Wednesday, July 18, 2007

Service essential for development

A few months ago one of Jamaica’s leading entrepreneurs said to me that there is only one world-class company in Jamaica. At the time I questioned what he was saying, and suggested to him that there were about three. He was insistent that there was only one and when I enquired as to why he said so, his answer was that this was the only company that year after year received world class awards without fail, and has been doing so for a while. The company he said is Sandals.

I still believed that there were two other companies, and when I think about it now, it was only because I wanted there to be more world-class companies in Jamaica. After thinking about it for all this time I am inclined to agree with him.

A few weeks after speaking to him I went to see Butch Stewart, for what was supposed to be a 15-minute meeting, and ended up being with him for more than an hour. Among the topics I spoke to him about was his start as a businessperson and the obstacles he faced along the way. What stood out more than anything else, and what I believe is behind his success, are two philosophies he holds dear. These are (1) good customer service is the most important rule to him; and (2) his affinity to hire good people and leave them to manage.

Customer service
After all, if he did not emphasize quality customer service, then there is no way that Sandals could grow to build such an international reputation, as the company is in an internationally competitive business. He also could not succeed against the odds of the high crime levels and poor infrastructure in Jamaica. Additionally, if he did not hire good people and trust them to work, then he could not grow the business to the size it is by trying to be hands on with everything, as many Jamaican businesspersons do.

About two weeks ago I had to go to the jewelry store to replace the battery in a watch. The first, well-known, store I went into they said that they could not replace the battery as the person responsible for that function was at lunch. Amazed at this response, I asked them if they were really open for business. I went to another store and they took the watch and damaged the back when opening it, as they apparently did not have the proper tool to do so. They never said anything to me and just presented the watch and the cost of the battery. When I pointed out to them that the watch was damaged the owner said that in order to open it he had to force it open. Never mind the fact that he has damaged the watch, as he was trying to sell a J$200 battery.

Well I immediately vented my anger and told him that I would not be paying for the battery. He offered no compensation, as would have happened in developed markets, without considering that I would never set foot in that store again and would relate my experience to at least five other persons. I am sure that some other customer must have at some time suffered a similar fate. But it won’t be the six persons, including myself, that will never shop at that store again.

This incident was what got me to thinking about what make a company, and country, successful. At the heart of any efficiently running market economy is the aim of providing good customer service in order to increase profits, due to competition. Of course one is assuming that the objective of the company is profit, and that the competition provides better service. The problem with Jamaica may be that the level of service is so sub-standard that bad service is acceptable. In the case of Sandals because they have to compete with international destinations, and is already at a disadvantage with Jamaica’s image, they have to provide a world-class service and product in order to excel.

Regulatory environment
The Consumer Affairs Commission does not do much to raise the standards of customer service also, which is what I think an organization like that should be proactively doing. This is a symptom of our regulatory environment, which is not about protecting consumer rights but rather government’s interest. Case in point the OUR and RGD, which although they try communicate protection of consumer rights is really not set up for that. I also started to think about the reason why the Jamaican electorate has always been satisfied with poor service from politicians. The fact is that Jamaicans have never been used to good leadership. We are accustomed to substandard service from our leaders, from even before independence, so accepting mediocrity is our nature.

One of the reasons why many companies are unable to provide good service is because they are so consumed with poor back office operations that they don’t have the focus of good customer service. This is a major contrast between US and Jamaican companies. Local companies do not like to spend money on proper systems and good people. And if you do not have proper systems then it is very difficult to deliver good service and compete, as information is not readily available.

How then does poor customer service prevent national development? Well f we accept that economies are driven by the private sector, then it is fair to assume that the more efficient the private sector is then the more successful the economy will be. If we accept that private companies are the ones behind exports, therefore providing Jamaica’s foreign exchange, then we see where those with poor customer service may have a problem competing internationally. Poor service will drive inefficient businesses, which may mean relatively greater costs per production unit.

Another major reason also is that our regulatory environment does not seem to encourage competition. The first reason for regulations in Jamaica always seems to be restrict rather than monitor. So we tend to make the process for coming under regulations so difficult that many persons get frustrated, and would rather stay in the informal economy. One example of course is the TCC process.

The US market, on the other hand encourages new ideas, and so frequently new products and services come to the fore. A case in point is a new financial product in the US called “Death Bonds”. As the name implies it is a bond on someone’s life. If, for example, I am the holder of a $1 million life policy and need cash, I could sell the rights today to receive the premium when I die, to an investor. The bet by the purchaser is that I will die within a specified timeline, and the earlier I die the more profit he/she makes. The purchaser may, for example, decide to take the risk on someone who smokes and does not exercise that they will die in a specified amount of years and decide it is a good risk to take. Such a product may be taking it too far, as the US always seems to do, but it is this sort of innovation that leads to development of markets. And lets face it two things are certain in life, death and taxes, especially in Jamaica.

So in order for economies to develop they must be driven by companies. In order for companies to grow they must provide good customer service, which if not done is negative for international competitiveness. The plea to companies is to realize how important it is to deliver good customer service, in order to build a company and nation.

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