Are You Kidding Me?

When you spend your spare time on news aggregation sites looking for business-related items to blog about, the way I do, wretched excess very quickly fails to amaze you any longer. The idea that there are $40 bottles of water for sale, or $6 trays of instant ice cubes (“Just pop it into your freezer!”), or even $10,000 cell phones becomes an accepted fact, and you find yourself becoming jaded in a very specific way. I grew up in Southern California, within driving distance of Hollywood, and may therefore have been a bit more susceptible than most to losing my sense of wonder (or outrage) at people overpaying for common items simply to prove that they could; western Los Angeles county is full of businesses that operate on the principle of providing exactly those sorts of goods and services to people. That said, I still think that paying $69,000 for a mattress set is absurd…

A story posted in the Life & Style section of the Wall Street Journal website profiles two of the companies that make these “super-premium” bedding sets, including the most expensive American-made product (the E.S. Kluft & Co. Sublime mattress set, at $44,000) and the somewhat pricier European equivalent (The Vividus set from Hastens Sangar AB, of Sweden). These hand-made products include a number of highly expensive materials, such as cashmere, mohair and silk, to form the layers of the mattress, and hand-tied steel coils to support the higher layers. Yet, despite the jaw-dropping price, these sets still retain the typical service life of an ordinary inner-spring mattress: between 7 and 10 years. To put this in perspective, that’s the equivalent of spending $822 a month, or $190 a week, just for your bed, before you even consider a bedroom to put it into…

Or, if you prefer, it’s the equivalent of purchasing 18 top-of-the-line Tempurpedic mattress sets, each of which has a twenty-year warranty (with a service life estimated at 30 years). Alternately, you could describe this product as costing effectively 55 times as much as the best memory-foam equivalent – which wouldn’t really be a jaw-dropping excess, except that the super-premium products also don’t have the same resistance to stains, liquids or dust mites you get from the less expensive product. There’s also no reason to believe that spending 55 times as much will actually assist you in sleeping any better; at least, there’s been no scientific evidence to support that position. All of which leads me to question if there aren’t better uses for one’s money…

Now, I’m not going to tell anyone how to spend their money; that’s your right by virtue of your having earned it in the first place. And speaking as somebody who has had to endure sleep studies, decades of insomnia, and clever machines that blow air up your nose while you’re asleep to keep you from snoring (and, in extreme cases, dying), I can honestly say that there are very few things that are better or more important than a good night’s sleep. It’s just that at current prices you could purchase a house in the Lansing area for monthly payments lower than what these mattress sets would cost you, and in 30 years you’d own the place and the land underneath it, free and clear. I can’t help thinking that if I had that kind of money the real estate investment would appeal to me a lot more. But that’s just me…

Too Good to be True

I’ve written a number of posts in this space about various employment scams – the one about The Millennium Centers scam is still one of my favorites – but I continue to be amazed by these particular confidence games. It’s amazing to me that anyone is still doing these, in a world where anyone who wants to can verify that these offers are a scam and that the people behind them are usually wanted in multiple states on felony charges with just a few minutes of Internet research, I would have expected that most con artists would have found a safer way of making money by now. But, of course, the really amazing part of these crimes is that in our modern world, anyone is still falling for these scams…

There was another story, this time in the US Today Economy site online, about several recent employment scams, and how crimes of this type are on the rise in the current economic downturn. Some of these are the traditional training and envelope-stuffing scams, where you pay $600 for materials that you then make crafts out of and sell back to the company at a profit, or $6,000 for “training” and client lists that turn out to be worthless, but others are adding a new wrinkle by combining credit card fraud with the traditional employment scams. The online article tells about one operation where the marks agreed to pay $1.95 for a “subscription” but failed to notice the illegibly small fine print where it said that if you don’t cancel your subscription within 24 hours, you will be charged an additional $49.95…

Now, I’m not saying that all mail-order and online business opportunities are scams. Actually, there are a number of opportunities online that have proven quite lucrative; it’s just that all of them require work on the part of the participants – and none of them require any significant money up front. The sad fact is that for many people the Internet is still a black box – unknowable and unfathomable technological magic. Millions of people – many of them otherwise sane! – actually believe that if you say it on the Internet it has to be true, that Wikipedia is an unimpeachable font of True Knowledge, and that if someone sends you an email claiming to be a Nigerian prince and offering you $40 million for a few moment’s work, it must be for real. Thus, they fall victim to frauds they would never give a moment’s thought to if they encountered them in any other format…

In all honesty, the linked news article is really more of a non-story than it is breaking news; people all over the world continue to fall prey to all manner of Internet scams, most of them far less credible than your average employment con. In just the past few months we’ve had another rash of Nigerian bank fraud scams, fake Publisher’s Clearinghouse scams, and phishing schemes where people actually fell for emails supposedly from their own banks requesting confidential information. Still, it probably bears repeating that if something sounds too good to be true, it probably isn’t true, and if a company wants you to pay them $6,000 or $600 or even $6 upfront but will not guarantee that you’ll ever make a dime, you probably won’t…

And if you are victimized by any type of fraud just because you were too lazy to do the legwork and research the “company” involved before you gave them money you couldn’t afford to lose… Well, I wouldn’t expect a whole lot of sympathy from people whose lives have been destroyed in the current economic crisis, either…

Differentiation Fail

When you study management strategy (not that I am for one moment suggesting that anyone ought to study management strategy), you quickly learn that all of the articles suggesting that there are dozens or hundreds of different strategies are mostly crap; just as there are really only three kinds of story (comedy, tragedy and history), so to there are really only three kinds of business strategy: low-cost, differentiation, and specialization. Every so often somebody claims to have come up with a completely new approach – usually for the purpose of trying to convince everyone to pay $30 for their new book – but these three categories hold up surprisingly well. What most people fail to grasp is that any of the types require parity in the other two dimensions to be effective in the first place; otherwise all you’ve created is an elaborate way to waste money…

Low-cost strategy is the easiest to understand; your logic is simply “buy our product because it costs the least!” But if your product is so shoddy as to be completely useless there will be no market – or niche – for it, and if your product is identical to every other product on the market – if it isn’t differentiated in any way – there will be no real reason for customers to select your offerings over the competition. By the same token, if your product is completely new, innovative and distinctive but costs 50 times what the competition’s equivalent does, it’s not likely to sell well unless it can deliver 50 times the value – which is generally hard to do. This isn’t usually a problem, since very few companies deliberately market a product that costs even ten times what the competition is charging, but as far as I can tell from the chatter online, somebody should have explained this to the Dyson people before they launched their new "air multiplier" product…

As the linked Consumer Reports article notes, the new Dyson product does, as advertised, produce a smooth, powerful current of air, ideal for improving the circulation in your room. It’s just that the basic model costs $300 and doesn’t do anything that a $10 box fan can’t do; the claim that conventional fans produce a “choppy” air current does not appear to hold up under testing. Even if it did, most of the comments I’ve seen online so far suggest that there’s no way anybody is going to pay 30 times the price for this thing. Sure, the “Air Multiplier” is a cool-looking gizmo, and the fact that it doesn’t have any exposed fan blades might appeal to anyone who lives with an entity stupid enough to try sticking random body parts into a fan, but it doesn’t seem to be worth the price…

What makes this all the more puzzling, in my opinion, is that the company has generally demonstrated a better grasp of pricing strategy in the past. The basic Dyson vacuum cleaner (which we’ve had for two years now and swear by) is an excellent piece of engineering, and only about 50% more expensive than the equivalent competitor. I had no problem paying $300 for it instead of the $200 competitive equivalent, but there’s no way I would have paid $6,000 for it or any other vacuum cleaner; even a Roomba robotic vacuum cleaner, which actually vacuums the room without a human operator, isn’t more than twice the cost of a conventional vacuum, and some of them are even cheaper than the Dyson…

I have no idea what possessed the Dyson people to set the price on this product as high as they did; all I know is that they aren’t likely to sell a lot of them. The store around the corner from us has had a display of these things up for the last month, and they don’t appear to be moving, while the same store has sold out of box fans at least twice since last summer. Unless Dyson can somehow add value, lower the price, or find a niche market for these devices (people with a morbid and crippling fear of moving fan blades, perhaps?) they will have failed to market this product – because differentiation by itself does not appear to have been enough…

Opus 500

There’s an old joke about eating an elephant that probably bears repeating here. At first glance, you look at the task and say “That’s absurd! Nobody could possibly eat a whole elephant!” But then you start carving off slices and eating, just a few bites at a time, every day. And at some point in the future, maybe a year, maybe four, you find yourself looking into the fridge and calling “Honey! We’re out of elephant! When you go to the store, can you pick up another one?” This basic principle lies at the heart of Strategic Planning, where nearly all of the operations involve breaking huge and complex tasks into smaller and smaller elements, until they are finally reduced to bite-sized pieces that you can assign a single person to handle. Neither of these things has anything to do with writing a blog, of course, but eventually you get to 500 posts and find yourself wondering “Well – how did I get here?”

When I started writing this blog three years ago, I wasn’t really thinking about where it would take me – which I imagine is obvious to any regular readers (assuming I have regular readers) by the amount of ground covered in this space. It was mostly a way of keeping my hand in during a period of under-employment; I’ve refused to monetize it, promote it, spam people about it, or otherwise do any of the things one normally does to increase web presence or increase readership precisely because this is supposed to be a diversion for me as much as it is for all of you. If it became a business it would have defeated the purpose – and I hate waiting for pop-up ads to load so that I can actually read a blog post just as much as you do. But while I can’t speak for any of you, one of the true constants in my life is that it keeps taking me places I did not expect to go, and this project is no exception…

Since BlogSpot doesn’t include a counter on any of these blog pages, I’m never entirely sure how many people read any given post, or which ones. I know a few of my old friends tune in from time to time, but I am always amazed when somebody mentions that they really enjoyed the rant I posted last week, and it’s somebody I didn’t realize even knew I had a blog, much less read it. Most of the time it’s like standing on a lighted stage, telling stories into a darkened theater, unable to see anything beyond the edge of the light; are there three people out there today, or thirty, or thousands? Generally, I’ve got no way of knowing. The lack of banner ads means that I don’t even get the multitudes of spambots trying to leave messages in my comments section with which most bloggers have to contend; it’s just me and a keyboard and the occasional hotlink…

I didn’t start this blog with the idea of documenting my passage through graduate school, my efforts to adapt to middle age and a new life, or my voyages through an increasingly strange and surreal world; all of these things just sort of happened as I went along. I had no plans, no expectations, and no idea of the ways in which writing 500 short essays about the foibles of business and the strangeness of life would change me, nor did I want any; as Jimmy Buffet once wrote, “The best navigators are never quite sure where they’re going until they get there.” Today, three years and 500 entries later, I’m still not sure where this project is headed – but it’s been fun so far. Shall we try for Opus 1000?

The Ethics of Creative Pricing

Last week we had occasion to travel to California for a family event, and I found myself reflecting on the ethics of all of the add-on fees with which our airline was hitting its passengers. There’s the checked-bag fee, of course, but then you have things like check-in fees, which are cheaper online but still can’t be avoided on some carriers; carry-on bag fees, food-for-purchase fees, change flights and stand-by fees, even fees to board the aircraft sooner than other passengers or in some cases get a window or aisle seat, and don’t even get me started about premiums for an exit-row seat. On the face of things, these charges appear to be nothing more than the company gouging its customers for every little extra that they can – including a broad range of things that used to be included in the price of your ticket. But when you consider the actual face of the industry today, things aren’t quite that simple…

Before the Airline Industry was deregulated there were over 40 national carriers in the United States; more than any two other countries combined. Regulation limited the number of competitors along any given route, which kept prices relatively stable and prevented significant differentiation on the basis of price. Since airfares were going to be relatively homogenous, the airlines would compete on convenience, amenities, and any other value-added concept they could dream up; this included ads extolling the virtues of quality food and drink, comfortable aircraft, even attractive cabin crews. But once the industry was open to anyone who wanted to rent an airplane and publish a schedule, everything changed – and not necessarily for the better…

The rise of discount airlines transferred the basis of competition from a value basis to a price basis; having the lowest fare became the driving force in the industry. Lower prices plus increases in costs for fuel, labor, and landing rights forced the carriers to economize everywhere they could, and more besides, if they wanted to remain competitive and still obtain the highest available profits. Airlines began offering more and more self-service activities to replace things that had once been done by live personnel, and trying to pack as many people as possible into each airplane. The end result, which we are only now starting to see, is a basic product that is almost unusable unless you are willing to pay for additional services. As long as customers continue to make their purchase decisions based on the lowest base fare – the one they will find on any of the various travel web sites – it will not be possible for any airline to survive unless it offers the lowest possible fares, regardless of their actual value…

Personally, I have never had a problem with paying for value received, and that certainly holds true for air travel. If a given airline would offer several tiers of service, or even just ala carte pricing for extras like extra leg room, good-quality in-flight food, or clean places to wait for an airplane to arrive, I’d probably purchase them. But it seems clear that any carrier that does not emphasize having the lowest possible price is likely to lose out to their competition – which will not benefit the company, their stockholders, their employees, or you…

So let me ask you: do the airlines have any responsibility to offer ANY specific services as part of your ticket price? Or, to put it another way, if you were required to pay money for a checked bag when you weren’t checking a bag (which is all a higher price without a baggage fee really is), would you be okay with subsidizing all of the people who did check a bag? Would you prefer a higher basic fare that included all of the old services, or would you be more inclined to do business under the current model, where all you get is basic conveyance, and you can purchase anything else if you want to? If the airlines aren’t just attempting to screw more money out of their passengers (and a lot of them have gone under in the last 10 years; it’s not like they’re sitting around counting their excess profits, the way the oil companies have been), is there really anything wrong with them offering all of their services ala carte?

It’s worth thinking about…

Can’t Fight City Hall

We’ve all had the experience of having an error get into a computer record somewhere and having to go through years of bureaucratic nonsense in a (futile) effort to get it corrected; some of these problems will actually outlive the person whose records were corrupted and remain an annoyance to their family for years following their demise. The problem in these cases is that you’re not actually dealing with people; the entity involved is a bureaucracy, and bureaucracies are extremely dim creatures. Once they get an idea into their heads there’s just no shifting it – sheep have a better time coping with abstract concepts like “your data-entry people hit the wrong key” than most bureaucrats do. In the long run it is sometimes easier to just close your account and start over, abandon the property you’re trying to claim, or move away and leave no forwarding address then attempt to resolve the mistake. Unfortunately, in a case that hit the news sites this week, none of these things have persuaded a national retailer to stop attempting to sell things to a customer who passed away four years ago…

All of this would merely be a modestly annoying side story, except for two factors. First, as reported by the local television news, the customer in question was a two-year-old girl, and the company in questions (Toys “R” Us) will not stop sending birthday cards and pre-recorded phone messages to her mother, despite the fact that the mother has repeatedly called, written to and even visited the company trying to get them to stop this. Her most recent attempt involved a shouting match with the manager of her local Toys “R” Us store that almost resulted in her arrest – or that of the store manager; the responding officers couldn’t believe this crap any more than you can. Second, the company is actually spending extra advertising money on these activities that are ruining their reputation and making them look like idiots in front of the entire world on the Internet…

Most of these cases involve routine activities that are a regular part of whatever the applicable bureaucracy does in the first place, and those functions are made to be difficult to stop or discontinue for a reason. In the case of the Bank of America customer who continued to be charged account fees for months after she passed away, it’s really not in the Bank’s interest to make it easy for someone to be taken off the billing list; the handling of that case hit the news (and this blog) because of the persistent incompetence in dealing with the situation, not the fact that it had happened. But in this case, Toys “R” Us is actually paying extra money to harass this poor woman and undermine their own public reputation; it’s not just that they aren’t correcting a mistake, they’re actually making new ones…

Now, admittedly one set of “Birthday Club” cards and messages doesn’t cost that much; we’re talking probably 23 cents for the postage and another penny or two for the materials (and the phone lines), but you have to wonder how many more of these things are being wasted. If the company’s mailing lists are that sloppy, there’s a non-zero chance that some of these cards and messages are being sent to people who are no longer part of the demographic the company wants to reach – and that sort of thing adds up after a while. More to the point, perhaps, while a single successful Birthday Club mailer (e.g., one that results in a sale) will make up for many failed ones, if the public relations fallout from this fiasco results in a single person deciding not to purchase something at Toys “R” Us, it will have defeated the benefits of dozens or hundreds of these mailers. If the PR damage spreads widely enough, this one mailer could undermine the effects of the entire program…

I’m not saying the company should abandon the program, of course, but if I was one of the stockholders, I’d really want to see management review how those mailing lists are being maintained – and the procedures in place for correcting them…

The Sound of Opportunity

There’s a moment in the classic comedy “My Blue Heaven” where Steve Martin’s crew of thieves has just discovered that the truck they thought was full of valuable merchandise contains nothing but empty five-gallon water bottles, and most of the crew is looking dejected. Martin’s character tells them that they’re not looking at things correctly; this isn’t a bust, it’s an opportunity. He then uses the empty bottles to set up what at first appears to be a simple “fake charity” scam (using the empty bottles to solicit donations for a non-existent fund to build a new Little League facility) but which eventually grows into a very sophisticated municipal scam that actually does produce a new baseball facility for the town – while providing huge amounts of rake-off funds and sinecure jobs for the criminals, of course. At which point it’s really hard to say if this is actually a criminal enterprise any longer; it’s certainly nowhere near as unethical as the no-bid contracts for Halliburton in Iraq, for example…

My point here is that no matter how unpleasant the situation happens to be, simply looking at it and bemoaning the misfortunes involved is both bad strategy and also bad business strategy. You already know that it makes more sense to respond by attempting to find a solution for the problem; what I’m driving at here is that it’s usually also more lucrative to do so. A good case in point is the adoption of the oil separation machines being produced by Kevin Costner’s Ocean Therapy Solutions to deal with the Gulf oil spill disaster. You can pick up the ABC News Story about it if you want to, but basically the things are highly-advanced centrifuge machines that can separate about 2,000 barrels of oil from seawater per day, depending on the concentrations involved. This may not sound like much, given that there are somewhere on the order of 30,000 barrels being leaked each day, but apparently these devices aren’t that difficult (or expensive) to build; if you had enough of them you might be able to keep ahead of the spill…

This is not intended to downplay the seriousness of the situation, of course. Left untreated, the Deepwater disaster has the potential to destroy the entire Gulf ecosystem; if enough oil gets into the currents and spreads into other parts of the world there is a non-zero chance that the resulting cascade effects could destroy all life on this planet. It’s an unlikely place to find a simple business lesson, but that’s why I’m calling it to your attention, of course. Mr. Costner didn’t invent the technology, he just purchased the patent for it and set up the company that has developed the present applications after seeing footage of the Exxon Valdez fiasco on the news. And there’s no guarantee that the United States or any other national or local government will respond to this situation by purchasing enough of these devices to defend its coastline, let alone that any other oil company will catch on to the enormous public relations and legal defense potential of these machines (you can use them to lower your legal exposure to damages from an environmental catastrophe AND improve your public image AT THE SAME TIME) and invest in a whole bunch of them…

But if even a small fraction of the people who ought to invest in this technology actually do, Ocean Therapy Solutions and Mr. Costner are going to end up being embarrassingly rich – which leads me to ask you if there are any problems going on in or around your company that might have lucrative solutions if you look at them the right way. Maybe you should go and look…

Tourists in Space

Many years ago, the late Science Fiction author Arthur C. Clarke wrote that he intended to go to the Moon just a soon as the passenger service started up. A scientist and engineer himself (he invented the communications satellite in 1946, more than a decade before the first artificial satellite was launched), Clarke probably knew that he likely wouldn’t live to see such an event, but given that only 32 years passed between the Wright Brothers first flight and that of the DC-3, we can certainly understand why he thought a similar interval might pass between the first manned space flight and regular commercial service – and Clarke was alive and well in April and May of 1993, thirty-two years after Yuri Gagarin and Alan Shepard, respectively, became the first men in space…

For all of the fanciful drawing of space shuttles painted to look like airliners and movies with spaceships in Pan Am colors, the commercial exploitation of space travel has so far been limited to communications satellites and similar machines; nearly fifty years after the first manned space flights the only private citizens in space have been a handful of people who have convinced one space agency or another to sell them a seat and a single “Virgin Galactic” suborbital space plane. If the commercial use of space is ever going to include passengers, there will need to be cheaper and more reliable ways of reaching (and leaving) orbit, and places to go/things to do once you get there. There’s a company in Nevada that may be about to change all of that, however…

You can find the New York Times story here, if you want to; there was also a profile on this company in the Smithsonian’s Air & Space Magazine a few issues back. The idea of an inflatable space station may sound a little outlandish, but the technology was actually developed over 50 years ago, and a number of test projects have worked quite well in practice. It probably sounds a bit less crazy when you consider that the inflatable structures in question have metallic and foam skins, and remember that in zero-gravity there is no stress on the structure. More to the point, perhaps, is the fact that these relatively simple and inexpensive structures have the potential to house six times the number of residents currently supported by the International Space Station – and that’s just the pilot project…

Of course, we still have the issue of inexpensive lift to orbit – which so far remains science fiction. And even if we can get that detail covered, tourism isn’t going to be enough to sustain a commercial presence in space (there are only so many hyper-rich adventure tourists to go around). But if the scientific and manufacturing possibilities of orbital workshops have even a tenth of the potential that people have been writing about for the past fifty years, it’s just possible that people might start putting laboratories and factories in the sky, assuming it was economically feasible to do so – and that would necessitate passenger service at least as far as the orbital Economic Development zone…

When I was a child, the idea that average people would one day venture into space on vacation was science fiction; even though there were manned space flights, “sensible” people knew it would be another thousand years before such things happened, if they were possible at all. But then, when my grandfather was a child, they said the same things about the flying machines launched at Kittyhawk the year before he was born, and those seem to have worked out okay. I’m not sure if we’ll live to see Virgin Galactic flights scheduled to an orbital complex of commercial hotels and resorts – or if I’ll be able to afford a ticket if they do. But if these news stories are correct, I’d suggest that everyone be really careful before you decide what’s possible and what’s not…

That Just Leaves Taxes…

On today’s edition of “Race to the Bottom” we explore another new low in the field of customer service achievements, with the case of a company for whom death isn’t enough to get out of paying your service fees. In fact, according to the story as presented by the local television news, death, two death certificates, a written request and statements by the executor of the estate and the beneficiary of the will were not enough to get out of paying your account maintenance fees. Which would probably be a little easier to understand if the bank account in question had more than just $40 in it to begin with…

In what I have to consider a truly exceptional example of bureaucracy run amok, a woman in Virginia who was trying to close her late mother-in-law’s checking account at Bank of America had to produce a death certificate for her mother-in-law, then that of her father-in-law who had passed away 15 years earlier; she was also required to bring in the executor of the estate to confirm the situation. After all of that, the company still refused to close the account and issued a bill for another “account maintenance fee,” then claimed to have never seen any of the relevant paperwork and demanded it be faxed to them…

It wasn’t until the local television station I linked above got the story and started telling everyone in their broadcast area (and everyone in the world over the Internet) that the company finally promised to resolve the matter and repay the account fees it had been charging. If that sounds to you like a case of closing the barn door after the horse has already run off, you’re not alone in that…

Now, clearly there was no one at B of A rubbing their hands together and cackling with glee at the prospect of raking in $40 dollars of extra profits from this account; it’s just a case of the company screwing up a routine function somewhere in their infrastructure and failing to complete the operation as they were supposed to. Given that they process thousands (if not millions) of similar account changes each day, it’s not that shocking that the occasional one falls through the cracks, or that the company is not particularly concerned by it. What is remarkable about this situation is the amount of money involved versus how much this foul-up is likely to cost…

If B of A charges just $7 a month for small checking accounts (and they often charge more than that), then the loss of a single account for six months (or six accounts for one month) will cost them more than they could have made on this situation if they had been in the right in the first place. They had no prospect of getting more money from the customer (since she’s dead) or from her estate, and the very real chance of alienating the family and anyone else who saw this story online, but this risk wasn’t enough to warrant making any special effort to resolve the situation before it go spread all over the world…

The truth is, the amount involved really isn’t enough to inspire the company to any special effort, and losing $7 (or even $40) will not ever draw the company’s attention. But if a few million people see this story (which they have), and even one percent of them decide not to do business with B of A as a consequence (which they might), then this could easily go from losing $7 to losing $140,000 per month – rather a lot for failing to fix what was probably just a clerical or routing error…

Not What You Would Expect

By now you’ve probably seen the story on your local news about McDonald’s recalling the glasses that were part of their latest movie tie-in, and you probably yawned – unless your kids were drinking out of a set, in which case you probably ran straight out to the restaurant and/or the poison control center to do something about the situation. For most of us, though, it’s just another case of a cheap imported product that turned out to not meet U.S. safety laws, and apparently not even a very serious case – the last set of children’s jewelry recalls had much higher concentrations of heavy metals involved. What makes this case interesting is the long-term implications – and the fact that, up until now, McDonald’s has always been able to avoid this sort of fiasco…

The story has been all over the Internet, but here’s an iteration of the Associated Press version of the story by way of the Houston Chronicle website. If you read down past the fear-mongering headlines and consider the facts of the case, it becomes clear that the McDonald’s promotional glasses don’t even violate U.S. safety standards; the recall is voluntary, and the company is well within compliance of all Federal laws. In fact, the only potential danger from these items is long-term low-level exposure, if the pigments eventually break down and the user gets some on his or her skin and then puts it in his or her mouth. But no one wants to have to deal with such things, and McDonald’s has very sensibly issued a voluntary recall. This does not take into account all of the similar promotional items given away or sold over the past 30 years or so, however…

If the risks with this item are actually significant, then the real problem isn’t glasses which were issued just a few weeks ago – which won’t be dangerous for years or decades to come – but the ones sold decades ago. There don’t appear to have been any reported cases of heavy metal poisoning that would align with such products, but the risks of cadmium exposure were less well understood back in the 1970s and 1980s, and it’s theoretically possible that there have been some such effects. Anyone still using the old decorated glass wear should probably consider retiring it, and you’ll have to stay tuned for whatever legal, medical or social consequences result, since so far nothing seems to have happened. But what’s even more surprising is that McDonald’s is in this situation in the first place…

Since the introduction of the Happy Meal in 1979, McDonald’s has been selling small, cheap trinkets along with the occasional larger tie-in merchandising item, and they’ve been importing these toys since at least the early 1990s. In all of that time the company has never had a product recall situation like this one; apart from the occasional product safety issue where some child got hold of an age-inappropriate item, the program has been relatively free of bugs. You have to wonder if there have been personnel changes at corporate headquarters, or if they’re using different business partners overseas, or what, but this is not the sort of error you would have expected to see the company make – not least of all because of the importance of trust in the food service industry…

If people start to believe that your company is being careless with heavy metals and toxins, it won’t take much to get them to start believing that you’re also being careless with other factors that could damage their health, or even that some other brand might be slightly less hazardous. It’s a trust-oriented business, and McDonald’s has always stayed well ahead of that curve, featuring product safety and food purity long before those concepts became popular in the industry. Of course, the voluntary recall should go a long way towards saving the situation, and I’d be willing to bet that it will be a few years before the company tries selling any other tie-in products that go in your mouth. We’ll just have to wait and see what long-term impact, if any, this has on their performance…

The Ethics of Helicopters

Despite the title, this post isn’t about the ethics of privately-owned rotary-wing aircraft; the helicopters I want to talk about are people – the over-involved parents who are sometimes referred to as “helicopter parents” by the media. Everyone who works in Education has heard the stories: parents who call to complain that their children are not getting higher grades, lower workloads, better opportunities, superior working conditions, or whatever seems to be in vogue this week. When the children are five or six years old this sort of thing is merely annoying; by the end of high school it’s just pathetic, and when it goes on in college there are actual laws that prevent administrators or instructors from telling the parent anything in the first place. Apart from the obvious waste of time and considerable annoyance this creates for people in our field, there’s a very real concern that children who grow up this way have no concept of self-reliance and will deal with any problem by sitting down and waiting for their parents to show up and save them. But that’s not even the worst of it…

A couple of stories in the last month or so have told the story of parent calling their children’s boss to complain about job offers and try to negotiate a higher salary and/or benefits. One of these cases was a new Ph.D. graduate whose mother did not think the salary her new university was offering was high enough. I could offer several opinions about this syndrome, but they’d all constitute social or political commentary, and this is a business blog. The question I’d like to pose to anyone who has tuned in this week is what should YOU do, as a hiring manager, if you make an offer to a new applicant and shortly thereafter get a call from his or her parent asking if there is any way you can offer more money?

If you’re offended by this sort of behavior there would be a real temptation to rescind the job offer and go to your next most favored candidate, but this may not actually be fair to the employee. It’s always possible that the parent is acting without the employee’s approval or permission, and they really don’t know anything about it; it’s also possible that the employee has no idea that this isn’t the way things are done in your industry, or in business in general. You might be willing to salvage the situation, assuming you’re willing to make the effort and assuming the employee is valuable enough to be worth such an effort. You could make a condition of continued employment that you never get another call from the employee’s parents; you could even put that into an employment contract if you’re using one…

On the other hand, there’s a real chance that you will be getting more telephone calls like this – every time the employee in question gets a raise (because it wasn’t big enough), a promotion (the new salary isn’t high enough), a change in office or assignment (because it isn’t prestigious enough), an annual review (because it wasn’t positive enough), or just at random because the parent feels their child hasn’t had a raise, bonus or promotion recently enough. There’s also a chance that the employee will not be able to learn to make their own decisions on the job, which could be a real problem in certain professions, including management. Or, for that matter, that when you fire the employee because his or her parent keeps calling to complain after you already said that was a termination offense, that the parents will spring for attorneys and sue the company…

So how do you deal with this situation? Do you punish your applicant for the behavior of his or her parents and give a potentially valuable resource to your competition, or do you take preemptive measures to prevent the company from suffering from future depredations of helicopters?

It’s worth thinking about…

Spin Control Part II

In my last post, we considered the curious case of BP CEO Tony Hayward, and some of his incautious remarks to the press during the ongoing disaster in the Gulf of Mexico. It’s tempting to dismiss such things as being the understandable result of a man under stress, trying to lead a company in crisis while being pestered by news media who have no more idea of what’s going on than he does. Unfortunately, the story isn’t a much of an isolated case as we might hope, as demonstrated by the reaction of AT&T to a customer emailing their CEO the other day…

I picked up the story off of the Engadget technology website, but you can find it in a few other places online if you want to. The basic idea is that an AT&T customer had some technical and business operations questions about the company, so he sent them to the CEO’s email address. After sending his second email, he got a polite but firm call from the company, advising him that if he didn’t stop emailing the CEO, AT&T was going to initiate legal action against him…

To me, the wildest part of the entire story, and the question that really needs to be answered here, is why anyone at the company cares in the first place. Blocking all messages received from this inquisitive fellow’s email, or just setting up a filter to deleted unauthorized emails from the CEO’s account, is so simple that even a graduate student like me can do it; alternately, the CEO could just delete the messages, unopened, each morning when he gets in. But I think we are also justified in asking why the CEO of a company that size is reading, let alone responding to, random emails from the public in the first place. I routinely delete messages from unknown senders; granted that most of them are only trying to interest me in lucrative job opportunities where I send them $800 and they run away and never speak to me again, but if I can handle the pressure, it’s hard to imagine while a guy with a seven-figure salary can’t…

Now, it is entirely possible that AT&T just does not care about this situation. With BP taking up most of the business news, and most of the attention on portable wireless devices focused on the iPad and iPhone (and their various knockoffs) these days, the company may figure that any adverse PR generated by this action isn’t going to draw the attention of anyone more important than a few grumpy bloggers. They may even be justifying these actions, saying that the CEO’s time is too important to spend dealing with random emails, or that these unwelcome public intrusions are harshing his mellow, or whatever. I’m going to respond by pointing out that no one in that industry has an especially good reputation, and while AT&T isn’t the worst, they don’t need any more people deciding to bail on them and go to another carrier. And if they lose their exclusive contract with Apple to support the iPhone, they’re really going to regret these image issues…

In many ways, this sort of random public relations gaff is really a violation of the First Law of Business. AT&T may not realize that it is, in effect, telling a paying customer to go away and not bother them, but that doesn’t make this any less asinine a thing to tell someone who wants to give you more money every month. It anything, I’d have to say it makes it worse. And while I’m not currently an AT&T stockholder, if I was, I’d be asking some very serious questions about what senior management thinks it’s doing with my money…

Spin Control?

I spend a lot of time in this space ragging on companies for their poor customer service, and talking about how the lowest-status and lowest-paid members of the organization are holding not on individual transactions but your company’s entire reputation in their hands whenever they take a customer service call. And I probably will do so again, tomorrow or next week, since it’s a staple of the less-than-stellar management practices that this blog was created to discuss. But today I think we should acknowledge that sometimes the reverse problem exists; sometimes the company’s image ends up getting tarnished by its most power and best-compensated employee, either through arrogance, rage, oblivious and tone-deaf disregard for the conditions of the moment, or simple stupidity. And in all of these categories, it’s going to be hard to top what Tony Hayward of BP has been saying lately…

You’ve probably already heard or seen some of it on your local news, but you can check out the Newsweek story online if you want to. Some of it has been completely understandable, if inappropriate to the situation, such as saying “I want my life back” on the Today Show. In all fairness, if any one of us suddenly found ourselves the CEO of the most hated company in the country (possibly the world) we’d probably want our original life back, too – or at least enough anonymity to be able to walk around without being identified all the time. Similarly, suggesting that there might be additional causes for the nine clean-up workers who fell ill isn’t unreasonable. If thousands of people working with identical materials in identical conditions all feel fine, but nine members of the same crew are ill, it might in fact have been something those individuals ate. Both cases were so completely tone-deaf that it’s hard to imagine what Mr. Hayward thought he was doing, however…

Then there’s the business with claiming that the miles-long plumes of oil detected in the water nearby don’t actually exist, or that the Gulf of Mexico is a “big ocean” relative to the oil and oil dispersing agents being poured into it. Even if these contentions were true, Mr. Hayward would still be coming off as a guy with a business degree telling a bunch of science experts they’re wrong (e.g., arrogant and oblivious). Unfortunately, these statements aren’t true, and have only served to enflame public opinion against him and his company. But worst of all is probably asking “What have we done to deserve this?” when your company has been hit with 760 safety violations in the last three years, or more than 70 times more of them than the next-worst company in your industry…

Now, admittedly, Mr. Hayward is a manager, not a professional spin doctor. Most likely he relies on experienced PR specialists to write and deliver statements for the company, and reads from prepared remarks when forced to give a public statement. But unfortunately, that also means that he really has no excuse for making ill-considered remarks to the public. Any professional manager already knows that corporate image is important, especially with a commodity product like gasoline or in a widely-reviled industry like the petroleum business. During a disaster like this, there’s really no excuse to be going around making embarrassing remarks, unless you want to be compared to a former U.S. Vice President with Tourette Syndrome…

I’m not sure how BP is going to repair its corporate image, assuming that’s even possible, and assuming that the disaster going on in the Gulf of Mexico doesn’t poison the Earth’s biosphere and make all of these discussions irrelevant. But I know a few things about strategy, and it seems to me that their spin control strategy in this case is sub-optimal…

Gaining on You

In my ongoing effort to bring you occasional snarky comments on the Race to the Bottom in American Commerce, I ran across a story that represents a new low in the field of debt collection, an industry whose standards are none too high to begin with. Sometimes I think I should start up a blog specifically for the purpose of documenting these brain cramps, but let’s face it, I don’t have enough time to write this blog, let alone start another one. As much fun as it would be to write a blog called “Race to the Bottom” I’m not sure anyone would read it, and it’s a near certainty that the people who actually need to consider these issues wouldn’t. That said, there’s a fine line between “bad customer service” and “making terroristic threats” and the collections representative in this story seems to have pole-vaulted over it…

According to the story in the Santa Fe Reporter (man, how I love news aggregation sites!), a man in Las Cruces, New Mexico was getting harassing calls about a defaulted Verizon cell phone account, lost patience with the collections people, and hung up. He reports that the collections rep called him right back, said they knew where he lived, and threatened to blow up his house if he didn’t make good on the debt. This would have been upsetting enough by itself, but such conduct violates Federal collections law, as well as assault laws and possibly RICO. There’s also the fact that, according to the court documents, it wasn’t even his cell phone – the account belonged to a relative…

Now, I know as well as anybody that you can’t believe everything you read in the paper – or see on the Internet. But if the plaintiff in our story is making this up he’s just committed perjury by filing the court case (and swearing to these allegations in writing), which is a heck of a long way to go just to prank (or scam) a giant corporation that won’t be threatened by this action even if he does win. More to the point, perhaps, there is an excellent chance that Verizon itself isn’t behind this – most likely they sold the debt to some other financial institution, just the way banks sell car loans to GMAC and so on. Whoever bought the account then turned it over to the cheapest collections agency they could find, on the principle that if you buy debt for a few cents on the dollar and collect even ten percent of it you can make a huge profit. In fact, I’d be willing to bet cash that no one at Verizon even knew this was going on until the news story hit. But that’s exactly why I’m calling the story to your attention…

Anyone who reads this blog on a regular basis (assuming anyone does) has already heard me going on about how customer service is your first and sometimes only point of contact with the customer – and your lowest paid, least well trained personnel are therefore holding your entire relationship in their unmotivated hands whenever they pick up the phone. In Verizon’s case, the collections agents working for whoever they sold their debt accounts to have no reason to worry how they make the company look; any legal action will be directed back at Verizon, not at the collections agency or even the purchasing institution. Verizon may be insulated from the legal ramifications – although that’s not a guarantee; it depends on the nature of the sale agreement – but even if they are, it’s another bit of bad press for a company that doesn’t need any more of it…

So to all of the companies we’ve occasionally made fun of in this space for their laughably poor customer service and PR, and especially the ones who are screwing themselves without ever realizing, I can honestly say, you’d best think up some new forms of idiocy – because Verizon is gaining on you…