Category Archives: Brand

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A Letter Regarding Financial Faith

Dear Financial Community:

The failure of Silicon Valley Bank is enormously troubling. Call it an isolated circumstance all you want, but it has further stressed our nation’s dialogue. An echo of other bank failures has followed SVB down the drain. Long lines of anxious customers waiting outside banks are never something we want to see. This was unnecessary. This was bad form.

As dependability in our institutions continues to fray, I worry increasingly about where we’re headed. As divided as we are in this nation, can we withstand a true crisis of faith in our banking system? What understandable assurances are in evidence that wider contagion is not possible, that limits can be maintained on the ramifications of remarkably poor judgment?

Where does resilience meet its match and cause us to lose faith in the basics of our grand experiment in economic expansion?

Our economy works on a number of elusive factors in concert with tangible reporting. One of those is faith. If we lose faith in our banking system, the notion of ongoing growth and innovation at scale seems to go out the window. The economic miracle we have created together freezes solid and then melts into the ordinary.

Ample credit fuels dreams. Intelligently borrowed capital brings to market hopeful new companies and bolsters the expansion of existing businesses. Financial institutions, mostly banks, have to lend money for ideas to become enterprises.

Lending money as its own business only works if there is leverage in lending. We understand the rules of engagement: a bank keeps some cash on reserve and lends more than it has at any given time. This works fine as long as there are no unaddressable runs on banks.

Should redemptions exceed liquidity, banks are forced to liquidate assets at any price to return cash to depositors. Trust in the banking system and the FDIC is required of depositors to prevent runs from melting down banks. Trust is a reflection of faith. Lose all faith, lose all trust, we all lose.

Here’s ground zero: If we lose faith that banks can get our money for us whenever we ask for it, deposits cease. If there are no deposits, there can be no lending. That’s the endgame you are teasing when you fail to do your job and cautiously manage risk. Kill deposits, kill lending — that’s a death spiral in the making.

Faith is increasingly becoming a conflicted proposition. Reckless financial engineers test us every decade. The savings and loan crisis. Long-Term Capital Management. Sub-prime mortgages. Washington Mutual. Collateralized debt obligations. Lehman Brothers. One day the combined impact of these attacks on faith may succeed in fully undermining the little faith we have left.

Then the thinning ice cracks for good.

Don’t tell me this time it’s about rising interest rates that weakened your balance sheet. You’re smarter than that. You know history. You knew interest rates had to rise. Nearly free money is never forever. You’ve been making loans as long as you’ve existed. You understand liquidity. You understand it so well that you spend millions lobbying against the very regulations you need to stay in business.

There are no excuses. You take bonuses for being clever. When you’re too clever, the damage has the potential to become systemic. When faith in the system evaporates, apologies are meaningless.

A brand is a promise. When a bank’s brand fails that promise, the entire concept of for-profit banking is soiled. We are only human. Serial violations of trust reveal fragile faults in what we’re repeatedly told is a robust system. We can only experience so many failures before trust is gone.

If we come to believe that U.S. Treasuries are the only safe place to park our money, what happens to commercial lending? If commercial lending retreats, how do the entrepreneurial efforts of the next hundred years replicate the last hundred years?

Do we really want to depend on government to keep righting the wrongs of irresponsible, conniving executives? Government’s role is to referee where self-regulation has proven farcical. Regulate, yes. Adjudicate, yes. Underwrite exponential losses, unsustainable.

If government must guarantee every deposit regardless of the amount in order to maintain faith in those deposits, how can bank executives ever be trusted to take risk seriously?

There’s a lot at stake, more than many of us may yet realize. We’re shell-shocked, but we’re supposed to maintain faith. Each day it’s harder. Each day we put our own historical investment paradigm at risk.

In simplest terms: Please stop putting our nation’s future at risk and punting your unnecessary failures to manufacture compensation you haven’t earned and don’t deserve.

Seek to restore our faith. You need deposits. We need loans. Keep our money safe to put it to work properly. We’ll pay our installments. That’s the contract. It’s a virtuous circle. We all have to abide by the rules, not wait to get caught if enough oversight is available.

Please make the rules work to all our advantage and believe in something more than your own benefit. Prosperity hangs in the balance. You’re toying with breaking everything. Let’s look to another hundred years of wise lending and liquidity to continue investing in positive outcomes we can’t even yet imagine.

Yours in faith,

A dissatisfied lifelong banking customer

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Photo: Pixabay

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The Difficult and the Daunting

You may have heard recently that Amazon is pulling back a bit on hiring and warehouse space. With all their vast resources in strategic planning, the executive team there overshot on leasing square feet their forecasts no longer support. I suspect they will manage through this just fine in the long run with little impact on earnings, but it is a powerful reminder of how difficult it is to predict future business both when you’re in an up-market and a down one.

We all get this wrong now and again. It’s normal and usually navigable. The problems come when balancing present challenges heavily compromises a company’s future, or betting only on the future sours a company’s current performance to the point where no one cares about the future.

I am often humbled by the nagging paradox of making tough business decisions every day at the relentless pace of 24x7x365. Running a company in response to everyday circumstances in the present will always be difficult, Running a company for an opaque future will always be daunting.

We have to do both well to accomplish our current goals and set the table for the next generation of growth prospects. Favor either the present or the future too heavily and the question becomes whether you want to lose now or later. While that’s not an option any leader wants to consider, if we don’t see the delicacy in how one affects the other, our intentions can be undermined by our outcomes.

We often hear about the pressures of being a public company, how corporate leaders make choices to focus on quarterly earnings from which they financially benefit immediately over building strong companies for the long haul. I do think this happens at some companies where short-term stock performance can dramatically impact executive compensation. Too often those companies fall prey to what Clayton Christensen famously has called The Innovator’s Dilemma and allow their long-established norms of success to be fully disrupted by more nimble competitors.

There’s a more ironic take on this notion, where equity markets sometimes forgive emerging companies for failing to produce earnings at all in the near term in the hope that someday they will have gained so much market share that they will prove invincible. This all-or-nothing strategy has paid off handsomely for companies like Amazon that didn’t produce earnings for years, reinvested heavily in their growth, and today reap the benefits of that bet. Sadly, this example has been exploited by too many newly public companies that don’t even consider near-term profitability a goal, allowing lazy business models to overshadow unfounded optimism that someday their customers will reward them with enviable positions.

A company that bets only on the future, never becomes economically successful, and runs out of cash can be train-wrecked just as decisively as a once successful company that fails to address The Innovator’s Dilemma. If the executives steering either of those failures happen to be selling shares along the way to a company’s demise, a feast of lawyers will follow.

Inflation and rising interest rates make the cost of doing business higher for everyone. We painstakingly decide how much of these costs we pass along to customers and how much we absorb. The benefit of preserving current operating margins is always tempting, but the rewards of long-term customer loyalty and lifetime value speak for themselves. How do we decipher the balance between current and future financial results? Data will often shine a light on the path, but there are no conclusive textbooks with clear answers to these calculations.

It truly is hard to run a company both for today and tomorrow. We have to consider the staff sizes we need, the leases we’ll require, the stability of our supply chains, price elasticity, and the promise of our brands. We also carefully must watch cash flow, our balance sheets, compensation, incentives, technology advancements, and investments in future product cycles. What works today may or may not work tomorrow. It is seldom that what works perfectly in one set of conditions works just as well in another.

There are no perfect answers, but the fluidity of making a decision now for its short and long-term impact usually weighs heavily on those who wrestle with the impossible crystal ball.

Covid-19 has been a good reminder of how difficult and daunting decisions can be. We were all blind during Covid and it was easy to misread fluctuating data. No leader had substantial experience with stay-at-home working conditions. No one knew how long the pandemic would last, how it would impact supply and demand, or how it would impact investor sentiment. If that wasn’t enough of a challenge, most of what we thought going into Covid proved to be wrong, and most of our assumptions about how employees, customers, and investors would behave post-Covid have been equally wrong.

If you want to be humbled, try making decisions that address the unknown with this level of frequency. You’ll likely realize you’re wrong more than you’re right, but the less tangible skill we develop is how to rethink and react quickly when we discover we are wrong. That’s why the rewards for creating a company that is “built to last” are immense, but the odds of lasting fifty years are long.

When it comes time to decide short or long, know you have to do both, and do your best you to keep dialogue and debate flowing among diverse opinions. The decisions we make have an impact we might be able to see today, but unless you know someone who has a gift the world has never seen, we are almost always speculating on the impact a year or more from today. Sometimes it’s decades before we find out if we were right or wrong.

We choose to sign up for the difficult and the daunting. The longer I do this, the more humbling it is.

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Photo: Pixabay

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The Call Center Launch Pad

All call centers are not equal.

I’m not just talking about the quality of customer service. I’m talking about the opportunity a company’s customer service department offers to its employees.

Sure, some call center gigs are dead-end jobs. Let me give you an example of what happens when the people who work in customer service know they are an afterthought to brand loyalty.

I recently had one of the worst experiences ever with a brand I have loved for decades. That brand is Hewlett-Packard, once arguably the single most shining icon in all of Silicon Valley history. The second HP printer I had purchased in three years died. Although I suspected HP had devolved into more of a subscription ink factory than a technology innovator, I bought the second printer with a two-year warranty to make sure it lasted two years. It did not.

When I called for support, I was handed off dozens of times from one failed interaction to another. Their technical training was all over the map, but no one could solve my problem. They put me on hold without setting time parameters. They dropped calls and didn’t call me back as promised. I invested hours in this runaround until my wife asked me what I thought my time might be worth to continue being poorly treated.

My case was escalated with the eventual offer of a “refurbished” printer because they did not have a record of my two-year warranty, even though I sent them documentation supporting their brand promise. The escalation manager had a broken headset and couldn’t complete our phone call, thus redirecting our negotiation to email spread over days. Finally I gave up and now own a competitor’s branded printer. I will never again own an HP printer. The HP Way is no more. That is a customer tragedy.

This got me thinking about all the product managers, software engineers, and information technology professionals I have hired or promoted out of customer service over the years. I don’t think of customer service as a cost center; I think of it as a profit center. Customer service is a place we invest in our brand and invest in our people. When we do that, our customers benefit and our employees benefit. That is the definition of a win-win.

If you are reading this today in an executive marketing role, ask yourself how you categorize the expense of customer service. Is it a necessary evil where unappreciated, low-paid people might be severing ties with your customers? Or is it a gateway for talent to join your company where well-trained people do their best to bond customers for life and in doing so ready themselves for significantly greater career opportunities within your enterprise?

For those of you currently in a customer service job, the question you might ask yourself is how you can transform your current day-to-day, sometimes thankless complaint handling into a launch pad that puts you on a path to be considered for your boss’s job and later your boss’s boss’s job. It happens, I promise you, but only if you position yourself to make it happen. Here’s a simple framework.

Choose Wisely

Look for an emerging company where promotions are frequent rather than a legacy behemoth where you’ll never got out of the boiler room. Don’t envision the call center where you work as a windowless dungeon, even if you are working at home, but instead see yourself in a trend-setting pool hall where you are setting up your next shot. If you are so remote and isolated from corporate management that no one who can promote you will ever know who you are, then you probably are in an inescapable place. Since you’ve chosen to do the work, do it somewhere where you will be noticed and appreciated.

Learn Every Day

The work you do today answering emails, chatting, or talking to customers on the phone is just that—it doesn’t have to be the work you do forever. Ask yourself: What did you learn from your last customer interaction? What did you learn about the product technology when you searched the database to address a customer’s problem? What insights about the next-generation product features have you gleaned from the thrashings you endure listening to the gripes of unhappy customers? One of these days you are going to bump into a company leader in the hallway who might ask for your opinion on something. Do you have an opinion that is built on valuable learnings that make you unquestionably promotable when that opportunity surprisingly emerges?

Do More Than You’re Asked

You were hired to do a job the person to the left of you and the right of you can do. If you do just that job, you will get paid as promised, rinse and repeat. If you want to do more, ask to do more. Volunteer for special projects. Don’t wait to be asked. Show initiative. Go to your manager and say you’d like to write a white paper on why returns are so high on a current product in market. Maybe your manager says yes, maybe no. If they say no too many times, see the section above labeled Choose Wisely. I tell every manager wanting to be a director and every director wanting to be a VP the same thing: Find a way to start doing the job you want before you have it. Those are the kinds of people companies want to retain. A customer service associate who knows things becomes a company leader who can fix things. Claim your own success.

Gut It Out

When your boss is unhappy with your performance, don’t quit on the spot because your feelings are hurt. Find out why your boss is displeased. If you ask and get a candid answer, listen to the critique calmly and internalize it. If you don’t get an honest answer, see the section above labeled Choose Wisely. If your boss suggests you are dialing it in and not living up to your potential, maybe this is a wildly constructive moment. Accept the feedback, up your game, and try even harder to do the best job you can. Leaders in companies do not give up because they have a bad week, a bad day, a bad hour, or a bad customer interaction. If you can hang tough in customer service, you have a shot at hanging tough when you are promoted. Grit matters, not just because of what it teaches you about resilience, but because of what it says about your commitment to exceeding expectations.

Love your brand, love your customers, love the opportunity hiding behind the door that is not yet open, and when you nudge that door open, your entire life might change in an instant. How sure am I? I’ve seen it happen hundreds of times. I’ve also seen too many times what happens when a company doesn’t get this right and spirals into oblivion. Taking your customers for granted as you grow is a clear path to the dead brand graveyard. A culture of aligned incentives that secures customer engagement is the rocket fuel that resists inertia.

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Photo: Pixabay

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The Upper Hand

Think you’ve got leverage? You might. Now think hard about whether you want to exert it.

The success of a business reveals itself over long periods of time. The same is true of a career, even more so.

At any given time, circumstances may go your way. Cheesy television shows that gloss over the true workings of business may suggest this is the time to seize control of a weakened opponent, play the hard angle of opportunism, lower the boom on the boomless.

Certainly that’s one way to play the game.

You’re a property owner and the market is tight. You can play hardball with potential tenants. Maybe that works and they sign the lease without much choice.

Are you 100% sure that’s a great idea?

You’re a well-educated graduate entering the job market where positions that capitalize on your skillset are abundant. You are offered a very fair salary at an employer where you can grow, learn, and evolve your talent. You ask for 50% more. Maybe they say yes because they have a job that needs to be done right now.

Are you 100% sure that’s a great idea?

You’re a broker of commodity supplies suddenly in demand for construction or renovation. Longtime customers ask for your support in quickly completing a needed project without breaking the budget. You tell them you’d like to help, but new customers are willing to pay three to four times what you’ve been paying for the same materials you have stockpiled in inventory. Maybe you get the new asking price from your original customer and your margin soars.

Are you 100% sure that’s a great idea?

Here’s my take: You’re blowing it.

In all three of the above examples, the true price of hammering home your isolated moment of glory far exceeds the devil’s bargain you might be invoking.

You are sacrificing the establishment of trust.

You are shredding the notion of loyalty.

You are establishing a set of ground rules where the nanosecond leverage shifts, you are going to get swatted with a mirror version of the upper hand you thought was so nifty.

Think I’m wrong? Think business is just a cycle of gamesmanship where everyone longs for effective application of the upper hand? If that’s you, I am sure you are confident in your convictions. Relish the spoils of your conquest, but do us both a favor: Seek others who are like you and leave the rest of us to apply a much longer view.

Deals are short. They come and go. Want to win every single dispute, argument, and arcane point of negotiation? Try to build a brand, reputation, or legacy on that.

One day you will lose the upper hand because no one has it forever. When that day comes, you will get what you get. You put it in motion, you own it.

Am I suggesting that you should rollover and take less than you are due in any meaningful negotiation simply to be nice? No, that’s not the takeaway. Always figure out what you need, convince yourself through the other side’s eyes that your position is reasonable, and then fight for it with cordial determination. At the same time, consider the possibility that the few pennies you may choose to leave on the table today might be a stealth investment in a future windfall you can’t yet see, but might have the foresight to envision.

Being clever is seldom obvious. There are too many other clever people always around you. Being consistent in your values with an obsession for integrity is way more valuable and easier to benchmark.

Wise investors know that equities trade in cycles over decades with an upward trajectory. Timing the market is a fool’s game. You play long. Same with customers, same with brands, same with careers.

Seriously, why?

Because in the next down cycle, you are going to need help. You are going to need to pick up the phone and humble yourself. The question is, will someone answer?

I often say that one of the few good things about getting older is that you’ve accumulated the experience to navigate events with a framework for predicting a myriad of outcomes. Challenges are both temporal and lasting. Knowing the difference provides you with context for better decision-making.

As I also often say, the great tragedy of too many careers is that the learning you wish you had in your earlier years doesn’t come until much too late, and then you’re out of time.

Get ahead of the pack. This won’t be the last boom. A bust is coming. No one knows when, only that it absolutely will happen.

Then another boom and another bust. Rinse and repeat. Those are variables. The constant is you.

Play the long game. Build your network with reciprocal give-and-take. Be the kind of person in business people want to call all the time, not just when either one of you has a temporary advantage. The inspired upper hand is less about brute force, more about wisdom.

I’m 100% sure that’s a great idea.

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Photo: Pexels