Wednesday, March 15, 2006

Customer Disservice: The Solution

My struggles with Apple, as we have seen, are only part of a very large and growing American folklore of customer disservice. One need not be obsessive about it, but this is no longer the country in which the customer is always right.

This isn't just Apple. It's Corporate America. As a business executive, albeit in a small company, I have a pretty good idea what has been going on. Let me blow the whistle from my corporate perch.

It's scarcely a secret that during the Cllinton Era boom the public became accustomed to prices of manufactured goods that went down or stayed the same. The Bush Era recession extended that through 2004.

What have companies done to squeeze those humongous profits?

Consumers know executives have tweaked the contents of products and played shell games with the terms of sale. Less visibly, they also cut costs. Products are shoddier, less well-made; hence the popularity of imports. Detroit hasn't made the best car in decades.

Lastly, they've increased productivity. Human labor is always the most expensive ingredient (although, as we shall see, not always reasonably so). Management has two choices: find some way to make it possible for workers to produce more in the same number of hours, or distribute more work among fewer workers. American companies have done both.

The result is a collective suicide of American business. GM, Ford, IBM, the airlines and more are filing for bankruptcy to avoid pay hikes and pension costs, while laying off employees by the tens of thousands week after week.

The problemo with the boardrooms, however, is that they're led by folks making 431 times what employees make. Yes, you read that right. The CEO-worker pay ratio reported last September went up from 301:1 to 431:1 (see my source here).

Executive pay has grown exponentially just as their companies have become ever bigger failures. To be fair, there are perverse economic mechanisms that actually force some companies into that juncture. Some companies produce more book value earnings when they are going down than when they are rising and profits are in the future.

But let's think the unthinkable for an instant, especially for publicly held corporations. Maybe if corporations fired one of these 431-ers, they could hire 431 customer service people.

Or, say, hire 215 workers paid enough that they'd care about a customer's problem; or 107 better paid customer service reps and 107 better paid manufacturing workers to make better made goods.

The possible permutations are endless. But maybe if we invested more in workers, more of them would care about what they make and more would care about keeping the customer satisfied. Maybe more of them could afford to be customers themselves.

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