Who is Guiding Your Company: You or Your Most High Maintenance Customers?

The executive team of a client company lamented that it felt they did not have control of their company, feeling that their priorities were dictated by whoever was calling in with the latest (loudest) complaint. Simultaneously, they toiled with the need to create greater profitability.

The team saw these as two independent, insurmountable problems with no clear solutions. HOWEVER, 1.) the problems are linked as they are two sides of a larger issue; 2.) simple steps can be identified and taken to make huge improvements in both areas.

Using the Pareto Principle as a guide, I helped the team understand that: 80% of our success is determined by just 20% of our activity. The same principle can be applied with your organization. Let me explain.

If you have 100 customers, mathematical probability suggests that just 20% of your customers provide approximately 80% of your total income stream. Another 65% provide somewhere between 12-15 % of your revenue. The last 15% of your customers provide 3-5% of your income. Alarmingly, most companies spend up to 80% of their time addressing the clients that provide only 3-5% of its income stream!! Allow me to provide red flags of these high profit drainage customers:

• They want their problem fixed now regardless of organizational priorities.
• They are loyal to no one. These customers threaten to use competitors as soon as there is a problem or if you don’t meet their price. This type of customer’s “loyalty” is based on the transaction only, not the relationship.
• They don’t value value, only price!
• They tend to be abusive. These customers have a tendency to yell, scream, and  disrespect – believing that buying your product gives them the right to expect perfection while treating your staff rudely and abruptly.
• They lack forgiveness, understanding, or empathy. They demand perfect service, at the cheapest cost, immediately, every time.

Would you marry someone who treated you this way? If this kind of customer is consuming much of your day then you are married to them (at work). In our next webinar we will teach you how reduce your stress, create a more enjoyable work environment, and improve your profits by setting appropriate boundaries with these high resource customers. We will teach you how to identify customers who will maximize your success through relationships rather than transactions?

Hint: One salesperson’s profitability increased by three hundred percent by managing his customer base according to the Pareto Principle!!

Sign up today to attend our complimentary webinar on August 18, 2011 at 12:00 CDT ..register here

During check-in at a recent Strategy/Leadership Retreat it became evident that this team was navigating through a HIGH CHANGE ENVIRONMENT. Eighteen months earlier, these individuals were charged with implementing one of the Critical Goals of the Matrix Organization. During our discussion, the team described the “drag” of conflict, fear of uncharted waters, and wasted energy (as high as 40%)in their work environment. Feeling beaten down and “tired of fighting the battle”, they wondered if any progress was being made. As we worked through the issues, we asked the participants to consider the following perspective:

Most organizations experiencing a high change environment are not prepared for, nor do they acknowledge the predictable “change reaction”. Remember Newton’s key principle? “For every action, there will be an EQUAL AND OPPOSITE REACTION.”  Leaders need to ask “How will we deal with the equal and opposite reaction (a predictable occurrence) when we implement change?”

Teams are least prepared, by far, to deal with the resistance that accompanies the process of change.

Teams unprepared for resistance to change will begin to feel beaten, tired and defeated while questioning their initial decisions. They may begin to look externally and point fingers, place blame and waste energy on drama! Fear must be exposed or it will become exponentially worse.

 As a team, we discussed the following concepts:

The true purpose of any NEGATIVE REACTION is to get you to STOP what you are doing! You now know you have the team’s attention. You’re beginning toimpact their environment. KEEP ON GOING!

1. Do not personalize it. IT IS NOT ABOUT YOUR MAMA!
2. Resistance is a predictable and expected reaction!
3. Keep your thinking above the noise!
4. Keep the END IN MIND!

Initially the team felt discouraged. We acknowledged that what the team was feeling was real — a quite normal reaction to significant change. We then lead them through a process to help reframe their thinking. This provided the shot in the arm they needed to gain momentum – becoming actual champions of change!

Rather than focusing on the predictable, effective leaders focus on fostering relationships and improving their environment. Understanding and implementing this approach increases the likelihood that change will succeed!

In the September edition of Forbes Insights, research suggests that as the recovery continues, many corporate senior leaders may be blindsided by an unparalled employee exodus in their respective firms. Many of these leaders have misread the high retention rates during the recession as a sign of employee satisfaction. The truer picture is that large numbers of employees are dissatisfied and disillusioned by the bottom line, maximization of profit over people, short-term thinking demonstrated by many corporate leaders during the recession. In a period where employees lack employment options, time will reveal that many are biding time silently until economic recovery is in full gear.
This will be particularly true among GenX and Gen Y employees. Why? Because they place a premium upon working in corporate environments that stress non-financial incentives to engage them. While all three of the most prevelent generations in today’s workforce (Boomers, Xer’s, and Yer’s) indicate that compensation is the highest priority for remaining in their current companies, both Xer’s and Yer’s stated other priorities that ranked closely behind in importance. Their four highest priorities were the need for strong leadership, job security, effective leader communication during the recession, and providing them with growth and advancement opportunities. In other words, employees noted a desire for their leaders to invest in their own development and to provide an environment of respect through communication, and long-term people growth opportunities.
As a leader, are you skeptical of these findings? Consider then Forbes reported that 49% of all employees surveyed are considering bolting from their jobs when the talent market heats up. An astounding 76% of these potential company changers reported low morale (They don’t dare tell their boss.) as the reason why they intend to leave their compnay while 62% cited dissillusionment in how their leaders’ communicated poorly with them during the recession as their prevailing reason for leaving.
While corporate leaders have struggled to walk the fine balance between corporate profitability and maintaining long term commitment to their people, the fact is that many leaders have won short term profitability while cutting so deeply that they have lost the trust of their people. The bill for that type of thinking is about to come due! It will be an expensive lesson for some!
To minimize the fallout of the “resume tsunami”, corporate leaders should begin prioritizing investment into development opportunities for their employees and paying very close attention to understanding issues creating plummeting morale AND THEN AGGRESSIVELY FIX THEM. THE TIME TO DO THIS IS NOW! Waiting until the company has returned to more normal levels of profitability will be too little too late! Remember an undeniable law of leadership: If leaders see their people as expendable resources, in time they will make themselves expendable. If leaders show deep value in their people, those people will value their leaders. Take care of your people and they will take care of you!! It’s all about the people!!
Comment? We encourage your responses. Thank you for reading.

In the early eighties while in college, I needed a summer job. In the midst of the Carter Administration, our economy was in a severe recession. Much like the present, unemployment was high and hope was low.

After interviewing for 40 other jobs a local pig farmer offered me a position as a temporary laborer. I was soon to learn this was no average pig farmer and no ordinary pig farm. At the time, it was one of the largest family owned hog operations in Iowa, sending hundreds of pigs to market every week. The owner was a shrewd business man.

I quickly learned that the price of pork was depleted. In fact, for every pig that went to market, the farm was losing an average of $15 per animal. One day I asked the owner, “Why do you stay in business when every animal you sell is a losing proposition that sends you further into the hole?” Riding along with him in his pickup truck, I’ll never forget his explanation. The wisdom of his thinking impacted me to this day. His words are relevant as we look for inspiration through this difficult time.

“Fred”, he said, “There are two cycles in this business. The first cycle is when you make money. These are your boom times when the market is strong. Just about any farmer can make money at a time like that.” “However”, he continued, “The second cycle is the one that separates the great operators from everyone else.”

He went on to explain that the second cycle occurs in the downtimes when many farmers become discouraged and quit the business! He taught me that this is when you make market share! This is essential for the long-term success of the business. He continued,

“If the farm can weather those months, even at a short-term profit loss, we come out
as stronger players in a thinner playing field when the economy reverses. I may be
losing money this year, but I’ll more than make up for it in the years ahead. I see it as
a time for investing in the future!”

He helped me to understand that it is much more difficult to gain market share in an “up” economy. A company can make greater strides to ensure the long-term success of the business if it can weather the challenging market while the lesser competitors are “weeded out”.

I asked him, “What is your secret of survival in these times?” “It is pretty simple”, he told me. “It is all in how you think! I see it as a time for investing in the future. “

He taught me how most owers in that moment would begin to shorten their long-range thinking, focusing only on the immediate crisis. They quit investing in capital improvements on the farm. They quit investing in the growth and development of their key employees. They stop planning for the future. They miss opportunities to make the market situation work for them! Most of all they stop taking risks. They get so immersed in the crisis that they stop working on their business.

I’ll never forget his ending words.

“The average person will give into his fear in a time like this and worry about all the things that are going wrong. Instead, I choose to look for the opportunities that this down market gives me that don’t happen any other time. The great farmers are the ones who stay the course and look through the crisis to the other side. It is all in the attitude my boy.”

That day a young student got a graduate school leadership lesson from an old farmer with 40 years of success behind him. The application rings true for any leader, for any company and for any industry in 2009. The great ones will take full advantage of this time, realizing that it will require course adjustments and preparation to position for future success.