Can There Be Excessive Productivity?


For a very long time Alan Greenspan, in his role as the top Banker of the US Federal Reserve Bank had enormous influence on the direction of the US economy. Especially in challenging economic times, readers, the media, and listeners to his testimony in congress as well as at many other places were literally craving for every word he said.

The Fed had developed a cryptic language, almost like graduate level academia, which sounds sophisticated but often doesn’t get to the point or allows for multiple interpretations. It became a standard to interpret what the writers of the minutes of the all important Fed meetings actually meant to say. Every so often Alan Greenspan himself stepped in front of the microphones and used basic English language to express his views or the views of the Fed.

One of these mantras was the recurring theme that the wellbeing of the economy, and in turn the country, was dependent on the continuation of productivity gains. Opportunity after opportunity, and speech after speech, it was proclaimed that more gains in productivity were achieved. What this meant in almost all cases was a reduction in cost: less people spending less time for less money achieving similar or greater results for an organization, thereby improving the balance sheet and increasing profits.

The last few days I personally experienced what all these great gains Alan Greenspan encouraged companies to generate lead to, and I am fuming, to say the least….

Here is the deal: In the past the American economy used to manufacture a lot of things and then sold them to the consumer. Since workers expect to make more money over time, this wasn’t really sustainable, especially when competing in a global market place. The solution was either outsourcing of manufacturing to China, India, Eastern Europe, and many other places around the globe – or transforming the economy into a service oriented market place.

Both solutions were applied and more often than we like, we are talking to technical service providers in India when we encounter an issue with our washing machine. That drove down cost, but it still wasn’t enough…

And then my TV stopped working. A few days ago at about 10 PM at night I finally got my butt out of the office and away from the computer and wanted to watch some TV to wind down and relax. I push the buttons on the remote, like always. A few clicks, and I start hearing the music and people speaking. Fully expecting to see a picture on my TV set in a few seconds, I began to pay attention…

To my surprise nothing happened. The TV stayed dark, but I could hear the audio. Afraid my relatively new TV set might be broken, I popped a DVD into the player, and sure enough, everything worked fine. WOW, what a relief, the TV is OK. But what about the fact that I don’t have a picture when trying to watch TV?

Well, I start playing with all the buttons on the remote hoping I just hit the wrong button before. Naturally that didn’t really make a difference – but it reminded me that I am not a technician. Next I got out the phone number for the satellite provider. Well, was I in for a surprise…?

The person on the other end first gave me a friendly hello, followed by: “Sir, no problem, we will help you get your system back to work”. I was feeling better already. That was a very short felt relieve, because the person with the name April immediately followed the reassuring statement with the first insult. She said: “Can you please tell me if you can see the little green light on the satellite receiver, the one that shows that the power is switched on?” It was relatively late at night and I am not very easily bent out of shape, even if insulted like this.

I told April that the light was on and that I had previously mentioned that I could hear the audio, which would hardly be possible without power to the receiver. Unimpressed with my technical savvy, April next asked: “Ok, sir, can you tell me if the little green light on your TV is on, the one that shows that the power is switched on to your set?” Staying totally calm, I told April that I had previously mentioned that the TV played my DVD’s perfectly, but it didn’t show a picture when switched to TV mode.

For the next 20 minutes I received a quick course in TV and satellite repair steps. I plugged in cables, unhooked power, connected different cables, rebooted the receiver several times, switches off the DVD player to see if that would make a difference, and followed all instruction step by step.

Finally April told me: “Sir, I have to tell you that your receiver seems to be broken and we will need to send you a new one.” No kidding, just 35 minutes after initially calling, we had come to the same conclusion.

I started to get my hopes up that customer service still existed. All it took was being patient, not getting angry for being insulted, and a willingness to participate in a quick course in electrical technician tasks.

Ready to go to bed, knowing that the new box will be on the way, April dropped the bombshell. She said: “Sir, for you to get the new receiver, I need to charge you $16.95 for shipping”. It took me literally a minute to comprehend and regain the ability to speak.

I am a paying customer for three years, paying my monthly fees, which are higher than any new customer the company tries to gain. I see their ads every week on TV but I can’t do anything about it because the great new deals only apply to new customers. Then, when my equipment fails, and although I am fully paid up, I have to pay for the shipping to receive a replacement box. Wow, what a great new world.

I am not easily impressed or moved, but at that exact moment I decided, in a very calm voice, to tell April that my service can be cancelled right away. She said: “Sir, I am sorry to hear that. I connect you to the cancellation department right away”.

Feeling a little better about myself, I continued with a new person through the process of getting rid of the TV provider I had faithfully paid for the last three years. If you thought excessive productivity in the form of incompetence and cost transfer to the customer had reached its crescendo, you are still mistaken.

This company had one more knock with a baseball bat waiting for me on the way out. When I had confirmed my cancellation, I was told that I needed to call back after 72 hours. The reason is this: “You are fully paid up for this month. Our automatic system does not recognize credit when a cancellation occurs. If you want the money back you already paid for the days you won’t have service, you need to call us again and demand a refund, or we will keep your money”.

Someone a long time ago had a slogan he used at the end of his broadcasts that goes like this: “Thank you very much, good luck and good night”.

That’s how I felt. The lesson learned for all of us is this: If you forget that your customer is the one source that keeps your job, keeps your revenues, and keeps your profits, all the cost cutting in the world doesn’t make any difference. It’s not a gain in productivity but the nail in the coffin that will close the company down sooner or later.

In case you wonder who it is? It’s the satellite provider with the word ‘network’ in the name.

Don’t worry, I got a much nicer system, now taking full advantage of being the new customer, all the bells and whistles, HD and all, and I am paying $20 less/month than before.

Peter Drucker once said and often wrote: “It takes many years to develop a stellar reputation, and 5 minutes to loose it.” When we try to push gains in productivity to a point where we make our customers pay for shipping when our equipment brakes, or ask them to call in to get the money we owe them because we feel there is a good chance we can keep what is theirs on the way out, we have driven productivity gains to an unhealthy, excessive level.

Be careful how you try to lower cost. If you do it like my former satellite provider did, you might find that you removed the foundation of your business. Rest assured that a customer with an experience like I had will forever warn anybody he touches about this company. That is much worse in the long run than the $16 it would have cost to ship a new receiver and continue to collect inflated fees from me.

Productivity gains are a good thing until they turn excessive – then they can turn into your worst enemy. Don’t go there if you want to build a successful organization and keep those who pay your bills, salaries, and bonuses happy.