How Small Businesses Can Deal With Competition

handshakes-business

Jay Cain was a promising engineering student at Georgia Tech. Coming into his sophomore year, Jay was ranked in the top of his engineering class. Having two high successful parents who were engineers themselves didn’t hurt his image among his peers. However, Jay was not happy with his projection in life. His passion was deejaying in front of an audience.  He had garnered a reputation in his high school and his local community for being a good talent in music. He even found himself deejaying parties in college while he was preparing for engineering exams and assignments. 

He told his parents several times he was thinking about leaving school in order to start his business full-time deejay. His parents dismissed the thought because they felt it was not realistic or practical given his abilities in engineering.  When the semester started at Georgia Tech, the school was missing one bright talented student…Jay Cain.  Leaving Georgia, Jay went to New York to make it big. Using money he saved, Jay found himself roomed with three unfamiliar roommates where the rent was cheap.  Jay found that working as a deejay was difficult because of the large competition among established deejays in the area.  Yet, Jay wasn’t about to give up with his dream. He just couldn’t go back to his parents or college.  Jay sat by himself trying to figure out how to meet the competition.

 As many millenniums start flooding the employment landscape, young adults are considering starting their own businesses.  Corporate downsizing and layoffs have thrust many individuals into a tough employment market while other employed workers who are unsatisfied with their jobs plot to fix a plausible exit strategy which will land them into their ideal job.

Sadly, many people run with these well intended ideas about starting a business with little insight into how to implement their plan so that the idea can be successful.  Most folks don’t realize that there is nothing new under the sun and found someone else who is doing what they set out to do. In fact, some people find themselves in a highly competitive environment with little or no plan for navigating this climate. In this issue, we will  examine the concepts of competition for small businesses fighting in global environments. Individuals will learn more about starting a business with competitive environment. Continue reading

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Performance Measures in Today’s Businesses

blind-leadership

Finding the right performance measure in today’s organizations is like trying to determine for each swimmer the right temperature of the water to swim in the Gulf of Mexico (a great place to vacation).  There are many variables to consider. Certainly, the amount of revenue produced for each customer would speak to the bottom-line of most organizations.  In relationship selling, you have the personality factor.

In fact, Mark Johnston and Greg Marshall, authors of Relationship Selling, maintain that customers pick up on a salesperson’s attitude. Does good chemistry exist between the salesperson and the customer? That’s an important performance measure. When developing performance measurement with relationship selling in mind, good chemistry between the salesperson and customer should be a factor.

The amount of customer referrals can be an extremely good indicator, because this friendly act speaks to the issues of customer trust.  Quality expert George Peeler argues that the key to designing and using systems that will build the traditional product source relationship in the Quality Era will be the creativity and commitment of management and customer insight provided through empathy.  Successful organizations understand the attitudes and emotions of their customers. Therefore, connecting with customers would be a vital performance metric.

In being effective, businesses need to understand what to measure.  Many times, organizations are measuring the wrong objectives or doing the analysis incorrectly. Johnston and Marshall argue for designing an effective measurement system which includes (a) what do we want to measure, (b) when do we want to measure, and (c) how do we measure. Therefore, it’s important that organizations create effective performance measures.

Yet, performance measures are very difficult.  Management expert Stacey views performance measures as a process rather than an event, involving a series of specific activities for creating, implementing, and using performance metrics. Organization must be careful about using the right data collection tool to measure performance. For example, most people hate doing surveys.

Given this reality, organizations must carefully analyze the survey data for bias. Are they truly getting a picture of their customers?  I found focus groups more useful. Peeler further explains that management must facilitate the processes of quality innovation through prompt action, removing barriers to employee performance by continually attending to process improvement. Regardless, management must establish a reliable performance measurement system for organizations. The bottom-line is that there is inherent risk with customer surveys.

Finally, businesses should be strategic and focused in their performance measures. If an organization wants to spin its wheel and go nowhere, having unclear direction is a great pathway.  It’s important to have clear objectives and desired outcomes.  The transformation process from where an organization is to where an organization wants to be is a clear application for performance measures.

Johnston and Marshall argue that specific, realistic, and measurable objectives are essential to a sales training program. They further acknowledge that salespeople exist in a highly competitive environment where a great deal of information must be assimilated for effective customer sales.

Please discuss organizational performance measure from your professional experience.

© 2014 by Daryl D. Green

The Nature of Effective Problem Solving

Whiteboard--business man-strategic-planning-on-the-whiteboard

Our youth program continues to grow at my church.  Of course, it is a simple formula as our church is one of the biggest in the area.  Church going parents make it mandatory for their children to attend church and participate in church services.  However, when the children graduate from high school and became young adults, their attendance becomes very low or non-existent. 

At that time, Velma Biddles was the youth leader and fairly new to the position.  She and her youth advisors have seen the shift of young people’s attitude.  If churches want to be effective with youth, they must change their underpinning message of: “Children are to be seen and not heard.”  Our youth advisors started to deal with the root causes of matters concerning our youth. Sadly, many businesses are spending millions on symptoms. What about you? 

Good problem solving can be an asset in an organization.  Some organizations find themselves solving the wrong problems and getting less than desired results.  Other managers assume that good technical staff members are naturally good problem solvers.  However, this observation is not necessarily true.  Effective problem solvers often have an intuitive skill set or enough training in problem solving for finding the right problems and making the best decisions.  

 John Gamble and Arthur Thompson, authors of Essentials of Strategic Management, outline the importance of filling key managerial slots with people who are good at figuring out what needs to be done and possess skills in effective implementation and in producing desired results.  They note, “No company can hope to perform the activities required for successful strategy execution without attracting and retaining talented managers and employees with suitable skills and intellectual capital.”  A problem can be defined as ‘an obstacle that stands in the way of achieving a desired goal.’ In fact, problems are divergences from the preferred outcomes.  

The basic problem solving stages include: (a) Identify the problem, (b) Gather information, (c) Clarify the problem, (d) Consider possible solutions, (e) Select the best option, and (f) Make a decision and monitor the solution. High performing organizations move beyond superficial problem solving in order to get to the root causes.  Good businesses realize that uncovering the real problems can be beneficial in many ways, such as reduced risks, cost savings, and greater efficiencies.  

Jeff Butterfield, author of Problem Solving and Decision Making, argues about the benefits of talented problem solvers: “People who can identify, define, and solve problems are valued members of an organization.” 

 

Like our youth advisors recognizing the problem and adapting appropriate solutions, today’s managers must be willing to move beyond their own bias to discover the real causes of problems.  Too many managers seek to major in the minors.  High performing organizations cannot afford to let this happen. 

In general, effective problem solving can be a great competitive advantage for organizations.  Formulating better decision making happens with more effective problem solving.  Businesses with talented problem solvers will have a greater capacity for sustainable success. 

Discuss your professional experience with problem solving in your industry or organization.

© 2014 by Daryl D. Green

Living Beyond Criticism

criticism1

I do know how to make my wife laugh…even at my expense. I have been fascinated with ballroom dancing since last year. It was something I reluctantly embraced after being taken kicking and screaming to the dance floor. Several weeks ago I thought it would be nice to practice my dance moves so that I would perform them better. My wife was out of town at the time. I got a notice about a dance with a live band on Saturday. I thought it would be cool.

However, I should have read the fine print. When I got to the event, it was packed full of energy and enthusiasm. What I failed to learn was that the dance was at a senior citizen center. That meant I would be dancing with my mother and grandmother at the event. Secretly, I pledged to myself that I would not ask anyone to dance and gracefully exit from this event. The average age of the attendees was over 80 years old. I was but a puppy at 40 + years old.

However, my exit strategy did not work. I invited myself to sit (of course, I did not know anyone and just dashed to the nearest unoccupied sit) with a well-to-do couple who was visiting in the area. They were well educated, financially secure, and very mobile; they had winter and summer homes. Having a questioning nature, I asked about how they perceived life and what the general attitude of these folks was in general since they were all part of the Greatest Generation. I was pretty shocked at the responses.

They noted that many of them did not care about any past accomplishments, titles, wealth, or status symbols. Most folks were mostly concerned with their health, quality of life, and having enough money to live. Kids and grandkids were rarely mentioned (many had been abandoned by them). With them approaching the end of their golden years, the focus was on current relationships and values. In fact, there was an evolution by many of them in their thinking: “There was no shame in their game.”

Many couples had forgone the taboos of living together (aka ‘shacking up) because these people did not want to lose their Social Security checks or other financial means. In a nutshell, they did not care about what others thought about them. It was something that I could relate to in ballroom dancing.

My male friends give me a hard time about ballroom dancing. However, at the same time, they cannot dance, garnish the attention of others by doing something others could not do, or inject into their character fresh confidence in learning how to do something new and different. Many people do not progress in life for fear of being criticized.

No one wants to be criticized. Dr. William Watley, Senior Pastor of the St. Phillip African Methodist Episcopal Church observed, “Criticism’s certainly something that you can’t be delivered from…From the womb to the tomb, you can’t escape it.” Criticism can be defined as ‘the expression of disapproval of someone or something based on perceived faults or mistakes.’

No one can avoid criticism if they are active in an organization or serve in a leader’s capacity. Yet, individuals can also be criticized because of lack of action. Dr. Watley argues that criticism is all that some people know how to do, which indicates to him that ”these people need to get a life.” Perhaps, actress Ava Gardner summed it up best about critics: “Hell, I suppose if you stick around long enough, they have to say something nice about you.”

On the contrary, a Constructive Critic points out things that will assist in the personal or professional development of a person. A Petty Fault Finder can always locate some short coming in an individual that is not helpful and a fault that he or she does not have a problem with. In fact, no matter how hard you attempt to correct a problem noted by a Petty Fault Finder, he or she will not be satisfied; a Petty Fault Finder will seek to only locate another problem in this individual’s life.

Great leaders know how to use criticism in a way that can transform an organization. Most people are unwilling to change even when it is out of necessity or survival. Richard Daft, renowned author of Management, notes that change can be problematic for organizational growth.

 

Employees and managers often resist change. Dr. Daft explains, “Yet most changes will encounter some degree of resistance. Idea champions often discover that other employees are unenthusiastic about their new ideas….People typically resist a change they believe conflicts with their self-interest.”[1] Most managers understand how to control and oversee their organizations.

Few managers have the innate ability to inspire their employees from mediocre to extraordinary performance. That position description requires a leader, not a status quo manager. All great leaders, from President George Washington to Albert Einstein, had their own share of criticism and a merry band of Petty Fault Finders.

Sadly, some individuals never are effective in their positions because they can never seem to manage because of fear of negative criticism. Gareth Jones and Jennifer George, authors of Contemporary Management, explained how bad leadership damages an organization: “When leaders are ineffective, chances are good that their subordinates do not perform to their capabilities, are demotivated, and may be dissatisfied as well.”[2] Consequently, it is important that leaders develop strategies for managing criticism effectively in order to move their organizations to exemplary performance.

Please discuss how to cope with negative criticism in a professional work environment.

 © 2013 by Daryl D. Green

 


[1]Management by Richard Daft

[2] Contemporary Management by Gareth Jones and Jennifer George

 

Ethical Decision-making in Business Operations

ethics-cross the finger

Last week, we had a special guest come to our MBA class. Rev. Anthony Rodgers, author of How God Restored My Life, shared with us his personal story that showcased a lifestyle of prestige, power, and wealth.  However, this pathway was through illegal and criminal behavior that the average individual would find distasteful.

Rev. Rodger’s was transformed; his life has become a symbol of how individuals can be redeemed and changed.  His lifestyle of drugs and crime are demised.  In the same vein, some business managers act immorally, unethically, and participate in illegal activities that can get organizations into trouble.  Do you remember Enron?  BP Oil?  There is a laundry list of these organizations.

If organizations are serious about having profitable operations, they must have good ethical systems.  Operations management does not exist in a vacuum; other business areas must be considered. Marketing and strategy are underlining principles that must be addressed for organizations selling abroad.

Michael Johnston and Greg Marshall, authors of Relationship Selling, argue that customers who reside in other countries pose unique ethical concerns for salespeople and management, especially in (1) cultural differences and (2) differences in corporate selling policies.[1]

Regis McKenna, author of Relationship Marketing, further suggests that effective marketing is the integration of the customer into the design of the product; to design a systematic process for interaction will create substance in the relationship.[2] Creating a good ethical system is critical for success.

First, any meaningful, ethical program must start with senior management behavior. In fact, ethical behavior must start at the top. Salespeople are not the only members of the sales force who face ethical concerns. Management must address significant ethical issues with (a) salespeople, (b) company policies, and (c) international customers and policies.

I do think that organizational culture is the cornerstone for understanding the ethical environment. Trust is the foundation of any meaningful corporate structure.  Gareth Jones and Jennifer George, authors of Contemporary Management, maintain that when leaders are ineffective, chances are good that workers will not perform to their capabilities.

Johnston and Marshall further suggest senior management style (do their actions match their words), the established culture of the organization, and external forces can create a climate where unethical or even illegal behavior is tolerated.[3] Therefore, senior managers should lead the way by example.

Second, the organization must evaluate the current corporate culture. There are both written and unwritten rules and behaviors that come into play. For example, Enron senior management demonstrated a lack of moral and ethical judgment that played a critical role in its decision-making (i.e. breaking laws) policies.  Therefore, one must review the organizational culture of the organization before attempting to implement an ethics program.

Last, the organization must be committed to a win-win approach. Companies need to have a plan for implementing ethics. However, these plans need to involve the workers. Typically, executives come up with a mandate on corporate policies and HR is forced to implement them.  There is little worker involvement.

Yet, ethical conduct impacts everyone.  Employees at various levels face ethical issues all the time. Their input would be invaluable. This fact has a great bearing on ethical behavior among employees.

Discuss your professional experience on how ethical decision making can impact business operations.

 © 2013 by Daryl D. Green


[1] Relationship Selling by Michael Johnston and Greg Marshall

[2] Relationship Marketing by Regis McKenna

[3] Contemporary Management by Gareth Jones and Jennifer George

Mapping Out the Right Job Process for 2013 College Grad

Unemployment-lines-youth-

Picking the right job candidate is not easy.  I was given the task of recommending college students for summer employment for my organization.  I promptly pulled together a team of both seasoned professionals and recent college grads to make the job selection.  We reviewed more than 100 resumes and interviewed several candidates.  We had to make these selections quickly.

To my surprise, I was flabbergasted at the lack of employment preparation for by some people.  For example, some students did not have the correct phone number listed on their resumes. We did not have time to waste tracking down candidates.

In one situation, we had called a prospect to interview him but missed him on our call to set up an interview.  He called us back with a list of times he was available to be interviewed.  In other words, he expected us to work our interview schedule around his.  Needless to say, we did not call him back.

In other cases, we contacted prospects and asked them two basic questions: (a) why did they want the job and (b) what separated them in terms of skills and abilities for the job.  In some cases, the students could not answer those questions.  I am sure in hind sight; they would have understood that those types of questions would be asked.

We were fortunate to land two quality candidates.  The team continued to be concerned about the lack of understanding by these college students about the job interview process.  Because of this, we developed a job strategies checklist to provide universities and college students for our campus visits or university interactions.

Sadly, these miscues in understanding the financial climate and the hiring process of employers could jeopardize their future.  In this blog, we will examine the current economic crisis and how students and parents can better position themselves for more employment opportunities.

The current economic forecast looks bleak in the near term for college grads and those preparing to graduate in 2013.  The U.S. Labor Department estimates that the unemployment rate for recent college grads between ages 21 to 24 has averaged over 8%.

According to the Economic Policy Institute, recent grads will probably need to settle for low-level positions.[1]  In fact, about 52% of employed college grads under age 25 were not working jobs that require a college degree according to a Northeastern University economist.[2]

College grads and current students must find alternative strategies to overcome employment obstacles. Rising tuition costs, a stagnate economy, and lack of career advancement continue to haunt ambitious young professionals.

Seasoned professionals are too cautious to retire early due to the uncertainty in their own future with the rising health care costs as they age.  In fact, getting a college education appears to be a big liability and financial load for students.

As the clock struck midnight several days ago, interest rates on federally subsidized Stafford student loans jumped from 3.4% to 6.8% until Congress can change it.[3] Some estimates conclude that the average college student will see an additional $2,600 cost for his or her loan.

According to the Project on Student Debt, two-thirds of 2011 college graduates had an average debt of more than $26,000.  Consequently, millions of college grads will see themselves carrying massive college debt loads with dim hopes of finding jobs in their majors.

Columnist Hadley Malcolm summed up this situation best, “Like countless Millennials across the country, they find themselves tethered to that debt load, stuck between the desire to become fully independent adults and not being able to afford the financial and cultural milestones traditionally associated with young adults.”

Employment opportunities have changed because the hiring processes have changed, yet most individuals do not realize this fact.  A process is defined as any part of an organization that inputs and transforms them into outputs in hopes of greater value to the organization than the original inputs.[4]

Robert Jacobs, Richard Chase, and Nicholas Aquilano, authors of Operations & Supply Management, note, “Understanding how processes work is essential to ensuring the competitiveness of a company.”

Yet, understanding the hiring process would be an asset to college grads who are competing with their college peers and seasoned professionals.  For most college grads, this reality makes it vital to find a good, well-paying job.  Yet, most people are in the dark about the job strategies necessary.

Peter Cappelli, author of Why Good People Can’t Get Jobs, explains that employers have shifted their expectations on prospective employees: “With an abundance of workers to choose from, employers are demanding more of job candidates than ever before…To get a job, you have to have that job already.  It’s a catch-22 situation for workers – and it’s hurting companies and the economy.”  Regardless of where you stand on today’s college students, it is clear that some intervention is necessary if they are to be successful in this troubled market.

 

With the increases in college debt and decreases in significant job opportunities, both college grads and college students must understand today’s hiring process. Additionally, with the rising cost of a college education, parents cannot afford to idly sit by and watch their child wander aimlessly through college.  Individuals can help themselves by becoming knowledgeable in all aspects of the employment process.  The road will not be easy, but planning will create the right environment for success in the future.

Please discuss employment processes that have changed since you graduated. Provide valuable employment strategies to recent college grads and current college students. 

© 2013 by Daryl D. Green

 


[1] “Class of 2013 faces grim job prospects” by Annalyn Kurtz

[2] “Class of 2013 faces grim job prospects” by Annalyn Kurtz

[3] “The cost of student debt loan” by Hadley Malcolm

[4] Operations & Supply Management by Robert Jacobs, Richard Chase, and Nicholas Aquilano.

 

Transformational Properties of Operations Management

Manufacturing-factory-China

Last week, I ran into an old friend at the Oak Ridge Post Office. He was a retired professional who I had played noon basketball with in my early years in Oak Ridge. He mentioned that most of the guys had retired from their jobs.

However, he also mentioned that one of the most seasoned professionals had been laid off from this prestigious firm after working for this organization more than 20 years. It was noted that the work had dried up. In fact, most of the local businesses are seeing the budget tightening in the government sector which is critical to the survival of most businesses in the area. Sadly, the financial crisis is not over.

Globalization will continue to drive down prices and force businesses to make hard decisions which impact the basic quality of living. Companies will look to operations management to gain greater efficiency and effectiveness in their systems.

The underpinning thread is how they understand value creation and what it means to customers. In this context, value can be defined as the perceived experience and worth gained from a product or service.[1] Creating value is not easy. Creating value across an international base is almost impossibility for most companies. Therefore, understanding operations management and supply management is a necessity.

Global markets continue to shift the direction of today’s businesses. Companies must be astute to the ever changing value perspectives of customers. According to KPMG 2013 Global Manufacture Outlook, companies should be optimistic. This international report surveyed 335 senior executives in five industries: Aerospace and Defense, Automotive, Conglomerates, Engineering and Industrial Products, and Metals.[2]

KPMG notes, “Global manufacturers’ ability to optimize performance and cost in their entire supply chain will be key to helping them become more competitive and resilient…Global manufacturers are building closer relationships with their customers, who in turn expect more due to advances in manufacturing technology.” These organizations are seeking a competitive advantage in several ways:

  1. Increasing transaction activity to take advantage of growth opportunities in global markets, while reassessing operations and product portfolios to control costs.
  2. Viewing their ‘channel partners’ as more of a network and building closer working relationships with their suppliers and other partners to maximize responsiveness to changes in the market. More effective and efficient collaboration enables them to optimize inventory, logistics, and other operational costs.
  3. Improving visibility in supply chain optimization provides a major opportunity for many companies to boost performance, agility, and resilience.
  4. Increasingly placing the supply chain at the center of their strategies to innovate, as they begin to look at suppliers not just as a source of production and logistics but also of ideas.
  5. Investing in breakthrough and incremental innovation to stay competitive. Nearly a third of respondents whose firms are stepping up R&D say their company will invest in breakthrough innovation.

Individuals as well as organization must understand the transformation properties of operations management.  Transformation processes relate to utilizing resources to convert inputs to desired outputs.

For example, automobile manufacturers convert primary inputs (i.e. sheet metal, plastics, engine parts) into a desired output (i.e. high quality cars). Yet, products are not the only thing that has a transformation process. Services also follow this paradigm. In the hospital industry, primary inputs (i.e. patients) create a desired output too (i.e. healthy patients).

Robert Jacobs, Richard Chase, and Nicholas Aquilano, authors of Operations & Supply Management, argue the merits of well-constructed organizational systems, especially during global competition: “Transformation processes are used in all types of businesses…Operations and supply management is about learning how to design these transformation processes.” Companies that understand what customers want and the intrinsic value desired by them will need to effectively retool their transformation processes in a cost effective manner.

 

According to the Economic Policy Institute, there are roughly 5.1 fewer American manufacturing jobs than at the start of 2001.[3] In fact, organizations argue that American worker’s wages have tumbled due to China’s cheap labor (i.e. primary input in the transformation process).

Global competition demands that organizations focus on the ‘small stuff’ as well as the big picture and embrace the attractive properties of operations managements.

Discuss the concept of operations management for today’s organizations.

© 2013 by Daryl D. Green


[1]Relationship Selling by Johnston & Marshall

[2] KPMG 2013 Global Manufacture Outlook

[3] “Report: America lost 2.7 million jobs to China in 10 years” by Danielle Kurzleben

Technology Relevancy

Components of Technology

We can’t survive without technology.  Are we too dependent on it?  When the computer network is down in our office, it’s a pretty wasted day because we are paperless.  Yet, you won’t find many modern organizations that can operate when their technology malfunctions. 

This week we will focus on technology relevancy as part of the three practical applications (i.e. value modeling, technology relevancy, and human factor buy-in) in socio-technical systems.  

Organizations must understand that technology needs to be relevant as it relates to benefiting the whole socio-technical system.  Technology relates to the combination of skills and equipment that managers use in the design, production, and distribution of goods and services.[1]   

Gareth Jones and Jennifer George, authors of Contemporary Management, argue the significance of technology forces on organizations:  “Technological forces can have profound implications for managers and organizations. Technological change can make established products obsolete….”  The graveyard of many businesses is littered with numerous failed opportunities of senior executives to understand market shifts and technology opportunities.   

As an engineer myself, we are taught to use theory in order to build, design, and operate technical systems, whether mechanical, digital, or otherwise. Sometimes this creates a technical superiority over the other components of this socio-technical system. 

Organizations should obtain input from employees to ensure that the organization has not only the best technology for its operations but the right technology.[2]  This sharing of information can only come with mutual trust of leaders and followers.  Gary Yukl, author of Leadership in Organizations, notes, “Empowerment is more feasible when there is a high level of mutual trust…Leaders can affect the psychological employment of followers in many ways, and participative leadership and delegation are only two of the relevant behaviors .”[3] 

There have been numerous cases where organizations have purchased new technology to solve a problem or to become more efficient when a simple conversation with impacted employees would have produced better results at a lower cost. Therefore, organizations should invest their time in identifying the relevant technologies for their socio-technical system in a participatory manner.    

Discuss the concept of technology relevancy for today’s organizations. 

© 2013 by Daryl D. Green                                    


[1] Jones, G.  & George, J. (2009). Contemporary Management

[2] “Leading others while supporting organizational values” by Daryl D. Green

[3]Leadership in Organizations by Gary Yukl

 

 

Guest Blogger – Jalene Nemec

We face unprecedented economic times in a globalized marketplace where purchasing from places as far away as China are just a click away. As a direct result companies have had to review, refocus and revamp their business scope to compete and sustain their livelihood.

Some have opted to accomplish this by changing their product line, cutting costs, slashing prices, removing excess overhead and reducing pay. All these options can prove successful and have. But there is a better solution. Improve your customer service and earn loyal customers!

Customer service by definition is to provide assistance with courtesy those who patronize a business. [1] A company that provides great customer service over their competitors creates loyal customers who will patronize their business year over year.  

The direct result of this is increased profits. Customers become loyal when they know they can trust your company to take care of their needs, even their most frivolous complaints and to do it with kindnesses.

To illustrate this, John Goodman used a simple calculation for getting customers to complain and then satisfying them. The assumption in this example is that a customer is worth at least $30 in profit over a year’s time.

The cost of handling a complaint is about $5 and at least 75% of callers are satisfied. To quantify the payoff of soliciting and handling complaints, it’s critical to know the prevalence rate of non-complainants and their loyalty, as well as the loyalty of those who complain and are not satisfied. The calculation for moving a customer with a problem from non-complainant to satisfied complainant is provided.

Payoff due to improved loyalty – Typically, moving a customer with a problem from non-complainant to complainant to a satisfied caller raises loyalty by about 30%, meaning loyalty) x (.75 satisfied) x $30 value). After covering the $5 cost of handling the complaint, one is left with $1.75 in profit and/ or an ROI of 35% ($1.75/$5 cost to handle complaint).

Over time, marketing executives have awakened to the fact that between 20% and 70% of all new customers are won by personal referrals, positive word-of-mouth. Research has also consistently shown that personal service interactions have 20 times the positive impact as advertising in fostering word-of-mouth referrals.

Payoffs due to enhanced word-of-mouth referrals: if, conservatively, one out of ten satisfied customers produce a word-of-mouth referral and one new customer worth $30 is won for every 40 who hear good things, then satisfying 10 customers adds $30 in word-of-mouth benefits, or $3 for each customer satisfied. That adds an additional $3 payoff for each satisfied customer, raising the ROI to 95%. [2]

The concept of these figures is intriguing. However they cannot come to fruition by doing nothing. Companies must be actively engaged in the task of improving and providing superior customer service.

Through my research, I determined that there were five key characteristics that lead to great customer service and ultimately increased profits. Those characteristics include: Attitude, Awareness, Accountability, Action, and Affability. Together they are my “5A-Wheel.”

Change begins with the right attitude. Before a company can change their customer service, they must establish a mission to provide quality service. Furthermore, the company should be aware of the current state of the service they provide. Change cannot be made without understanding the situation at hand. A business may question, has there been a noticeable decline in sales? If so, could it be a result of the customer service? 

The best way to kick-start change is to hold employees and managers accountable. Without effectively maintaining accountability for everyone involved, people will not see a reason to change their behavior and the business will suffer.

Holding personnel accountable is the first part of taking action. Unless a company makes a conscious decision to actively improve, change will be temporary or non-existent.

The final characteristic is affability. It seems like a minor detail, but consider some of your past consumer experiences. There were probably a few instances where an employee helped you in an “I have to” way, and there were times where you were helped in an “I want to” way.

This is the difference between attitude and affability. An employee has the right attitude if he or she understands a need to help the customer, but wanting to help the customer provides the best possible experience for everyone. 

Using these five characteristics as a guideline will help companies succeed in their customer service department. As you begin your career or start up your own business, be better than your competition and provide the customer service of yesteryear that people value, a customer service that people are loyal to.

Please share your thoughts with this guest blogger.

ABOUT THE BLOGGER

 

Jalene Nemec, MBA,  is the author of the upcoming book, Great Customer Service. She is also one of the brightest business thinkers in the world, having both extensive customer service and leadership experience.  She is a former Lincoln Memorial University MBA graduate.

REFERENCES

Entrepreneur. http://www.entrepreneur.com/encyclopedia/printthis/82148.html. 2011. (accessed   16 March 2011).

Goodman, John. “Manage Complaints to Enhance Loyalty.” Quality Progress, (2006).


[1] Entrepreneur.com

[2] Manage Complaints to Enhance Loyalty by John Goodman

Demising the American Living Wage

Are you worried about your children and grandchildren’s future in terms of a better life?  You should be!  Market forces will make it harder for individuals to make an honest wage.  American companies, once loyal to their employees, have abandoned the social contract with their employees.  

Leaving today’s workers vulnerable to the consequences of globalization.  Thomas Friedman, author of The World is Flat, notes ‘The best companies outsource to win, not to shrink. They outsource to innovate faster and more cheaply in order to grow larger, gain market share, and hire more and different specialists—not to save money by firing more people.”  

Sadly, most companies do not have this long-term perspective about globalization.  In hindsight, globalization may produce a more equitable average wage across the world, while reducing the earning power of developed countries and increasing the living wages for emerging countries.  These realities on living wages are a critical concern for most Americans.  

Since the recession in 2008, U.S. businesses have posted historical profits even while unemployment has risen.  Consequently, the market place is saturated with seasoned individuals who are willing to take massive pay cuts in order to obtain a secure job.  Employers understand that it is a buyer’s market where employers can be picky. This reality has bottlenecked millions of young college grads who must fight for entry level jobs with career veterans.  

According to a Manpower Group analysis, 52% of U.S. employers state they have a difficult time filing positions because of talent shortage.   Peter Cappelli, author of Why Good People Can’t Get Jobs, outlines the hypocrisy of most employers:  “With an abundance of workers to choose from, employers are demanding more of job candidates than ever before.…To get a job, you have to have that job already. It’s a Catch-22 situation for workers—and it hurting companies and the economy.”  Employers are setting unrealistic hiring expectations and offering low wages.  

People, from every country, seek to earn a living to sustain themselves, by taking care of their basic needs.  According to the United Nations’ Millennium Development Report, more than1 billion people on the globe live on less than $1 a day.  

Ironically, as most Americans have watched their wages decrease, most other workers across the globe sees a significant increase.  The world’s middle income class earns between $700 to $7,500 per family member. Consequently, individuals making more than $7,500 are considered part of the global affluent class.   

Some experts argue that globalization has eroded America’s standard of living, especially during the resurgence of manufacturing.  Economist Gordon Hanson notes, “The U.S. has held manufacturing wages in check while there has been strong wage growth in China and moderate wage growth in Mexico.  

With high unemployment and fierce global competition, manufacturing companies has used this fact to their advantage.  This reality has forced two-tier contracts with unions to pay new hires less than existing workers and reduce new hires’ benefits.  In 2010 and 2011, new hires (manufacturing of durable goods) who had three years or more of experience, were paid an average of .3% less than workers in 2007 and 2008. 

Today’s American workers are finding it difficult to make ends meet. According to the Pew Charity study, economic mobility will be more difficult for individuals, especially depending on where they live.  Economic mobility relates to the ability of a person to move up or down the economy ladder.  

The Pew study concluded that people living in Louisiana, Oklahoma, South Carolina, Alabama, Florida, Mississippi, North Carolina, and Texas would be less likely to improve their economic standing.  However, states such as Maryland, New York, and Pennsylvania would have a better chance of economic mobility due to higher wages in manufacturing and public jobs.  

While the poorest American class wouldn’t consider itself part of an affluent class, this relative inequality of incomes is a bitter pill from citizens of poorer countries.  According to an UN study, the poorest countries across the globe consume 14% of the planet’s resources while 20% of the richest countries with the industrialized nations (including the United States) consume 86% of resources.  

Due to globalization, economic mobility will produce a variety of winners and losers.  Consequently, social mobility becomes more difficult as Americans are forced into a caste system of unemployed or underemployed workers. 

What will happen to economic mobility in America? Will the inequality of wages for global workers create new problems for businesses and society at large?                                                                                              

 © 2012 by Daryl D. Green