Dear friends: we will be suspending work on this blog until we finish the manuscript of a book we’re writing. Thanks for hanging in there with us. We expect to be back in the game soon.
In the NYT’s article this week about Dell’s recent decline, what struck me most was how far Dell had strayed from its original obsession with customers. My sense had always been that Dell’s low-cost fanaticism was in many ways similar to Wal-Mart’s — their mission was to deliver the absolutely lowest prices, so they were willing to work like crazy, and perhaps even torment their suppliers to get there.
But the details in this article, including a cover-up of faulty motherboards and evasive maneuvering with customers, is completely at odds with that genesis. If true — and the article makes a pretty compelling case — then Dell would be following in a long tradition of organizations that stumble when they start to view customers as obstacles to their own corporate performance.
Dell became Dell for its operational excellence in the service of customers. The company ushered in a whole new way of serving by delivering variety, speed, and prices that had never before been seen in its industry. It was truly revolutionary. And truly focused on end users. But something different, and not that uncommon, seems to have happened in recent years: Dell began to find itself more interesting than its customers.
It’s as if companies like Dell wake up one day, excited and surprised by what they’ve become, and start suffering from the self-distraction of a teenager. They’ve gone from boy to man, and it’s heady stuff. And the media fawning and magazine covers make it that much more difficult to resist themselves. Along the way they seem to forget that what made them great was their customers. In Dell’s case, it was the relentless and creative focus on finding better ways to serve them.
But like a nagging parent, Dell’s customers were eventually treated like a drag on the company’s bright, shiny future. My advice to Dell management — and to any other company on a similar ride — is to have some respect, remember where you came from and make customers the center of your universe again. The correction shouldn’t be that hard for Dell. Looking up to customers is in their corporate genes.
In an incredible announcement, AT&T declared that it will be raising its termination fee for iPhones and a few other devices from $175 to $325. The company offers some explanatory chatter about handset subsidies, but the real message it’s sending is that it’s simply done trying to win over customers. Rather than keeping us the old fashioned way, by creating and sustaining real value, AT&T is now just charging us a ransom to leave. Imagine an AT&T that was truly confident in its ability to serve? How would it behave in the marketplace? It would invite customers to stay only as long as we’re satisfied — and not a cell-phone minute longer.
I find this decision scandalous, particularly since I’m already a frustrated AT&T customer (I can barely make it through a phone call without it being dropped). When a company moves towards trapping customers, the clock starts ticking on its ability to serve them. Penalties for ending the relationship create sharp antagonism with customers — antagonism that’s disproportionately felt by front-line workers — and signals to the entire organization to forget about excellence.
This toxic combination ensures mediocrity and accelerates a company’s decline. I get it. Winning the cell phone game is hard, and the people behind the idea likely had the best interests of the company in mind. But when you broadcast that you can’t convince customers to voluntarily stick around, everyone hears you loud and clear, including your employees. Who would keep trying in a culture like this?
Sigh. This is a sad day for AT&T.
In today’s column David Brooks tells a riveting story about rapid change in the culture and mindset of the U.S. Army, in response to bad news coming back from the Iraq War. The story itself is fascinating — he chronicles the rise of the “COINdinistas,” a small group of leaders led by Gen. David Patraeus that embraced a counterinsurgency strategy — but I was also deeply moved by how a few individuals dramatically changed such a large and complex organization. If you’re looking for evidence that it’s possible to transform your own environment, it’s worth the read.
I was intrigued by a recent NYT interview with Omar Hamoui, founder and chief executive of the mobile advertising network AdMob. Hamoui argued that organizational insecurity led to deep resistance to discussing problems:
When people are insecure, they just tend to hide and bury [problems]. The bad news eventually comes out, but it comes out all at once, and in sort of catastrophic form. I’m just much more in favor of conveying all the bad news in real time.
If everybody at the company can feel that they’re not putting their jobs in peril by relaying those kinds of things, then you really do get a pretty accurate picture.
This manifests in a distinct culture at AdMob:
…we spend a great amount of time talking about everything that’s wrong. Not because we’re trying to be negative. You can only talk for so long about what’s going well and have it be useful. You can be a lot more productive if you spend time on the things that aren’t going well.
But this is atypical in most organizations, and so when others join the conversation, they need to be trained:
When we would have visitors come to our board meetings, I would have to spend time prepping them ahead of time, basically telling them: “Don’t worry. The company’s not falling apart. Everything’s going fine. This is just how we are.”
I often discuss the need to surface problems (here’s an earlier post on the subject), and whenever I do people get nervous about creating a culture of “whiners.” They worry that if people are encouraged to bring up problems, particularly if they’re not on the hook for the solutions, then discussions will be reduced to toxic complaining about the other guy. Hamoui has found just the opposite:
… nobody at AdMob is shy to point out a problem or an issue with a product or service, even if it’s a product or service that they didn’t build or they don’t own or doesn’t fall within their domain. People aren’t shy about bringing up these issues and being fairly demanding that we solve them. I think that that’s led to us being very proactive.
Every company has problems. Surfacing those problems and addressing them quickly is the sign of a healthy, secure organization. It’s also the sign of an effective leader. As Hamoui demonstrates, spinning reality and covering up the truth may be the more costly and dangerous path.
I agree with at least part of Arizona Governor Jan Brewer’s statement on Friday – our broken immigration policy is a problem her state “did not create and the federal government has refused to fix.” Arizona could have filled that leadership vacuum with a bill that had a prayer of addressing the issue. Instead, local policymakers drummed up cynical, punitive measures that are likely to further bankrupt the state and achieve limited upside besides a false sense of progress.
Maybe it was worth it in an election year. Brewer may get to keep her job, but Arizona is likely to find itself in even more trouble if the bill actually succeeds in reducing the number of migrants to the state. Immigrants played a key role in driving Arizona’s economic growth over the last decade or so, a case the American Immigration Council lays out in a recent press release.
I agree with Obama’s characterization of the bill as “irresponsible,” but policymakers who are ready to roll up their sleeves on immigration shouldn’t simply dismiss what happened on the Arizona border. Voters made it clear that it’s the illegal part of illegal immigration that’s most troubling to people. Most Americans don’t want to lock the doors. Most want to be strong enough to strike an honest deal with the world’s tired and poor – and smart enough to keep our preferential access to the global talent pool. But the failure of policymakers to design a system that works has turned this into a fight about rule of law.
If I know my people well enough, and I like to think I do on most days, we’ve got a very healthy appetite for law and order. We see it as the backbone of our freedom, the foundation on which we build our do-it-yourself dreams. 12 million human beings with ambiguous legal status has rattled our sense of order, particularly in border states like Arizona. This has made it difficult to have an honest conversation about the real social and economic tradeoffs of immigration.
I feel like I’m stating the obvious here, but this is one of those fights where basic truths are easily lost. Here’s how I see it. Rather than do the politically difficult work of creaking open the country’s front door a bit more, policymakers just shamefully left the back door unlocked. Arizona revealed the cost of that short-term calculus. It’s now hard to move forward on immigration policy until a sheriff rides into town.
Solving our immigration problem feels like a classic public sector challenge – the issues at stake are things like border enforcement and protecting vulnerable populations (lower-skilled native workers, illegal migrants). This is a job for pundits and policymakers. Capitalists have companies to build.
It’s critical that business leaders jump into this fight. The reform process has big implications for American competitiveness, and the public debate is filled with basic misinformation. In many cases, the data to inform a more honest debate is locked up in the experience of companies and managers on the front lines of rebuilding our economy.
One place where we need a reality check is on the merits of expanding our guest worker programs. Our economy needs temporary workers to grow and compete, and many migrants are eager to work on temporary contracts. But both the right and the left are united against these programs, claiming that it’s impossible to control or protect the workers we let in temporarily. My colleague and co-conspirator, Edward Schumacher-Matos, challenges these assumptions in his column on immigration for the Washington Post.
A real guest worker program is a good idea that’s been executed badly. As Schumacher-Matos suggests, we can fix the execution problems. Designed well, these programs can strengthen our economy while helping migrants escape poverty without sacrificing their safety and dignity along the way. All without picking a high-profile political fight over who is worthy of citizenship.
Critics claim that these programs are impossible to enforce, at least without turning into Singapore, but other liberal democracies are now experimenting with creative solutions that don’t rely on draconian enforcement measures. As Eleanor Brown, (George Washington University), has documented, Canada is quietly innovating with norms-based compliance strategies that rely on community pressure and a truly bilateral partnership with sending countries. The results are an unambiguous improvement in compliance rates.
Scholars studying the features of good program design emphasize longer and more flexible contracts for migrants, options for re-entry that don’t create incentives to disappear, and visas that aren’t exclusively tied to one employer. Programs built on these principles can be consistent with our values as a nation. It’s our obligation to protect anyone working within our borders from abuse, but that doesn’t have to mean unrestricted access to all the privileges of citizenship. We have to weigh the moral tradeoff of denying guest workers some rights against giving our neighbors the only chance they may have to work for a living wage. Poverty is its own crime against humanity.
But policymakers need political cover in order to take up this issue. Business leaders need to help them make the case to the American public for why programs like these — and immigration, in general — are good for the growth and prosperity of the country. Bob Hildreth, a successful financial services entrepreneur and founder of the Foundation for an Open America, is one of the few private sector voices fighting for a more informed discussion about the true economics of immigration. He is now funding academic research at Harvard’s Center for International Development on the economic upside of immigration, and he’s working to promote these benefits himself by championing immigrant education and legal protections in the U.S.
We hope that more business builders follow Bob’s lead.
In response to our post on Youngme Moon’s Different, one of our readers asked, “what criteria do you use in determining the quality of a good business book?” It’s a great question, and the answer is probably far more subjective than we want it to be. I’m personally looking for the mix of inspiration and instruction, solidly in that order. I want to be challenged to be a better manager/leader/person, and then I want some directional clues as to how I might pull it off or at least what success might look like. And I want the messy, human version of it. I want the backstory and the stumbling, the scenes of people taking their swing and sometimes missing because that’s how my life feels to me. Those details normalize the improvement process.
Based on that criteria, here are ten more “business” books (very broadly defined) that moved me recently, in no particular order:
- Absolutely American — a Rolling Stone writer spends four years following cadets at West Point as they learn how to lead, and drinks the Kool-Aid by the end. Speaks to the power of commitment and meaning in an organization.
- The Essential Drucker — a ‘best of’ volume from the “man who invented management.” There is magic on every page, sentences like, “there is surely nothing quite so useless as doing with great efficiency what should not be done at all.”
- The Power of Full Engagement — lessons from training high-performance athletes on managing energy, not time. Explores how change occurs at the personal level. Good enough for Oprah.
- It’s Hard to Make a Difference When You Can’t Find Your Keys — the title inspires me on good days, mocks me on bad ones. The book lays out a very actionable framework for creating order out of chaos.
- Difficult Conversations: How to Discuss What Matters Most — my favorite message here is to do it, to really have those hard conversations, a useful reminder for someone like me who grew up in a WASPy, midwestern culture that’s not so sure that’s a good idea.
- The Prophet — quick, accessible wisdom from Kahlil Gibran, the brilliant Lebanese philosopher. I’m reminded daily that business is actually quite personal, and the quest to be a better human being touches all aspects of life, including work. Among the best guides I’ve found.
- Speak Like Churchill, Stand Like Lincoln — a less-than-gentle reminder that communication is an essential leadership act. Some of the advice is silly, like put headlines on the bottom of all your slides in very large caps, but the basic message stands. You’ll be a better speaker by the end.
- Leadership and Self-Deception — not easy to consume, but the only book I’ve found that goes after the personal and organizational costs of lying to yourself, a very common human behavior. The cover calls it the “word-of-mouth phenomenon that is changing lives and transforming organizations,” and I don’t think that’s an understatement.
- John Adams — I’m a shameless Adams fan, so take this with a grain of salt, but the story offers up an alternative portrait of effective leadership. Adams was the anti-Washington, abrasive and emotional and aesthetically displeasing. Hated by many of his contemporaries, Adams did as much if not more to create and sustain the unlikely American experiment.
- Start-Up Nation: The Story of Israel’s Economic Miracle — aside from telling the incredible story of Israeli entrepreneurship, the book reveals why culture is such a critical input into ambition and innovation. The message is relevant for anyone who wants to learn how to grow countries, companies or leaders.
The first time I heard the concept of “fewer, better people” was in an executive education session taught by my colleague and mentor Earl Sasser several years ago. I have been captivated by the idea ever since, the idea of building an organization that cultivates and rewards excellence in its employees — and makes it sustainable by minimizing the size of the team. I have rarely seen the fewer/better HR strategy in practice, however. In a recent NYT interview, Kip Tindall, CEO of the Container Store described his version of it:
…one great person could easily be as productive as three good people. One great is equal to three good. If you really believe that, a lot of things happen. We try to pay 50 to 100 percent above industry average. That’s good for the employee, and that’s good for the customer, but it’s good for the company, too, because you get three times the productivity at only two times the labor cost.
A significant obstacle to enacting this strategy is that you need a great deal of confidence in your ability to tell the difference between good and great employees. And then you need the discipline to say no to the good ones, which can be particularly difficult in a growth context. But the merely good can destroy a culture of great. Finally, you need to design an environment where great people can work effectively.
None of these steps is easy. Take the average fast food restaurant as an example. Now try to redesign the restaurant to require a third of the people, each making twice the current wage. The current selection and training processes would have to be scratched. Jobs and incentives would have to be thoughtfully reconsidered. Where to begin? Start with this workforce in mind, and pull out a clean sheet of paper. How could their work be done differently?
The answers aren’t obvious, but what’s the potential payoff? Employees, customers and owners who all love interacting with your business.