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The Costs of Near-Sightedness

Oct. 1, 2008
Avoid business myopia to position your company for long-term growth.

Business myopia is the failure to look far enough forward to make smart decisions today for a positive impact on the future. Of course, the future cannot be totally predicted. But smart executives can anticipate logical consequences and long-term ramifications of the decisions they make today.

The most common occurrence of business myopia today is thinking we are going through a down economy which we just need to ride out and do some cost cutting to survive. Wrong! This is our new economy, and we need to identify adjustments that improve customer experience and improve the employee day as well as improve profitability.

Consider the Customer Experience

On one of my many poker pilgrimages to Vegas, I learned a poker room I visited frequently was firing all the dealers, removing the tables, and replacing them with electronic tables which need no dealer, no chips — in fact, no cards. As I asked fellow players what they thought of this idea, overwhelmingly they said they had no interest in coming to Vegas to do something they can do on their computers at home. Furthermore, they would never play in that poker room again because there are too many other human poker experience options in town.

The myopia of the casino's director of operations is multi-faceted. Someone offered him a free trial of new machines that remove the human element, and on paper it looks like less labor cost and more revenue generation because the game can be played faster electronically than with a human dealer.

The first mistake he made is the same one cigarette companies learned when they tried to sell a smokeless cigarette: there is more than one source of enjoyment in using their product. In cigarettes, it's the lighting of the cigarette, blowing smoke rings, the habitual rituals of the process of nicotine delivery. In this low-stakes poker room, players enjoy the banter with the dealer, shuffling and manipulating chips, pushing the chips to the center in dramatic fashion announcing “all-in” and then raking in a pile of chips after a big pot win, and sharing stories about bad beats with new-found friends. The human interaction and the habitual rituals are underestimated in their importance.

Just because it's faster, makes fewer mistakes, and is cutting-edge technology doesn't necessarily mean an “improvement” is the right choice for the company if it sends away customers. In this case, the customer experience has significantly changed and no longer serves the many reasons someone is looking for that particular poker experience.

Now apply this perspective to your business. Where in your business have you made a technology shift to save money or create more revenue that lessens the customer experience? What does this do for your long-term customer relations? For example, automated phone systems frustrate customers, exacerbate a negative situation, and create walls for employees to hide behind and for customers to distrust. Have you shifted to this “cost-saving” technology that runs off customers? Where else have you cut costs — and ended up cutting revenues as well?

The same effect can happen on the other side of the balance sheet with petty costs and junk fees. The newspapers have been filled with airline passengers complaining about new fees for checked bags, resulting in more people trying to stuff too-large bags into overhead compartments. Then they are asked to pay for formerly complimentary beverages without even the distraction of a movie on trans-continental flights after the equipment was removed in another “cost-saving” move. So they can catch a nap instead — after paying for a pillow and blanket. Coach air travel hasn't been fun for many years, but the customer experience has been stomped flat and sacrificed on the altar of the bottom line.

On a recent business trip, my office overnighted two copies of my new book to me, hot off the press. Imagine my surprise when the front desk informed me there was a $5 charge for accepting the small package for me. When it came time to leave, I inquired about printing my boarding pass at the hotel, a common amenity at many hotels which have a special computer station in the lobby for just such guest-friendly small tasks. Even at hotels that lack a lobby station, I have been cheerfully given permission to check in for my flight and print a boarding pass in a back office. Yes, I could use a back-office computer to print my boarding pass — for a $5 fee.

So my wallet is now $10 lighter. And their future bookings from me are 100 percent lighter. The issue isn't the $10. I drop much more than that on tips, taxi fares and other small business expenses every time I travel. The issue is that I was not treated as a guest, but as a revenue stream. The customer experience took a fatal hit.

Just do this…

  • Evaluate your current customer experience. Where have changes been made that were easy technology to put into place but alienated customers? How can you recapture that customer relationship? What are the benefits of getting back to the human contact?

  • What changes are you considering to reduce costs or to increase income because of “the bad economy”? Before taking those steps, think through and discuss the potential harm to the customer experience. What other options do you have to improve your bottom line by making the customer experience BETTER — not worse?

What About the Staff?

The fewer than 50 employees of this poker room (a very small part of an extremely large group of casinos under one ownership) were notified roughly 10 days before closure that their jobs were being eliminated and the insurance benefits terminated. They were not offered placements within the organization other than bidding on jobs already in the general employee pool. Not a single dealer mentioned a severance package, although some had been employed for well over 10 years. The short-term notice had dealers scrambling to make ends meet, and this approach with its lack of concern for long-time employees has sent ripples of anxiety through all their employees, who now also fear being replaced by technology with little advance warning.

This was the second facet of that monumentally bad decision by a director of operations. Why is the myopic decision potentially bad for the casino owners? The buzz going through the casino floor employees is talk of unionization to seek at least some type of protection from being swiftly and unexpectedly terminated. The employees have been given a jolt of fear and distrust. Putting the management at odds with the staff for a few dollars of savings in one small poker room of a vast gambling empire is a poor decision with future repercussions, one that could have been partially mitigated with a better exit plan for the affected employees.

With its tourist economy, Las Vegas was for years considered recession-proof, even when other sectors of its economy got dinged, such as the real estate market. This year Las Vegas is learning that's no longer the case. Fearing bottom-line losses, myopic managers — especially ones with little experience at adapting to changing market conditions and economic forces — will make knee-jerk decisions that can lead to even more negative consequences in the future. In high-stakes gambling, it is well known you make poor decisions if you are afraid to lose the money. Businesses are also gambling with money and myopically focusing on the short-term bottom line, causing executives to make poor choices and decisions that have the opposite of the desired effect. Be cautious of only looking at the balance sheet for options to make goals and hit targets by reducing labor costs.

Just do this…

  • When executives panic, it sends shock waves through the organization. Where have your executives overreacted and sent a damaging shock wave through your organization? Smaller organizations are much more susceptible to greater damage from these reactions. Make the effort to look for ways to increase revenue to cover costs before deciding to do a slash-and-dash of employees.

  • In the event you believe you have no other choice than letting someone go for economic reasons, do it professionally — with proper length of notice, severance that is commensurate with level of service, and with interest and assistance in helping the employee find new employment.

  • Don't wait. If you are knocking on hard times, get your staff involved in finding solutions from all angles. They have a vested interest. You will strengthen your company's approach because employees will know they have a stake in the outcome. To work in the new economy, employee performance will have to be improved. The first step in making that happen is to get them to buy in.

The myopic executive who doesn't see the future will hope and play for better times and find himself like the poker dealers at that casino — out of work, out of luck, and out of position to see the future.

The author is president of Pinnacle Solutions Inc., Lake Wylie, S.C., and known in speaking and consulting circles as “The Big Guy.” He is an author, trainer and international speaker with 25 years of experience as a Fortune 500 manager and consultant. He can be reached at (877) 275-9468 or by e-mail at [email protected]. Visit his web site:

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