Added Value

  • When was the last time you paused to reflect on your personal and business values and the impact, both positive and negative, they are having on your business? The need to do this was recently driven home to me when a manager in one of our remote offices was ready to give up after receiving bad news in the way of our monthly profit and loss statement.
  • One of the markets we serve is relatively small and prone to ups and downs depending on national and local economic conditions. In the past the office has depended heavily on new home construction. The recent mortgage crisis coupled with local "no growth" restrictions on building have pretty much caused home construction to dry up. As a security business, our strategy when we entered that market almost six years earlier was to build a significant market share of security monitoring accounts. One way to do this was to participate in new home construction.
  • In the security monitoring business it's important to add accounts with as little up-front cost as possible. This is measured by the break-even point. In other words, if the monthly monitoring sells for $30 per month and it cost you $300 to secure the account (all office costs considered), the break-even point is 10 months out. In order to incentivize our manager to keep the break-even point low, we developed a bonus plan that paid for achieving lower the break-even points. Bonuses could be earned by selling more monitoring accounts or by improving the profit on the systems that are monitored, thus keeping the costs down.
  • For three years the manager made his bonuses and life was good. Then the economy changed, business slowed, and fixed costs could only be reduced so much. After observing this trend, seeing his bonuses disappear, and viewing several months in a row of disappointing losses, the manager decided he couldn't take it anymore and wanted to leave. He was convinced that one day soon I would walk into the office and announce we were going to close it, and he would be out of a job.
  • As we discussed his concerns, he agreed that we had always been very supportive, had never given the impression that we were going to pull the plug, and demonstrated great patience as we built up the small market and his local business. He had always done everything he could to represent our brand well. The customers trusted him, I trusted him, and it was clear he was doing everything he could. One of our business values is demonstrating patience and caring for our employees and their needs. We try hard to take the long view and not make knee-jerk reactions to changing business conditions. The problem wasn't him, but that there were conditions outside of his control-the economy.
  • So I asked why he thought our support and understanding would suddenly change. His response was that this just is not the way American businesses operate. When times get tough businesses make cuts, they don't show patience, and they put profits ahead of people.
  • I had to admit that for many businesses, especially those beholden to public stockholders, the reputation he described was accurate. But I countered that we were different. I reminded him of past examples of our patience and fortitude through difficult times, and that despite the ups and downs of our 50-year history in business, we had survived, grown, and prospered with the same business values, putting customer and employee needs ahead of growth and profit goals. Of course we're in business to make a profit, but if you take advantage of your employees, and cut and run when things get a little tough, it's hard to build a strong brand and a loyal staff.
  • He was still skeptical, but he finally admitted that we were different than the companies in his examples. So I seized the moment to pose the most important question: "Did you ever stop to think that maybe we're right and those other businesses are wrong?" The question has an obvious answer in light of 50 years of success. Values do matter. More importantly, living those values when times get hard, rather than bowing to the moment and doing the expedient thing, demonstrates business leadership that is all too uncommon but earns respect, loyalty, and eventual success.