Thai Head Hunter- Edwin Sim- Human Capital Alliance

“Satisfying Customers–Key to Sustainability”

2012-01-24T13:40:00.022+07:00

Comments to "Satisfying Customers-Key to Sustainability"

The comments have been separated into three sections: customer satisfaction, processes implemented to optimize shareholder value and coping with financial markets and shareholders demands.

Customers:

(1) The article's core thesis is what I personally subscribe to.

However, I have seen companies struggle with defining customer centric strategies.

Amazon is one of my favorite examples of putting customers first.

They seem to be putting most of their marketing efforts in strengthening their customer relations and then relying on word of mouth.

(2) If our customers are satisfied we retain business and are able to negotiate/talk with them about price, problems, service blips etc.

I have great trepidation when I hear our people want to get rid of loyal customers that have been with us for many years.

Some people think we can achieve better margins from new customers so they suggest we get rid of older less profitable customers. We often forget about the risks associated with retaining the new customers versus the loyal long-time lower-margin customers.

(3) The key to everything is employee engagement

How long a customer stays with us is highly dependent on how the team on the ground provides customer satisfaction.

The key is engaging the team. If team is fully engaged, the business will be sustainable.

The leaders of the business at all levels are critical to the success of the business. They must convey the right message at all times.

Just focusing on shareholder value without a heart for our staff and our clients will not work.

(4) We are in business in providing services and helping our clients achieve their overall objectives and if we are successful, our customers reward us with good returns.

Processes implemented to optimize shareholder value

(1) At one stage our company aggressively drove revenues and growth.

We successfully achieved many financial goals and our Customer Satisfaction Index and Employee Satisfaction Index numbers were great.

However, over time in the drive for growth, our margins deteriorated.

At the same, our competition began lowering prices and in our drive to remain competitive, our profits deteriorated, we suffered high staff turnover and our customers satisfaction indices began falling.

We learned our lesson.

(2) Our number one goal is focusing on staff competency.

We implemented processes such as Standard Operating Procedures, (SOP), DWC, checklists etc to ensure that we deliver the best in class products & quality services

We also want our staff to be creative so that they can help us keep up with customer demand and changing lifestyles.

(3) We developed pro-active strategies to retain key employees.

While we don’t have the highest market share, we have increased customer loyalty and higher business volume per account.

(4) Customers are viewed as long-term business partners who are happy to pay higher prices in return for higher services quality and standards.

(5) Maximizing shareholder value is only one element of a sustainability model.

Many elements are required for a successful business including: people and organization development, HSSE (Health Safety Security Environment) sustainability, customer satisfaction, competiveness, government and compliance, etc.

Coping with financial analysts, markets and shareholders

(1) Sad part is most financial analysts and media rate companies that make the most money as the best companies.

(2) Article echoes my own sentiments.

I took a company through an initial public offering but I would not do it again because a public company structure just doesn’t allow us to make the right long-term choices, especially because of quarterly shareholder pressure to deliver the numbers.

(3) Shareholder value still should be the main objective.

The problems arise when we begin equating shareholder value with short term stock prices.

In any business, long-term shareholder value is built by balancing between current profit and investment for the future.

Keeping customers happy and other best practices are all investments for the future.

(4) If markets are perfectly efficient and information symmetric, stock prices at any time should reflect the long-term value taking into account all company investments.

However, the market is not perfect.

Therefore, we must still maximize long-term shareholder value, and not only the next quarter’s share price.

(5) Even if maximizing shareholder value often results in short-term thinking, it’s still what many shareholders demand.

(6) Managers are paid to achieve targets given by the real bosses, the shareholders.

If they don’t want to achieve these targets, they should resign and play golf.

Best regards, Edwin Sim.

Edwin Sim may be reached via edwinsim@humancapitalalliance.com

___________________________________________________

Satisfying Customers-Key to Sustainability
Edwin Sim, Managing Director-Human Capital Alliance
Posted 9 January 2012

One of our most frequent discussions with clients is how they try to build sustainable businesses.

Initially in Thailand, many family businesses struggle with making the move to hire professional managers to help scale their businesses.

Once they decide to hire professional managers, they’re then faced with determining how performances can best be monitored and evaluated. Most importantly they must ensure the business grows sustainably over the long-term.

For more than three decades, many executives including Jack Welch of General Electric made “maximizing shareholder value” a top priority.

Welch was known for relentlessly pushing managers to become more productive and efficient. Companies that could not become number one or two in their industry would be sold off or abandoned.

As more and more CEOs across the country accepted Welch’s strategy, maximizing shareholder value became known more for slashing inventories, reducing costs and ruthlessly lowering employee head counts to hit profit targets.

GE’s Jack Welch and Coca Cola’s Roberto Goizueta were two poster boy CEOS that exemplified why “maximizing shareholder value” was the most effective way to run a business.

Welch transformed GE from a $US13 billion dollar market cap in 1981 to $US484 billion at his retirement in 2001. To keep increasing shareholder value, Welch pushed GE to achieve higher and higher growth.

Near the end of Welch’s illustrious career, GE’s biggest engine of growth, GE Capital accounted for about half of GE’s earnings. However, by 2009, GE was forced to take massive write-offs at GE Capital and saw its market cap drop as low as $75 billion.

In a 2010 Harvard Business Review article, “The Age of Customer Capitalism, Roger Martin said that “while the $471 billion increase in shareholder value that Welch oversaw seemed wonderful at the time of his retirement, particularly to shareholders selling out at the top, it is questionable how much shareholders benefited in the long term.”

Later on in 2009, in a Financial Times interview Welch said that “shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy... your main constituencies are your employees, your customers and your products.”

In his Harvard Business Review article, Martin, who is Dean of the University of Toronto’s Rotman School of Management questions whether maximizing shareholder value is really the overall key to building sustainable businesses.

“For three decades, executives have made maximizing shareholder value their top priority. But evidence suggests that shareholders actually do better when firms put the customer first.”

Martin said it was time to discard the popular belief that corporations must focus first and foremost on maximizing shareholder value. “The idea is inherently and tragically flawed.”

According to Martin, it’s impossible to continually increase shareholder value because stock prices are driven by shareholders’ expectations about the future, which cannot be raised indefinitely. He added that the data shows that focusing on shareholder value hasn’t done shareholders any favors. They have actually earned lower returns since corporation adopted it as their guiding principal.

Martin’s studies showed that from 1933 to 1976 when “professional management” was in vogue, the S&P 500 earned compound annual returns of 7.6 per cent. “From 1977 to the end of 2008, the S&P 500 did considerably worse with returns of only 5.9 per cent a year when maximizing shareholder was at its zenith.”

A business’s primary purpose, Martin said should be to acquire and keep customers. “To create shareholder value, you should instead aim to maximize customer satisfaction.”

Legendary management guru Peter Drucker also said that the primary purpose of a business is to acquire and keep customers.

Determining what your customers value and focusing on always pleasing them, Martin insists is a better optimization formula.

In promoting what he called the “customer capitalism” age, Martin warned of various constraints. “Companies will quickly go bankrupt if they made customers happier by charging ever lower and lower prices for ever greater value.”

Instead, companies he said should seek to maximize customer satisfaction while ensuring that shareholders earn and acceptable risk-adjust return on their investments.”

Edwin Sim may be reached via edwinsim@humancapitalalliance.com

Common mistakes for executive job-seekers

2011-12-08T16:08:00.000+07:00

Human Capital Alliance’s Vauraporn Iamsupanimitr discusses a recent study led by Harvard Business School associate professor, Boris Groysberg on common mistakes made by executive job-changers.

Senior executives considering new jobs should carefully and consciously assess the risks and realities so that they can avoid making mistakes that may result in major setbacks.

In today’s fast changing business environments, people are expected to change jobs many times before their retirements. Careers have become processes of continuous movements.

Recent US Bureau of Labor Statistics indicate that the average baby-boomer will change jobs 10 times.

In a recent Harvard Business Review article, “Five ways to bungle a job change”, Boris Groysberg and Robin Abrahams said that job moves are seldom easy and nearly always emotionally fraught. “Moves of all kinds entail significant internal and external challenges and often cause turmoil in one’s home and social life.”

After interviewing 400 search consultants from 50 industries and 500 C-level executives in 40 countries, including HR heads at 15 multinational companies, Groysberg and Abrahams concluded that five common mistakes generally accounted for most problems.

In general these included:

1. not doing enough research

2. leaving for money

3. going “from” rather than “to”

4. overestimating yourself, and

5. thinking short term

The researchers said that the mistakes were usually not independent of each other and generally followed predictable patterns and persisted throughout the course of careers.

These mistakes played out as a system of maladaptive behaviors that included dissatisfaction, unrealistic hopes, ill-considered moves, and more dissatisfaction

For instance, executives that fixated on money would often disregard the need for research. “Overestimating yourself can cause you to ignore a bad fit – a problem that research might help you anticipate.”

Some job seekers make all the mistakes at once. For instance, if they overestimated their value, they will feel unjustly treated at year-end reviews. “They will jump to the first company that promises a signing bonus without doing due diligence on the firm’s long-term prospects.”

The executives surveyed were not young untested professionals but included successful people that hadn’t looked for jobs for years or even decades. “Surprisingly, many of them were ignorant of job market opportunities.”

Many of these executives, they said assumed their new companies would be flexible about having them learn new areas of business as when they were young. “If they’re high up on the hierarchy, it may have been some time since they received truly honest feedback about their strength and weaknesses.

Mistake number one – not doing enough research

Many executive job seekers, the authors said neglect due diligence in four areas.

1. If they don’t do homework on job market realities for their industry or function, they will be not fully informed and will be prone to unrealistic expectations.

2. Many executive job-seekers don’t pay enough attention to a potential employer’s financial stability and market position even if they are people that would normally scrutinize the balance sheet of a company they are acquiring.

They assume companies offering them jobs are on solid ground. It is up to applicants to assess if new jobs will exist in six months.

3. Many executives fail to consider the cultural fit.

Although hiring managers are supposed to attend to matching cultural fits, new hires suffer most if it’s a poor fit.

4. Too many recruits assume the official job title and job description accurately reflect the role. Many companies are known to sweeten titles to attract top talent.

Additional, in badly managed organizations, people may find themselves in ill-defined jobs that have little relationship to formal titles.

Mistake number two - leaving for the money

The authors research showed that it was easy to fall for financially attractive offers.

Most search consultants said that although executives contemplating job changes rank money fourth or fifth in terms of importance, they usually bumped it to first place when making the final decision.

Mistake number three – going “from” rather than “to”

Often, many job seekers are so unhappy they are happy just to get out. Instead of planning their career moves, they lurch from one place to the next.

These people the authors said apply artificial urgency rather than wait for the right job and often fail to look strategically for opportunities that their current companies may have for them.

Mistake number four – overestimating themselves

The authors’ survey indicated that many executives believed they contributed more than they actually did at their current organizations. They tended to undervalue the organizations’ strength in helping them achieve their objectives.

Many of these job seekers, they said seem to have unrealistic view of their skills, their prospects and occasionally their culpability. “The often can’t identify sources of success and failure at their existing jobs.”

These candidates looked at their current companies as being the problem and not acknowledging that they themselves may be part of the problems. These people may also fail to be realistic and be self critical, and therefore think that external circumstances and environments have more to do with their frustrations or failures than their own issues.

“They may overestimate the salaries they can command and their capacity to deal with the new positions’ challenges, particularly, the difficulty of creating change at large organizations.

Mistake five – thinking short term

Executive job seekers with short term perspectives can make many mistakes.

For instance, if they overestimate their abilities, they may believe they should be paid a high salary now and not after they’ve proved themselves. Some people leaving organizations for more money are often overly-influenced by immediate short-term information and considerations.

The authors conclude that the best protection against career management mistakes is self awareness, which they said is a broad concept that encompasses not only an understanding of one’s career-relevant strengths and weaknesses but also insights into the kinds of mistakes they you are prone to make

Knowing how to correct tendencies, how others perceive us and when to consult a trusted mentor or network is critical.

If an executive takes a wrong job, the authors said the experts were unanimous in their views” “Cut your losses and move on.”

They suggested that these executives should make their next moves strategically. “Don’t hesitate to go down another road if it becomes evident that a certain kind of change wouldn’t be right.”

Executives, they said should understand what elements of a job make it truly satisfying for them and what constitutes a healthy work-life balance.

Vauraporn Iamsupanimitr may be reached at nuch@humancapitalalliance.com

Satisfying customers: key to sustainability

2011-12-07T11:22:00.002+07:00

One of our most frequent discussions with clients is how they try to build sustainable businesses.