too often, as with Time Warner and AOL, or diversified financial services, the cross-selling is in the mind of the producer, not the consumer.
Neither Sandy Weill at Citicorp, nor Henry Silverman at Cendant, could force consumers to behave in ways which provided the predicted integrated revenue and profit growth from their respective acquisition empires.
Second, creative marketing management doesn’t seem to lend itself to scale. Innovative product development and marketing positioning seem to be fleeting instances of genius. It’s not clear you can “best practice” it across a business, let alone across businesses. Empirical evidence on the lethargic total return behavior of most conglomerates seems to bear this out.
If anything, the recent decades of technological advances in computing and communications have lowered the effective size for successful creative management, not raised it.
Finally, this leads to scale. Grandiose visions of imagined consumer buying behaviors changed by conglomerating products and services usually fail to account for the sheer difficulty of managing scale.
One of the oft-missed effects of conglomeration is probably the loss of many of the most talented employees. From my own experiences at AT&T, then the largest private employer on the planet, Chase Manhattan Bank, and Andersen Consulting (NOT Arthur Andersen, thank you very much!), I can vouch for this. Large scale organizations inevitably have to be run by a middle class of talent at most, if not all levels. Innovation is hard to tolerate in a firm of large size. Management is typically routinized into a definable culture, so that the firm is more efficiently run.
When you put all these effects together, you get disasters like Cendant.
I’ll leave you with this little gem. Today, in an interview on CNBC, Silverman solemnly intoned something to the effect that his conglomeration was, ‘an artistic success, but a commercial failure.’ How nice of him to tell his shareholders now that all this time, he was dabbling in art, not commerce.
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