Friday, April 27, 2012

Treating Employees and Customers Fairly

One of the areas in which I believe we, as a society, have deteriorated recently is care for the customer. Everything now is about improving profit margins, with customer service often being compromised. If we call on the telephone, we get a machine that takes us through many menu items. Often you have to enter your customer number or some other identifying number before the machine will let you continue. Then what’s the first thing they ask you if eventually you connect with an actual person? Of course it’s the number you punched in!

Stores are trying to save money by having fewer sales clerks. Some companies have their customer service reps in another country, thus taking away jobs from Americans. With customer service or technical service in another country, you have to deal with unfamiliar accents as well. I do have to say that when I’ve dealt with Dell’s technical service people in India, they have been very good and capable, but I still don’t like the fact that jobs are being taken away from Americans.

Historically, industry has not always treated employees well. That’s why labor unions were organized. Today things are much better in some respects, but new ways of giving employees less than a fair deal have arisen. Some companies, especially in retail, avoid giving benefits by hiring employees as part-timers and having them work fewer hours. This is especially bad because these employees are typically on the low end of the pay scale, close to minimum wage, yet they are prevented from working 40 hours. Plus they have no medical benefits! How can anybody live on such meager take-home pay?

There was a program recently on CNBC that looked at the success of Costco. Their employee turnover rate is very low compared to the rest of retail. Why? Costco pays its employees well and provides benefits. Does that hurt profit margins? Apparently not, because Costco is doing quite well despite its relatively small markups. They are saving money with less employee turnover in a number of ways. First, they are better able to hire higher quality and more productive employees, and second, there is less training and disruption with lower employee turnover, thus saving money.

Morally and ethically, companies have responsibilities to at least five constituencies.
(1) Provide a fair return on investment to stockholders;
(2) Provide a safe and good quality product to its customers at a fair price;
(3) Provide a good and safe work environment to its employees, pay a fair wage, provide medical benefits, and don’t discriminate;
(4) Pay its vendors on time;
(5) Serve the community and the country by hiring Americans, manufacturing here in the U.S., buying from local and U.S. vendors, obeying laws, not polluting, and paying its fair share of taxes.

When these get out of balance, such as too much emphasis on #1 and not enough attention on the rest, you have a problem. Because so many items are manufactured in China these days – thanks in large part to Wal-Mart – #5 isn’t being served and the customer, while paying less, often gets a poor quality product that won’t last as long. That is false economy, and I believe the American people are being ripped off as a result. Moreover, some unsafe products have come out of China because stores haven’t even bothered to do any testing or quality control. So #2 isn’t being served and people have been hurt as a result.

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