Corporate culture always reflects the true priorities of a company. Some companies such as Porsche, Domino's, and 3M have a tradition of innovation, technical superiority, or excellence. These cultures drive employees to give their best every day in the pursuit of the company's mission. These cultures attract customers and investors who share in the company's mission.
When a company declares its purpose is profit, and jobs are a means or incentive to accomplish that purpose, the corporate culture reflects the mission. For example, some companies have laid off substantial amounts of their workforce shortly after announcing record earnings. The message to their workforces is clear, and a culture develops that supports the company's purpose. It is a culture that recognizes the temporary nature of its employment and an underlying fear of job loss.
Every business has its own unique culture. Most business organizations don't consciously try to create a certain culture. The culture of an organization typically evolves based on the values of the top management or the founders of an organization. As in every other endeavor, culture evolves more from behavior and the examples leadership provides than from what leadership says.
Business leaders who embrace a constancy of purpose of truly wanting their workers to feel fulfilled and happy demonstrate their desire and belief. They are interested in the members of their workforce as individuals with concern for them inside and outside the workplace and help establish a culture that reflects that interest. This culture manifests itself in every aspect of how employees relate to each other and, most importantly, to their customers.
When employees are threatened by ambiguity of their purpose and the value of short-term versus long-term goals, they telegraph their feelings to each other and to customers. What results is a corporate culture that recognizes that only one stakeholder really matters.
Frederick Reichheld, author of The Loyalty Effect: The Hidden Force Behind Growth, Profits, and Lasting Value, claims, "On average, U.S. corporations now lose half their customers in five years, half their employees in four, and half their investors in less than one year. We seem to face a future in which the only business relationships will be opportunistic transactions between virtual strangers."
This is an enormous problem with tremendous consequences. These defection rates affect the stability of every business. Replacing customers, employees, and investors consumes enormous sums of time and money. When more resources are spent attracting new customers, new employees, or new investors, there are fewer resources left to compensate and reward the remaning stakeholders.
Loyal customers are the cornerstones for stability in a business. Loyal customers keep coming back to buy again and again. There is no cost to attract loyal customers because they are already doing business with you. They are predictable and easier to do business with than new customers. For these reasons, loyal customers produce profits where no profit existed before. Profits can be used to attract, retain, compensate, and equip more productive workers. Ultimately, loyal customers and loyal employees benefit the company and, therefore, the investor. This is the phenomenon of organizational loyalty. Organizational loyalty benefits internal and external customers, employees, investors—all stakeholders.
The credibility collapse of many American businesses, the unemployment created by downsizing, and the loss of monumental sums of potential profit can be repaired through organizational loyalty. The book you are holding is a discussion of creating customer loyalty. Focusing on customer loyalty is the first step in developing organizational loyalty. Loyal customers are the people who show up at your front door with the money every day. Loyal customers are never the problem, they are always the solution.
Organizational loyalty fairly rewards all stakeholders. As each stakeholder is rewarded, the other stakeholders should benefit as well. Unfortunately, too often companies are swayed by Wall Street's constant scrutiny and demand for favorable quarterly or even daily earnings reports. Inevitably, these demands require a company to trade short-term rewards for long-term gains. Cost-cutting, downsizing, and layoffs are the results. The short-term investor profits, but the benefits of long-term organizational loyalty are lost.
Investors should be rewarded in proportion to their contribution of capital and risk, but their reward should not be at the expense of the other stakeholders. Organizational loyalty fairly rewards the investor when the other stakeholders are fairly rewarded.
For example, health insurance is a substantial expense. On the surface, health insurance appears to benefit only employees. The cost of health insurance premiums appears to either raise the ultimate price of goods and services charged customers or decrease the return to investors.
If we examine the benefits of providing health insurance more closely, we find companies with insured workers have less absenteeism. Workers with health benefits are more likely to take preventive health measures and submit to regular checkups. Companies that provide health benefits have healthier workers. Living without health benefits can be stressful and can produce many aliments and conditions assoiated with stress. Companies that provide health benefits are better able to attract more qualified and productive workers and they profit from a healthier workforce. The efficiency gained from a more productive workforce ultimately benefits customers and investors. The cost of health insurance is not at the expense of the other stakeholders, it fairly rewards all stakeholders.
The starting point for creating loyalty is a mission or vision statement that declares a purpose or goal that all stakeholders can subscribe to. Because loyal customers are the ones that show up with the money every day, they should be the starting point for every mission. The sequence for reward is, customer first, employee second, and company or investor third. The phenomenon of organizational loyalty protects the company or investor from only getting the crumbs. When the customer as stakeholder benefits, loyalty is created. This loyalty produces greater net revenue to benefit both employees and investors. Creating customer loyalty rewards all stakeholders.
Domino's Pizza's mission of "Exceptional people on a mission to be the best pizza delivery company in the world" is a worthwhile goal with enormous rewards for all stakeholders. Customers, employees, and investor/owners can subscribe to the mission. The continuing accomplishment of this mission fairly benefits everyone. Domino's can attract customers, employees, and investors who all profit from organizational loyalty.
Its mission statement does not repeat Peter Drucker's directive word-for-word; however, the spirit of "The purpose of every business is to get and keep customers" is evident. If you are a Domino's Pizza customer, you are dealing with the best pizza delivery company in the world. Why wouldn't you want to be a loyal customer?
Domino's further clarifies its mission with their guiding principles:
We demand integrity.
Our people come first.
We take great care of our customers.
We make "Perfect 10" pizzas every day.
We operate with smart hustle and positive energy.
These guiding principles reward all stakeholders. Integrity, a superior product "Perfect 10" pizza, and operating with smart hustle are advantages to everyone. Keeping people first and taking great care of customers are fundamental to organizational loyalty.
Crafting and living by a mission statement that serves all stakeholders is an important endeavor for every business. Don't think that your company's stock has to be publicly traded for you to qualify. Your auto body shop, dry cleaners, real estate office, or insurance agency will benefit from an appropriate mission statement. Even if you own the business and are the only employee, a properly crafted mission statement will clarify and fortify your daily activities.
Many times we tend to focus on what we do not have. We tell ourselves, "I don't have the kind of customers that will ever be loyal. My employees don't stick around long enough to be stakeholders. I don't have the resources to improve and grow my business. I have fierce competition and I'm lucky just to be earning a living. Where I work, they only care about what I have done for them today."
Life is always filled with obstacles and challenges, but our obstacles and challenges can be our greatest strength.
I met Jim Patterson several years ago. Jim grew up in Louisville during the 1940s. His family was poor and they lived on the southwest side of Louisville in the housing projects that had been built by the Works Projects Administration (WPA). Similar to most government buildings of that era, the walls of his home were yellow-glazed block, which would get pretty hot during a Louisville summer.
Jim also remembers eating fish on Fridays in accordance with his family's Catholic beliefs. The smell of fish blanketed the housing complex every week. Jim does not have fond memories of the smell or the heat.
Jim worked his way through four years of college and graduated from the University of Louisville in the early 1950s. He enlisted in the U.S. Air Force and was stationed in a remote area. So remote that he was able to literally save all of his Air Force pay. He emerged from the Air Force with an education, $20,000, and a desire to make it big.
As soon as he returned to Louisville, Jim put an advertisement in the Louisville newspaper: "Ex-serviceman with $20,000 looking for business opportunity or partner." Jim got a ton of responses, most of them crazy schemes. He took an interest in one response and within just a few weeks he was the proud owner and franchisee of a Jerry's Restaurant on the south end of what is now Dixie Highway. Unfortunately, Dixie Highway was not a highway yet and road construction over the next several months nearly put him out of business. Jim still remembers keeping the restaurant immaculately clean when he only had a few construction workers as patrons. Eventually, the road was completed and Jim's business began to prosper. He did so well he was able to buy several more Jerry's Restaurants throughout Kentucky.
Jim was an accomplished restaurateur and businessman when he attended the National Restaurant Association meeting in San Antonio, Texas, in the mid-1960s. Jim and a few of his friends went out for dinner one night during the convention. They voted on where to dine and Jim lost the vote, so they chose a local fish house. Jim's friends assured him that this fish house was different. "This fish taste like white meat of chicken," they said. Jim was so impressed with his dinner that night that he returned to the fish house twice more during the convention.
He returned to Louisville enthusiastic about the new taste of fish he had discovered. Jim wanted the rest of the world to experience his discovery and founded Long John Silver's Seafood Shop. The concept was a hit and very quickly franchises for Jim's new restaurant began springing up all over the country. Jim later sold his interest in Long John Silver's and went on to other ventures where he enjoyed similar success.
I asked Jim, "To what do you attribute your success?" He told me, "Luck, hard work, and most of all, where I came from. I was so poor for so long. I know how to be poor. I don't like it, but I know how to be poor. For every risk I have ever taken I have been confident that if I lost everything, I could still go back to being poor. I know guys who have done well but came from money. Those guys are paralyzed when it comes to making big decisions. They are always afraid they're going to loose what they've got. Starting with nothing is the best thing that ever happened to me. There are so many people that worry they will lose their job or their business will go into a slump. I worry about those things too, but I know the loss of one thing always liberates me to find the next thing."
This book is about creating loyal customers. There are five principles that, when employed, will earn customer loyalty. Sometimes you can employ all five principles and you may still lose a customer. You may do everything right, but the outcome is not what you were hoping for. Does this mean the five principles don't work? Does this mean the five principles are a sham, a fraud? Stand back and look again. The perfection lies in your viewpoint. Your biggest losses may be your biggest learning experience. Your biggest weakness may be your biggest strength. Jim Patterson started his life thinking he had a handicap because he came from a poor family. It was not until later in life that he learned his supposed handicap was one of his greatest assets.
You may feel that you are starting with a handicap. You may feel the competition is so far ahead of you that you don't have a chance to catch up. By creating customer loyalty you can level the playing field. Loyal customers are the answer whether you own the business or you're an employee. People do business with people. When you use your unique skills, personality, and attributes to express a genuine interest in others, you have started on the path to creating loyal customers.