The Silver Lining in the Recession Cloud: a Shift Toward the Customer

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Can you feel it? It’s all around us.

No, I’m not talking about the doom and gloom of the stock market or the latest bank collapse. I’m talking about a the subtle changes where you shop, eat, bank, style your hair and service your car. Despite the dark sky of economic woes, there’s a silver lining – a shift toward the customer.

* Chain restaurant staff are more welcoming.
* Safeway has a sale sign on every item (recognizing that people need to perceive a deal before they’ll buy)
* The local Toyota dealership is offering free Cappuccino’s on Monday, Wednesday and Friday and now leaves you with a bounce-back coupon.
* Staples offered 50% off any copy paper (although tied to their rewards program – not very customer focused)

Last night, while I was at the local Target, the floor manager announced (loud enough for customers to hear) that any employee that helped a customer find a “high ticket” item resulting in the largest sale would get a $5.00 Target gift card.

Think back to not too long ago. Didn’t you feel complacency just prior to the storm clouds moving in? I’m guessing Lehman Brothers, Fannie and Freddie all were perched on their porches in rocking chairs before the tornado came. The energy was about to drift to the buyer.

New found energy?

Genuine customer focus?

Desperation?

Here’s the question that pulls at me – what if this customer focus du jour carries beyond the current storm clouds? What if this recent shift back toward customer satisfaction propagates valuable lessons that translate into better service once the sunny days are here again?

Perhaps this is a divine shake up — requiring us to “love your brother as yourself” in order to get back on track.

Those who are truly customer-focused will soak up what works and what doesn’t through these trials. Those that are thinking about these activities as a tactic to wait out the storm will probably revert back to their old ways.

In the short term, buyers benefit. In the long-term both buyers and seller can.

 

Selling Problem Solving by Solving Problems

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One thing about accountants I really like. They learn awfully fast.

I had breakfast the other day with an old friend, a forensic accountant—call him Joe the Accountant. He’s a bit of a loner, motivated by achieving results, and impatient with what he sees as bureaucratic and procedural focus. And he is very sharp.

He’s a bit like a bloodhound; don’t point him toward the scent and expect him to back off. Perhaps that’s why he tends to rotate employers every 6 – 8 years.

“Maybe I should just do free-lance work,” he mused to me. “I don’t mind selling. I just don’t know how to do it well. I could get appointments with several well-positioned past clients. I could just ask them if there’s some work I could do for them, I suppose.”

“No,” I said. “Talk to them about what problems need solving.”

Joe: Of course, silly me. Then I can pitch how I might be able to solve them.

Me: Congrats, you just went from weak salesman to average salesman in ten seconds.

Joe: So–how do I get to the next step? (Joe’s pretty impatient too).

Me: Pick one problem and solve it in that meeting.

Joe: Hmmm. I like that. But will the client do anything if I just give him the advice?

Me: You just went from pretty good to almost really good. So answer your own question.

Joe: I see, he’s got to be involved in getting the right answer in order to act on it it. So—you’re saying just do the work right there in the meeting?

Me: Pretty much.

Joe: So when do you make the sale?

Me: After you solve the problem together, you say, “This is great fun. We ought to do more of this. Though after one more session, you need to pay me. I can’t just be having fun for free. So how shall we set this thing up?”

Joe: Hmmm. Yes, that works, doesn’t it? Give ‘em a taste of your wares, so to speak. Just do it–then ask for the sale. Right?

Me: That’s about it.

Joe: Great, thanks. Gotta run; this breakfast is now interfering with scheduling my first sales call.

One thing about accountants I really like. They learn awfully fast.

Madoff Madness: When Smart People do Stupid Things

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Bernard Madoff’s Madoff Securities lost $50 Billion in an apparent Ponzi scheme.

You can read about the details anywhere—try the Wall Street Journal, for example. But the details don’t answer one question.

How? How could some of the world’s supposedly smartest investors—hedge funds–have been hoodwinked by something that, in the rear view mirror, was a blatant scam?

The answer reveals a common myth about trust in business. The myth is that good businesspeople make rational decisions about trust.

They often don’t. And in the rush for “best practices,” many “good businesspeople” shortchange commonsense for wishful thinking.

I have written about the Trust Equation: the trustworthiness of an individual can be expressed as a function of credibility, reliability, intimacy, and other-orientation. Someone who rates highly on these dimensions, as seen by others, is trustworthy.

But a con man is as good as the gullibility of those who want to believe him. Let’s examine the trust equation point by point.

1. Credibility: the man was the former Chairman of Nasdaq, and remains on their nominating committee. He is known as a leader in the industry. And his own website says he has "a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark."

Never mind there were complaints to the SEC, questioning articles in Barron’s, unavailable data, and a one-man accounting firm of record. Don’t wanna go there, uh uh.

2. Reliability: the man had a multi-year track record of over-market returns. Regular. Dependable.

Never mind that he lacked the data, or explanations, to back up just why those returns were so steady.

3. Intimacy. Many people knew him personally; he was a regular at toney golf clubs in Palm Beach and Boca Raton.

In language we usually hear about mass murderers, acquaintance Jon Najarian said, “He always seemed to be a straight shooter. I was shocked by this news.”

And in classic Big Brother language, his lawyer stated—after Madoff’s apparent confession to operating a Ponzi scheme—stated “he’s a person of integrity.” And I’m the Pope.

Never mind that “intimacy” may be the easiest factor of the four in the trust equation to fake. It’s probably the favorite factor of con men.

4. Self-orientation. Clearly his customers thought he was generous, a regular attendee of the Red Cross Ball, a desirable acquaintance by virtue of his willingness to share advice.

Never mind his broker-dealer business model was under-powered to take advantage of his supposed insights, casting doubt on his motives. Conflicts of interest were present in the situation of a funds manager using a related broker-dealer.

Trust is a funny thing. Trustworthiness can be analyzed. But it often isn’t. Which means trust is as much about the one doing the trusting as the one being trusted.

In the days to come, the absence of regulatory action will be rightly noted. Where was the SEC?

But at the same time, let’s not forget the willingness of the sheep to be fleeced.

If it looks too good to be true, it is.

There’s no such thing as a free lunch.

An emperor without clothes is just a naked man.

We know that untrustworthy people are often greedy. We can protect against that to some extent.

It’s harder to legislate against greed and willful stupidity on the part of those doing the trusting.

When commonsense takes a back seat to greed, it’s a con-man’s market.

 

 

Are You a Competent Jerk or a Lovable Fool?

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Tiziana Casciaro and Miguel Sousa Lobo wrote in “Competent Jerks, Lovable Fools, and the Formation of Social Networks” in the Harvard Business Review (June 2005) about how people choose who they work with.

“In most cases, people choose their work partners according to two criteria. One is competence at the job … the other is likability.”

Arrayed on a two-by-two competency vs. likeability matrix, everyone prefers to affiliate with the lovable star–no one with the incompetent jerk. No surprise there.

But what happens when we are forced to choose from the last two quadrants–lovable fool and competent jerk? Place your bets, now.

Based on data from four diverse organizations and over 10,000 work relationships, Casciaro and Lobo discovered (drum roll….) —

Yep, you guessed it. We prefer the lovable fool – even though we may not readily admit it.

We say out loud that we prefer skills and expertise (it sounds unprofessional and illogical not to) and that being “nice” is a nice “bonus.” But in practice, their study showed that your personal feelings about your colleague play a more important role in forming work relationships than do your evaluations of their competence.

“In fact, feelings worked as a gating factor: If someone is strongly disliked, it’s almost irrelevant whether or not she is competent; people don’t want to work with her anyway. By contrast, if someone is liked, his colleagues will seek out every little bit of competence he has to offer.”

Feelings trump rational thought. Again.

Implication: our clients would rather we be lovable fools than competent jerks. Which means we’d be better off if we spent more time boosting our likability than our competence, despite what our clients say out loud.

There may be a better business case for charm school than for business school.

I Think Therefore I am a Consultant: Not!

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I worked 15 years for a strategy consultancy, then 4 years for a change management firm.  They were wildly different.  The first celebrated raw brain power.  The second focused on emotional alignment.  (This explains my schizophrenia).

I then went off on my own to do trust work.

A few years later, I collaborated with an ex-strategy colleague, an excellent consultant.  Call him Ishmael.  He was in Boston, me in New Jersey; we met in Stamford to spend the day working together.

He began, “Let’s first spend a few hours discussing what it is the client wants.”  A classic strategy question.  I settled in to the old easy chair.

Then it hit me.  “No, Ishmael,” I said, “let’s just call the client and ask them what they want.” 

Ishmael was not impressed, but that was OK.  I knew I’d just discovered something.  

David Maister  has a medical metaphor to describe professional services firms.  There are Nurses, Pharmacists, Family Doctors, and Brain Surgeons.

Many firms aspire to be Brain Surgeons.  The market says the true number is far smaller.  Brain surgeons, as Maister points out, are known for two things.  One is great technical mastery; the other is a low degree of client interaction.

There are great examples of the “brain surgeon” model. Think of the leading strategy firms, used-to-be investment banks, think tanks, many top law firms. They are high-margin businesses, pay high salaries, and cultivate a mystique of envy and status. 

And—I would argue—they are grossly under-achieving.

Why?  Because of the cult of intellect.  We revere IQ in this culture; it is more important to cite Goleman’s Emotional Intelligence  than to read it–much less practice it. 

Malcolm Gladwell punctures this cult of intellect in talking about innovation:

Ideas weren’t precious. They were everywhere, which suggested that maybe the extraordinary process that we thought was necessary for invention—genius, obsession, serendipity, epiphany—wasn’t necessary at all.

He describes Nathan Myhrvold’s first Innovation Session, bringing together a half-dozen brilliant people:

"He thought if we came up with a half-dozen good ideas it would be great, and we came up with somewhere between fifty and a hundred. I said to him, ‘But you had eight people in that room who are seasoned inventors. Weren’t you expecting a multiplier effect?’ And he said, ‘Yeah, but it was more than multiplicity.’ Not even Nathan had any idea of what it was going to be like."

The finest law firms and strategic consultancies are great in large part not because of brilliance, but because of brilliance shared.  The pity is, their very ethos denigrates the “share” part of the equation. 

As Maister says, part of the “brain surgeon” model is the image of high-on-a-mountain solo thinkers who occasionally interact—and only with each other—to create brilliance.

How much enormous value is left on the table because of the celebration of an heroic myth of solo cogitation, rather than of direct intellectual, collaborative contact with the client?  Two bright people working collaboratively can usually out-think one very bright person.  Make it four people, and there’s no contest. 

The answer is to focus not on getting better and better at solo cognitive manipulation, but also on sharing that brilliance in a way that is ego-less, collaborative, and enthusiastic.  Brilliant 1 plus brilliant 1 makes not 2, but 5.  As Myrvohld said, it’s way beyond multiplicity. 

The absent-minded professor, the eccentric genius are respected, even revered.  But this just lets them off the hook.  By idolizing such anti-social behavior, we are rewarding mediocrity relative to what they are capable of accomplishing.
 

Do You Trust the Tech Support Folks?

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What is it about tech support?

We want to trust that they will solve our problem. But wanting isn’t getting.

I had lots of time-on-hold to think about this recently – that is – what bolsters trust and what detracts from it? Here are my recent experiences.

1. My computer died in my sleep. It was under warranty. I called the tech support line. When I tested the computer with the agent on the line, the video card ignited in flames!

The agent stayed calm and made sure I was safe, genuinely caring about me and my home. Then he cared about my hard drive – assuring me that it was likely to be safe as well.

Then he addressed the issue – and decided to replace my computer, rather than just the parts. He described the exchange process, and said it could take one to three weeks, but might come even sooner. It arrived in 3 business days.

2. My PDA Calendar was deleting my entries. I called my cellular carrier. I slogged through one automated system and two phone agents–repeating my identification and other security data, in addition to my issue each time. Most of the conversation was scripted apologies about my woes, repetition of what I just said, and thanks for using their service and calling them. Having exhausted the service available, the last agent rightly granted me access to the manufacturer.

At that point, my experience changed. The first person asked about my problem and for my phone number in case we disconnected. Then I was transferred to a person that already had that information on the screen and who didn’t ask me to repeat either my identification information or my issue. He assured me he would stay with me until we resolved the problem – which is what I really wanted – instead of a disingenuous apology. We agreed to break at one point, at my request. He kept his word and called me back right on time, using the number that was logged earlier. And we resolved my problem.

Net net: for my computer problem, I trusted my phone agent, and through him, his company, and will buy from them again. I trust my PDA manufacturer, and will buy another when I’m ready. I’m not so sure about trusting my cellphone service carrier, and may change next time around.

What engendered trust:

• Skipping the unnecessary script and focusing on the problem
• Genuinely caring about me, wanting to help and reassuring me every step of the way
• Being transparent about process
• Keeping promises, showing reliability
• An agent recognizing that he can’t help, and referring me to one who can, as quickly as possible.

What detracted from trust:

• Canned apologies, fake empathy, and useless thank-yous designed to meet some behaviorally observable criteria judged by “management” to serve as a proxy for genuine trustworthiness;
• Asking me for the same information over and over and over…making me doubt either their intent or their competence, or both;
• Multiple transfers without results.

That’s just me. What makes you trust tech or customer service — and what makes you cringe and wonder whether anyone really cares?

Is Trust a Substitute for Risk Management?

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Some financiers say the current financial crisis is a risk management issue. Unwarranted risks were taken; better risk management tools are needed.

They misunderstand the difference between risk management and trust.

Risk management is when we contract that you’ll staff my project with the best people, you’ll use best practices, charge me a fair rate, that I can terminate with 30 days’ notice, and so forth. And if you don’t do those things, you’ll be in violation of a legally enforceable agreement.

Trust is where we look each other in the eye, shake hands, and say, “we’re going to do right by each other, including changing whatever else it takes to do so.”

Risk management is for hurricanes—things, events. Trusting the weather won’t change it one whit, and can be suicidal.

But treating people like hurricanes actually increases the risk. The more you give employees lie detector tests, the more they’ll lie—“someone must be getting away with it, why else would they keep testing us?” More fine print just leads to gaming the system.

Conversely, when you trust people, you increase their trustworthiness. A client once cut short my praise of a proposed subcontractor. “Charlie, enough–if you say he’s good, he’s good—I trust you,” the client said. I instantly felt the weight of the burden of trust.

When people are involved, risk management partially raises risk. Trust lowers it. Why do the financiers have it wrong? Because they think our crisis is about securities capable of being evaluated in absolute terms. It’s not–it’s about people relationships, capable of being evaluated only in subjective terms. It’s not a crisis of derivates valuation–it’s a crisis of trust.

Trust won’t eliminate risk. Some people steal from honor boxes, and take advantage of others. I commonly hear, “Charlie, you’re naive. You need to legally enforce legal rights to copyright, employee behavior, or pricing. There are no sanctions with trust.”

In fact, there are sanctions, both carrot and stick, and they can be more powerful than contracts.

Suppose I trust a French contractor with my intellectual property. I could get a legal contract stating sanctions. If violated, I could enforce it in France. But at what cost in euros, time spent, and time elapsed?

Here’s the trust carrot. “Pierre, think of the great business you and I can do together—new markets, products, opportunities; as long as, of course, you continue to respect my property rights, we can do this again and again. This can be the beginning of a beautiful friendship.”

And the trust stick? “In the inconceivable event that you, Pierre, were to violate this agreement—not that you ever would, of course—then I would be forced to make that fact public. In a blog. In letters, emails, articles, public websites, aimed at your other business partners and potential partners, your customers, your employees. That would be most harmful to your reputation for trustworthiness, Pierre, and we both know that, so we needn’t speak more of such terrible things, now do we? We understand each other, oui?”

The common way to manage risk is with lawyers and contracts. The better way is often to create trust–over a fine French meal and a bottle of wine.

One of those ways is cheaper, faster, stronger, more pleasant. Why would I want to use lawyers when I can use trust? Why manage “people risk” like you manage hurricanes, when you can use trust instead?

(The usual pushback is how to scale trust: more on that soon).

The Cost of Broken Trust

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by Mark Slatin

What happens when an insatiable drive for profits permeates the culture of an organization?

Eventually you forget whose business you should be taking care of.

Consider Office Depot’s current woes. The number two office products "mega dealer" ascended to their position in large part due to their strategic focus on the education and government markets. Now they have lost favor with those same markets amid questions surrounding "pricing and other irregularities."

Consider the following as reported in the Independent Dealer Magazine’s Depot State Contract Watch:

•    After the state of Georgia raised some red flags, an internal audit revealed rampant overcharges. An industry trade publication estimated the overcharges as much as $1.2 million. As reported last February by the Atlanta Journal Constitution, the state canceled their $40 million per year contract. Georgia is not alone.
•    California: The San Jose Mercury News reported that Office Depot has agreed to repay the state of California $2.5 million for over-payments, state officials said, as they released a state audit concluding that state workers routinely failed to get the best value when buying office supplies the past two years.
•    Southeast Florida: Lee County tallied nearly $60,000 in overcharges, according to a report by that county’s internal audit department as reported by the Palm Beach Post.
•    Southwest Florida: Fox 4 News reported that in Collier County, Florida a "whistle blower" from within the company has been terminated after voicing his concern for overcharging that county’s government (WFTX video).
•    North Carolina: The office of the state auditor in Raleigh, NC announced he found overcharges under an Office Depot contract with the state purchasing agency. That audit examined six months of purchases and identified $294,413 in net overcharges through direct testing of purchase orders.
•    Nebraska: State Auditor Mike Foley has concluded an investigation showing the State of Nebraska is paying too much for office supplies because of serious pricing errors and overcharges. Overcharges ranged from less than 1% to over 400% on various items according to the report.
Office Depot’s stock has plummeted from $46.52 in May of 2006 to $1.82 earlier this week, nearly 97% drop as compared with only a 30% – 40% drop in the major stock indexes over the same time frame.

Is there a connection between their B2B pricing strategy and their poor performance?  Sales and operating margin dropped by nearly half in Q3 08′ for their B2B segment.

Time will tell the depth of Depot’s damage as investigations continue throughout the country.  Despite persistent denials by Office Depot officials, the tide doesn’t seem to be going in their favor.  Are they wrongly accused?  Simply out of alignment with their core values?  Or is this part of a strategic pricing strategy that’s become part of their culture?

Office Depot’s website defines integrity and accountability as follows:

Integrity – "We earn the trust and confidence of associates, customers, suppliers and shareholders by being open, honest and truthful in all that we do".
Accountability – "We are responsible for achieving and sustaining unprecedented results that create extraordinary value to our shareholders…"

Maybe it’s just me, but it seems like their failure to adhere to the former is impacting their realizing the latter.

With ever increasing pressure on corporate earnings, the temptation to slide down the slippery slope of profit margin improvement at the cost of integrity will rise.  If your conscience is telling you "this doesn’t feel right," listen to it.  The pennies saved won’t be worth the risk.

How many years and advertising dollars does it take to create a corporate brand built on trust?  Not only does bad publicity cause buyers to question your pricing, it causes them to re-think inviting you to bid in the first place.

What can you do to avoid the high cost of broken trust?

1. Don’t do anything in the short-term that could potentially come back to bite you in the long-term. Ask yourself, "would the buyer think this is equitable?"

2. If you work in an industry in which customers already question the trustworthiness of sellers (guilt by association), address issues like pricing head on. Don’t let pricing integrity become the "elephant in the room" that takes over the room.  Bring it up first and get it on the table.  Transparency is a precursor to trust.

3. Leadership not only has a responsibility to set the tone, it has a charge to sniff out unethical pricing behavior at all levels. Make sure your team knows that you’re not willing to cross the integrity line, not once. 

Restoring broken trust takes a lot longer than building trust; a reputation can take years to build but only seconds to destroy.
 

What’s Trust Got to Do With Respect?

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On the one hand, the connection between trust and respect seems clear. As Thomas Friedman put it:

I’m often asked how I, an American Jew, have been able to operate so successfully in the Arab world. My answer is simple: it is to be a good listener. It has never failed me. Listening is a sign of respect. If you truly listen to the other person, they will then listen to what you have to say.

Aretha Franklin just spelled it out.

Behaving respectfully toward others is likely to increase your trustworthiness in others’ eyes, and to make them more likely to trust you.

But should it work the other way? What if someone is disrespectful to us? Should we then behave in a less trustworthy way toward them? Should we trust them less?

There’s an equally venerable point of view that says get over it, sticks and stones may break my bones but names will never hurt me, someone can hurt you emotionally only with your permission, hear other people but do not allow your emotions to be held hostage by theirs.

Of course, sometimes name-calling is a prelude to violence; disrespect can signal untrustworthiness. Only a fool doesn’t look for a nearby exit door in such situations.

But we over-rate how often that is true.

This territory of trust, listening and respect is rife with opportunities for self-improvement. Strive to respect others—not in the ways you would be respected, but in ways the other person would consider as being respected. Which means listening, very attentively.

But when disrespected, strive to rise above it. Return respect for disrespect, by listening for motives and for understanding.

Does this mean holding ourselves to a higher standard than others? And is that disrespectful in itself?

I’d like to think not. On some absolute scale, all of us are awful at this. When you behave disrespectfully, notice it and resolve to do better in future. When someone is disrespectful towards you, notice how much like them you are, and resolve to overlook it on the spot.

December Carnival of Trust is Up

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The December 2008 Carnival of Trust is now officially up, courtesy of Stephanie West Allen at Idealawg. Many thanks to Stephanie for a fascinating set of selections.

Do yourself a favor and click through to her site to view the full set of the Top Ten selections. To whet your appetite, here are a few subjects Stephanie has selected:

–What a con man has to teach us about trust

–Seth Godin on trust

–25 behaviors that will destroy trust

–the 8 factors that go into evaluating a handshake.

And six more round out the Top Ten Trust selections this month. Fascinating stuff. Just what the Carnival should do–the tough job of screening the internet each month for interesting material on trust, and doing the heavy lifting by narrowing it down to the Top Ten. Must-trust reading.

Again, read the current Carnival of Trust here. Read past Carnivals here.

And if you’d like to submit your own blog post for consideration in next month’s Carnival, please do so by clicking here.

See you next month!