Saturday, December 31, 2011
One reason I love what I teach and research is because many of the lessons are applicable not just to business but to life in general. During this time of the year, we often read and think about resolutions for the New Year. Here is a bit of advice to those of us who want to stick to our New Year’s resolutions: choose just a few things that really matter and make a 100% commitment; not 90% or 95%, but really 100% commitment.
This advice comes from a case I taught in my service operations course last semester about Bugs Burger Bug Killers (BBBK), a pest extermination company. While all other companies in their industry promised to reduce pests, BBBK promised to eliminate them and gave a 100% service guarantee to boot. They said “if we don’t satisfy you 100%, we don’t take your money.” How much were their customers (hotels and restaurants) willing to pay for a 100% guarantee? A lot! BBBK charged ten times more than their competitors and made a ton of money.
What is beautiful about this guarantee is that it was BBBK’s 100% commitment to it that allowed it to provide it while still being very profitable. The lessons from BBBK are easily applicable to other businesses. When companies make a 100% commitment to their values or principles, they are more likely to be successful in achieving them for at least two reasons: 1- 100% commitment prevents them from giving in to short-term pressures and make exceptions. 2- 100% commitment forces them to make operational decisions or innovations they wouldn’t have made otherwise.
Let me describe these reasons using the following example from life. Say that one of the problems in your life is that you work too much and that you don’t spend enough time with your family. You know that this is bad for your and your family’s long-term happiness. So, during the next year you decide that you will dedicate your weekends to spend time with your family.
1- What do you do when there is an important project that is due Monday and by Friday evening you find out that you are way behind? Would you make an exception just this one time and work that weekend? I bet that without a 100% commitment, most of us would make this exception and many other exceptions like this and have short-term wins, like a project well delivered. But in the end, we will end up working most weekends again and lose in the long-term. We will probably regret all the time lost with our children.
If we are tempted to give in to short-term pressures in the context of our families, imagine how easy it would be to give in to them in the context of business. Unless certain values/principles are practiced 100% of the time, people may be tempted to make exceptions. They may make bad or unethical decisions, especially if they work for companies that are constantly under short-term performance pressures.
Making a 100% commitment to certain values or principles eliminates these exceptions and saves us from making decisions that hurt us in the long term.
2- When we know that we will spend all weekends with our family, our “work time” will be constrained. As a result, we will be forced to find ways to be more productive during the five days we spend at work. We will probably eliminate much of the time we waste surfing the web or hanging out in our colleagues’ offices and make lots of other decisions that make us more productive. We may become so productive that we may end up doing better both professionally and personally.
This again applies so well to companies. In retail, for example, there are some companies that commit to offering good jobs to their employees. They pay higher salaries and offer more benefits than their competitors. Having higher labor costs forces these companies to innovate in ways they wouldn’t have innovated otherwise. As I explain in my recent HBR article, these retailers end up making operational decisions that are very different than their competitors. And in the end, they perform much better than their competitors.
So that’s my two cents for New Year’s resolutions. Make a commitment and stick to it 100%.
Happy New Year!
Posted by Zeynep Ton at 4:52 PM