If I Gave You a Million Dollars

You would be… poor

With
apologies to the Barenaked Ladies for a poor parody of their tune, the fact is,
it’s true. Most mega buck lottery winners are worse off less than five years
after winning—they have drug and alcohol problems, they have lost their jobs
and families, they have a bunch of new best friends, all of whom have
can’t-miss business ideas that tank. In entrepreneurship, we say it
differently, ‘Give a person a fishing rod, not a fish.’

A
friend of mine sent me an article on Zappos, a web-based retailer that grew to
more than $1 billion per year in sales in less than ten years, in part, because
of an emphasis on customer service, CS. I can’t believe the number of companies
that believe that CS is a cost centre—it is not. It’s obviously a profit
centre. If you get most of your business as Zappos does from repeat customers
(75% of their volume is from repeat customers!), just imagine how much money
they save by not having to spend precious marketing dollars on replacing
unhappy clients?

They
do things like provide free shipping–both ways. One of the biggest drawbacks of
using web retailers is returning goods. They take the hassle out of returns.
It’s expensive but the results are in… excellent customer service, works.

Tony Hsieh, their CEO, sold
Zappos.com to Amazon for a reported 1 x sales or $1.2 billion. The transaction
completed in November 2009. Tony, then age 36, immediately wrote a book called Delivering
Happiness (2010). The
reader can be forgiven for thinking the book is about how much happiness is
delivered by $1.2 billion in cash and Amazon shares. It’s not about that. It
delivers an exciting, blow by blow description of the building of Zappos, it’s
near death experiences, the need to change its biz model and make significant
mid-course corrections. For a review of the book please see https://www.eqjournal.org/?p=973.

To
drive home the point that CS works, Zappos will pay any new hire $1,000 to quit
after the first month. No questions asked. You can have $1,000 to go away.
Zappos has realized something that almost no one gets these days—your HR is the
number one thing you have going for you. If you have good people, you will be
much more likely to succeed.

Now
$1,000 to get rid of someone who provides lousy CS, who doesn’t buy in to the
idea that the customer is number one and who doesn’t buy in to your corporate
culture is a really cheap way of de-hiring someone. Trust me, it costs a lot
more to fire someone—you have to give them a reasonable period of time to
improve, meanwhile the lousy customer service may continue. You lose orders,
you get bad word of mouth and your brand suffers. One unhappy client tells two
others. You need to give them a warning letter then you must monitor their
performance and meet with them a second and maybe a third time. This takes up a
lot of management time. You need to get your legal staff to prepare a letter of
dismissal. You have to provide them with notice or payment in lieu of notice.
(The latter being infinitely preferable because you don’t want them around for
five more minutes damaging not only your customer relations but poisoning your
staff.)

You may get sued for wrongful dismissal. Then you need to prepare a defence,
present yourself for cross examination for discovery, attend a settlement
conference, go to trial if you can’t settle and, if you win or lose, face a
possible appeal. It’s endless. One thousand bucks to pay someone to go away who
doesn’t want to be there and who doesn’t buy in to your corporate culture is a
bargoon.

Now
what if your Rich Uncle Fred gave you the World Financial Center in NYC
consisting of four towers of eight million square feet in the centre of Battery
Park for free? A heck of a deal, right? Wrong. I would predict that you would
be broke and lose this wonderful portfolio in no time at all.

It
isn’t your buildings that produce revenue for you, it’s your people. If you
don’t have great leasing people, maintenance folks, property managers,
financial controllers, contractors, cleaners, security personnel, managers and
so forth, you won’t manage your portfolio well at all. Pretty soon, tenants
will be giving you notice and you won’t be replacing them and, if you did, you
might get the wrong ones—tenants who don’t pay their rent are worse than no
tenants at all.

Do
you know who pays the operating costs and utilities when your buildings are
empty—you do. Do you have any idea what it costs to pay—realty taxes, cleaning,
garbage removal, security, snow removal, maintenance, heat, gas and
electricity—for a Class A Tower in New York City? It is at least $45 per sq.
ft. per annum; that works out to $360,000,000 per year for the WFC!

Before Uncle Fred gave you those buildings for free, you were happily working
as an advertising executive somewhere earning $100,000 per year. Your annual
salary (if you still have a job) can support an empty WFC portfolio for .101 of
a day or around two and a half hours. You would lose your real estate portfolio
before lunch.

Stick
to what you know. Every business has ‘secret’ levers you pull to make them
work. No business is easy. Even one you get for free.

It’s
great to have a good business model, a few launch clients and customers and
some cashflow, but after you get the business off the ground, your first hire
and every one after that are the most important things you will do. Be like
Google, get the very best people you can.

There is a great book, Blink by Malcolm Gladwell (Little Brown and Company,
2005), that talks about using the power of your unconscious mind (the part of
your brain that forms impressions in the first two seconds of any situation) to
make certain decisions. He also points out how it can work against you.

Gladwell
talks about how hiring for the wind section of a Symphonic Orchestra can be
overwhelmingly influenced by the eyes instead of the ears. He calls this the
‘Warren Harding’ effect.

Warren
Harding is considered the worst President of the US ever (although I suspect
that President George W. Bush will, in the distant future, vie for this role).
But he looked the part—tall, good looking and imposing. And he got elected
despite being patently unsuited, unprepared and unready for the job.

So
in auditions for the wind section, a good looking, tall imposing male has every
advantage over a petite woman. Women were ‘known’ to be unable to play with the
strength, vitality and range of a man. But it turns out that when Maestros were
encouraged to do blind auditions (placing musicians behind screens), women
could, in fact, play as well or better. In less than a generation, women make
up nearly half of US-based orchestras (up from less than 5%).
Walt Disney knew this. He realized that an attractive female could unduly
influence his judgment of the calibre of her voice. He placed all would-be Snow
Whites behind a screen. The result is a magical film that saved Walt’s company
from bankruptcy in 1937.

The
number one thing we look for in our employees is good heartedness. Pretty much
everyone will have the required credentials or they would not be in the
interview in the first place. What we want is people who care about
people—their colleagues, their clients, their suppliers, their families, their
company, their city, their country. These people don’t quit when the going gets
tough. They share information. They are generous with their time.

This
you can probably deduce from the first two seconds after you meet someone, if
you pay attention.

@ProfBruce
@Quantum_Entity