Office Intelligence: Rethinking the Rules of Business
By Tracy Mueller
Photographs by Matt Wright-Steel
OPEN magazine, Fall 2011
They lurk around cubicle corners and infiltrate mission statements. They hide in plain sight, unassuming in their influence but potent just the same. Proverbs and old marketers’ tales that have for years colored the way many of us do business, whether we care to admit it or not.
Their simplicity does not typically invite careful inspection. And yet, if the unexamined life is not worth living*, then surely the unexamined adage is not worth following.
So we picked 10 business rules of thumb and put them under the microscope to see what they’re really made of. Some still hold true today. Some are ready for retirement. And some have been woefully misunderstood, which, when you think about it, probably means they weren’t great rules to begin with.
- It's not personal, it's business
- Location, location, location
- The customer is always right
- Jack of all trades, master of none
- You have to spend money to make money
- The best supply chain strategy is "Just in time" inventory management
- If I earn another $1,000, I'll lose money because I'll be bumped into a higher tax bracket
- Corrupt people are evil
- It's not what you know, it's who you know
- Do what you love
Leon Chen knows all about the personal side of business. Chen, BBA ’01, co-founded warm-cookie delivery franchise Tiff’s Treats with Tiffany Taylor while they were dating in college. The partners in business and life were married in 2010.
“Business is personal. You deal with people, and it’s very rarely black and white because people make decisions based on their personal beliefs and preferences,” Chen says. “But you can’t maintain relationships and be nice to people just hoping to get something in the end.”
Chen’s own beliefs have led him to make his business as personal as possible. He and Taylor have drawn on personal relationships to build their website and design their graphics. They developed a friendship with their bookkeeper, whose husband’s business partner eventually became a major investor in the company.
“It’s always been an advantage to me because then I know the kind of person I’m getting into business with,” Chen says of working with friends. “Our whole company is built on personal relationships.”
And he says he couldn’t have built the company with anyone other than his wife.
“Being together every minute of every day for years building the company—that wasn’t easy, but they’re still some of our favorite memories—being stuck working together for hours upon hours,” Chen says. “It’s a lot sweeter to have accomplished what we have together.”
If a food truck doesn’t tweet, does it really exist?
Kogi Korean BBQ is a fixture of the Los Angeles street food scene, but in order to enjoy its popular short rib tacos, fans have to track the five roaming food trucks via Twitter and Kogi’s website to find out when and where they will park next.
For the 21st-century business, location, location, location now often coincides with social media, email blasts and online customer reviews.
Jay Steinfeld, BBA ’76, is the founder and CEO of online retailer Blinds.com and says investing in prime digital real estate was paramount to turning his company into an $80 million business.
“Our domain name gives us a competitive advantage, just like someone who has a location in Times Square,” Steinfeld says. “That’s going to get you free traffic. We have tens of thousands of people who type in ‘blinds.com’ looking for a company that sells blinds. It’s free advertising.”
Steinfeld previously owned two brick and mortar stores in Houston. But five years after launching an e-commerce site in 1996, he was making as much money online with two employees as he was in his stores, working 10- to 12-hour days, seven days a week. So he sold the physical store, bought an online competitor and has been growing ever since. The company is now the top online seller of window blinds worldwide.
But just like a physical location, digital real estate is about more than the address.
For Steinfeld, that means a modern logo and a clear, uncluttered home page—think of it like a front entrance. “If you don’t have it identified with good signage, people will go right past it,” Steinfeld says.
The website also needs to be easy to navigate for a variety of purposes, including browsing and buying, comparison shopping, customer service and learning what customers are saying about products and services. Blinds.com has thousands of unfiltered product reviews on the site.
“Our whole mantra is to make it surprisingly easy to buy custom products,” Steinfeld says.
A smart business objective no matter where you’re located.
Henry Ford once said, "If I had asked people what they wanted, they would have said, ‘faster horses.’"
Long hailed as the ultimate customer service mantra, whether by department store executives or disgruntled shoppers, “The customer is always right” may actually be wrong. Or at least overly simple.
“At Pizza Hut, we believe that 100 percent customer satisfaction is the only acceptable option,” says Kurt Kane, MBA ’98 and chief marketing officer for the company. “But this means we focus on creating the best possible products and experiences. It doesn’t necessarily mean that we do exactly what customers ask us to do.”
Like Ford envisioning the Model T, Kane thinks it’s important for brands to think beyond what the customer expects, pointing to Pizza Hut’s successful expansion into selling chicken wings.
“You have to push your brand to give consumers something they didn’t know they needed or wanted until you provided it. That’s how you achieve growth in your business and improve customers’ lives at the same time.”
But what about responding to customer complaints?
Robin Boesch, BBA ’00, co-owns the y&i clothing boutiques in San Francisco and Austin with Robyn Sribhen-White, also BBA ’00. She says it’s difficult to live by “The customer is always right” when what the customer wants violates established guidelines—the store’s return policy, for instance.
“As long as you adhere to the policies, we try to go above and beyond to make it a great experience for you,” Boesch says.
She adds that it’s also important to balance customers’ wants with protecting employees.
“We want our sales girls to feel like if they follow our policies and say something to a customer, that we’re not going to come around later and say, ‘Oh we’re the good guy, we’ll make an exception for you.’” Boesch explains.
But even if they can’t give in to a customer’s requests, Boesch listens to the complaint, apologizes, consults the sales person if necessary and offers a discount for a future purchase.
“Even if the customer is wrong, their experience wasn’t good in their mind. And that’s what’s important.”
Kane agrees that the customer’s perception becomes the company’s reality.
“When it comes to the area of value, the customer is always right,” he says. “If they think or say that what you provide for the money isn’t a good value, then you need to listen and take action.”
Jack of all trades, master of none
The casual baseball fan has probably never heard of Tony Phillips, but the punchy journeyman spent 18 years in the Major Leagues, earning a World Series ring with Oakland during the famed 1989 “Earthquake Series” and racking up more than $21 million during his career.
A key to Phillips’ success was his versatility. He played every position except pitcher and catcher and was the first Major Leaguer to start at least 10 games at five different positions.
"I think Tony has shown that having the ability to do a lot of things is a big deal and can make you a lot of money,” his Oakland manager, Tony La Russa, told the Baltimore Sun.
Operating as a jack of all trades worked out for Phillips, but does the “master of none” flip side more typically result in a mediocre career?
“Being someone that knows all the different areas of an organization generally makes you more marketable, as opposed to someone who’s just a specialist,” says Sekou Bermiss, an assistant professor of management, who researches organizational identity and the management of knowledge workers.
“But part of this new knowledge economy is you have to be able to come up with really good ideas, and in the long run, those with a lot of expertise should actually do better. Get expertise in something, just don’t become pigeon-holed.”
Bermiss points to musicians as an example.
“Playing a little bit of everything is never going to help you become the top in your field,” he says. “You can play around with other instruments, but you better be world-class in at least one thing.”
In the business world, having a knowledge base in one area—PepsiCo CEO Indra Nooyi calls it your “core horsepower”—can help guide decision making as you move out of that base.
“There are a lot of studies showing that a CEO will frequently see things from the paradigm of their specialty—finance, operations, what have you,” Bermiss says. “And if you don’t have any kind of home, it’s harder for you to make decisions because you don’t have that lens.”
Of course, being a specialist doesn’t mean operating in isolation.
Any successful innovator knows that the best ideas often come not from creating something entirely new, but from combining existing things in a new way. Industrial design firm IDEO creates innovative products and systems by finding experts in fields like engineering, design, business and manufacturing and bringing them together to solve problems.
In other words, a company of specialists collaborating with each other becomes the aggregate jack of all trades.
And that, says Bermiss, is a formula for long-term success for both the employees and the organization.
You have to spend money to make money
“It’s another way of saying, ‘Nothing ventured, nothing gained’ and the counter to, ‘If you build it, they will come,’” says Jim Nolen, distinguished senior lecturer of finance. “If you don’t venture anything, then you can’t be unhappy with your returns, because you didn’t risk anything.”
Management lecturer Rob Adams agrees that this old adage still holds water. As director of the cross-campus startup accelerator Texas Venture Labs and also an angel investor, Adams has worked with hundreds of entrepreneurs on launching new companies. He says usually the mistake is spending money the wrong way rather than not spending enough.
“They overspend on the product or service development and underspend on sales and marketing,” Adams says. “The rule of thumb I tell people to start with is both equal amounts. So, if it costs $50,000 to build the product or service, I better have $50,000 to sell and market it.”
Nolen, who sits on the board of directors of an independent bank, a recycling company and a medical distribution company, adds that businesses should invest strongly in intellectual property and hire the best possible staff and advisors.
“When you own your own company, a lot of times you think you’re making money by saving money, by being cheap,” Nolen says. “But you can pay a $500-an-hour attorney who can tell you the answer off the top of his head or a $200 attorney that’s got to research it for three hours. You think you’re saving money but you’re not counting the opportunity costs.”
When all else fails, some go for the “fake it ‘til you make it” approach. Nolen compares it to the idea of dressing for the job you want.
“I knew a guy with an HVAC company who used to advertise telephone numbers for north, central and south locations, and they all rang at the same place,” Nolen says. “He made himself look bigger than he was, just like Dell did when they started. You have to look like you’re going to be around for the long haul.”
The best supply chain strategy is “Just in time” inventory management
The headlines were eager to declare defeat:
“Japan Earthquake Hobbles Car Makers”
“Disasters Show Flaws In Just-In-Time Production”
“Lean Production: Another Casualty of the Japanese Quake?”
Quicker than you can say “Toyota,” pundits began to question the just-in-time inventory strategy as the global supply chain recuperated from the March 2011 Japanese earthquake.
Part of an overall “lean” strategy to streamline the manufacturing process, the just-in-time approach keeps inventory at low levels, often just what is needed on a given day. But when entire manufacturing facilities were shut down due to the earthquake, the ramifications were felt worldwide. General Motors halted production and laid off workers at plants in Buffalo, N.Y., and Shreveport, La., because of a shortage of parts from Japan.
Are the disruptions caused by unforeseen natural disasters a fatal chink in the just-in-time armor?
Not so fast.
“The flip side of leaner supply chains is that processes get streamlined and standardized, which improves the ability to recover,” says Sridhar Seshadri, professor of operations management and author of the book, “Toyota's Supply Chain Management: A Strategic Approach to Toyota's Renowned System.”
Seshadri suggests rather than scrapping just-in-time, companies need to bolster their disaster preparedness, a strategy many firms ignore when times are good.
Seshadri’s research partner, Atanu Chaudhuri at the Indian Institute of Management, Lucknow, says deciding who owns disaster preparedness is also a challenge.
“[One department] might not have complete understanding of the operational implications of the various risks,” Chaudhuri says. “It needs to be a cross-functional activity probably under a chief risk officer.”
Seshadri and Chaudhuri recommend a four-step approach to disaster preparedness:
- Classify products and industries based on the transparency required by regulators and shareholders. “Industries that require less transparency or regulation might be more prone to unexpected shutdowns,” Seshadri cautions.
- Create a potential disaster map for all global locations of the company, its suppliers, and competitors. Base it on the history of natural disasters, accidents, supply shortages, and labor unrest in the area.
- Classify potential disasters to create a location’s overall risk rating. Rate the severity of a disaster by assessing its impact on the firm, industry, society, shareholders, and the entire supply chain.
- Prioritize disaster management actions. Create safety standards and determine related costs. Build in flexibility to be able to temporarily shift production to other facilities. Create a detailed response plan for evacuation and recovery.
“Good companies will follow these principles but will know how to adjust and adapt in extreme situations when things go wrong,” says Chaudhuri.
And as for the notion that having less inventory in stock makes disaster recovery more difficult?
“Lean philosophy is a system-level philosophy and it works,” says Seshadri, stressing that lean is about minimizing waste, not simply having less of everything. “From standards and protocols to communications and behavioral decisions, lean philosophy does work to anticipate and recover from problems.”
When President Obama proposed allowing the Bush tax credits to expire for the wealthy, some Americans thought reaching a higher tax bracket might cause them to lose money overall, effectively punishing them for bringing in a higher salary.
“That reflects a gross misunderstanding of progressive tax rates,” says Lillian Mills, professor and chair of the Accounting Department. “It’s a complete myth that getting up into a higher tax bracket will cost you money overall.”
In the U.S. progressive tax system, income is taxed in brackets. A progressive tax system with three brackets could work like this: 10 percent tax on the first $10,000 of income; 20 percent on income between $10,000 and $100,000; and 30 percent on income above $100,000. So if you earn $10,000, you pay $1,000. If you earn $100,000, you pay $19,000 in taxes (the first $1,000 plus $18,000 of tax on the next $90,000 (20 percent x $90,000 = $18,000).
But what if you earn an extra $1,000 to put you over the $100,000 line and into the 30 percent tax bracket? Do you pay more than $30,000 in taxes?
“Absolutely not,” Mills says. “You just pay the 30 percent rate on your last $1,000 of income, bringing your total tax burden up to $19,300.
“It is true that high-income people already in the top bracket lose money when the rates go up,” Mills continues. “But middle-income people still increase their take-home pay by earning more, even if it moves them into the top bracket for the first time.”
The Bush tax cuts are due to expire in 2012.
Corrupt people are evil
Psychopath, egomaniac, nasty.
The curses hurled at Ponzi-schemer Bernie Madoff depict a man devoid of character—or rather, possessed of an abominable one.
"What kind of monster could do that to people?" the world wondered. And while authorities say Madoff did indeed set out to deceive investors, the reality is that even good people can find themselves engaging in fantastically unethical behavior.
“Most of those who went to work for Richard Nixon went with the intention to do a good thing. I’ll bet not one of them thought, ‘Now is my chance to commit a felony,’” said former White House staffer Egil (Bud) Krogh during a guest lecture to MBA students in January. Krogh was a member of the Watergate “Plumbers” and served four-and-a-half months in prison after pleading guilty to conspiracy charges.
Krogh said he mistakenly let his desire to be a team player override his better judgment.
“Sometimes that [loyalty] blinded me to some of my other obligations I had as a lawyer and as a public servant,” Krogh said.
He also pointed out a lack of “emotional intelligence” as contributing to his downfall.
“I had a great deal of technical proficiency but couldn't quite read the environment clearly enough to say, ‘Wait a second, I'm in a dangerous area right now.’”
Bad decisions often sneak up on us rather than bust through the front door, says Robert Prentice, professor of business law and chair of the Department of Business, Government and Society.
His advice: everyone, no matter how seemingly noble, should stay on guard at all times to avoid ethical pitfalls.
“Keep your ethical antennae up so you can spot ethical minefields before you enter them,” Prentice says.
Research shows that most people believe they are more skilled, ethical and generous than others, which Prentice says can produce a dangerous sense of unguarded entitlement and the perfect environment for unethical decision making.
“Under certain circumstances, we give ourselves license to play a little faster and looser than we normally would,” says Prentice, adding that people will take more risk to prevent a loss than to achieve a gain. “And we don’t realize how much the last decision can affect the next decisions we make.”
So the next time you find yourself scoffing at the despicable character of a trouble-maker, consider that you may be moments away from your own ethical misstep.
It’s Not What You Know, It’s Who You Know
“At first glance that idiom seems to be correct,” says Leslie Cedar, MBA ’98, who as the new executive director of the Texas Exes spends considerable energy thinking about the value of a network. “But when I think about how it applies to long term and meaningful success, I don’t agree with it.
“I think it’s both content and connections. You reach out to your network to help further your career, but if you don’t have the content to back it up, then it’s a pretty short-term fix.”
However, Cedar admits that if you have the talent and knowledge, knowing the right people certainly makes things easier.
“After my first position post-MBA, every job I’ve gotten has come via someone I know who recommended me for the position, or someone I know hired me directly,” she says. “That’s one of the greatest things about the business school experience. The people you meet in the classes or the extracurricular events are those that could potentially cause such a meaningful connection for you later on.”
Cedar’s advice for how to benefit from who you know without becoming obnoxious?
In addition to simply being a likable person, do the work of networking yourself instead of relying on others to sell you.
“Give [your connection] enough ammunition to have the next door opened, and then take over,” Cedar says. “That gives you the ability to control the messaging but also shows your drive and willingness to stick your neck out. Employers really value that.”
Cedar adds that it’s unlikely a connection alone can advance you, nor should it.
“People you know can help you get into the conversation, but it’s 100 percent up to you to actually win the deal or to close the business or close the new position. You shouldn’t make them do the work. And you better make sure you’re seriously intent on providing a quality reason to be in the conversation.”
Finally, perhaps the most important rule in networking: return the favor when someone comes around wanting to know you.
Which is worse—no passion or no money? Who’s happier—the starving artist or the bored executive?
“If you’re happy with what you’re doing, you’ll be much more successful at it,” says Velma Arney, BBA ’87, MBA ’96 and director of undergraduate career services at McCombs.
Arney is a professional career advisor, but she also speaks from personal experience.
After majoring in finance “because everyone else did,” she advanced through the corporate world and then returned to Texas for her MBA. Only, she found herself motivated more by helping fellow students sort out their own careers. When the opportunity came to join McCombs’ career services department and oversee the undergraduate career advisors, Arney did some soul searching, reevaluated her priorities and accepted the job.
“That’s probably why I’m so passionate about this topic,” Arney says. “Because I understand it.”
When Arney is advising students, in addition to helping them figure out what they enjoy, she says it’s key to help students define what success means to them.
“That sometimes is a better way to help—to help them understand what success is for them personally versus what success is to everyone else,” Arney says. “Everyone will still reach those milestones at different stages in their life, but I try to put a few more steps along the way to help them reflect.”
But doing what you love doesn’t just mean you should buy a winery because of your passion for merlot. Arney says it’s important to think seriously about less romantic variables like location and salary, too. It’s also useful to keep in mind that no job is perfect.
And as for when you shouldn’t do what you love for a living?
In a blog post for the Harvard Business Review, marketing strategy consultant Dorie Clark offered four reasons to save your passion for your personal time: you love something but you’re not great at it; you hate the work that surrounds your passion; you’re too emotionally involved; and finally—the ultimate definition of a hobby—no one will pay you for it.