Paul Orfalea's Blog

Pointless Pollution: The Chlorine Whitewash

2010-07-01T09:07:09Z

Paper production is a notoriously pollution-rich process. One of the most toxic and least necessary chemicals currently used is chlorine. Paper mills use chlorine and chlorine gas to bleach pulp for brighter white paper products. One might make an argument for bright white printing paper, but really, do we need bright white toilet paper, napkins, and paper towels? For that matter, how bright does printing paper really have to be? Why do FedEx boxes and envelopes have to be bright white? Will they lose packages if they cannot see them in the dark?

Paper mills dump tons of dioxins - byproducts of the chlorine bleaching process - into American streams and rivers. Dioxins accumulate in fat cells, and have been implicated in higher cancer rates, as well as reproductive and developmental harm in both animals and humans. If paper mills only had to bleach a very few premium products, how much less dioxin would be released into the environment?

Better still, mills could use less environmentally damaging bleach agents, such as hydrogen peroxide, which produces byproducts of water and oxygen. The paper industry might need a little nudging. I think the most effective way to move paper mills from chlorine to less damaging chemicals is to build a viable market for unbleached products. That's why I've asked my partners and coworkers to switch to chlorine-free paper products.

Back in the late 80s and early 90s, we faced a surprisingly difficult challenge introducing recycled paper into our Kinko's stores. At that time, recycled paper was a specialty product, manufactured in relatively small quantities. As a result, it was more expensive than virgin bright white paper. We introduced recycled paper at our stores in Portland, Oregon, a city known for its environmental consciousness. Yet customers balked at paying a half-cent more per sheet.

This presented a quandary, because people wanted recycled paper, but did not want to pay more for it. We had a business to run, and did not want to shoulder the entire burden and expense of offering a more environmentally friendly choice. Our solution was to grow the market ourselves - we took a chance and made recycled paper the default choice in our thousands of copiers nationwide, significantly increasing demand and bringing down the price in the process.

I'm no longer affiliated with Kinko's, but I think other companies can do for chlorine-free paper products what Kinko's helped to do for recycled paper. I understand that FedEx cannot exactly adopt a "brown is beautiful" environmental campaign while competing with UPS, but there are quite a few shades still available between the bright white FedEx boxes and UPS brown.

For more information on eco-friendly paper products, check out this shopper's guide from the Natural Resources Defense Council.

Why You Should Study Accounting

2010-05-02T10:05:06Z

When a person living in a small village in India buys a can of Campbell's soup, that act triggers an elaborate economic scorekeeping system that both describes and empowers worldwide commerce. The scorekeeping system is called accounting, and the score is a measure of rewards owed to people along the value chain for their effort, ideas and investments.

Accounting is the most practical subject in school, because it expresses what all of us do with money everyday. I'm not saying that geometry is not practical, but when a teacher tells a roomful of ninth graders that they'll need geometry if they ever want to build a bridge across the creek, well, most people live to a ripe old age without building a single bridge.

But we go to the supermarket and the gas station pretty often, and we want to know whether we can afford a gallon of milk, a dozen eggs, and a tank of gasoline. We don't call it accounting, but that's what it is. And with a little instruction, we could be handling our money a lot better. Most Americans don't budget, don't regularly balance the checkbook, and can't seem to understand where the money goes.

Knowledge of accounting empowers business people across a wide range of disciplines, building credibility into marketing plans, product proposals, and HR decisions. Today, business students can take classes in entrepreneurialism, marketing, management, leadership, organizational analysis, etc.; and they all offer valuable lessons. People often skip accounting because it seems too banal, or, for those with math anxiety, too difficult. But accounting is the very language of business, just as mathematics is the language of science. To fully understand your business, you need to understand its accounting.

Think about all the executives in the news who didn't seem to understand how the finances at their own companies worked. Think about all those people who panic at tax time because they don't understand basic financial terminology - even after their accountant explains it! Whether you are still a student or have long-since graduated, consider taking an accounting class. It's a great way to empower yourself in business and increase your overall financial literacy.

Firing People is Easy

2010-04-22T09:04:05Z

Many supervisors feel tremendous angst when they must fire a coworker. But there are two groups for whom the termination process is easy: bad supervisors and great supervisors.

Bad supervisors find terminations easy because they are oblivious to their own failures in the hiring and development process, they don't care about the person they have failed, and they don't make the connection between these failures and the company's performance. And since they face no repercussions from the bad supervisors to whom they report, it's easy to place the blame on the terminated coworker, wash their hands of the whole affair, and move on to the next victim. E Pluribus Kinko's (BookSurge, 2009) author Dean Zatkowsky calls them "bossiopaths," because they bring a sociopath's self-centeredness to the workplace.

Great supervisors, on the other hand, find it easy to fire poor performers because they do so to benefit the terminated coworker and the organization. The difference between the good supervisor and the bad supervisor is that the good supervisor knows that his or her top priority is the success of the people supervised. Even if that success must be found elsewhere.

Generally speaking, there are two reasons to fire a coworker: poor performance and values violations. Termination for values violations should be a no-brainer, because what you tolerate, you encourage. If, for example, you let a top performing salesperson get away with dishonest behavior, you will quickly build a culture of dishonesty. Fire them fast and don't look back.

Great supervisors devote tremendous effort to hiring and developing coworkers, but the need to terminate for poor performance still arises. Perhaps a coworker's skills or self-motivation were misjudged. Perhaps a coworker's motivation has lapsed over time. How do you fire a poor performer in a way that benefits the coworker?

Bad supervisors tend to handle terminations through the annual performance review, which UCLA professor of management Samuel Culbert calls, "...the most pretentious, fraudulent, ill-advised exercise taking place at companies." In his book, Get Rid of the Performance Review! (Business Plus, 2010), Culbert says that instead of holding an annual adversarial meeting where coworkers defend their mistakes, companies should engage in "performance previews."

In other words, do what great supervisors have always done: maintain a constant dialogue with coworkers to ensure everyone understands each other's goals, objectives, and performance on an ongoing basis. In such environments, termination is neither a surprise nor a humiliation - it is merely the fulfillment of an agreement between responsible parties. The coworker leaves knowing what went wrong and how to find a better fit at another organization.

Just as with values violations, poor performers must be terminated quickly. Do not live with a problem - whether you are motivated by kindness, laziness or discomfort, your tolerance of poor performance hurts you, the coworker and the organization. The longer you let it go on, the more damage you do.

When you do your job well and maintain an environment of accountability and transparency, firing people is easy. I did not say it's fun. It certainly is not fun. But after hiring, it's the supervisor's greatest responsibility to his or her coworkers.

Other People's Money at the Game

2010-04-09T02:04:07Z

Not too many years ago, any teenage sports fan with a part-time job could easily afford Dodger or Laker games here in Los Angeles. Today, a few hours at the ballpark or arena is a big financial decision for working people - it could easily cost two hundred dollars for a family of four to enjoy a day at the game.

Am I just grumpy and feeling nostalgic for the good old days? No, I'm angry because the absurd spike in ticket prices is a market distortion caused by spendthrift executives wasting other peoples' money. And I hate waste.

I expect frugality in my business partners, and chose Kinko's owners who showed a history of saving money - if they were not careful with their money, why would I expect them to be careful with mine? Today, when I buy stock in a company, I view that company's executives as my business partners, and I hold them to the same standard of frugality.

I've written in the past about Manhattan's opulent restaurants, crowded to capacity at lunchtime as executives treat each other to lunch on the shareholder's dime. I also find it outrageous that people brag about their $2,500 Lakers tickets. Companies purchase expensive tickets because they are tax deductible - those fancy skyboxes are taxpayer-subsidized entertainment.

That's right: We can't afford daycare or school lunches or pre-school, but we can subsidize luxury skyboxes. Don't let anyone tell you that such entertainment is necessary to conduct business, because it isn't. In fact, the business use of luxury entertainment seems highly suspect. How poor a salesperson do you have to be if you need to offer such expensive gifts? What kind of customer demands such things?

This kind of entertainment has no business purpose, costs the taxpayers money, and makes sports events too expensive for local fans. As an op-ed piece in the New York Times points out, the main reason tickets have become so expensive is because companies bid up the prices by throwing shareholders' and taxpayers' money around.

According to authors Richard Schmalbeck and Jay Soled, "Over the last two decades, the average ticket price for a Chicago Cubs game has increased 265 percent, more than four times the inflation rate."

Current business-entertainment deduction rules encourage waste. The authors call them "...little more than an excuse for corporate executives to consume luxury items at a discount, distorting markets and cheating the public out of substantial tax revenue."

I don't like anybody wasting money, whether it's the government or a private company or a child that hasn't learned the value of his or her allowance. It just rubs against the grain. Schmalbeck and Soled recommend a fixed $50 deduction for luxury tickets, and I see the logic of their idea. Not only would this bring ticket prices back to a more natural market level; it would also help executives remember their responsibility to spend the company's money wisely.

Are People The Biggest Impediment to Customer Service?

2010-04-02T04:04:44Z

A curmudgeonly colleague of mine claims that he prefers automatic teller machines to human bank tellers because, "the machine knows me better, and it always says, ‘thank you.'"

He may be on to something. Online retailers Overstock.com, Zappos.com, and Amazon.com came in 2^nd, 3^rd, and 4^th in the 2009 NRF Foundation/American Express Customers' Choice survey, right behind 1^st place winner L.L. Bean, the catalog-retailing giant. Television shopping channel QVC came in fifth, which means that none of the top five retailers in this customer service survey is known for face-to-face service.

Brick-and-mortar retailers Nordstrom and Kohl's tied for tenth place. These companies seem to maintain a culture of customer service in shops dispersed throughout hundreds of malls, but in many other stores, it seems as if the salespeople often know less about their products and services than their customers do, and nothing at all about the customers themselves.

Two differences leap to mind when I consider the survey rankings.

First, the online and catalog retailers know how to use customer information. For years, consumers ridiculed Radio Shack, which continuously badgered them for information but never seemed to use it for any specific purpose. Amazon, on the other hand, quickly seems to know its customers better than their own spouses do.

When you walk into a department store, your buying history does not change the layout of the store to accommodate you, but when you log onto Amazon, it does. Customers may choose to refine the system's knowledge by rating purchases, but even when they don't, the personalization of the shopping experience is surprisingly accurate.

Ironically, the automated shopping experience often seems more personal than the in-person store visit. While mall clerks robotically attempt to upsell whatever product their manager overstocked, online retailers suggest additional products and services based on your known preferences. Upselling has long been a retail profit enhancement tactic - online retailers turn it into a customer benefit.

Another significant difference is that unlike brick-and-mortar retailers, catalog and online companies have the option to hire and train a small core of centrally located customer service representatives. As a result, the company's leadership exerts direct influence on coworker development and organizational culture.

Physical retail chains face a tougher challenge. A far-flung empire of buildings, managers, and part-time coworkers presents numerous points of failure. As the survey notes, some physical retailers do a good job, but the world of shopping has changed, and it will be interesting to see whether in-person retailers will find a way to benefit from the customer service innovations of their online competitors.

Customer Service Heroes: Veterans Health Administration

2010-03-25T07:03:51Z

Did you know that the Veterans Health Administration is the largest single medical system in the country? It is also one of the most efficient, and, according to numerous independent surveys, provides the highest quality of care.

A colleague frequently praises the VA for ease of use after he takes his father, a World War II veteran, to the VA Medical Center in Long Beach, California.

"We wait, just as one does at any doctor's appointment. But when we see the doctor, he or she knows my dad's history, knows what the plan is for this visit, and can instantly review and adjust his prescriptions. By the time we walk down to the pharmacy, everything's ready. We order refills online and they arrive at the house without a hitch."

I've heard similar stories from others, and wondered what measures and methods helped such a giant organization provide such excellent service. The question is more intriguing because many people imagine VA hospitals to be dirty, inefficient, uncaring places, as depicted in such films as Born on the Fourth of July.

Much of the VA's success comes from clarity of mission: the VA serves those who have served, and does so proudly. But the big secret of their turnaround is something known as VistA, the Veterans Health Information Systems and Technology Architecture. I don't understand technology all that well, but this seems to be a clear case of problem-solving engineering - and everyone can understand the results.

According to a 2005 article in Washington Monthly, "...the National Committee for Quality Assurance today ranks health-care plans on 17 different performance measures. These include how well the plans manage high blood pressure or how precisely they adhere to standard protocols of evidence-based medicine such as prescribing beta-blockers for patients recovering from a heart attack. Winning NCQA's seal of approval is the gold standard in the health-care industry. And who do you suppose this year's winner is: Johns Hopkins? Mayo Clinic? Massachusetts General? Nope. In every single category, the VHA system outperforms the highest rated non-VHA hospitals."

In various incarnations, VistA has been in development since the 1970s and in use since the 1980s, winning many prestigious awards along the way. To say that VistA is an electronic medical record barely scrapes the tip of the iceberg. The system includes advanced imaging and communications capabilities, and offers an elegant interface accessible to every level of healthcare worker in the VA system.

Internal communication has improved dramatically since the adoption of VistA, raising the VA's pharmacy prescription accuracy rate to 99.997%.

The VistA software is in the public domain, available to anyone who cares to download and implement it. Of course, "not-invented-here syndrome" is so prevalent that most healthcare systems still rely on expensive and less effective proprietary systems. Even the Department of Defense does not use VistA, which resulted in congressional chiding after healthcare scandals involving returning Iraq and Afghanistan veterans.

It takes more than a good information technology system to produce a customer service hero, but the VA's VistA shows how such tools help a motivated, mission-driven organization to provide excellent service on a truly massive scale.

Why I Teach the Way I Teach

2010-03-11T10:03:10Z

Recently, some instructors at Cal Poly San Luis Obispo questioned my qualifications for teaching a business seminar. This issue drew plenty of mockery (for both sides of the argument) in the local press.

Since the predominant theme of all my seminars - at several universities - is the importance of asking useful questions, I'd like to answer one that none of the critics has bothered to ask: Why do I teach the way I do?

Of course, that question breaks down into several others: Why do so many students receive "A" grades in the class? Why do I provide a meal for the students? Why do I not require exams? Why do I give rudimentary geography quizzes to seniors in a Global business class?

I give rudimentary geography quizzes because most Americans - and too many Global Business students - cannot identify the Straits of Hormuz, yet when we see it on a map we understand instantly why our entire economic future is tied to this narrow waterway. On a blank map, most Americans cannot identify Iraq. Or Missouri. Ignorance of world geography limits our understanding of other cultures, and that limits our ability to engage with other people. I want students to use their eyes - as well as their minds - to understand the lay of the land around them and around the world.

I do not require exams because I am interested in what people know, not what they can remember for a few hours after cramming. The students are tested every week through their required participation in class, where each must ask three questions related to selected stories in the news. Many students make it through four years of college without ever raising their hand to ask a question. Not in my class. Every student learns to look me in the eye, speak clearly, and ask intelligent questions about the news of the day. And guest lecturers will assure you I am relentless on this point - students are required to rephrase a question dozens of times until they can ask it cogently and clearly.

Anyone with a basic knowledge of blood sugar knows you cannot nourish people intellectually if you starve them physically. I provide a meal for the students because four hours is too long to go without food. I treat my students like human beings - why should I not? Moreover, many of the most important conversations in business and life occur over meals, and it's a great pleasure watching students hone their conversational skills in a relaxed atmosphere, sharing ideas and learning about each other's business concepts and future plans.

The most controversial and most often misreported aspect of my class seems to be the fact that I guarantee an A to each student. This is not correct. First of all, this only applies to surviving students. A failing grade on any quiz/assignment is grounds for being dropped from the class, as is arriving late or missing class more than twice. My class is a bit more like a real world business: you either make it or you don't. I also find that grades often say more about our measurement system than what is being measured. Successful managers know that you get what you measure, and too many schools measure their students' ability to game the grading system. I don't want to deal with students trying to get a good grade. I want to deal with students who can fearlessly engage, debate, discuss, teach, and learn with one another.

At most schools, my classes are composed of seniors. I like to think I'm giving them a little taste of boot camp for entering the real world. Because, make no mistake, college is not the real world. As artificial worlds go, it's one of the best. But the transition from grade-grubbing to problem-solving shocks many straight-A students. In the real world, you must apply your education. In the real world, your intellect must find relevance. In the real world, you must engage. And most of all, in the real world you must abide by Cal Poly's motto every day: learn by doing.

My responses about grades, exams, food, and geography summarize how I teach and why. I concede that my critics have a point: I am not qualified to teach the way many professors teach. Most students consider this my best qualification.

Customer Service Hero: Trader Joe's

2010-02-25T06:02:41Z

When was the last time an anonymous customer wrote a song and produced a music video praising your company? This YouTube video, called "If I Made a Commercial for Trader Joe's," has been viewed over half a million times.

Trader Joe's, a quirky, southern California-based grocery chain, appears alongside such companies as BMW, L.L. Bean, Amazon.com, and American Express on Business Week's 2009 List Of Customer Service Champs.

Over the years, Trader Joe's outstanding customer service has been attributed to its hiring choices (in The Supermarket of Struggling Artists, we learn how the retailer hires in the image of its customers), its high degree of local flexibility (in this story, a local store delivers food to a snowed-in octogenarian at no charge), and a business model that incorporates "...value, rareness, inimitability, and non-substitutability," according to the Graziadio Business Report.

Fast Company took note of Trader Joe's organic approach to customer service back in 2004, praising the company for its listening skills. The article explores how individual stores and coworkers act locally to respond to customer requests, ranging from product selection to store hours. They don't use focus groups, 800 numbers, or online forms - they just talk to their customers every day.

I think the company's success can be summed up in one word: Integrity. Trader Joe's knows who it is and who it wants to be. The company put a stake in the ground at its founding and has stayed true to its vision of friendly, human interaction. As my West Coast Asset Management colleagues and I wrote in 2003, "People talk about a trip to Trader Joe's as an EVENT. A quirky alternative for those who love to experiment with an ever-changing inventory, Trader Joe's offers gourmet fare at discount prices, and does so with humor and personality." Because it is not afraid to have a personality, Trader Joe's does not appeal to everyone, but its friends are loyal to the company, and the company is loyal to its friends.

Understanding its niche and maintaining its integrity has grown the company from a single store in Pasadena, California, to 339 stores in 25 states, and over $7 billion in annual sales. To provide outstanding customer service, it's essential to know who your customers are. Trader Joe's reminds us that it's also important to know yourself.

The Getty Gets the Art of Customer Service

2010-02-23T12:02:38Z

Tourism is a huge industry in Southern California, and over the years entrepreneurs and ambitious municipalities have worked hard to build a large number of competing attractions, from Disneyland to the Long Beach Aquarium to Universal Studios to the LA Science Center to The Getty Center.

Historically, arts and education organizations have not focused on customer service, perhaps because they did not see themselves competing with other attractions. But they do compete for discretionary spending, and some have begun to recognize the value in providing an excellent visitor experience. Excellent customer service helps turn visitors into donors.

Friends tell me that The Getty provides one of the best customer service experiences an art lover can find. Long before you arrive at The Getty's simple, orderly parking structure, you can learn about the museum and plan your visit at its simple, orderly web site. The site is laid out very clearly, so that even infrequent web users see key information immediately.

Upon arrival, visitors marvel at the location (overlooking Los Angeles and the Pacific Ocean), the architecture, the gardens, and, of course, the art. But The Getty offers something else that impresses visitors from all over the world: everyone on staff, from the guards to the gift shop to the food concessions, offers cheerful, friendly, patient assistance.

I do not know whether this is the result of a customer service culture promoted by the leadership of the organization, or a more organic outcome of the environment and the people it attracts. Certainly, the open spaces, beautiful buildings, pools, fountains and gardens spread a feeling of calm and joy to visitors and workers alike, but I suspect a sense of mission also permeates the staff and volunteers - they believe in The Getty's role as a community resource. Other than a charge for parking, there is no admission fee.

Why should customer service matter to museums? Reach Advisors' museum audience survey showed that "only 8 to 16% of visitors to science museums, children's museums, outdoor history museums, and cultural organizations indicated that they felt that ‘the staff really cares about me and my family.'" But among those who DO feel the museum staff cares, visitors are significantly more likely to become members, to contribute, to praise and promote, and to visit often.

I think The Getty gets it. Can you think of any other museums that provide outstanding customer service?

Bad Service Creates Opportunity

2010-02-12T05:02:59Z

For many years, conventional business wisdom held that a satisfied customer might mention your company to one or two people, but a dissatisfied customer would tell nine. Today, the average Facebook user has 140 friends who will surely be instantly notified of customer service transgressions. Millions of people write blogs, and while many may have no readers at all, many others boast readership far exceeding the nine people an unhappy customer of the past would contact.

One might think that widespread, credible, instantaneous communication puts a lot of power into consumer's hands, and it does, but one would also have to wonder why bad customer service is still so prevalent.

In a blog entry called The Rise of Business Populists, Fast Company cofounder Bill Taylor quotes a Harvard Business Review article that pretty much explains why bad service persists: it's profitable. Mobile phone companies, for example, all find slightly different ways to mistreat their customers, but there seems to be an unwritten understanding that all of them will "infuriate their customers by binding them with contracts, bleeding them with fees, confounding them with fine print, and otherwise penalizing them for their business."

Consumers cannot exercise their ultimate power - the power to vote with their wallets - until they have a slate of candidates. Dissatisfied customers have a louder voice than ever, but the power in that growing chorus accrues to entrepreneurs. When companies habitually abuse customers, Taylor points out, "...it constitutes an open invitation for blank-sheet-of-paper newcomers to right wrongs and change the game."

He cites Southwest Airlines as an example - noting that its recent decision to not charge for checked bags is part of its long-term strategy to simply treat customers better than its competitors. Any first year economics student recognizes that availability of substitutes significantly impacts price elasticity. If there were no Southwest Airlines, the other carriers would not have to charge for bags because they would still be charging two-to-three times as much for each ticket. Southwest changed the game in 1971 by focusing on customers, and the other airlines still cannot figure it out.

Some people think they cannot be entrepreneurs because they don't have a big, new idea, but you don't have to invent something new to be an entrepreneur. You just have to solve a problem. Aspiring entrepreneurs should search the Internet every day for customer service horror stories. These companies are vulnerable to competition and their customers are looking for an alternative. Why shouldn't it be you?

The Eye of the Master

2010-02-06T05:02:33Z

In the comments for last week's entry on Zappos.com, Tamara Windt from Loyola Marymount University's Entrepreneurship Program praised a local restaurant called Mama D's.

According to Tamara, the Manhattan Beach restaurant is "a cozy little place that has a line around the block each night." She attributes this to unexpected extras, such as complimentary garlic bread, pizza, and other treats for the patrons in line. The family-friendly restaurant also keeps a stack of toys and games on hand for antsy children.

I haven't had a chance to check out the restaurant in person, but something written on the menu by Mama D caught my eye: "Papa D, one of the children or I constantly supervise the cooking. We feel it is a sincere honor and a privilege to serve you. At Mama D's we are devoted to insuring that you truly enjoy your meal and that you have a Wonderful and Memorable Experience."

Clearly, Mama D's is a family restaurant in more ways than one, and there are two points that reveal how the business embeds exceptional customer service in its culture. First of all, the owners recognize that inviting you into their business is the same thing as inviting you into their home, so they take pride in treating you like an honored guest. The reference to a "wonderful and memorable experience" shows that Mama D understands she is not in the food business, but in the hospitality business. People can go many places for a plate of food - Mama D promises much more, and her coworkers know exactly what has been promised. As the menu says, "We are here to please you!"

The other point that speaks to the organization's service ethic is the fact that a member of the family personally supervises the cooking at all times. This reminds me of the Benjamin Franklin saying, "The eye of the master will do more work than both his hands." Mama D takes responsibility for the quality of her restaurant's food, building a personal connection between her family and yours. Every bite you eat at Mama D's has been personally approved by the owners.

Of course, talk is cheap. But the "line around the block each night" suggests that Mama D and her team walk the walk. Still, to be absolutely sure, I think some in-depth, on-site research is in order. Buon Appetito!

Customer Service Heroes: Zappos

2010-01-27T10:01:56Z

Last May, I wrote about Zappos.com CEO Tony Hsieh and his devotion to coworker and customer happiness. In July, Amazon acquired the online shoe retailer.

Zappos' success seems to be the payoff for a very big gamble on customer service. In the shoe business, customer satisfaction depends on fit - physical and stylistic - so Zappos goes out of its way to ensure customers get exactly what they want. The company's phone representatives actively encourage callers to order products just to try them on, because Zappos offers free return shipping for a FULL YEAR.

In fact, shipping is free in both directions, and most customers get an unannounced free upgrade to overnight delivery, even though the website says shipping will take 2-5 business days. Exceeding expectations is built into the business model.

Other elements that contribute to the company's culture of customer service include call center and warehouse management. Call center representatives at the Las Vegas headquarters work without scripts, quotas or time limits on calls. Instead, they devote themselves to relationship building and innovative problem solving. The warehouse in Kentucky operates 24/7, prioritizing the fastest possible turnaround on each order over cost efficiencies in the operation.

A lot of Zappos' operations rely on trust, which Hsieh's research showed was a key component of happiness. The company trusts its customers, coworkers and vendors, and that respect is returned. Certainly, some people abuse the relationship by returning shoes irresponsibly, but Hsieh and his team do not penalize everyone else because of a few misdeeds.

The culture of trust is also supported by a culture of excellent execution and an inventory advantage over other shoe sellers. According to customer Robert Schaefer, "I was impressed with how much emphasis they place on making it easy to return shoes. It is noticeable as soon as you open the box. I've yet to return any shoes, but the knowledge that it will not be a huge hassle makes me a return shopper, and no shipping charges (amazing) makes you feel that they really want your business, not just your money. On the first visit, tears welled up in my eyes when I conducted a search for men's shoes SIZE 15, and some 1,000 or so product hits came back. I could shop bricks and mortar retail every day for 10 years and not find that many size 15 shoes."

The first of Zappos' 10 Core Values is "Deliver WOW Through Service." As the company defines it, "To WOW, you must differentiate yourself, which means doing something a little unconventional and innovative. You must do something that's above and beyond what's expected. And whatever you do must have an emotional impact on the receiver. We are not an average company, our service is not average, and we don't want our people to be average."

Perhaps this is why Zappos' performance is so far above average.

Customer Service Heroes: Abraham Lincoln

2010-01-25T06:01:25Z

As I collect stories about customer service, it occurs to me that our notions of good customer service play out in the folklore of our nation, and no one stands taller in the folklore of America than Abraham Lincoln.

Before he was President, and even before he was an attorney, Lincoln managed a small country store. Two anecdotes from this period account for Lincoln's nickname, "Honest Abe."

On one occasion, while doing his bookkeeping at the end of the day, Lincoln realized that he had overcharged a customer by three cents. He immediately stopped what he was doing, traveled a considerable distance on foot, and returned the money to the astonished customer.

Similarly, Lincoln one day discovered that his scale had malfunctioned, resulting in a customer receiving less tea than she had purchased. Once again, the young clerk traveled a great distance on foot to make up the deficit.

Contrary to our images of pastoral innocence, the America of Lincoln's youth was a brutish place, and business was governed by the maxim caveat emptor - let the buyer beware. This is why country folk considered Lincoln's honesty exceptional. Lincoln saw that the foundation of good business practices is a devotion to fairness. And the responsibility for fairness rests on the shoulders of the business, not the customer. As Lincoln's honesty became the stuff of legend, it set the standard for ethical business behavior.

At first glance it seems odd that in both cases, Lincoln was lauded merely for correcting his own mistakes, but the business literature on customer service often revolves around tales of recovery. A company providing consistently good service gets taken for granted, whereas a company that goes out of its way to correct a mistake and satisfy a disgruntled customer often turns that customer into an evangelist, winning praise and enthusiastic referrals.

Today, we take for granted that commerce is supposed to represent a fair exchange between business and consumer, and we enact consumer protection laws to discourage dishonest practices. To earn a reputation for outstanding customer service, companies must do more than correct their mistakes - they must also provide some form of premium or "hassle compensation" to regain the trust and loyalty of unhappy patrons.

As the land of opportunity, America owes a great debt of gratitude to Abraham Lincoln, not just for his political and moral wisdom and courage, but also for his role as a customer service hero.

The Lawn or The Porch?

2009-12-23T05:12:58Z

This generally joyous season of giving is also a stressful shopping season for many. Great customer service can make the difference between cheerful "Noels" and grumpy "Bah! Humbugs!" In the best organizations, excellent customer service is an ingrained habit, not just a marketing initiative.

Former swimsuit model Kathy Ireland made the successful transition to mega-successful entrepreneur, creating a design and retailing empire. Forbes called her "the prototype for model-turned-mogul."

I had the good fortune to speak with Kathy recently, and she shared a story that I believe explains much of her success. As a child, Kathy had a paper route, and her father told her to never throw the newspaper on people's lawns, but to take the extra care to place the paper on the porch. Thus, in her first entrepreneurial endeavor, Kathy Ireland got in the habit of providing good customer service. Her work ethic centers around giving - giving her best effort for her clients and customers.

Entrepreneurs who internalize excellent customer service as part of their character go farther, faster. Kathy went into business to help busy moms. Do you know whom your business exists to serve? Are you giving them your best? Do you throw the paper onto the lawn, or place it on the porch?

From all of us here at PaulOrfalea.com, Merry Christmas, Happy New Year, and best wishes for a prosperous 2010!

Customer Service Heroes: UPS Driver Daryl Hansen

2009-12-16T11:12:21Z

Few companies live to the ripe old age of 100, and fewer still are more vibrant at 102 than at any other time in their history. United Parcel Service (UPS) was founded by a couple of teenagers as the American Messenger Company in 1907. This week, two events helped me understand why the company is going strong in 2009.

First, I saw an article in the Santa Barbara News Press about UPS using bicycles to increase the agility of the delivery team while also reducing fuel waste. Over its long history, the company has experimented constantly to improve efficiency, investing in compressed natural gas vehicles and sophisticated routing software that reduces the time vehicles spend idling in left turn lanes. For a company like UPS, environmental and economic forces are well aligned with the times - fuel efficiency is good citizenship and good business.

Yet, the other event of this week was even more impressive than the company's fuel-efficiency initiatives. I encountered driver Daryl Hansen. Daryl is one of the most positive, can-do people I've ever met. He is always smiling, and takes great pride in his job. He says that he works hard to create a happy atmosphere on his route, and that other drivers love to cover for him because customers are so happy to see the UPS truck arrive. He says he always gives a smile because it increases the odds that he'll get one back - he creates his own work atmosphere.

I have no doubt that Daryl would bring the same enthusiasm to any workplace - as a cancer survivor he knows a thing or two about priorities in life. But UPS deserves some credit for maintaining a culture in which people like Daryl can thrive.

The September 2006 issue of Outlook Journal identified some of the key cultural values that help UPS "build on past successes and adapt to future challenges."

One of the values driving UPS is the company's devotion to long-term relationships. They so aggressively promote from within that one HR vice president tells his college recruiters, "You're hiring a CEO today. We don't know who it is, but somewhere, we're hiring one. So make sure you treat that person properly." The company's attitude that "we hire people for careers" finds expression in the fact that 68 percent of full-time managers were promoted from non-management jobs, while 78 percent of the company's vice presidents began their careers in non-management roles.

Another value close to my heart is the idea that "We are all owners." According to the Outlook Journal article, "Today, more than 53 percent of full-time employees own stock, and together, the company's employees, retired employees and families of the founders own more than 40 percent of outstanding shares."

Pride of ownership drives exceptional customer service, as we see when Daryl Hansen visits the Orfalea Foundations. He is very proud of his company, and his coworkers have every reason to be proud of him.