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I was standing in a line at the grocery store. The person in front of me was paying by check. At what I thought was the conclusion of the transaction, the cashier called the manager to her workspace. I watched quizzically as he initialed the check without even pretending to see what was on it and returned it to the cashier, who put it in the register.
After completing my transaction, I approached the manager, introduced myself, described my line of work and initiated the following conversation: "Why were you asked to initial that customer's check?" He responded, "Because approving that check for that customer was not within the cashier's level of authority." I continued, "When you are asked to approve a check, how many do you not approve?" His response, "Well, I approve all of them."
I'm sure you get where I wanted to go with this line of inquiry. Deciding discretion, in this case, was the better part of valor, I shrugged my shoulders, smirked a bit and left.
Bureaucracy burdens large and small organizations alike. Recently, an HR executive at a Fortune 500 firm said the following to me in a casual conversation: "Well Rand, we're a lot bigger than we were a decade ago. Having some bureaucracy is a natural consequence of size. Having some bureaucracy is a good thing!"
Let me be clear about where I stand on bureaucracy: It is a bad thing; more of it is a worse thing.
Here's my definition of bureaucracy: "Processes, policies and procedures that create little or no value for an organization's constituents." That includes some well-intended processes and procedures that ought to create some value for someone but are followed blindly by people who have no idea of the relevance or context of those rules and procedures.
Companies exist to create and balance value for constituents. CEOs exist to make sure that happens. That said, my personal obsession is for companies to put value creation for buyers of their products and services at the top of their pyramid of priorities. If nobody buys anything, there's no need for anything else to happen.
In the March 2005 issue of Performance Digest, I included the equation that I believe best describes "value." Now I'll take that concept one step further and examine value creation as it pertains to the conversion of "suspects" to "clients."
Follow the diagram with me, beginning at the top.
In the center of the large circle is "performance." It's surrounded by the cadre of an organization's internal mechanisms. To be relevant, this system of P's (purpose, proficiency, processes, policies and procedures, paradigms, positions, people, plans and practices) must create value for a buyer. An organization creates value for a buyer through its value proposition. I have a one-word definition of mechanisms that don't create value: waste.
Buyers exist along a couple of major dimensions. The dimension of "segmentation" stipulates that all customers are not created the same or equal. To wit: Holiday Inns do not attempt to appeal to the same market segment that Ritz-Carltons do.
Returning to the diagram, suspects are potential buyers who have not been qualified by the seller. Prospects, by contrast, have been qualified. Customers have made at least one purchase of a firm's product or service and clients are repeat customers. I call this the "buyer commitment" dimension.
The requirements for buyer attraction and buyer retention differ. Many companies put a disproportionately high percentage of their marketing effort into attracting new buyers rather than retaining clients — a huge mistake! While most sellers are plotting the conquest of their next prospect, existing clients are waiting for their own emotional investment in the relationship with the seller to be acknowledged and rewarded in some way. My advice to you is: Cultivate your client relationships in a way that is perceived as meaningful by the client or your indifference will be met in kind.
As a business person, you need to be continuously, repeatedly and obsessively asking yourself and others in your organization the following three questions:
- Who are our targeted buyers?
- Why should they buy from us?
- How will we convert "suspects" into “clients"?
All of your other concerns are derivative!
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