[Image by Gerd Altman under Creative Commons]
"Sticks in a bundle are unbreakable" - Bondei saying
In the previous century, access to capital and natural resources, and ownership of means of production were the key factors for success. Not so in the 21st century.
Today, companies gain competitive advantage through their employees, who possess skills and knowledge and deploy them to help their companies gain enduring competitive advantage.
But treating employees as the source of competitive advantage involves a tectonic shift in corporate mindset.
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Episode 16: New Rules of Business
A widely held corporate view is that the customer is god. And god can do no wrong. In the new way of thinking, god seems to have changed avatar. Today, it is felt that employees should be treated as equals of, if not better than, customers.
The basis for this critical shift in outlook is the inference that if employees are happy, they will make customers happy. When customers are happy, they will come back with repeat business and finally become brand advocates.
Take this simple test. You are booking a hotel for a well-deserved family vacation. You have two options:
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Hotel A treats its customers like gods. It caters to each and every whim, even if it means mistreating its employees.
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Hotel B respects its employees. It pampers them, who, in turn, take good care of its customers.
Which one would you prefer? Chances are you will find staying in Hotel B more pleasurable.
Let me share with you the philosophy of Herbert "Herb" Kelleher, the Southwest Airlines chairman emeritus: put your employees first and if you take care of them, they will take good care of your customers and then your customers will come back, and your shareholders will like that, so it’s really a unity.
Walking the talk has resulted in Southwest Airlines recording 40 consecutive years of profit in an industry plagued by bankruptcy.
Ritz-Carlton proudly proclaims, "We are ladies and gentlemen serving ladies and gentlemen." Because the luxe hotel chain treats its employees as "ladies and gentlemen", they behave like one and, in turn, treat their guests like ladies and gentlemen, providing them with genuine care and comfort. This experience is consistently delivered and transforms its guests into brand advocates, bestowing Ritz-Carlton with an enviable competitive advantage in the cut-throat competitive world of the hospitality industry.
Ritz-Carlton's guests, consistently exposed to its legendary service over time, transform into brand advocates. They speak well about the brand and the positive buzz generated is free advertising for the brand.
When employees are happy, they too, like brand advocates, transform into "employee advocates" and create a buzz about their company. At Ritz-Carlton, employees are advised to be ambassadors of the hotel, both in and outside the workplace and always speak positively. This too creates buzz for Ritz-Carlton.
Starbucks chief executive Howard Schultz rightly believes partner (employee, in Starbucks lexicon) satisfaction leads to customer satisfaction. He puts the money behind this strategy. Starbucks provides a generous health insurance policy and stock options to even entry-level partners. No wonder partner satisfaction rate hovers in the 80-90% range, well above the industry average.
The business lesson gleaming through this brief conversation is simple. Shift your focus from customers to your employees, make them feel special and empower and engage them. They, in turn, will look after your business and bestow it with competitive advantage. Result: sustained profitable business growth.
Of course, it goes without saying that treating employees better than customers does not mean mistreating your customers. They are the ones providing you with business. The only change in your business policy should be: treat employees as first among equals.
At times, ugly situations may arise. What if some customers misbehave with your employees? Simple, show them the door. You will lose their business, but you will gain the goodwill and loyalty of your employees who will work with redoubled effort and turn into passionate employee advocates. Moreover, when you make an example of a rude customer by putting them in their place, other customers will not risk crossing the line.
Does any profitable company follow such an aggressive strategy?
Zappos does. If a customer is rude to its employees, the company, a successful online business that is part of Amazon.com, fires them.
In an article in Harvard Business Review (July – August 2010), Zappos chief executive Tony Hsieh shared 'Seven Ways to Achieve Exceptional Customer Service’. The third point clearly states: "Fire customers who are insatiable or abuse your employees."
This may sound counter-productive in the short term, but don't underestimate the strong emotional bond that grows between the employees and the company. When staffers know they have the company’s backing, they will go the extra mile to ensure that the company prospers, and protect its assets and reputation. These feelings are reflected in higher attendance rate, lower attrition rate, and increased productivity and creativity. All this leads to higher customer satisfaction scores, a source of competitive advantage for a business.
Once you have started treating your employee as first among equals, what should be the strategy to increase their performance levels? Develop and implement systems and processes for a 'network of commitment' among the employees.
Like the African saying goes, "If you want to go fast, go alone. If you want to go far, go together."
A good example is Domino's Pizza, which promises to deliver "hot and fresh" pizza in 30 minutes to your doorstep. The company has created processes where employees work in unison as part of a large team to deliver the company's promise. Every time.
From the time an order is received, everybody in the system knows "hot and fresh" pizza has to be delivered at the customer’s residence within 30 minutes. Hence, every member--from the chef to the person packing it, the person making the invoice and the person delivering it - assists the other in a symbiotic relationship to deliver on their company's promise. They are so confident that the system will deliver that they self-penalise themselves if the delivery takes more than 30 minutes.
Here also, Domino's has empowered its employees to take appropriate decisions on the spot in the unlikely event the penalty has to be paid.
Bottom line: Employees should be treated equal to, if not better than, customers. A company should foster a network of commitment where every employee knows their role in the ecosystem and must coordinate their collective action to help the company deliver on the promises it makes to its customers.
If you have any questions mail us at askrajesh@foundingfuel.com
