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Netflix announced huge price increases in July, leading hundreds of thousands of customers to cancel their subscriptions to the company’s DVD and video streaming services. After the company disclosed the extent of its customer losses, the company’s price plunged 26 percent in two days.
So on Sunday, Netflix CEO Reed Hastings sent out a much-discussed email and blog post in which he acknowledged that customers felt the company “lacked respect and humility” with the pricing and service changes. Hastings admitted “sliding into arrogance” and offered a “sincere apology.”
Good start – exactly what you’d like to hear from a company that truly listens to its customers and tries to do right by them.
And then? He announced the price increases would remain in place and the DVD service would get a new name (“Qwikster”) and would no longer be integrated with the streaming service (“Netflix”). (This, of course, potentially creates dramatic new inconvenience for remaining customers, who apparently will need need to maintain and manage two video queues, one for DVDs and one for streaming.)
Hmm. Not what customers were looking to hear.
Online comments on Twitter were heavily negative. Salon.com’s Mary Beth Williams summed things up by tweeting, “So Netflix’s plan to win us back is an email…saying ‘I messed up’ and a name change to QWIKSTER? Gosh, I’m sold!”
Seeking transparency through clear communications and a willingness to admit mistakes are both admirable qualities in a company. Still, they’re not ends in themselves, and this is where Netflix seems to have fallen down again by not truly listening to what its customers were saying.
Most fundamentally, a good seller recognizes the importance of (1) customer trust, (2) delivering services at a fair price, and (3) quality of its services. Netflix fails in all three areas. Its customers complained loudly about the first two of those when the price increase was announced – and ironically, are likely to begin complaining about the third now that Netflix has made its services less convenient – as part of its “apology.”
A recent story on business skepticism about the Obama jobs plan struck me for the way companies came across as whiny—or worse.
In the article by Motoko Rich, a variety of business leaders pooh-poohed the President’s plan as unlikely to boost their hiring.
Jeffery Braverman, owner of an e-commerce company that sells nuts and dried fruit, told the New York Times that the plan’s proposed $4,000 credit for hiring the long-term unemployed would not spur him to hire someone. “Business demand is what drives hiring,” he said.
Perhaps the demand for Mr. Braverman’s dried fruit and nuts is drooping. But overall, business demand in the United States has been inching upward in recent quarters. As importantly, corporate profits have been climbing. Profits from current production increased $57 billion in the second quarter, on top of an increase of $19 billion in the first quarter.
In many cases, the revenue and earnings growth has been coming at the expense of workers. Workers who are stressed as they shoulder heavier and heavier loads.
In the emerging Worthiness Era, companies that want to succeed will have to avoid taxing their workforce overly much. And besides acting as a Good Employer, they will need to be Good Stewards of society—which includes playing a role in providing employment in their communities.
In this context, dismissing Obama’s plan—which includes cutting in half the taxes paid by businesses on their first $5 million in payroll and eliminating payroll taxes for firms that increase their payroll by adding new workers—amounts to unseemly griping.
Even worse than the whining, though, is the way bias against the long-term unemployed persists. In the article, Jen-Hsun Huang, chief executive of computer chip maker Nvidia, said his firm is hiring. But the jobs proposal wouldn’t keep him from looking askance at the long-term jobless. “The people we hire tend not to be out of work for six months,” said Mr. Huang. Instead, he told the Times, the company recruits recent graduates from the country’s top engineering schools. “The guys we hire are like sports stars,” he said.
Huang must never have heard of stars like Kurt Warner or Aubrey Huff—who were effectively out of work before helping to lead the St. Louis Rams and San Francisco Giants to championships. Evidence and common sense make clear that discriminating against the jobless is bad for business—and will become illegal nationwide if Obama’s plan becomes law.
It’s unclear whether Obama’s plan, at least in its entirety, will become law. Still, it is disconcerting to see businesses react so negatively to the jobs plan. After decades of corporations complaining that government rules make it too hard to hire, here is a proposal to ease the burden significantly. Companies ought to welcome these ideas for themselves, for their workers and for the country.
A version of this post originally appeared at Ed’s Work in Progress blog at Workforce.com.
Laurie Bassi spoke recently at Bellevue University regarding Good Company, its stories, research, and data. Click here to watch her full presentation.
Here’s how we think about what it means to be a good company:
The GOOD COMPANY does business in an “all-win” way. It seeks to ensure employees, customers, communities, and investors all benefit from its actions.
For years, too many businesses have reaped profits by taking advantage of employees, ripping off customers or fouling the planet. Good companies, in contrast, are about reciprocity with all their stakeholders. As a result, the good company acts as a good employer, good seller, and good steward of the community and the environment.
Think of it in terms of guests at a party you throw. Less-than-good companies are like the jerk who may be entertaining but wolfs down more than his share of food, insults your friends and trashes the place. A good company is like the perfect guest – one that has fun and livens the party but not at anyone’s expense.
Good companies are, in a real way, good company.
What do you think? How do YOU define good company?
The scandal that has battered News Corp. shares and given legendary leader Rupert Murdoch a black eye could be remembered as the moment that corporate reputation became really important.
That’s the argument Geoff Colvin, Fortune magazine senior editor-at-large, made in the publication’s Aug. 15 issue. I agree.
Colvin notes that News Corp. lost about $5 billion of value in the few weeks after phone hacking and alleged bribery by the company became headline news.
“Previous major scandals were mostly financial: the numbers were lies. Not this time. The damage so far derives entirely from behavior—phone hacking and possible police bribery—that appears to be illegal but has nothing to do with reported financial results,” Colvin writes. “Whether it’s illegal doesn’t matter anyway; it’s slimy, and that’s enough. News Corp. is deeply tarnished, and the financial effects could be significantly bad.”
That privacy invasions and the possibility of bribery could so badly damage News Corp.’s stock and its prospects dovetails with our belief that the business world is at the dawn of the “Worthiness Era.” In this new economic epoch, people are setting higher expectations for the companies in their lives. A reputation for upstanding behavior, for example, is becoming a key part of consumer calculations.
Consider a 2009 paper by researchers Remi Trudel and June Cotte. They found that customers will pay a premium for ethically produced goods and punish companies (by demanding a lower price) that are not seen as ethical. What’s more, Trudel and Cotte discovered, a bad rep is particularly bad for business: “The negative effects of unethical behavior have a substantially greater impact on consumer willingness to pay than the positive effects of ethical behavior.”
How did News Corp. get into unethical habits? Colvin says one answer is the “one-man problem.” That is, too much power has been concentrated in the hands of Murdoch himself, which led good-governance group the Corporate Library to give News Corp. an “F” grade for six years straight.
Thus far into the controversy, not much has been written about the long-term effects on the News Corp. corps of employees. But that too is likely to suffer. People—especially civic-minded Millennials—are going to think twice about casting their lot with Murdoch and his sullied empire. A 2009 study by public relations firm Edelman found that globally, 56 percent of people want a job that allows them to give back to society versus 44 percent who value personal achievement more. Slimy stuff like hacking into the phones of families of slain soldiers is like the opposite of giving back to society.
When public outrage persisted despite his shutting down a tabloid and dropping a bid for greater control of a satellite TV firm, Murdoch turned to Edelman itself to help manage the hacking scandal. It’s not clear whether that move will salvage the company’s reputation. But it’s another sign that a good name now matters like never before.
This post originally appeared at Ed’s Work in Progress blog at Workforce.com.
Call me Good Company’s accidental co-author.
I more or less stumbled into the book project in late 2009 after a conversation with Laurie Bassi. At that point, I’d reached a point in my journalism career where I wanted to tackle a book. But my efforts to pin down a topic and find a collaborator were sputtering.
Enter Laurie, whom I was interviewing for a story about faltering employee engagement. Almost as an afterthought, I asked how her book was coming along. She said she and co-author Dan McMurrer were struggling to get it off the ground. In response, I blurted out, “Can I help?”
It was an impulsive but sound offer. I’d come to admire Laurie and Dan while writing a profile of them for my publication Workforce Management earlier in the year. During my decade as a business and labor reporter, I’d never come across anyone who had proven the value of investing in employee training by linking it to future stock performance. They did, marrying hard-nosed facts with what is often the “soft” discipline of people management.
When I talked to Laurie for that profile piece, she mentioned she and Dan were working on a book. Tentatively titled “The Worthy Organization,” its major theme was the same one that you’ll find in the final version of Good Company: a variety of forces are pushing companies to behave better to all their stakeholders if they want to succeed.
This argument resonated with me. On the one hand, I have an activist, social-justice, reformer streak dating to my college days. I even was a union officer of The Newspaper Guild and helped secure a contract at the Oakland Tribune chain of papers. But I also appreciate the creativity and practical benefits of businesses. My namesake founded Iron City Brewery in Pittsburgh in 1861, my grandfather was an inventor, and my father is an entrepreneur. As a journalist, moreover, I’ve found many examples of companies doing right by workers in a way that benefits both sides.
The idea that reciprocity on a grander scale was becoming a business requirement intrigued and inspired me.
Thankfully, Laurie and Dan welcomed me onto their team nearly two years ago. And I’m proud not only to have helped flesh out the initial argument but to have made some novel contributions. I thought it was important, for example, to discuss how the Worthiness Era relates to the rise of Asia and to today’s business focus on agility. And when Laurie and I met inSan Franciscoin late 2009 to discuss the contours of the book, I pushed to include a ranking of companies on their relative “goodness.”
Perhaps it’s because I have the least quantitative training on our team that I thought we could pull off such a ranking. Indeed, creating a meaningful, defensible rating of Fortune 100 companies turned out to be a difficult, labor-intensive task—with Laurie and Dan doing most of the work! Dan then led the research on the connection between index scores and stock market results.
But all the effort on the index paid off. Our research showed that companies with higher Good Company Index™ scores—those that have behaved better—substantially outperform their peers in the stock market.
That finding echoes other compelling evidence we discovered showing that Laurie and Dan’s initial hypothesis is proving correct. We truly are entering a “Worthiness Era” in which companies have to be “good company” to employees, customers and communities in order to thrive.
As Laurie mentioned, I think we’ve written something valuable with Good Company. And the book joins a broader debate about corporate citizenship, sustainability and economic progress that is critical for our own times and for future generations.
Speaking of duration, this project has been longer and more demanding than I expected. But the late nights and frazzled nerves have been worth it, in large part because of Laurie and Dan’s diligence, intelligence, fairness and generosity. I may have stumbled into the book, but it’s no accident I stuck with it. I’ve been in good company.
Our book Good Company has been a very long time in the making. It all started back 23 years ago with a conversation that changed my life.
In those days, I was a young assistant professor of economics at Georgetown University. With my newly minted Ph.D. from Princeton in hand, I understood the rules of the game for someone in my position. First among them was publish or perish. Equally important was to do so in a way that was respected and valued by my profession – by doing research and publishing papers in prestigious journals based on complex mathematical modeling and sophisticated econometric analysis. I became totally immersed in my field and this perspective. I came to view the world and the people in it through a lens of simultaneous structural equations and elaborate statistical methodologies.
And then one day in 1988, I found myself in a steel mill in western Maryland. I was there interviewing workers about the “learning environment” at the mill. These interviews were a component of a well-funded research project I was fortunate to be working on – one that held the promise of getting some good papers published. My immediate task was to translate the findings of my interviews with workers into quantitative, coded data. It was definitely a “stretch assignment” for me, because truth be told, although I was a card-carrying labor economist, I had never been in a workplace anything like this before.
This steel mill was a pretty tough place. It was hot – probably at least in the low 90s – dirty, noisy, and dangerous. Workers were busy managing the flow of red-hot, molten metal as it moved between various pieces of massive processing machinery. And there I was in my neatly pressed pant suit, with a tasteful purse on my shoulder, and clip board and Cross pen in hand – interviewing workers in steel-toed boots, hard hats, work clothes covered in grime, with sweat running down their sooty faces. They were compliant and polite as I took them through one question after another about the extent and usefulness of the (virtually nonexistent) learning opportunities available to them through their work.
In the very last interview, I apparently asked one question too many. In a very respectful tone of voice, the fellow I was interviewing finally said to me, “Look lady, I can sum it up for you like this. I go home at the end of every day, whupped, tired and disgusted.”
That pretty much ended the interview – there was really nothing left to say. He thanked me for my interest, and I thanked him for his time.
As I drove home that night, his words played over and over again in my mind. I shared them with my husband, and I thought about them the next day and the day after. The raw honesty of what he said didn’t fit neatly into my data coding scheme, and I understood that no system of equations – no matter how sophisticated or elegant – could capture the grim reality this gentleman had shared with me.
Over the course of the weeks and months that followed, I began to think very differently about my work. It was no longer an academic exercise that would help me publish papers and get tenure. It was much more important than that. It was about the quality of people’s lives, and how they are shaped for good or for ill by their places of work. I also came to understand the profound effects our work places have on our lives outside of work, and indeed, the very society in which we live.
That conversation set me on a journey that ultimately led to Good Company. The book is a marriage of heart and head. It is, I believe, an important book. Here’s what my favorite professor at Princeton, Dr. Alan Blinder (former Vice Chairman, Board of Governors o f the Federal Reserve System), wrote about our book: “Close your eyes and wish that companies that were good to their employees, their customers, their communities, and the environment made more money than ‘the bad guys.’ Now open your eyes and read this fascinating book. Amazingly, Bassi, Frauenheim and McMurrer marshal evidence that it’s true. Read it and smile.”
I hope you will take the time to read it. And if you agree it is important, please consider helping us to get the word out by sharing it with colleagues, writing a blog post, posting a review on Amazon, or sending us a testimonial.
Thanks in advance for whatever support you can provide. I look forward to hearing from you.