Dissing the Customer

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Some things are so obvious, you wonder what business executives are thinking. If they are.

A business of any size exists for its customers. Without the revenue from their purchases, there is  no business. Companies can leverage laws to force customers to buy from them, but even that effect is limited. A cable company may have a virtual monopoly is a specific service area, but it can’t force customers to pony up for optional services such as pay-per-view. And most customers don’t. Tick people off and they find ways of getting back at you.

In fairness, companies face a tug-of-war between profits and costs, and most executives see customer service as a cost. For that reason, they

  • Replace people with automated voice response or call direction systems — which consumers hate with a passion.
  • Reduce staffing at call centers. (“Your call is important to us. Please hold for the next available agent.  Your wait time will be approximately 45 minutes.”)
  • Replace experienced field service personnel with lower pay, semi-trained and less dedicated contract employees. (As an employer, you get what your pay for.)

As a researcher, one of my very first projects was for a Midwestern utility that had raised customer management to an art form. Literally. Customers who called with billing problems or service outages were happier with the utility than those that had no reason to call.

That’s because the utility understood what customers really want:

  • Prompt attention, and
  • Keeping people informed on the status of actions being taken on their behalf.

Consumers are realistic; they don’t expect perfection. That just doesn’t happen where humans are concerned. How you handle problems when they occur makes all the difference.

Smart managers learn that some shortcuts just aren’t.  If you lose customers, or if you increase the number of service calls to solve a problem, then the shortcut you took doesn’t save you anything. In fact it may increase your costs substantially.

Thus it was with amusement that I read the list of US companies with the poorest ratings for customer service.  The list includes almost every cable and wireless provider.  The cable companies are shaded; Sprint, T-Mobile and AT&T are on this list, and Verizon is very close to inclusion.

Other notable companies are

  • K-Mart (financially struggling)
  • Bank of America
  • Wal-Mart

There’s no great surprise about who is here.

The chicken-and-the-egg question: Does cost cutting inevitably cause poor customer service? Or does poor customer service inevitably create the need for cost cutting? And where are companies using the resources that should be put int0 rebuilding relationships with customers?

Worst_service

 


Sources:

  1. Evan Comen, Samuel Stebbins and Thomas C. Frohlich, “The Customer Service Hall of Shame,” 24/7WallSt., 23 August 2016. http://247wallst.com/special-report/2016/08/23/customer-service-hall-of-shame-4/7/

 

The Employee Benefits Divide

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There are immense divisions in US society:ben_franklin

  • Rich versus poor
  • More educated versus less
  • Old versus young (ageism lives)
  • Urban versus rural (fading since most people live in urban areas, but still very real)
  • Ethnic and racial

We can add big employer versus small business to the list.

Large employers are adding benefits for employees that small businesses simply can’t afford.

American Express announced an increase in paid parental leave to five months with added surrogacy and IVF benefits, and Ernst & Young expanded parental leave from three to four months for parents of all genders and added adoption, fertility and surrogacy benefits.

Basically, if you have fertility issues, it really pays to work for one of these large financial services firms.

The larger division is a shift in focus in large companies from the cost of benefits to the total well-being of the employee. That shift has benefits for these companies in terms of worker retention and productivity.

Small companies pay a price for their focus on cost in terms of employee turnover, learning curves for new employees that affect productivity, and errors that affect customer relationships. However, they simply can’t afford some of the benefits that large companies can offer. Nor do they get the favorable pricing for benefits that insurers give to their largest clients.

The size divide isn’t clean. There are small companies that recognize how important their employees are.  I know of one diner (a class of eatery for which New Jersey is famous) that offers a good benefits package to staff, but that’s unusual in food service establishments.

Conversely, large retailers tend to treat employees as replaceable. In one recent study by the ACSI, retailers closing stores were seeing improvements in customer satisfaction ratings. My guess is the stores that were  under-performing had the lowest individual store ratings for customer satisfaction, but the ASCI data aren’t sufficient to address that.  Why not? Minimum wage employees with limited benefits and no career path aren’t motivated to deliver for customers. People do what they are incented to do.

What you need to consider:

  • Students need to think about the kind of company for which they will work in the future.  College is less optional if benefits matter.
  • Small businessmen need to get creative about ways they can invest in employees. The old mentality that “having a job is sufficient motivation” is simply a way to guarantee mediocre staff. Good people can always find another job. When there is turnover, the best are the first ones out the door.

Sources:

  1. Ann Clark, “Top 5 best work benefit trends for 2017,” BenefitsPro, 6 March 2017. http://www.benefitspro.com/2017/03/06/top-5-best-work-benefit-trends-for-2017?kw=Top+5+best+work+benefit+trends+for+2017&et=editorial&bu=BenefitsPRO&cn=20170312&src=EMC-Email_editorial&pt=Benefits+Weekend+PRO&t=employee-paid&page=2
  2. American Customer Satisfaction Institute, “ACSI: Retailers Improve Customer Satisfaction Amid Store Closings,” 28 February 2017. http://www.theacsi.org/news-and-resources/press-releases/press-2016/press-release-retail-2016

 

Internet Insecurity Revisited

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Your applications encrypt your data.  You’re protected, right?ben_franklin

Wrong.

There are three things you need to know about the latest round of papers made public by Wikileaks:

  • The CIA (in some cases in partnership with UK’s MI5) developed ways to hack device operating systems. The devices include all types of computers and cell phones, networked TVs, car onboard systems — basically everything anyone uses that’s connected to the Internet. The operating systems affected are Windows, Android and Apple.
  • The hack allows the user to read data as it is entered (typed or oral), before it is encrypted.  Everything.
  • The hack allows users to control devices and use them for spying on device owners.
  • The CIA may have LOST CONTROL of these hacks, meaning that they are out in the public domain where others can use them.

The CIA might not care about you, but are there others who might want your bank account?

The revelations have shocked experts.

Still, the amount of smartphone vulnerabilities and exploits detailed in these documents was shocking even to experts. “It certainly seems that in the CIA toolkit there were more zero-day exploits” – an exploitable vulnerability in software not known to the manufacturer – “than we’d estimated,” Jason Healey, a director at the Atlantic Council think tank, told Wired Magazine. He added: “If the CIA has this many, we would expect the NSA to have several times more.”(3)

Early reports are that the documents published by Wikileaks appear authentic.  None of the companies involved have commented on the situation. Nor do there appear to be any patches immediately in the offing.  After all, none of the players is yet admitting that they have something to patch.

Some writers see a bright side in these revelations: the decision to hack operating systems means that data encryption tools work.  That may or may not be true.  We don’t know what is still to be revealed.

Security problems aren’t under control or going away.

“Anybody who thinks that the Manning and Snowden problems were one-offs is just dead wrong,’’ said Joel Brenner, former head of U.S. counterintelligence at the office of the Director of National Intelligence. “Ben Franklin said three people can keep a secret if two of them are dead. If secrets are shared on systems in which thousands of people have access to them, that may really not be a secret anymore. This problem is not going away, and it’s a condition of our existence.’’(4)

I’ve said that nothing on the Internet is private, but this takes that statement to an entirely new level.  Nothing you type or speak into an Internet connected device is private. 

Ben Franklin was indeed a very wise man.


Sources:

  1. Sharon Profis and Sean Hollister, “WikiLeaks and how the CIA sees your WhatsApp messages, explained,” CNet, 7 March 2017. https://www.cnet.com/how-to/wikileaks-cia-hack-phone-tv-router-vault-7-year-zero-weeping-angel/?ftag=CAD3c77551&bhid=25995825932822145966367556179766
  2. Jose Pagliery, “Wikileaks claims to reveal how CIA hacks TVs and phones all over the world,” CNN Tech, 7 March 2017. http://money.cnn.com/2017/03/07/technology/wikileaks-cia-hacking/
  3. Trevor Timm, “WikiLeaks says the CIA can use your TV to spy on you. But there’s good news,” The Guardian, 7 March 2017. https://www.theguardian.com/commentisfree/2017/mar/07/wikileaks-says-the-cia-can-use-your-tv-to-spy-on-you-but-theres-good-news
  4. Devlin Barrett, “FBI prepares for new hunt for WikiLeaks’ source,” The Washington Post, 7 March 2017.

Merchant of Death

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f22raptorThe US spends more on weapons than do other developed countries that are not actually at war.

In the US, 3.3% of GDP (2015) goes to military spending. In Russia (still considered a “developing country” economically, it’s 5%; in China, it’s 2%. In the EU, it’s 2.8%.

The big spenders on weapons are the Arab states, led by the Saudis. The Saudis spend approximately 14% of annual GDP on weapons, the highest percentage in the world.

The US also sells more weapons to other countries than does anyone else.

Out of 197 countries, 12 of the largest 25 weapons manufacturers are based in the US. Here’s the top 10 (2015 data, as not all companies have closed their 2016 fiscal year):

  1. Lockheed Martin (US) $40 billion
  2. Boeing (US) $29 billion
  3. BAE Systems (UK) $25 billion
  4. Raytheon (US) $22 billion
  5. General Dynamics (US) $19 billion
  6. Northrop Grumman (US) $18 billion
  7. Airbus (The Netherlands) $15 billion
  8. United Technologies (US) $13 billion
  9. Finmeccanica (Italy) $11 billion
  10. L-3 Communications (US) $10 billion (1)

In addition to domestic purchases, the US is a major provider of weapons to other countries (2). The major buyers are

  1. Saudi Arabia, $1.9 billion from US out of $3 billion in total arms imports
  2. Iraq, $893 million in purchases from the US (51.5% of total arms imports)
  3. Australia, $869 million from US (82% of total arms imports)
  4. United Arab Emirates, $773 million from US (61%)
  5. Qatar, $595 million from US (66%)
  6. Israel, $526 million from US (87%)
  7. Italy, $511 million from US (59%)
  8. South Korea, $501 million (37%)
  9. Japan, $307 million (93%)
  10. Mexico, $280 million (72%)

Oddly, current foreign policy in the Middle East and towards Mexico could put much of this weapons revenue at risk. In World War II, the US was “the arsenal of democracy.” That’s no longer the case since most of the major buyers are monarchies.

 


Sources:

  1. http://ceoworld.biz/2016/02/17/the-top-25-largest-defense-companies-in-the-world-2015
  2. http://247wallst.com/special-report/2017/02/24/countries-buying-the-most-weapons-from-the-us-government/2/
  3. “Military Expenditure,” http://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS

 

Best and Worst States for Business

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24/7 Wall Street has published a lengthy article assessing the business climate in the %) total-county-population-change-2016.pngUS states.  It’s a fairly comprehensive analysis, looking at 50 different criteria, including taxes, labor force characteristics, infrastructure, etc.

The bottom five states are fairly predictable.  The top five aren’t, including political polar opposites.

Best five states for business:

  1. Utah
  2. Massachusetts
  3. Idaho
  4. Colorado
  5. North Dakota

Utah, Massachusetts and Colorado benefit in particular from a  highly educated labor force.  That’s important for the technology sector that’s likely to drive economic growth in the future.  Idaho and North Dakota are pro-business in the sense of having weak unions and low wages.

Massachusetts is the one state in the Northeast that isn’t losing population.

Five worst states for business, starting from the bottom:

  1. Louisiana
  2. Mississippi
  3. West Virginia
  4. Maine
  5. Pennsylvania

The bottom states share a common lack of an educated work force.  Fewer than 1/4 of workers in Louisiana and Mississippi have bachelors degrees, and the percent employed in science and technology is in the very low single digits.  West Virginia and Maine share these problems, just to less of an extreme.  The local economies suffer from high poverty rates.  Given the trend to robotize unskilled labor positions, the future in these states is scary.  All five states are losing population.

Pennsylvania represents a special case of self-inflicted problems.  The state has a poorly maintained highway infrastructure which is a drag on business growth.  Pennsylvania really is bipolar.  There are highly educated nuclei in Philadelphia, Pittsburgh and State College, and then there’s everywhere else.  It’s the modern version of Lincoln’s “house divided against itself”.


Sources:

What’s Your Next Career?

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17456_1269532813224_1076952025_30803996_7657050_nAmericans don’t stay with the same employer, or even in the same career.  As White notes, it may be unrealistic to expect that given the number of years of work the average person will have.(1)  For the average person, work life will last more than 40 years, and more than 50 years for those going straight to work from high school.

According to the US Bureau of Labor Statistics (BLS), the average person holds 11.3 jobs between the age of 18 and 46.(2)  Half of these jobs are before age 25, but that still means an average of 4-5 years per job during the prime years of work life.

  • The BLS doesn’t track career changes.  That policy needs to change.

Some of the volatility in the workplace is voluntary, and some is forced.

  • As several studies have shown, people will change jobs to improve benefits, especially healthcare.
  • Of course people will change jobs for money.
  • Company layoffs can force people to find other lines of work.
  • Automation can eliminate jobs, and more of that is coming.
  • Ageism, and the desire of companies to reduce labor costs by dismissing the highest paid (and most experienced workers).

The jobs under threat span all classes of work:

  • Taxi drivers  (self-driving Uber cars)
  • Truck and bus drivers (yes, tests of self-driving tractor trailers are under way in Nevada, and a the Otto start-up in San Francisco, now owned by Uber, offers to retrofit trucks with driverless capability for $10,000 less than the average trucker salary)
  • Doctors — general practitioners (telemedicine)
  • Doctors — anesthesiologists (replacement by robots)
  • Store clerks and cashiers, grocery and fast food (more robots)
  • Statisticians (offshoring and automation)
  • Line cooks
  • Business analysts (offshoring and automation)
  • Auto mechanics (automation)
  • Masons and bricklayers (there’s a robot that can lay 2,000 bricks in 8 hours; the video is on You Tube)

There are issues with how rapidly job destruction through automation will occur.

  • Robots are expensive.
  • Robots aren’t as intelligent or as flexible as some of the people they replace, and that can lead to major problems for the company using them.
  • Legal liability for companies and individuals using robotics are not yet well defined. (3,4)

So, forecasts that up to half of US jobs could be eliminated by mid-century are probably sensationalist.

That said, there’s also a question about how fast the US can create new jobs to replace those being lost.  Right now, losses exceed job creation, which means that people are still downsizing into lower paying work.  That’s limited wage growth in the current economic cycle.

Elon Musk has argued that the government should be responsible for paying salaries to people whose jobs are lost to automation.

“There is a pretty good chance we end up with a universal basic income, or something like that, due to automation,” says Musk to CNBC. “Yeah, I am not sure what else one would do. I think that is what would happen.”(9)

That’s a vision of a world in which all labor intensive jobs have been automated and people who lose their jobs have no meaningful work options.  Happily, we’re not there yet.

What you need to know:

  • Whatever your job is now, there’s a good chance you won’t be in that job or even that type of work five or ten years from now.  Even tenured teaching positions can be eliminated (8).
  • So, what do you want to do next?  What skills or education do you need for that?  You need a plan. NOW!
  • Education and training for advancement in your current job or career is tax deductible.  Education and training for a career change is not.  That needs to change.  Time to complain to your Congressman.

Sources

  1. Mary White, “Career Change Statistics,” undated.  http://jobs.lovetoknow.com/Career_Change_Statistics
  2. US Bureau of Labor Statistics, “Number of Jobs Held, Labor Market Activity, and Earnings Growth Among the Youngest Baby Boomers: Results from a Longitudinal Survey Summary”, press release, 31 March 2015.  https://www.bls.gov/news.release/nlsoy.nr0.htm
  3. Casey Sullivan, “Is It Time to Grant Legal Rights to Robots? What About Legal Liability?” FindLaw, 29 August 2016. blogs.findlaw.com/technologist/2016/08/is-it-time-to-grant-legal-rights-to-robots-what-about-legal-liability.html#sthash.F6Yswvt2.dpuf
  4. Mady Delvaux, “DRAFT REPORT with recommendations to the Commission on Civil Law Rules on Robotics” (2015/2103(INL)), European Parliament, 31 May 2016.
  5. Salary.com, “9 Jobs Most Likely to be Taken Over by Robots,” undated.  http://www.salary.com/9-jobs-taken-over-by-robots/
  6. Olivia Solon, “Self-driving trucks: what’s the future for America’s 3.5 million truckers?”, The Guardian, 17 June 2016. https://www.theguardian.com/technology/2016/jun/17/self-driving-trucks-impact-on-drivers-jobs-us
  7. Gavey Alba, “Amazon’s Real Future Isn’t Drones. It’s Self-Driving Trucks,” Wired, 20 December 2016.  https://www.wired.com/2016/12/amazons-real-future-isnt-drones-self-driving-trucks/
  8. National Education Association, “The Truth About Tenure in Higher Education,” undated.  http://www.nea.org/home/33067.htm
  9. Catherine Clifford,”Elon Musk: Robots will take your jobs, government will have to pay your wage,” CNBC 4 November 2016. http://www.cnbc.com/2016/11/04/elon-musk-robots-will-take-your-jobs-government-will-have-to-pay-your-wage.html

The Economy: Back to the Future

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Have you heard the advertising mantra, “Perception is reality”? rollover082712

It’s not.

Reality is based on data that isn’t subject to twisting by political pundits — for example, a rapid growth in inventory of unsold cars and trucks at US dealers.

The election brought about  a rally in consumer confidence and in the stock market without changing any of the fundamentals affecting actual economic performance. Auto makers apparently lifted production, and are now left scrambling for buyers. Layoffs haven’t been announced yet, but they’re likely.

  • Now we know why Ford was so agreeable about cancelling a new car plant planned for Mexico. There’s no reason to expand production when you can sell what you make. However, Ford is still moving small car production to Mexico, just to an existing plant and not a new one.

If you drain consumer wallets with health insurance costs, housing costs, credit card interest rates, education costs and taxes, there’s no money for discretionary purchases, like a new car, vacation, or furniture. Of course, we’re talking workers here, not the 1%ers. There simply aren’t enough top earners to keep the US economy going.

As I’ve noted previously, current administration policies are going to negatively impact consumers:

  • Food prices (Mexico import tax)
  • Gasoline prices (Instability in the Middle East)
  • Health insurance (Insurers are projecting increases in premiums of 15 to 20 percent.   for 2018 with the repeal of the Affordable Care Act.The nonpartisan Congressional Budget Office thinks the increase for individual health insurance will be between 20 and 25 percentA lot of people won’t be able to afford insurance in 2018, and then with pre-existing conditions, won’t be able to get it later under current guidance about reforms. Planned revisions in Medicare will raise the price of Supplement policies and make them more essential.)
  • Rising foreclosures (Financial deregulation and end of consumer assistance programs)

Some analysts are calling for growth in business investments due to reduction of government regulation.

  • There’s no actual data to support that argument.
  • Changes require new government regulations, that typically require one year or more to move through the approval process. Even if there were a benefit, it wouldn’t be felt in 2017. As time slips by, maybe not in 2018 either.

The government isn’t acting on any of the fundamentals that are dragging on the US economy.

  • Example:  Federal law is responsible for sky high pharmaceutical prices in the US. Efforts at reform have failed in both 2016 and 2017 to date, after intense industry lobbying and payoffs.

It’s really hard to see how we can avoid a recession.


Sources