A New Record

I write about a lot of stupid things in this space; in a very real sense, it’s my job. I’m a management scholar, and one of the areas I study is Institutional Failure – the reasons why businesses fail, and the amazing ways the people who own/run then manage to accomplish these failures. Over the years I have come to believe that the single greatest cause of business failure, and certainly a major fact in the disturbing statistic that 90% of all new business ventures end in failure, is simple stupidity. Consequently, I spend a certain amount of time each week looking for outrageously stupid things to write about, rant about, or look into in greater detail. If you click on the “stupidity” tab at the bottom of this post, you’ll be treated to a few dozen examples that I’ve documented for the entertainment and edification of my readers (assuming I have readers) over the past three years. None of it quite prepared me for having two of the dumbest stories ever hit my desk in the same week, however…

First, we have this item from the New York Times online site. According to the story, one of the top executives at AIG has resigned because the CEO has imposed limits on the company’s compensation programs. Now, to some extent, this is not unreasonable; if your boss told you that you were never getting another raise (and you had some expectation of being able to get higher pay somewhere else) you might make the same choice. What makes this story so exceptional is that the company in question is AIG, whose highly-paid executives managed to run their organization so firmly into the ground that it took $50 billion of your tax dollars to pull it out again – and that the salary cap that so offended the departing individual was $500,000…

Given that over the past year AIG has managed to replace Haliburton as the most hated corporate entity in America (a feat that I would have sworn was impossible just a few years ago), this has to be one of the most tone-deaf moves I’ve seen since their President was publically quoted demanding a private jet for personal use, and threatening to resign over government-imposed compensation limits last August. If I was the employee in question, I’d make sure everyone knew I was resigning to spend more time with my family, pursue a new career direction (grad school, maybe?) or move to Hawaii (where the banking jobs don’t pay as well but the weather is really nice) before I’d let a story like this get loose about me. And if I were AIG, I’d make up some story about our “vice chairwoman for legal, human resources, corporate affairs and corporate communications” being fired, defecting to State Farm, or being eaten by newts before I’d let this story run in the media…

In fairness, I believe that the other story is actually a bit stupider. Law enforcement officials in San Diego, California are reporting that a new record for blood alcohol level was set earlier this month by a woman found passed out at the wheel of a stolen delivery truck. In general, a BAC of .40 is lethal to about 50% of the population, and .70 should kill any human being – or any other air-breathing mammal of similar size, for that matter. This individual recorded a BAC of .708, a possible new record for the State, although not for the country. A few weeks earlier a man in New Jersey managed to top .80 and live to tell the tale. Although I don’t believe he managed to commit DUI or GTA while doing so…

Happy New Year, everybody! Drive safe tonight; there may be other world record holders still at large…

The Ethics of Forgetting

We all know that remembering the important things is an important character virtue; it shows that you take those things seriously, and in the case of birthdays, anniversaries and such, that you take the relationship seriously and value the person in question. Certainly, anybody who has ever had their family fail to remember their birthday, or their significant other fail to remember the anniversary they share, knows that it’s a completely wretched feeling. You’d almost rather believe that they ARE doing it on purpose, since it’s easier to believe that somebody is angry at you than it is to believe that they think so little of you that they can’t even remember what day you started going out. And we all know that having a bad memory really won’t excuse such a mistake; this is why we have automatic reminders in our computer calendars, alarms on our PDAs and post-it notes stuck to the monitor of our computer. But what happens when, despite all of your best efforts, YOU are the poor schmuck who has forgotten the big day?

Depending on the nature of the event forgotten and the relationship you’re in, you might be able to use the Power of the Internet to pull yourself out of the pit you’ve constructed. Almost any conceivable gift item is available online, and with overnight shipping you can probably get it into your partner’s hands in 24 hours or less. If you don’t have that much time, you might be able to blame your Internet vendor, saying that you DID place your order well in advance of the event, only to have the shipment delayed by a backorder situation. If you are truly desperate, you can probably dig up something from around the house that might serve, although given the inherent problems with re-gifts (and unintentional re-gifts) this is generally not a good option. Some people will always try to keep a few potential gift items in “inventory” (somewhere around the house) against just such a failure of the memory, while others will resort to quickly creating a card that promises a vacation, tickets to a future event, or some product that isn’t yet available (but soon will be) to cover up the gap. Unfortunately, none of these concepts really addresses the inherent dishonesty of the situation…

The real question is whether you should be attempting to cover up the mistake in the first place. On the one hand, one of the best ways to resolve any situation is to make things right, and if you’ve injured someone by failing to get them a present then the logical thing to do is make good the lack. And certainly, telling someone that you were so overwhelmed by other events that you forgot the event (birthday, anniversary, holiday, whatever) is not likely to have any good outcome; you’re just likely to hurt their feelings to no good purpose. But on the other hand, failing to acknowledge your mistakes and taking furtive actions to cover up your failure is likely to cause trouble in the long run, especially if your counterpart finds out about your actions. In that event, you’re likely to be adding distrust onto whatever other problems you might be having…

All of which becomes much worse, of course, when the situation you are dealing with isn’t just forgetting the anniversary of your first Deeply Meaningful Telephone Conversation, but rather a major error of omission that has brought Federal auditors, customer lawsuits or tax liens down on your company. Which brings us to the point of this post: we all know that lying to Federal authorities (especially while under oath) is a felony, whereas maintaining a brutal degree of truth with your significant other will probably leave you alone even sooner than forgetting your anniversary. But where do you draw that line? At what point should you stop trying to just quietly fix your mistakes before anyone notices, and start holding press conferences announcing that errors have been made and you’re going to clean them up before they can have any negative impact on the American people. Or, to state it more plainly, when is honesty REALLY the best policy, and when would it be better to just try to make the situation go away?

It’s worth thinking about…

The Grad School Diaries: Barry’s Cross-Time Paradox

In East Lansing, as in most college towns, I suppose, the first sign of spring isn’t a groundhog failing to see his shadow, or a handsome brown-and-red bird looking for food, or even a small purple flower sprouting bravely through the snow; it’s the arrival of applicants looking for admission the following fall. In the Business School each department has its own procedures (and traditions); in Management we start seeing and hearing from applicants in person during the early months of the winter/spring semester. This was news to me, of course, since my admission appears to have been up in the air until the last moment – I was still having telephone interviews the week before I had to commit to a graduate program. But then I’m definitely what you’d call a “non-traditional” student; unlike most of the people who have gone through the doctoral program I’ve already spent two decades in corporate America, lived and died through an endless series of mergers and acquisitions, and hustled just to stay alive. There have been older Ph.D. students in the Management department; there’s at least one of them now. But as my beloved wife is fond of observing, “It’s not the age, it’s the mileage…” And I’ve been down more miles of bad road than most…

This has never been more clear to me than it is now, meeting a half-dozen shiny new candidate for admission to the doctoral program. A few of them have some years of their own, but most of them look and sound as young as they actually are, and they seem very earnest as they listen to what the current corps of students has to tell them about life at MSU. It was while I was listening to the various grad students in our department talking about their own experiences that I was first struck by how much those present and the process we are all navigating resembles a river. On any given day there will be students ranging from first to fifth years in the program, and while those individuals flow through like individual drops of water, the course of the river itself changes only very slowly over time…

One day soon, if all goes well, I will be in the second or third year; five years from now I should be gone altogether. And perhaps next year the students we are meeting with will be in the First Year, filling in behind us as we move on. Somewhere out there in America the students who came before us are reaching the end of their careers and preparing for retirement, and elsewhere there are children being born who may – twenty-five or thirty years hence – be sitting where we are sitting now. Collectively, we will (hopefully!) advance the discipline we have come here to study, before we pass into history and are remembered only in a series of peer-reviewed articles and by our own students, assuming we ever have any. Becoming part of a great continuity of students and teachers, never ending or beginning, as we voyage slowly toward a greater understanding of the quirky science that dominates our lives…

As previously noted, several authors have made reference to a metaphorical River of Time that carries us from the headwaters of our birth to our eventual end in the ocean – the great equalizer, the one true democracy that awaits us all. American Humorist Dave Barry, in particular, also notes that with the right equipment, the right decision made at the right time – in his case, an electric guitar that he bought instead of something much more sensible – it’s possible to paddle against the current in the River of Time. Or, at least, to hold your position for a while…

It’s certainly not the ONLY reason I’m doing this, of course. It’s also about finding a new way, since my old ones aren’t working anymore; about finally standing up to my shortcomings and finding out if I’m really all of the things they tell me I am, or if that was just an illusion, too. It’s about character, and courage, and all of the intangibles that a man my age has usually worked out. But part of it, beyond question, is my last, best chance to swim against the current and see where I end up. It’s just a rare event when you can see the whole course of the River reaching out before you – and in this case, behind as well. I’ve come a long way since last summer – and I’m just getting warmed up…

Out of Luck Part 2

So what does one do when the obscure gift item one had intended to purchase is not available through the web site, and will not be available before spring of next year? In years past one might have been forced to simply wait for the thing to become available; perhaps giving the recipient a nice card and a picture of the gift that they will almost certainly get before Easter, assuming that your mail delivery person doesn’t freak out and just throw an entire of truckload of mail under the foundation of their (the mail carrier’s) house (which apparently happens from time to time). Alternately, you might find some other mail-order product that would do, or perhaps even break down and venture into the violent chaos that any large shopping complex will have degenerated into during this joyous season. In the age of the Internet, however, you’ll probably just feed the name of the product into whatever you use as a browser program and go find another vendor for the same thing…

Needless to say, perhaps, a single search turned up literally dozens of other sources for the gift I was looking for. The first five sites were also out of stock, but the sixth one, Kult of Athena.com not only had the item I was looking for, they were offering it a better price than the original vendor was. Which was remarkably odd, in fact, because the original vendor is the parent company of the manufacturer that actually makes the item in question. That’s right, folks, the new vendor I found online not only had a better selection than the company that makes my merchandise, they also sell it for a better price. I suppose I can see how one of your customers might have more ready inventory of your product available than you do, particularly if you business is primarily wholesale, rather than retail, based. I just can’t fathom how they would also be able to undercut your price…

In the long run, however, this little foul-up is going to end up costing my original vendor a lot more than whatever the difference between the wholesale price was and what their retail price could have been, because the new vendor carries merchandise from at least a dozen other manufacturers, including a much greater range of product categories. Since I can get all of the original vendor’s products off the Kult of Athena site, as well as the offerings from a dozen other companies, all at better prices, the original vendor is not likely to ever get my business back, but the real selling point is the “in-stock” indicator on the KofA web pages. Not only do they indicate what’s in or out of stock, they’ve actually got three categories: in stock, on backorder (available within a week or so) and out of stock (30 or more days wait). They’ve also got product ratings that cover how heavy-duty specific items are, what the proper uses for them might be, and so on, but frankly, just not having to wonder if I can get what I want now (as opposed to having to wait for a month) would be enough to keep me coming back…

It struck me this week that there’s a lesson here, not just for people in the mail-order industry, but for all of us in management. We’ve all known that the Internet has changed the way we do business for ever; sales, marketing, customer service, point-of-purchase, even operational management will never be the same. Now it turns out that even your inventory control system (or lack of one) has become another place where the rubber meets the road, where you can move with the times or become as obsolete as the paper ledger you’re using to keep track of your stock. It doesn’t matter how you feel about these newfangled contraptions; you can either keep up with the industry standard – or get left behind…

Three Hour Rule

By now you’ve probably already seen the news about the new rules for airline tarmac delays on some less obscure channel than this, but in case you missed it, Congress has ruled that airlines can no longer delay passengers by having their aircraft sit on the tarmac for more than three hours, and must provide food, water and restroom facilities in the event of such a delay. If this sounds completely absurd to you, or more to the point, if the idea of companies that depend on repeat business in order to stay in business violating not only the Rules of Business and Common Sense but in fact the Geneva Conventions and several Federal laws by effectively falsely imprisoning their passengers under such conditions for longer than six hours seems completely ridiculous to you, don’t worry. This merely indicates that you are still sane…

A much better question, at least from where I’m sitting, is why one airline or another hasn’t already jumped on this issue in order to gain a competitive advantage, the way Southwest did with the baggage fees issue. When the other major carriers started charging extra for checked baggage ($15 to $25 for the first bag, and often $25 to $125 for the second), Southwest immediately started advertising the fact that they were not going to institute any such fee, and have since developed television commercials (complete with jingles and choreography) that capitalize on the fact that their competition has rather stupidly decided to annoy the public. It seems obvious that someone could launch the same sort of campaign regarding tarmac delays and the three hour rule; either pledging not to do this sort of thing (unless necessary for safety or security reasons, of course) or bragging that anyone subjected to this delay will be given food, drink, free toys, frequent-flyer miles, or indeed anything else you can obtain for cheap…

The really beautiful part of such a campaign, you see, is that the airline doesn’t actually have to take any action; they just have to convince the public they are going to. If you use fast turn-around times as a key part of your business model the way Southwest does (it’s how they manage to provide so many flights each day with relatively few airplanes; their aircraft spend the smallest possible amount of time on the ground) you can already advertise having the shortest flight delays and the fewest of these day-long tarmac delays of anyone in the business. All you have to do now is convince the customer that the potential cost of the “free” services you’re promising in the event of a tarmac delay are so high that you couldn’t possibly afford to pay them out with any frequency, and the rest is just writing ad copy…

Now, I don’t want to suggest that misleading the public into thinking that you’re going to take care of them when you have no intention of doing so is an acceptable way of doing business. If you advertise added services in the event of a tarmac delay you must be ready to provide them; and if you promise to do everything possible to eliminate such events, you should be prepared to do exactly that. And if it really isn’t possible for you to do anything about such events under your present business model, well, then I’d have to recommend you start making changes as soon as possible. Because the few dollars that extra services will cost, or even the few thousand dollars that de-boarding the passengers and starting over when you can get the flight on its way successfully would cost, are going to be small potatoes compared to the millions of dollars in fines that the FAA is going to charge you for leaving even a single large plane filled with passengers waiting on the side of the runway...

Out of Luck

A few nights ago I went online to purchase a Christmas gift for a member of my family. It was still more than a week before the big day, and I’ve never had a problem with paying for 2-day shipping when I need something in a hurry, so I wasn’t expecting any trouble. Unfortunately, the e-commerce site I was dealing with did not have the “in-stock” indicator on its web pages – and items like the one I was buying can take 30 to 40 days to get in from the factory. With deep misgivings, I filled in my card information and clicked on the purchase button. Sure enough, when I got up the next morning there was an email waiting to me that my purchase was out of stock and would arrive by February or so…

I’m not going to provide a link to the site for obvious reasons, and I’m also not going to name it, since I’m not really into litigation. If anyone really wants to know you can drop me a line in the comments and I’ll reply by private email. This is not to downplay my irritation, however. It’s hard to say which part of this is worse; the fact that they’re violating the First Law of Business by not selling me the thing I want, or the way they’re violating the Second Law by annoying me. Regardless of which, I’m now faced with finding a replacement gift before December 25, and with the fact that I’m apparently not nearly as clever as I thought I was…

Now, to be sure, it’s not entirely the seller’s fault. I should probably have placed my order weeks ago, and if I really wanted to be sure of getting mail-order merchandise (which is all e-commerce is, really; except the ordering part is faster) in time for Christmas, August would have been better. And no one is disputing the fact that keeping unusual (and expensive) merchandise in inventory at all times is bad for business. But in this case, the company could easily have avoided the bad feeling (and the Second Law violation) by just having an “in stock/out of stock” indicator on the page…

You might object to this conclusion by noting that no one will “buy” something that is listed as “out of stock,” whereas they might be willing to wait for it rather than going to the trouble of more shopping during the Christmas rush. Which is certainly possible, given that at least half of the population would actually rather chew off their own foot than go to a shopping mall during this time of the year. But even if we accept this logic, it still does not account for the massive amounts of bad public relations (and bad customer relations) created by this sort of management practice. I’m not going to wait until February for a Christmas present; I’m not even going to wait until next week. I’m going to the competition right now, and I will probably tell more than the industry-standard assumption of 26 other potential customers about how this vendor was going to make me wait until Valentine’s Day (or possibly St. Patrick’s Day) to get my merchandise. In fact, I’m probably going to find 26 people in the real world in addition to whoever is reading this post (assuming I have readers)…

All of which leads me to conclude that I’m not the one who is out of luck, here…

In What World?

Sometimes when you encounter news stories concerning monumental stupidity, it’s possible to generate some sympathy for the poor fool (or fools) responsible. The Hughes-Kaiser HK-1, better known as the “Spruce Goose”, made perfect sense in the context of World War II, submarine warfare, and the need to move thousands of men rapidly across the Pacific Ocean during the final phases of the planned invasion of Japan. Charging interest rates that no one could possibly afford, seizing the defaulted property and selling it at a profit made perfect sense during the real estate bubble of the early 2000s, and running off to South America to sleep with a woman other than your wife probably didn’t seem any stupider than having sexual contact with an intern in the Oval Office or breaking into the Watergate complex, at least at the time. But even if we can accept that these decisions made sense, at least in context, it’s still hard to imagine what Universal American Insurance thought it was doing when it mailed out 80,000 postcards to its customers with their account information and Social Security numbers on the back…

As noted by the local CBS affiliate, WGAL the company was working through a third-party vendor, and never intended to send out either the Medicare ID numbers or Social Security numbers. However, I think we are correct in asking why the company didn’t know such a mailing was being sent, why the vendor would be sending such a mailing without the client’s approval, and why the vendor itself though this was ever a good idea in the first place. What possible purpose could there be in sending a mailing to people reminding them of information they would have had to provide to the insurance company when they signed up, and in what world could anyone possibly have thought that having sensitive personal information printed where anyone could see it would be a good idea?

It’s even more egregious, in a way, because a similar blunder occurred in New York about fifteen years ago. The local telephone company (NYNEX) noticed that its customers were not using their “calling card” codes to make calls from pay phones (this was before cell phones were common), and decided that these customers had forgotten their personal ID numbers. So they printed the codes, along with the connected telephone numbers, onto post cards and sent them to all 500,000 or so of their customers. The resulting costs (changing the codes to something that hadn’t been leaked to the public, people refusing to pay for telephone service they claimed not to have used and calls they hadn’t made, associated lawsuits, etc.) would have destroyed any smaller company, and was almost certainly a contributory cause of NYNEX being acquired by Bell Atlantic under very favorable terms a few years later. But apparently nobody at Universal American Insurance, or at least its mailing vendor, ever heard about this case…

For the moment, things seem to be resolving in the present case. Universal American Insurance is offering all of its customers a year of free credit monitoring, and there don’t seem to be any reports of massive Medicare fraud in Pennsylvania or any of the surrounding states. In the meanwhile, I’d have to say that this case serves as a warning to every company out there that has sensitive customer information to be careful with it. Don’t assume that just because something seemed like a good idea at the time that it won’t turn out to be compared unfavorably to the Dot-com crash, the Mortgage crisis, or the decision to give a performance artist $55,000 to place a giant inflatable banana into low Earth orbit. Because in our world, it might be…

They’re Not Listening…

There’s a grand tradition in this country which is known as “voting with your feet” – or sometimes “voting with your wallet.” The basic idea is that if a company is doing something that offends you, they probably have a competitor who won’t – and if they don’t have a competitor you could always start one. Thus, if (for example) a firm is doing something that offends your moral, ethical, dietary, nutritional, political, comedic or religious requirements, you can always choose to take your business to some other firm in the same industry that does not so offend you. And, if you like, you can tell all of the like-minded people in the country about your choice, and encourage them to do the same. In theory, this should persuade the company that is offending you to change their ways, since they will not want to give your business (and that of all of the like-minded people) to their competition. Failing that, you will at least have the satisfaction of giving your business to a firm that is more in line with your belief system, whatever that might be…

Where this becomes a problem is when extremist groups start using the tradition to impose their views on everyone else. Take, for example, the American Family Association’s ongoing feud with the Gap (and any other retailer that doesn’t wish to offend all of their non-Christian customers) over the company’s “refusal” to feature the word “Christmas” in its holiday advertising materials. Leaving aside for the moment the inherent issues with advertising specifically intended to promote gross commercialization of a religious holiday and the fact that our system of government was designed to provide religious freedom (separation of Church and State) specifically BECAUSE of religious persecution in Europe, the calls for boycotts of the Gap over a supposed refusal to include the word “Christmas” in their advertising are completely asinine for a much more basic reason. You see, the current year’s ads DO include the word “Christmas” – rather prominently…

As noted by The Los Angeles Times this week, the current Gap ads advocate purchasing the company’s products for Christmas gifts – and also Chanukah, Kwanzaa, and Solstice/Yule presents, for that matter. One has to wonder if the American Family Association was unaware of the ads when they issued their annual boycott, or if they’re just not bothering to actually listen to any of the advertising before they start spewing this sort of nonsense. A much more disturbing issue here is what we, as businesspeople, as supposed to do about this sort of lunacy. Leaving aside for the moment the obvious impossibility of trying to conform to the requirements of the literally thousands of competing religions groups in the world, should we even concern ourselves about what a small group of fruitcakes from one specific group want us to do and say?

In the long run, I suppose, it comes down to a matter of servicing the customer. If the majority of your customers belong to a religious sect that will only do business in a room with a blue floor, investing in blue carpeting for your retail stores would probably not do any harm. And if a major demographic group in your customer base wants you to wish them a Merry Christmas every year, you certainly could. But if someone if going to release official pronouncements condemning your company for advertising practices that you’re not even actually doing, your best bet is probably just not to listen to them. After all, they’re clearly not listening to you…

No Substitute

This past weekend I took our daughter over to a nearby shoe store that I’m not going to identify (or provide a link to) because they’re annoying me and I’ll probably end up calling them something actionable before the end of this post, but you’ve probably seen this chain or something quite like them before. Basically, it’s a single huge room the size of an aircraft hangar with long aisles of shoes piled up, surrounded by banners, signs and other promotional artifacts that extol the high quality and low prices of these products to the high heavens. There are “Clearance” racks on the back wall (which contain the products that the store no longer has enough of to make up a complete pile) and four cash registers at the front, and that’s about it. The company calls it a “shoe warehouse” and apart from having carpet and zombie-like sales associates instead of concrete floors and forklifts it’s not a bad description. You might expect that this would be an easy place to find a good quality pair of dress shoes at a decent price. If so, you’re either an idiot or else you have feet in one of the three or four most common sizes…

Walking up and down the aisles (any of which are long enough to land a small plane on), I was struck almost at once by the lack of size choices available. Specifically, there was nothing available below a 9 or above an 11 in most of the products offered for sale. Granted that these are the most common men’s shoe sizes, and that these constitute something on the order of 70% of all products for sale, that still makes it impossible for a significant number of people (in the greater Lansing area, 30% of all male customers would mean something like 45,000 to 50,000 people) whom you’re just blowing off. Telling, in fact, to go away and not give you any of their money. When the first style of shoe I wanted to buy turned out to have nothing in my size, I went to the next decent style, and the next and the next, without any success. Disheartened by this, I went to find a sales zombie and ask if they had any additional stock anywhere…

At this point, the shoe warehouse had already broken the First Law of Business by not taking my money, but now they went the extra mile and broke the Second Law as well. The salesperson I found told me that they don’t have any back stock; what they have is what you see out on the floor. However, they do have a special online service you can sign up for which has a much wider range of sizes, and will sell them to you electronically and send them to you free of shipping charges! All you have to do is fill out their paperwork and agree to receive an almost unlimited amount of SPAM emails in order to have the privilege of spending money on shoes you can’t try on and will have the devil’s own time trying to return! Was that something I might be interested in? I think the sales zombie almost cracked an expression when I said, flatly, “no,” but it was hard to be sure…

I could point out, of course, that if I wanted to do my shopping online there are already several websites that specialize just on virtual shoe sales, not to mention sites like Amazon that carry all manner of foot ware, and none of which require extensive (and invasive) sign-up procedures. But the fact is, I don’t buy shoes online, simply because there is a fair amount of variability in shoe sizes depending on the manufacturer and style selected. There are some shoes where I’m a 12 1/5, and others where I need a 14 just to have a chance of getting my feet into them, and there’s no way to tell which is which in a virtual shoe store. There’s also a little matter of needing to wear them the following day, not some time in a week or two when the shipping department and the freight carrier get around to sending them to me. Until such time as you can virtual try on a pair of shoes and reliably get them delivered the next day, there’s really no substitute for an old-school shoe store – and the shoe warehouse people should probably put more effort into their original business model…

Franchises Revisited

Las summer I brought you the story of Burger King’s ongoing war with its own franchise holders, in a post I called The Trouble With Franchises. The issue, in case you’ve forgotten, is that Burger King wanted its franchise holders to participate in a national $1 promotional price for the double cheeseburger product, which would be the subject of television, print and Internet advertising. The franchisees were resisting the program because, on average, it costs them roughly $1.10 to make a double cheeseburger, which turns the entire product into a loss-leader for them – without actually costing the company itself anything. The company had put the subject to a vote, only to have the franchise holders vote it down. They attempted a second vote, with voting conditions rigged to make it harder for the franchise holders to vote “no” the second time, but the vote still failed. So the company did the logical thing and just went ahead with the promotion anyway, figuring that the franchise holders would have to go along with it once the television ads started to run…

It’s an impossible situation for the franchise holders. If they go along with the promotion they’ll be losing money on every double cheeseburger they sell, and there’s no limit on these things – nothing to keep an entire college football team from coming in and ordering ten of them for each player, or 550 of the things, every one at a loss, for example. But if the franchise holders refuse to honor the promotion, they will be in the position of having to telling paying customers that they can’t have special promotional price from the television ad, thus violating both the First and Second Laws of Business in one simple statement. Nor can they just explain the situation and try to get the customers’ sympathies; most fast-food consumers will not know the difference between corporate advertising and local franchise holder economics, or care if they did. So the franchise holders have done the only logical thing: they’re suing the parent company…

As reported by the Associated Press through the St. Petersburg Times, The National Franchise Association (which represents about 80% of the Burger King franchise holders) has filed suit in Federal court, claiming that the promotion will cost them a fortune and contending that the parent company’s franchise contract does not allow it to set maximum menu prices in the first place. The parent company, in turn, is claiming that the case is without merit because an earlier court decision ruled that the company can require franchise owners to participate in “value-menu” promotions. It remains to be seen how the court will interpret this new case, and the contract it is based on; if the contract specifies that the franchise owners must produce the promotional items but does not specify participation in a pricing scheme (or control of menu prices) then the franchise holders may have a case. Otherwise, they will probably be treated to another iteration of the advice that just because you don’t like what your contract is telling you, that doesn’t mean you can just ignore it…

In the long run, the franchise holders may have to accept the situation, eat the loss on each burger, and try to make up the difference on soft drinks and other menu items with huge markups. But even if the company does triumph in court, I think we case safely assume that Burger King franchises just got a lot harder to sell – and probably won’t sell for as much, assuming that the prospective franchise owner has been following this case. Which may turn out to be an example of the company winning the battle – but ultimately losing the war…

The Trouble with Land Grabs

One of the most worrisome legal proceedings of local years came in 2005, when the Supreme Court ruled that the City of New London, Connecticut could use eminent domain to seize a large number of private homes and give the land to developers. The rationale for the original land-grab was that the developers would construct new high-end housing, shopping facilities and office space, which would bring a huge influx of business into New London. The city had to pay the homeowners for their property, of course, but the people who were evicted claimed that they were paid pennies on the dollar (as such people always do), and just about everyone who isn’t either ultraconservative or a real estate developer who stood to make money on such dealings condemned the entire action as being nothing more than “corporate welfare”. None of which would really have mattered, in the long run, if the project had lived up to its hype, or at least succeeded. Or, for that matter, gotten off the ground in the first place – which does not seem likely, now…

At the time, the seizure (and subsequent bulldozing) of an entire neighborhood did appear to make sense, at least if you held stock in Pfizer. The original real estate development project would have constructed facilities that would have been perfect for the use of personnel from the nearby Pfizer corporate facility, which was already one of the area’s largest employers. In fairness, we should note that Pfizer itself was not given any of the land or any other goodies by the city, and had no stake in the project other than being located nearby (and therefore being one of the potential key customers for all of the business units involved), but the concept of Pfizer employees buying the new condos, shopping in the new stores, staying in the new hotel when working at the facility temporarily, and so on figured heavily in the developers’ plans. Which just makes it that much more unfortunate that the company has decided to close its New London facility…

The announcement came a few days ago, and was recorded on the Wall Street Journal opinion page, among other places. But while the Journal ends the piece on an up note, crediting the New London debacle with inspiring the creation of laws limiting eminent domain and preventing this type of blatant corporate handout in 43 of the states, I have to admit that I’m not reassured by these events. We’re living in a country where the same people who will oppose any form of public subsidy for food, housing or healthcare (because that’s “Socialism!”) apparently see nothing wrong with a financially weak city (and State) spending $78 million to benefit a wealthy real estate developer or the country spending $700 billion to allow financial service companies to maintain their million-dollar annual bonus program. As incredible as it sounds, people on the Far Right are still arguing in favor of the New London land grab – and that means that it’s only a matter of time before somebody, somewhere tries this again…

Now, I’m not going to argue against government-backed development projects. I’m not even going to try to tell you that there is no place for eminent domain proceedings. I’m just pointing out that any government-sponsored program that takes money or property away from average citizens and gives it to well-heeled companies so that they can make even more money at taxpayer expense is not merely bad government; it is also, of necessity, bad business practice. And there’s definitely a limit to how much more of that the country can afford before something REALLY bad happens…

I’d Buy That for a Dollar!

Most of the time I avoid comment on whether the current age is better or worse than the way things were when I was a child; that sort of thing is clearly geezer-talk, and along that path lies madness. Kids today may not actually have things any better or worse than we did; the world grows more complicated every year, but “good” and “bad” are value judgments, and therefore subjective. For every person who sincerely believes that the iPhone is actually the greatest invention since the wheel there is at least one other person who hates everything about cell phones, smart phones, the Internet, or the Information Age itself and wishes we could all go back to manual typewriters, carbon paper and party lines. But I’d be willing to bet that even some of those people would have liked to be able to purchase higher grades in Middle School…

From the pages of the News Observer online comes the story of a middle school in Goldsboro, NC that was having trouble with its school fund raisers. Last years efforts to raise money by selling candy appears to have fallen flat, so this year the school came up with the idea of using class credit to incentivize its pre-teen salespeople in the student body. According to the published account, a $20 donation to the school would have bought the student a 10-point credit on two tests of the student’s choice; enough to make the difference between a “B” and an “A” – or enough to turn a fail grade into a marginal pass. Of course, school officials dispute whether this would be enough to impact a student’s overall grades in a class, and they insist that no student would be allowed to obtain more than 20 points this way, but I’ve been in class with enough grade-grubbers over the years to know (even if the principal apparently doesn’t) how the students would see this…

Now, I don’t want to imply all of the parents and educators who are talking about how this sends the wrong message to the students and teaches the kids that it’s okay to pay for grades are wrong, exactly; most people do learn ethics by watching their parents (or other authority figures) deal with exactly this sort of decision. What needs to be pointed out here is that this is a slippery slope – and this fund-raiser is hardly the first step onto it. Kids today are already facing such inequities as private test preparation for the SAT (or equivalent) that determines who will get into college based on whose parents can afford such services, and private consultants who can help “package” a student’s college applications to similar effect. The college you select will determine your starting position in a great many careers (or your choice of graduate schools), and every college student in the world has services that will offer to provide “sample” term papers targeting them in various media ads. Even the good kids have to be wondering if it wouldn’t be more efficient to just purchase the grades in the first place…

But what I think is the most disturbing thing about this entire story is the origin of the grades-for-cash program: a parent advisory group came up with it, and the school’s principal approved it. If the school district hadn’t stepped in and shut it down, this program might have become a regular feature at Rosewood Middle School, and might even have spread to other schools. Which means that all of the people who have been railing about the degradation of our educational system by parents who think they can buy their child’s way through everything are actually quite right – and it’s later than we thought. Maybe we should start thinking seriously about education reform in this country while we still can…

Believe it or Don’t!

Sometimes you run across a news story so absurd that you hesitate to post about it, just because you worry that people will think you are making it up. This is why, for example, I never did anything with the tale of the giant (25-meter) rubber ducky that got loose on a Dutch canal and ended up blocking traffic when it got wedged into the span of a nearby motorway bridge. Despite being an excellent example of a publicity stunt gone horribly, horribly wrong (a lesson on the importance of good operational planning as well as the critical need to avoid annoying potential customers), I was too concerned that everyone would think the pictures were created in Photoshop and the story was made up. I also failed to report the truck accident that spilled 10,000 gallons of Miracle Whip onto Interstate 80 on the same day that another truck on the same road overturned and spilled 30,000 pounds of corned beef. But frankly, even you can believe that those things happened, I still wouldn’t blame you if you refused to accept that United Airlines lost Dave Carroll’s luggage this week…

For those who don’t remember him, Carroll is the musician who witnessed his $3,500 guitar being hurled (and broken) by United’s baggage handlers, only to have the airline refuse to pay for the repairs to the instrument or make any effort to compensate him for his time a trouble until he created a song about the episode and posted the video of it on You Tube. I wrote about the original situation last July after it happened in a post about customer service and stupidity. Today, however, the CBC online is reporting that Carroll was on his way to Denver last Sunday to give a keynote speech about customer service, and had to fly United as they were the only carrier that had a flight going where he needed to go, when he needed to go there. Carroll arrived without incident Sunday night; his luggage did not turn up until Wednesday evening…

Now, I don’t really want to rag on the airline; when you are moving several million pieces of luggage each day, you’re occasionally going to have one end up someplace it wasn’t supposed to go. It just seems incredible that it would take them four days to find a bag again, having lost it in the first place – let alone that they would engage in the farcical behavior described in the news story, where they gave contradictory instructions to the passenger whose property they had, once again, placed at risk. Even leaving aside the fact that you would expect them to keep an eye out for Dave Carroll and try to keep from providing him with any additional career-enhancing material, it’s amazing that the airline would have completely violated Department of Homeland Security regulations that require every bag to travel on the same aircraft as its owner – or been unable to just load and unload the bag if they didn’t…

The long-term effects of this story remain to be seen. Certainly, it’s not a good thing for United Airlines; unlike the original episode, which seems to have brought them only ridicule and discomfort, this one could actually end up bringing them Federal investigations, sanctions and fines. If those investigations actually turn up some half-baked attempt on someone’s part to “get back at” Dave Carroll, it could bring the airline criminal charges, huge liability lawsuits, and an absurd amount of lost business. I normally discourage people from believing everything they see on the Internet, but in this case I have to believe that it’s a story too absurd for anyone to have made up. Believe it, or don’t, as you see fit…

Pay Attention, Already!

I am sometimes amazed at the attitude taken by people who have no familiarity with business toward legal proceedings. It resembles nothing so much, in my opinion, as the way a barbarian hero from a swords-and-sorcery epic regards magic: as a malevolent, incomprehensible force that can’t be fought against, can’t be reasoned with, can only be avoided or perhaps occasionally bribed to leave you alone. For reasons that escape me, people who would never consider telling a plumber how to install pipes or a carpenter how to drive a nail will feel no compunctions whatsoever in calling for the most preposterous changes in our legal system – and people who will bravely face down accountants, evangelists, or even dentists will take to their heels at the suggestion of a possible lawsuit…

Even worse, I suppose, would be those people who for some reason believe that if you ignore spurious lawsuits they’ll just go away. There’s a reason why most large corporations keep a few lawyers around, and there’s a story out of Wisconsin this week that demonstrates the principle better than most. A story reported by Milwaukee Journal Sentinel online tells of a $1.26 billion award granted to two men who sued PepsiCo, claiming that the soft-drink giant stole their idea for a revolutionary new product: bottled water. According to the online article, the plaintiffs claim to have a signed agreement from thirty or so years ago regarding their ideas for selling a purified water product, which they claim PepsiCo violated by producing the “Aquafina” product for sale. Without examining the facts of the case more closely we can’t really say if this claim was supported or not, but the award was a default judgment, given because PepsiCo failed to show up in court…

Now, according to the company there were “internal process issues” involved; specifically, a secretary in the company’s legal department failed to log correspondence on the case or tell anyone that a key letter had been received. It’s difficult to imagine that this was the only correspondence PepsiCo received about the case, however, or that they routinely allow billion-dollar cases to be “misplaced” by a single clerical employee. What seems more likely is that the company mistook this action for a simple “nuisance” lawsuit (of which any large corporation receives hundreds every year) and failed to pay proper attention to the case, even after it had cleared preliminary hearings and had been assigned a court date. Unfortunately, one of the ways you can tell that a legal action is for real (and not just a nuisance) is when it isn’t immediately laughed out of court and is given a spot on the calendar…

PepsiCo is trying to get the award rescinded, claiming that they haven’t had due process and that the confidentiality agreements on which the plaintiffs have based their case have nothing to do with Aquafina in the first place, but this will not be easy for them, both because they failed to show up for the trial and also because of the claims of internal process issues, which sound remarkably like “the dog ate my homework.” Even if everything PepsiCo is presenting is absolutely true, their initial actions (or lack of actions) were at best bungling (which undermines their credibility) and at worst highly disrespectful of the court (which is not a good way to plead your case). A court case in which the plaintiffs claim to have signed documents which prove that you are in material breach of an agreement made years ago does not fall into the same category as lawsuits in which someone is claiming that your bottling plant is secretly being used to send military secrets to space aliens in Belgium, and should not be treated with the same disdain…

Of course, if PepsiCo were playing attention to their official legal correspondence, they would already know that…

Sibling Rivalry

We’ve been hearing a lot about outsourcing (contracting or subcontracting activities previously handled in-house to outside vendors) and off-shoring (moving operations previously handled domestically to locations outside of the home country) in recent years, most often with somebody complaining that faceless, heartless companies were using these methods to obtain lower costs at the expense of American workers. The implication is that these companies should put a higher priority on patriotism than profitability – or, if you are a less rhetoric-obsessed individual, that these companies should take a more holistic approach to their strategy and consider that if their own community has no jobs, there will be no disposable income and no one to purchase their products, thus defeating the point of going offshore in the first place. Of course, it remains to be seen how the people raising those arguments will fare when the “foreign” location turns out to be South Carolina…

The Associated Press, in a story cited by Google News online, notes that Boeing has elected to build its new factory in South Carolina, where it will locate the second assembly line for the new 787 airliner. The primary motive cited is the $170 million in incentives offered by South Carolina’s state government, but the article concedes that part of the rationale behind the selection is the recent labor problems in Boeing’s long-time home base of Washington State, including a machinist’s strike and the inability to reach acceptance of a no-strike contract with the union. Various analysts are now speculating that if the move works out well for Boeing (and it is expected to), the company could move all of the 787 production, and possibly other new product lines as well, to the South Carolina location to take advantage of lower costs, non-union labor, and a favorable relationship with local government. Which would not bode well for Washington State…

Now, no one is suggesting that the people in Washington State have anything against the people in South Carolina; it’s quite likely in fact that the people in Washington State are happy for their Southern counterparts and wish the people in South Carolina all the best. It’s even more likely, however, that the people in Washington State would be happier to have all of the 787 production stay in their neighborhood and have Boeing expand into South Carolina and build something new in their new factory. It’s a near certainty that when the machinist’s union went on strike last year, shutting down Boeing’s commercial operations for over eight weeks, that none of their leadership was counting on the company moving a large portion of their operations to another state, let alone the appearance of a massive national economic crisis that would make it difficult for their membership to find alternative work. Still, we have to question if the strike was really the best choice they could have made at the time – since, even without the current recession, moving operations to somewhere cheaper has been a subject of much discussion in recent years (as noted at the start of this post)…

I’m certainly not anti-union; I’m not even opposed to this specific union, although I suppose it must sound that way. I’m opposed to people who refuse to consider the larger strategic implications of what they are doing, however, and I can’t imagine how the possibility of losing all of those union jobs to another state could possibly have slipped past the union’s leadership in this case, considering that Boeing already makes a large percentage of the 787’s parts in facilities in South Carolina. Fondly imagining that the company is too patriotic to move operations overseas is one thing; blindly accepting that they would somehow balk at giving the work to your brother and sister workers in another state is something else again. And in current climate it’s hard to imagine a state government in the U.S.A. that wouldn’t gleefully try to poach jobs and revenue away from their neighbors if they got the chance…

Which means, I suppose, that if you’re considering labor actions or anything else that might cause someone to send jobs somewhere other than your home state, you should probably give some thought to who else might be willing to take them for less money. Chances are, the list isn’t limited to some companies overseas…

Getting Worse?

Every few years we get treated to another talking head somewhere telling us how much worse the world has gotten since the last time we looked, and how all of this is the fault of whatever social, political, economic, racial or national group the talking head making the pronouncement is against. Most people pay no attention to this sort of thing, given that self-appointed guardians of taste, purity, goodness and/or righteousness have been making these pronouncements for at least the last 12,000 years (and possibly longer), and despite the dire warnings being given the world is still here and no one is being eaten by giant goat-eating cockroaches (except in certain parts of New Jersey). But then there are cases like the one out of Long Island, New York, this week about a mother using Craigslist to get revenge on one of her 9-year-old daughter’s classmates…

As reported by the local CBS affiliate station, a 40-year-old woman placed a sex ad on Craigslist and then gave out the victim’s first name and telephone number to men who responded to the ad. Needless to say, the mother in the case is protesting her innocence, and we should all remember that you shouldn’t believe everything you see on the local news, let alone read on the Internet. But in this case it doesn’t really matter, because we all know that even if this case turns out to be a hoax, somebody, somewhere is going to see this story online and decide it’s a good idea. Unless Craigslist stops taking sex ads (which seems unlikely; they didn’t stop taking those ads after it turned out a serial killer was using them to find his victims), this exact scenario is going to happen somewhere in America in the next year or so, and there’s no telling how many more people will get hurt…

People who are prone to that sort of thing will pounce on this case as further proof of the corrosive effect of the Internet on our society, but I have to wonder. No one was actually hurt in this case, and unless the girl being targeted and her parents are complete idiots, there was never any real danger involved; this would appear to be nothing more than an extremely high-tech version of the old prank of writing someone’s name and telephone number on the wall of a public restroom. The difference is that instead of a small local audience, this prank could be seen by anyone in the world who wanted to, and instead of hearing about it around the community, we’re hearing about it online (or on television), which tends to increase the volume (and the outrage) in these cases. The real question isn’t even whether this sort of thing is making our world even worse to live in, so much as it is, what do we do about it?

Granted that years ago a prank of this type couldn’t possibly be disseminated to dangerous recipients around the globe, years ago we didn’t have the resources to identify, track, report and defeat such outrages, either. Measure and counter-measure have evolved together, as they always do, and if the reach and impact of idiots like the offender in our story have grown, so have our abilities to fight them. The real question is how do you propose to prevent this sort of thing? We’ve established that governments will never be able to regulate the content floating around out here in cyberspace, and that means that there’s really no way to guarantee that someone can’t post prank ads somewhere, anymore than you could patrol every public restroom in the world with a rag and a bottle of solvent. With proper education (and vigilance) we should be able to keep anyone from getting hurt, but that’s still one more thing to worry about in an increasingly hostile new world…

So is our world actually getting any worse? Personally, I doubt it; I’ve often said that the world is getting more complicated, not necessarily better or worse. Unless somebody can actually show me that the percentage of idiots in our midst is actually rising, I have to conclude that the more things change, the more they remain the same. Even if it means that we’re going to have to invent the electronic equivalent of self-cleaning latrines…

Flying Sideways

We’ve often spoken of lateral thinking in this space, although I don’t always call it that. Any discussion of competitive advantage in business – certainly any discussion of strategic management or organizational theory – will eventually include the concepts of creativity and innovation, and why having a sufficient amount of each is critical to the long-term survival of the company. What often surprises people – even people who should know better – is that the goal here isn’t having as much of each as you can possibly get in every department and work group of every commercial enterprise. All forms of innovative thinking introduce uncertainty into the calculations of running the firm, and uncertainty is inherently difficult to manage; this is why so much of the early work in Scientific Management was focused on making a company as mechanistic – as automatic – as possible. Consequently, the more common problem is getting management teams to show any creativity at all – despite the fact that sometimes the answer is as simple as just not booking certain seats on an airliner…

A story being reported by the Globe and Mail Online brings us the case of WestJet, a Canadian airline that was facing the interesting problem of wanting to transport passengers to destinations in Hawaii, but lacking the long-range aircraft necessary to do so. At the same time, the carrier was also seeking new ways to add value to its tickets, as most airlines are currently doing, because of the falling revenues in that industry. Ordering new, longer-ranged aircraft (like the 767 or 787 from Boeing, or the equivalent Airbus) would cost a small fortune and cause a delay of some years – by which time any current demand for travel from Canada to Hawaii would almost certainly have been absorbed by other carriers. But all of the company’s current aircraft were medium-range machines like the Boeing 737, which doesn’t really have the range for the Calgary to Hawaii run. Which meant either increasing the airplane’s designed range – or lightening its load…

Which led to the rather clever scheme WestJet is proposing, of leaving some of the middle seats empty, effectively creating a premium economy class, where passengers willing to pay a small premium (they’re thinking about making it $20 US) would be guaranteed of having an empty seat next to them. The lower weight requirements should lower the plane’s fuel consumption enough to cover the extra distance, but such a program would not require any modification to the existing fleet, let alone the acquisition of additional aircraft. Unlike the introduction of a Business Class section or even an Enhanced Coach Class section (more room between rows of seats, for example), such a program wouldn’t cost anything to set up; the same aircraft could even be used at full capacity on shorter runs when not needed for the flight across the Pacific…

Whether or not the relevant government authorities will approve this scheme remains to be seen, of course. And there’s no word yet on whether WestJet will keep the prices for this new class of seating down to a pittance level (to attract more customers) or if other carriers will try it simply as a means of increasing value to the customer (providing more space in return for a higher fare. But for our purposes, it can serve as an excellent example of lateral thinking – and a reminder that some crazy ideas are also brilliant ones…

The Grad School Diaries: Crossing the Road

As it turns out, the question isn’t so much “Why did the Graduate Student cross the road?” as it is “HOW did the Graduate Student cross the road?” Why is moderately obvious: the other side of this road is the location of a large shopping center that includes several places which sell food, including a Cracker Barrel, a Bob Evans, a Steak n’ Shake, a Subway, and a McDonald’s (just to name a few), whereas this side of the road only features the Pontiac dealership where we’ve taken our Torrent for service, and the waiting room here offers only a drink machine and a coffee pot. Unless we want to go hungry for the duration of however long it will take them to fix the car – and there’s really no telling how long that might be – we need to cross the road, which in this case is Saginaw Highway, in Delta Township just outside of Lansing. How we are supposed to manage this crossing is an entirely different matter…

It’s the middle of winter in Central Michigan, and while I’m pretty sure this road has sidewalks on both sides of it (I remember seeing them when we were here in the summer) no one is bothering to plow them, since there are no houses around here and no one is likely to walk along them. Except us, of course; even getting the corner where there’s a traffic signal on Saginaw will mean slogging through two or three feet of snow, and when we do get there the intersection does not feature a crosswalk or a walk signal. We’ll have to wait for the green light (which won’t be visible from this direction) and then run like heck for the other side, hoping that none of the oncoming drivers is in the mood to jump the gun and go while the light is still red...

It’s never the big things in life that change the way your existence actually unfolds; it’s always the little things. A year ago, I had never operated a snow thrower and cleared my driveway so that I could get to work; today it’s not even remarkable to me anymore; just something I do on particular mornings before heading off. A year ago I’d never had the experience of going to work in my parka, or of needing to suit up to go outside, even for a moment, even just to cross the street from my parking structure to the Business Complex. A year ago I’d never even owned a snow brush or an ice scraper, let alone carried one in the back of my car against the possibility of having to clear the windshield before I could drive away, let alone actually having done so. A year ago, a hat was something I wore to keep the bald parts of my head from burning in the sun, not to keep my body heat from escaping and my ears from aching with the cold. There have been a thousand little things like this, all of them trivial, all of the combined taking up only minutes out of my day, but collectively a complete change in my life and how I live it…

This is why a lot of people believe that kids should go away to college; “away” being defined as however far the speaker thinks one must travel to experience a different lifestyle and experiences that one’s home city, home state or home climate can not provide. It’s certainly not the first time I’ve lived somewhere outside of my childhood home; it’s not even the first time I’ve lived outside of my home state; my travels have taken me to much stranger and more far-flung places than this. But this time is different; this time I have committed to this place for four or five years, with no prospect of leaving early unless disaster strikes and I am unable to complete the doctoral program. And, just as importantly, this time I have no real prospect of ever going “home” again, whatever that might mean. Certainly, there is nowhere in Redondo Beach for me to go back to, and no sane reason to go. And even if I am successful, in that time just four years into the future and yet unimaginably far away, there is no telling where the winds of fortune may carry me next. Will it be a return to Southern California, a voyage to New England, or the Pacific Northwest, or the Atlantic Coast, or even somewhere else in the Midwest, possibly somewhere even colder and snowier than here?

I have no way of knowing. I’m adrift in an almost featureless white expanse of time, with no real choice but to put my head down and press on through the winds, hanging on to the belief that there really is an “other” side – and that somewhere over there, the promise of hot food and cold drink may still come true…

The Little Things

Most of the time, when you hear about a major corporation making a minor cost-cutting measure, the temptation is to laugh it off. A company that grosses hundreds of millions each year can’t really care about a wasted slice of lemon here or there, can it? I mean, unless you’re getting into six figures worth of money, why would it even matter?

Well, sometimes it does. Consider, for example, this story on UPI Online, which details a cost-cutting measure adopted by Southwest Airlines last week. According to the UPI account, flight attendants had been noticing for some time that at the end of the day they were ending up with a lot of leftover lemon slices on the drink carts. It may not sound important, but when you add up 3,200 flights a day (that’s over a million flights a year), even a few cents worth of waster fruit adds up. The company’s estimate is that they will save over $100,000 per year, just by not carrying lemons and just offering people a slice of lime instead. Which still doesn’t sound that important, until you consider that it isn’t costing them anything at all to get it; all of that money drops straight to the bottom line…

For some time now we’ve been seeing several different airlines making what appear to be trivial cost-cutting measures, and I’ve mocked them as much as the next person. It’s not so much the fact that going from an ounce of peanuts per customer to a half-ounce doesn’t actually save much money; as noted above, saving a few pennies at a time adds up if you do it several million times each year. My problem with these measures has always been that they annoy your customers by implying that you’re saving money by doing less for them. But Southwest’s lime versus lemon initiative is saving money in a sector of operations that the paying passengers will never even notice – the leftovers in the galley (or lack of them) at the end of each flight. It makes you wonder how many additional little nuggets of waste are wandering around each Southwest flight – and how many of them are things you’d never even notice unless you read about them in a UPI online article…

Which, of course, raises the same questions about other types of business. Fast-food companies introduced those little ketchup and mustard packets to promote the same kind of incremental savings by reducing waste, and if you really cared I could suggest a dozen similar innovations. Trimming a little bit off your operational costs every day isn’t usually that difficult, but doing so without violating the Second Rule of Business (e.g. without annoying your customers) is another matter. If you haven’t already considered how to achieve incremental savings in your own business, it’s probably worth taking a moment to do so, but I’m going to suggest that you take it one step farther and consider the cost-cutting measures you may already have taken. How many of them are true cost-cutting measures, things that will eliminate waste, and how many are things that will cost you as much in lost business as you save by cutting costs in the first place?

It’s probably worth taking another look at those programs. Oh, and while you’re at it, you should probably get the lime juice off your keyboard…

Buy American?

Over the past few years I’ve had a number of arguments with people who seem to believe that, for whatever reason, they shouldn’t pay any attention to the 94% of Planet Earth that isn’t the United States. Some of it can probably be explained away as jingoistic nationalism, or willful ignorance (assuming there’s any difference between those categories), but some of it appears to be business people who genuinely believe that if your company has a purely domestic focus there is no reason you should ever consider what the various International markets are doing. It’s an amazing example of 18th or 19th Century thinking, and there’s no telling how many more companies it will do in over the next few years. And it doesn’t help that the people in Washington apparently don’t grasp this either…

As noted in this article from the Wall Street Journal Online last week, one of the provisions in our $787 billion economic stimulus package was a “Buy American” provision, which requires anybody receiving those funds to spend them on American-made goods (and services, one assumes) wherever possible. On paper, it looks like an entirely logical idea; since this is government funding, provided by America’s long-suffering taxpayers, as much of it as possible should be put back to work here, where it can provide jobs, stimulate the local economy, and hopefully help those same taxpayers to earn even more taxable income and keep the whole loop going. Unfortunately, this fails to take into account the fact that other countries (or at least the people who live in them) have feelings, too – and some of them are just as susceptible to jingoistic nationalism as we are…

The example given in the story is a firm doing business in both the United States and Canada, which is ideally suited for stimulus-package products, but is losing about 25% of its business because many of the Canadian cities and towns the company does business with are refusing to spend anything on American goods or services until this “discriminatory” practice is rescinded. While there’s no way to be sure how widespread this problem may become, the WSJ article notes that exports to Canada are down over $5 billion for 2009 – and the year isn’t over yet. Nor is there any way to be sure what other countries may also be curbing their spending on American-made products. All we know for use is that our country’s foreign trade imbalance has been a huge problem for several years now, and this is not going to help…

Of course, foreign trade relations has never been an American strong suit. From the early days of this country we seem to have been better at making excuses than at making healthy trade relationships. But in the 21st Century, it would appear that telling other countries that they should let us do whatever we want in foreign trade because we’re defending the free world with our nuclear arsenal, or because without us you’d all be speaking German (or Japanese), or because our manifest destiny demands that we be complete jerks to everyone that stands in our way, or that we’re still breaking free from the tyranny of King George, or any other lame excuse we can think of is no longer going to work. Whether the issue is pure food, product safety, or just being more diplomatic in how we phrase government money giveaway legislation, it might just be time for us to start caring about the International Markets…

Because, as I’ve noted before in this space, it doesn’t matter whether or not you believe in the Global Economy; the Global Economy believes in you. And if we don’t start being better neighbors, no amount of free money giveaways are going to stimulate our economy to do anything…

The Ethics of Privacy

It seems likely that most people would agree that they have some expectation of privacy when conducting private business transactions – like having their photographs developed, for example. While you don’t have any active protection along the lines of attorney-client privilege, most of us would be fairly upset by the idea of total strangers going through our negatives and deciding if our behavior seems beyond reproach. At the same time, most people would hope that if ordinary people working ordinary jobs run across potential evidence of a crime being committed that they would report it to the relevant authorities – especially if the crime in question is a particularly heinous offense, like child abuse or child pornography. But what happens when these two generally accepted principles come into direct conflict – possibly in the same news story?

If you missed it in the news aggregation sites this week, there was a case where a family had taken the memory stick from their digital camera to the photo counter at a large retail store near their home to get prints made from their vacation photos. Unfortunately, the memory stick also included bath-time pictures of the three kids (ages 2, 3 and 5), and one of the photo technicians noticed these, decided that naked pictures of small children were probably evidence of something, and alerted the child protective services in the jurisdiction. The authorities “investigated” the matter and wound up removing the children from the home for several weeks until it could finally be determined that there was nothing wrong, no crimes were being committed, and there was no reason to go on with the case (and no chance of prosecuting anyone). Which is pretty much the end of the matter, except for the lawsuits and the corresponding question about what (if anything) the retail business involved should do about the situation…

On the one hand, your employees have the same responsibility as any other citizen to report crimes they become aware of, and even if you could order them not to (you can’t) there’s an excellent chance they wouldn’t obey you. Nor would you want them to; the last thing your company needs is to have prevented employees from reporting the next 9/11 attack or similar outrage just because you want to avoid inconvenient lawsuits. But by the same token, you don’t really need to pay your personnel to go through customer pictures looking for evidence of crimes, and you definitely don’t need to have them see a few family photos, jump to conclusions, and get your store (or your corporation, or worst of all, you personally) sued into the process…

So the question seems to be, where do you draw the line? At what point does it stop being your employees performing their civic duty and become a matter of nosy idiots taking too much of an interest in things that are none of their business? How can you tell, months or years before the event actually arrives, how to set your corporate policy so as to avoid incidents of this type? In the long run, parents are going to continue taking the sort of naked baby pictures that feature in so many wedding albums (and other special events documents) twenty or thirty years later, and running the photo counter in a drug store or general merchandise store is going to remain one of the most colossally boring occupations imaginable. Eventually, inevitably, somebody is going to start looking through the batches of pictures just to stay awake, and they’re going to run into something that might just provide the opportunity to call the authorities and create some excitement…

Which means that, sooner or later, if your business has anything to do with customer media and under-paid employees, you are going to face this exact scenario. And even if you have given your personnel very clear instructions and careful training on how to handle these situations, it's still quite possible that your entire corporation's policy, conduct and financial future will be in the hands of some teenage employee with a deficient sense of perspective (or possibly humor). When that day arrives, how will you handle the case?

It’s worth thinking about…

Don’t Look Now

I continue to be amazed at just how naïve some of the comments we keep hearing about the economy – and some of the more problematic aspects of it – really are. Take, for example, the media reaction to FBI Director Mueller’s statement to Congress that the Bureau’s mortgage fraud caseload is larger than it was just a few years ago, and that the number of cases under investigation is continuing to rise. How can that be? I hear people wondering in alarm. The Federal government is spending close to a trillion dollars to take care of this problem, major financial institutions have improved so much that they’re now able to start giving away tens of millions of dollars in bonuses every year again, and the Fed Chairman is talking about the Great Recession being over! How can the amount of mortgage fraud still be rising? Let alone corporate fraud (which is also up dramatically)?

You can read about these gloomy reports here if you want to, but if not, just take my word for it that during the worst financial crisis in three generations, there seems to be an increase in the amount of fraud going on. What puzzles me is why anyone is surprised by this, let alone the Director of the FBI, who is supposed to be one of the top-ranking law enforcement officials in the country. The fact that these numbers are continuing to climb since May of this year, when all of the bailout money had already been spent and the worst should have been over, is upsetting, to be sure, but hardly surprising. The fact that corporate fraud is still rising after all of those corporations have been given so much of our money is even more upsetting, but it’s important to remember that in both cases, the people who are getting all of the free Federal money are probably not the same ones committing all of the bonus fraud…

I say this for two reasons: first, while the initial phases of the bailout may have been laughable from an oversight standpoint, over the past few months Congress is taking a closer and closer look at where that money went, and when (and whether) it’s coming back; and second, because if you’re having the Feds stuff random gobs of money into your face, there’s both an incentive not to draw any more regulatory attention and a disincentive to put forth the effort to commit fraud in the first place. Neither of these was exactly the point of the TARP legislation, but the outcome is the same. What I do wonder about is the climate in which all of this crime is occurring. There was a time when mortgage fraud was a crime with limited appeal and an even more limited resistance to detection and punishment. But with all of the chaos in the financial industry these days, you have to wonder if more people are getting the idea that they could carve out a little Federal money for themselves – and how many of them are getting the idea that if the people who nearly destroyed our economy can get $10 million bonuses, that they deserve whatever they can carry away…

In the long run, I expect that our economy will survive all of the idiotic things that were done to it in the early years of the 21st Century, and that when high school students 80 years from now study the Great Recession, it will look just a quaint (and just as idiotic) as the Great Depression 80 years before that. If our culture has changed to the point where people in business start to believe that they are entitled to whatever they can screw out of the system, on the other hand, I seriously doubt if there will still be a country here in 80 more years. And I’m not so sure about the planet, either…

The Grad School Diaries: The Atlanta Transition

Here I am, locked in a life-or-death struggle with the doctoral program in Management at Michigan State University, surviving by the skin of my teeth, the good will of a few professors, and possibly by the grace of God, if one believes in a deity who looks out for secular humanists with very confused ideas about organized religion. By the closing weeks of the year 2008 I knew I had passed all of my classes, but that was about the best you could say for me; the first semester of the doctoral program is generally considered to be your best chance to impress your professors, and my performance had very clearly impressed no one. As I remarked at the time, I was very glad to be one of the 12 people who passed our all-important Methods class – I just wasn’t that crazy about being #12. The sane thing to do would have been to spend as many hours as possible in my office (or my study at home) between the semesters, divide my time between frantically trying to get ahead on the reading for the new semester and compulsively trying to memorize as much of the past term’s information as possible, and hope for the best. So of course, I’m spending the last week of the year in Atlanta, Georgia, hanging out with gamers half my age and helping to throw a really good New Year’s Eve party…

In fairness, I have spent a lot of time during this break working. I’m trying to get ready for an Independent Study project in Entrepreneurship for the new semester, and my advisor has me putting together readings from courses on this subject from all over the country. And there’s no question I need a break; anyone reading these posts probably already knows that my stress level has been ranging between “really bad” and “suicidal depression” for much of the fall, with occasional spikes into the “jumping around yelling ‘Ya-HA! Ya-HA!’ and pelting people with chunks of rump steak insane” level. I need a vacation, and this is more than just a trip back to the South; it’s a trip back in time, as well…

Twenty-five years ago I was in college for the first time, in what even I have to admit were unfocused and generally unproductive years. Much of the time I had no idea of what I wanted to do with my life, or even what the horizon of years beyond my bright college days would bring. Days passed when my biggest concerns were what kind of pizza to order for dinner, what role-playing game systems to invest my meager income on, and whether I’d get a date before the Big Crunch at the end of the Universe made the whole question academic…

It was glorious.

As much as I loved going to school in Santa Barbara, living on campus in dorm room that featured a view of the ocean, and being just “on my own” enough that no one ever told me to clean up my room, some of the best times in that period where when I returned to Los Angeles to hang out with my friends and game, and some of the best of those days were in a multi-generational game where the players included the young woman who would one day become my wife, and the (slightly) older gentleman who would one day become my father-in-law. It was impossible to imagine my own parents hanging out with a bunch of college-age gamers; they’d have been shocked (and bewildered) by the suggestion. I remember thinking, back in those days, that if my turn ever came, if I ever wound up being somebody’s parent, that this was the kind of person I wanted to be, and this was the role I wanted to take…

And now time has come full circle, and it IS my turn to be the older generation of gamer, still playing, still telling collaborative stories with nothing more than a few rule books and some polyhedral dice, still cool enough to actually be the kind of person you’d like to hang out with at a gaming party and maybe share a few tall stories with, both in and out of character. They say you can’t go home again, and undoubtedly it’s true; there is no way for me to return to my single dorm room in Santa Barbara, even if it’s still there, and even supposing that I wanted to go. But if you try hard enough, you might just be blessed enough to return a place and time that everyone else would have told you was gone forever – even if you have to do it as one of the old-school gamers with grey in his beard and jackscrews in his neck…

I’ll have to return to the present day, and all of the anger, frustration, desperation, fear, despair, rage and endless days and nights of effort soon enough. But for the next couple of days, at least, I’m going to hang out in the past. The year 1983 is a nice place to visit – even if you can’t actually go and live there…

Don’t Complain

No, seriously; don’t bother complaining. At least, if you’re flying Delta Airlines and you have a complaint about any aspect of their service, including not taking you to the destination you’ve hired them to transport you to, losing your bags, taking forever to board or deplane an airplane, or even sitting on the tarmac for hours at a time waiting for an opportunity to take off, you shouldn’t bother trying to complain to the company. Because they’re definitely not listening; they apparently don’t even have a telephone line available to listen to you…

A story published this week in Time Magazine makes the surprising claim that Delta no longer has a customer service number, and requires all inquiries to the airline be made in writing, either by e-mail or by conventional mail. There is a company 800-number, but it’s used entirely for Frequent Flyer issues, and the Representatives assigned to it will just refer anyone with a conventional customer service issue to the website. American Airlines stopped taking customer complaints by telephone some time ago – considering some of the people they had working the phones, it’s probably just as well. And United Airlines apparently shut down their customer service lines just a few months ago – around the time I was asking why they even HAD a customer service department if they weren’t going to do anything to mollify their customers. Maybe I should be more careful about whom I mock…

Now, on the face of it such a policy seems like a clear violation of the Second Law of business (“Don’t annoy the customer!”) as well as all common sense. If someone is having a problem with your operation, telling them to send you an email and you’ll look into it really isn’t much help; they want someone to find their missing bag and tell them when it will be arriving, address the fact that they’re being harmed, or cheated or grossly inconvenienced and try to make it right, or at least reassure them that the company DOES care about their business and will attempt to take care of them. Complaints can be handled by email easily enough – problems that occurred hours or days earlier do not require immediate correction, and most people would be just as happy to register their complaint and then go do something while you process it. But when there’s an actual crisis – or even an ongoing problem – email is never going to replace a human voice…

Unfortunately, this appears to be the direction the entire industry is going. Customer Service Representatives are expensive, not least of all because each one of them can only really take care of one customer at a time. To handle the volume from a large customer base you need a large number of CSRs, along with a large number of telephones, computer terminals, desks, and an inconveniently large building in which to house them. This is the real reason so many call centers have been outsourced to countries where the labor and the real estate are relatively cheap, and why you can often find yourself talking with a guy with a thick Bangalore accent who says his name is Joe. But as previously noted with regard to baggage fees and charges for services that used to be free, budget cuts and petty nickel-and-dime fees are not going to save any company, let alone an entire industry, from financial destruction…

Perhaps in the long run the airlines can find some way of making this new business model work. Maybe they can incorporate text messaging or Instant Messenger services into their online customer service sites and create a text-based immediately available service model. Maybe people will grow to appreciate not having to deal with different accents and crappy telephone connections and instead getting clear, easy-to-read replies on the screen. Maybe the reply time for email or text message replies can be brought down to a few minutes, which would definitely be better than waiting on hold for the next Representative for two or three hours…

But in the meanwhile, if you need to complain about something, you’d best get ready to put everything in writing – and keep a copy…

It Could Be Worse…

It seems appropriate that this post will run on Labor Day 2009, given the subject matter. Of course, since this is a web log and not a newspaper column, I can make anything run any day I want it to, which makes it easier for me to time this sort of thing than it would be for a real columnist. But it still seems appropriate to have a column about miserable working conditions pop onto your web browser on Labor Day, so for the next few hundred words, if you’d care to imagine me as a crabby, middle-aged man with a bad complexion and a beer gut wearing a fedora with a “Press” ID stuck in the hatband, crouching over an ancient manual typewriter and grumbling quietly as I slam out this story, please feel free. I’d still be doing better than the poor bastards who appear in the news account I’m going to hot-link in a minute…

People who believe that being a commercial pilot must be exciting, glamorous, or at least nice work if you can get it may want to skip the rest of this post and wait for the next Grad School Diaries installment on Saturday. As noted in this story from the The Associated Press quoted by SF Gate online, 62 pilots and flight engineers from a Florida-based air freight company went on strike last week protesting the fact that their employers do not provide restrooms for them onboard their aircraft. It seems that these old 727 cargo conversions had everything stripped out of the original cabin, including the lavatories, leaving the crews with nothing but plastic zip-lock bags to relieve themselves in. And you thought your office restroom stank…

Now, in fairness, relief bags of this type (usually with a small sponge in the bottom to help with containment) are commonly used by military pilots assigned to make long flights in aircraft without restrooms, but it should be noted that many military aircraft have no where to put a restroom in the first place. These old 727s originally mounted several lavatories and the support systems to operate them, and we must assume that the freight company had them removed to save on weight and space. Moreover, while military flights in single-seat or two-seat aircraft may sometimes last as long as 18 hours, very few such pilots will be subjected to regular 18-hour shifts in peacetime – a practice the striking pilots describe as the rule, rather than the exception on their jobs. They also note that after 18 hours with a crew of three and nothing but zip-lock bags for sanitation, the inside of the aircraft can get a bit unpleasant…

Why, exactly, the freight company thinks this is a good idea is not addressed by the article linked above. Certainly, every pound of equipment you can remove from the airplane means more payload you can carry and less spent on fuel, but even the military will provide pilots with a chemical-pack toilet (like the one in an RV or camper) whenever there is room to do so, and there’s no doubt that the company is not coming off very well in the press accounts of this issue. To say nothing about the striking pilots or the potential loss of business if more of their personnel join the revolt…

I point all of this out to you not, as usual, because I believe that anyone following this blog (assuming anyone follows this blog) would be daft enough to believe that their employees would be okay with 18-hour shifts every day, let alone 4-hour turn-around times between shifts or plastic bags for lavatory functions, but rather to illustrate the point that decisions that make sense on paper don’t always work well in practice. The fact is, I’ve worked 18-hour (and 20-hour and 25-hour) shifts without overtime pay, had to go back to work after only 4 or 5 hours off, and worked under conditions where a plastic bag would actually have been a step up over our sanitary facilities – and every one of those companies has been destroyed by the competition, driven out of business by employee lawsuits, bankrupted by boycotts, shut down by government regulations, or all of the above. So the next time you have a great money-saving idea, remember to think it through…

Happy Labor Day, everybody!

The Ethics of Down Time

In some of my earlier posts in this space I’ve already commented on the need to handle employee paid leave (vacation days, sick days, and paid holidays) fairly and even-handedly. It may seem incredible, at times, that anyone is still arguing the other side of this issue; leaving aside the legal, social and regulatory aspects of paid leave, even a purely pragmatic view should be sufficient to confirm that denying your workers time off with pay will result in lower productivity, poorer worker relations, and increases in such undesirably behavior as shirking and employee vandalism. But what happens when the people requesting time off don’t have a doctor’s note or a religious observance they need to perform? What if it’s just a matter of needing a couple of days off?

If your immediate reaction was to roll your eyes and mutter something about giving people inches and seeing them take miles, you’re not alone. Anyone who has ever managed a group of workers knows that there are always going to be people on the crew who are going to regard any benefit you offer as an attempt to squeeze anything extra they can get out of the company, just as there are always going to be those people who have to observe the Feast Day of Saint Monday (better known as calling in with a hangover) multiple times every month. But what about cases where somebody has put in three straight weeks of 80 or more hours trying to finish a project on time, or people who are not eligible for stress leave even though they’ve been through a rough experience on the job? What is a manager supposed to do in those cases?

The obvious answer in these cases is to use comp time if you have it, but many employers do not have a comp time program, and in many cases union agreements, offset shift arrangements, or remote supervision issues would make one impossible. It’s sometimes possible to give somebody a day (or even an afternoon) off in a purely informal sense; telling them to go home and marking their time card as present, or clocking out for them, or whatever, but this brings up the problems of other members of the work group resenting this “special” treatment and the fact that this tactic is technically perjury (falsifying in-house attendance documents). And if the person receiving this special consideration is perceived as the office brown-nose (if the other members of the work group believe that you are arranging your assignments so that workers you particularly like get to have more time than everyone else) the overall effect on the group is likely to be even worse than just offering your stressed-out worker a few hours off the books…

Of course, the best solution would be to distribute the assignments so that no one is pulling significantly more work than anyone else while building the team up to the point that when someone who reports to you is experiencing a serious problem, the other members of the work group will suggest that you give the affected teammate the day off even before you think of it. Backing this up with either a comp time program or a discretionary budget (something that allows you to do overtime pay or special merit rewards for off-the-clock work hours) that you spread around evenly would be even better. But the situation is still going to come up every so often when you have the choice between doing what’s best for your employees, and following the company’s attendance (and compensation) policies. When that happens, what will you choose?

It’s worth thinking about…