Out of Touch Executives Damage Companies: Go to the Gemba

When your customer service organization is universally recognized as horrible adding sales requirements to customer service representatives jobs is a really bad practice. Sadly it isn’t at all surprising to learn of management doing just that at our largest companies. Within a system where cash and corruption buys freedom from market forces (see below for more details) such practices can continue.

Such customer hostile practices shouldn’t continue. They shouldn’t be allowed to continue. And even though the company’s cash has bought politically corrupt parties to allow such a system to survive it isn’t even in the selfish interest of the business. They could use the cover provided by bought-and-paid-for-politicians-and-parties to maintain monopolistic pricing (which is wrong ethically and economically but could be seen as in the self interest of a business). But still provide good service (even while you take monopolistic profits allowed with corrupt, though legal, cash payments).

Of course, Adam Smith knew the likely path to corruption of markets made up of people; and he specifically cautioned that a capitalist economic system has to prevent powerful entities efforts to distort markets for individual gain (perfect competition = capitalism, non-competitive markets = what business want, as Adam Smith well knew, but this is precisely not capitalism). Sadly few people taking about the free-market or capitalism understand that their support of cronyist policies are not capitalist (I suppose some people mouthing those words are just preaching false ideas to people known to be idiots, but really most don’t seem to understand capitalism).

Anyway, this class of protected businesses supported by a corrupt political and government (regulators in government) sector is a significant part of the system that allows the customer hostility of those politically connected large businesses to get away with a business model based on customer hostility, but wasn’t really what I meant to write about here.

Comcast executives have to know they are running a company either rated the worst company in the country or close to it year after year. They, along with several others in their industry, as well as the cell phone service providers and too-big-to-fail-banks routinely are the leaders of companies most reviled by customers. Airlines are also up their for treating customer horribly but they are a bit different than the others (political corruption is much less of the reason for their ability to abuse customers for decades than is for the others listed above).

Leaked Comcast employee metrics show what we figured: Sell or perish [Updated]
Training materials explicitly require a “sell” phase, even in support calls.

The company’s choice to transform what is traditionally a non-revenue-generating area—customer service—into a revenue-generating one is playing out with almost hilariously Kafkaesque consequences. It is the nature of large corporations like Comcast to have dozens of layers of management through which leadership instructions and directives are filtered. The bigger the company, the more likely that members of senior leadership (like Tom Karinshak) typically make broad policy and leave specific implementations to lower levels.

Here, what was likely praised in the boardroom as an “innovative” strategy to raise revenue is instead doing much to alienate customers and employees alike. Karinshak’s assurances that he doesn’t want employees to feel pressured to sell in spite of hard evidence that Comcast demands just that are hard to square with the content of the document.

So what is going on here? Most people can easily see this is likely a horrible practice. It is a practice that a well run company theoretically could pull off without harming customers too much. But for a company like Comcast to do this it is obviously going to be horrible for customers (same for all those too-big to fail banks, cell phone service providers and other ISPs and cable TV providers).

Lets just pretend Comcast’s current leadership executives were all replaced with readers of the Curious Cat Management Improvement blog. And lets say that for now you are suppose to focus on improving the policies in place (while thinking about policy changes for later but not making them yet).

The very first thing that needs to happen is executives need to go the gemba and actually understand what their business units are doing. Only amazingly out of touch executives could sit unconcerned in their offices while Comcast practices are creating results so obviously horrible to the country as a whole.

Once that is done, my guess is such removing sales from support would be one of the first actions taken. Hopefully institute honest data collection about which policies were creating the most harm to customers would be close behind. And then an overhaul of the business to focus on running our business honestly would be next.

Study is needed but likely that means understanding we fit into the economy as a regulated monopoly. Even if the government is too corrupt to properly understand that we can make an appropriate business model for our business. Then we can start designing our processes to provide what our customers need: easy to understand options, reliable services, honest billing, etc.. Instituting a proper management system in the company selected as the worst company in America is going to take time but as moves in that direction are made the efforts to build an effective management system can begin.

Related: Poor policy is effectively a tax on the systemHow Could They Know? By Reading and ExperimentingEconomic Consequences Flow from Failing to Follow Real Capitalist Model and Living Beyond Our MeansCustomer Gemba

The Cronyism Club (Too-big-to-fail-banks, ISPs, CableTV, Cell phone service providers)
Obviously executive pay should be slashed at Comcast, but that isn’t so likely, of course none of the ideas to improve are very likely to be given a chance. Comcast, and the companies in the industries on the list, are likely to continue to be extremely customer hostile as long as a corrupt political system allows them to avoid a competitive marketplace.

Now in my opinion, even if so, Comcast and their collection of customer hostile companies would be wise to provide friendly service with a smile while they continue to use the corrupt political and regulatory system to extort monopolistic profits. But I doubt they will. When they have the power to extort monopolistic profits it seems very hard to have them see customers as anything but ATMs to be mistreated.

You would think they would be worried about going too far (they certainly have gone farther than I every thought they would be allowed to get away with). But they seem to have a better idea of how much room to abuse customers the cash paid to politicians buys them.

In the USA these companies all share certain traits. Senior executives that take enormous compensation from the companies they run. A history of buying out potential competitors. A pattern of large donations to politicians to allow anti-competitive buyouts and to ensure regulation of non-competitive markets are for the benefit of those giving cash and harm the customers of those companies (or citizens of the officials taking the cash). A customer base that has next to no choice and sometimes absolutely no choice. Executives that have lost all touch with what everyone else can see about their companies but they claim to be blind to (see the too big to fail executives congressional testimony, for but one example).

The companies from these industries take advantage of a corrupt system to protect their position (they don’t allow themselves to be subject to market forces and therefore can be systemically abusive to customers and stay in business). In some cases that corruption sees to it competitors can be bought out, in others it prohibits potential competitors though bought and paid for politicians and political parties.

The harm to customers is enormous and the system encourages even more customer hostility as the entrenched partners (companies with monopolistic market power and a corrupt politician and regulator system) power is consolidated. From that spring all sorts of horribleness for consumers and the economy: bailouts for too big to fail banks, pitiful internet broadband, huge wastes of consumers time and energy on customer hostile companies, rampant consumer financial fraud (with the bailed out too big to fail banks repeatedly being fined hundreds of millions of dollars for thousand of illegal transactions ).

The health care system in the USA is also part of this cronyist economic system but it is somewhat different in how that is manifest than it is for the others. It is part of the same system, it is just that there are special interaction with health care that result in similar but a bit different manifestations of the cronyist policies.

And really that is the base economic system in the USA now (cronyist/corrupt). In industries where the market still is only largely corporatist (nowhere near perfect competition but at least not extremely oligopolistic or monopolistic markets).

So, for example, retail is significantly less dominated by cronyism and corruption though it is still significant and in instances total – for example the car dealers buying political cover (it is only this political corruption that allows the customer hostility of car dealers compared to going to buy a new TV). Funeral services is another that combines with psychologically trying times to make customer’s venerable (but cash to politicians prevents sensible markets for funeral services in many instances).

Another example of this system in practice is Google Fiber. When Google first announced Google Fiber then did so to create an incentive for entranced parties to stop being so hostile toward broadband customers. Google figured the entranced parties would see the risk to their business and reduce the harm to a less severe level and let Google stop worrying about a simple infrastructure requirement for modern economies.

I am not sure why Google’s move didn’t work. I would guess the entrenched parties figured Google wasn’t serious and so they didn’t have to stop being more and more hostile to broadband (and incidentally Cable TV) customers (Cable TV customer mistreatment is not something I imagine Google cares about but the level of horribleness provides a market opportunity for Google Fiber which also allows Cable TV delivery over the infrastructure). I believe they very well could have made a critical mistake. I believe at this point Google understand the ISP business is great fit for them. As it currently exists the business provides monopolistic profits. The biggest barrier to entry is large amounts of cash (billions) and a long investing time horizon.

Google has $60 billion in cash and it is increasing every week. One of Google best strengths is a long term investing time horizon (and one that is profit focused). The ISP, Cable TV and cell phone service provider businesses in the USA are licenses to print money. It isn’t really a business Google wanted to be in (Google does seem paranoid about having to provide customer service avoiding doing so until absolutely required to – including, it seems to me, leaving lots of money [or at least lots for any company not named Apple, Google and few others] on the table by just avoiding business that requires support).

Mainly Google wanted to make sure everyone had great access to the internet. The more people use the internet the more money Google makes (especially the last few years where they dominated so much of the online profit). Going forward I expect Google’s profit to increase but its share of online profit to decrease significantly (just because so many others are making so much more online).

But with cash piling up (even with large research and development spending at Google) the ISP business is a perfectly great place to invest billions (even tens of billions for Google). They will earn very attractive profits.

In addition, it does several very valuable things for Google. First, it prevents ISP from extorting cash payments from Google to let users view YouTube (or other Google properties). Second, it provides Google tons of data on users activity online.

The main reason for Google to avoid this business has nothing to do with the business case. There is a risk, I believe, that Google’s pervasiveness worries regulators and creates problems for Google overall. It is more a long term risk. This is the only reason I think Google has to avoid the business. I think Google would be happiest if the ISPs in the USA would just do their jobs.

While the business is very profitable I don’t think it is really Google’s desire to be in this business (other new businesses I think intrigue them much more – self driving cars, renewable energy, robotics, wearable technology, etc.). But Google investors will do quite well if Google uses some of their huge cash pile and cash flow to build another huge cash flow business.

Google also benefits from the amazing infrastructure expertise they have – you could not have picked a worse competitor if you are the entrenched monopolies (though Amazon would also be really bad – if Amazon had a $60 billion hoard of cash they would have ramped up this business much more than quickly than Google has (political roadblock do actually make it challenging to move fast but even so Google could have pushed much faster starting at least 18 months ago). Jeff Bezos, Amazon CEO, would completely see the great cash flow he would get for decades to come (and along with growth and customer focus cash flow [not earnings] is a priority for him).

And the continued bad behavior by Verizon, Comcast and AT&T have pushed Google much further down this path then they ever planned to go. Now they may see how great a fit it is for them that they decide it is worth investing billions every quarter for year to create a huge cash flow for decades to come.

This entry was posted in Customer focus, Data, Management, Psychology, Systems thinking and tagged , , , , , , , , , , , , , , , , , , . Bookmark the permalink.