Category Archives: Revenue Risk Management

Doused Fyer: Does Our Obsession with Audacious Innovation Make Us Suckers for Scams?

 

What’s the difference between aggressive marketing and a sales scam?

The aftermath of the 2017 Fyer Festival  explores this question, and lawyers are debating the answer. Was the event a wayward business venture, or a get-rich-quick scheme? The festival’s originator, entrepreneur Billy McFarland, claims honest intentions, but blames faulty planning and bad circumstances for the festival’s demise.

Over-promise, then don’t deliver. Embedded within the debate lies a festering boil, epidemic in sales: the gap between a company’s marketing speil, and what customers get. With the Fyer Festival, though, it’s not a gap, but a chasm. Some question whether McFarland even had the wherewithal to deliver the flamboyant sales vision he created. Was he committed to keeping his promises? There are at least eight lawsuits pending against McFarland and his company, Fyer Media, and the courts will sort out the answers. The Fyer Festival has become “the focus of a criminal investigation, with federal authorities looking into possible mail, wire and securities fraud,” The New York Times reported on May 21st. This is not your run-of-the-mill business belly flop.

What was promised.  In 2016, McFarland promoted a mega-party scheduled for April, 2017 featuring music, celebrity chefs, gourmet food and luxury accommodations. Fyer Media showcased the venue as an island in the Bahamas called Fyre Cay – which doesn’t exist. One ticket package, the “Artist’s Palace,” was offered for $400,000, and provided four beds, eight VIP tickets and dinner with one festival performer.

To prospects, McFarland scrupulously maintained the festival’s high-end image. Rapper Ja Rule (whose real name is Jeffery Atkins) was touted as a celebrity business partner. Advertising listed musical acts by G.O.O.D Music, Major Lazer, and Migos. Fyer Media targeted millennials, and they sold about 8,000 tickets. To pump up revenue, the company also encouraged customers to pay $1,500 in advance for a digital Fyer Wristband to facilitate cashless transactions for “incidentals.” That added nearly $2 million to the top line.

But a few weeks before the event, as the Fyer hype engine was rocking at full throttle, a harrowing story was unfolding behind the scenes. According to a May 21 article in The New York Times,  In Wreckage of the Fyer Festival, Fury, Lawsuits, and an Inquiry,

“Expenses were swelling: Bed frames and beach chairs were rush-ordered; beach umbrellas had to be flown in, rather than shipped, because of late payments, according to three production staff members. Essential production tools, like walkie-talkies, never even arrived. Back at Fyre Media, the company credit cards were being declined for everyday office purchases.

Employees said they feared that their boss was using funds from their booking app to fund the festival. But Mr. McFarland reassured them in April when he said that Comcast Ventures, the investment arm of the cable and media giant, had agreed to invest up to $25 million in Fyer Media. In fact, Comcast had considered a deal, the company said, but passed ‘after conducting thorough due diligence.’ Mr. McFarland did not tell his employees.

As the festival date neared, the production crew’s wages, paid by wire or cash, arrived late, or short, and then stopped altogether, five members of the crew said.”

“As late as that Thursday evening [before the first weekend of the festival], Mr. McFarland and Ja Rule had continued to assure talent agents that all systems were go. But by Friday morning, both weekends of the festival had been cancelled. Within a few days, Mr. McFarland and the rest of his executive team had left the island, their site strewn with mattresses, empty Champagne bottles and other detritus.”

On April 1st, McFarland was still scrambling to find a location to accommodate the prospective partiers, scheduled to arrive on the 27th. McFarland finally secured a venue, Roker Point on Great Exuma Island. It was too little, too late. The festival was doomed.

What was delivered. Instead of luxurious digs and lavish buffets, arriving customers got tents, and cheese sandwiches on white bread. And lots of horseflies. Vendors lost money, too. Luca Sabatini claims his Miami-based company, Unreal Systems, lost about $10 million. Adding to the dismal ambience, a storm dumped heavy rain on the disappointed partygoers.

The Fyer Festival became a safety crisis. Many attendees could not leave readily. As they struggled to make arrangements, Fyer Media provided them this message on their website:

“Fyre Festival set out to provide a once-in-a-lifetime musical experience on the Islands of the Exumas. Due to circumstances out of our control, the physical infrastructure was not in place on time and we are unable to fulfill on that vision safely and enjoyably for our guests. At this time, we are working tirelessly to get flights scheduled and get everyone off of Great Exuma and home safely as quickly as we can. We ask that guests currently on-island do not make their own arrangements to get to the airport as we are coordinating those plans. We are working to place everyone on complimentary charters back to Miami today; this process has commenced and the safety and comfort of our guests is our top priority. The festival is being postponed until we can further assess if and when we are able to create the high-quality experience we envisioned. We ask for everyone’s patience and cooperation during this difficult time as we work as quickly and safely as we can to remedy this unforeseeable situation. We will continue to provide regular updates via email to our guests and via our official social media channels as they become available.”

The Fyer Festival provides an iconic recipe for a business fiasco: combine a shaky business model, lame assumptions, empty promises, opaque management, unpaid workers, stiffed vendors, jilted customers, and environmental wreckage. Blend and pour. Top off with a generous dollop of management arrogance. Serve.

Selling the vision is the easy part . . . Was McFarland dishonest in selling something he didn’t yet have? Before you answer, remember that selling things before they are available is not new or uncommon. Real estate agents sell resort property “under development,” and companies in many industries sell future services like maintenance plans, for which they may not have capabilities to provide. Lately, Tesla accepted deposits for its solar energy roof tile systems pending future installation. I’m not sure if anyone batted an eye.

What drives sales of not-yet-available products is the abiding hope that vendors will deliver what’s expected. That – and legal contracts. Contracts are created to protect sellers and buyers, and that helps facilitate transactions. But customers must never forget that when vendors write contracts, they prioritize and protect their own interests. Always. Check the fine print: customers generally bear whatever risks the vendors don’t want or can’t afford, and absorb the costs when they come home to roost. The truth about whether the Fyer Festival’s terms of sale offered adequate – or any – protection to its customers will unfold in the coming weeks.

McFarland’s “killer skill.” Customers of McFarland’s earlier entrepreneurial venture, Magnises, “complained that offers, like Beyonce tickets, never materialized, and that annual dues were charged to their credit cards months early . . . Still, he had a way of engendering trust.”

This irony galls me. But I shouldn’t be surprised. It’s rare to find anything written about strategy, tactics, and best practices that’s coupled to maintaining moral or ethical foundations. It’s all about money. We worship revenue production and profit performance. We laud “audacious risk takers” and developers of “the next great thing.”

We enthusiastically offer them advice and encouragement, but we don’t scrutinize their premise, motives, or intent. Senior managers fire functionaries for what they deem misbehavior or “not living up to the company’s ideals,” but they don’t banish their peers after they exploit customer trust. Had the US government not stepped in, Elizabeth Holmes, who admitted that the blood analysis company she founded, Theranos, is a fraud, would still be enriching herself while imperiling her customers. Now she has been forbidden from running another lab for . . . two entire years!

The same apathy allowed a company like SwanLuv to get launched. And the same apathy enabled Billy McFarland, a checkered serial entrepreneur, to execute a harebrained venture like the Fyer Festival, and sell 8,000 tickets. As long as there’s a pot of gold at the end of the entrepreneurial rainbow, who cares if people get hurt or die as the result of someone’s misguided aspirations?

“We’ve moved from an industrial economy to a consumer economy to a service economy to an information economy to what you might call a flagrant-exploitation economy – one in which branding and ‘storytelling’ have replaced advertising and possibly even reality. It’s not just that we’re being sold the sizzle more than the steak. It’s that we’re being sold the sizzle instead of and at the expense of the steak,” Carina Chocano wrote in a New York Times article, False Front.

“Cultivating authenticity” – the new watchword for marketers. “If everything lived up to its hype, the world would be burdened with far fewer bad movies, miracle vitamins and optimistic campaign promises,” Chocano says. “Wells Fargo employees spent five years creating millions of fake accounts for unsuspecting customers in order to charge them additional fees; the year before this practice was uncovered, a news release introduced the bank’s new brand campaign as one that would ‘eschew product promotion for storytelling.’ [President Trump] has agreed to pay millions in fraud settlements to thousands of students of his ‘university,’ with its $35,000 ‘Gold Elite’ program; his daughter, whom he has employed for much of her career, has published a book in which she writes about ‘cultivating authenticity’ and presents herself as an accomplished businesswoman. It’s a brand that she’s selling – the have-it-all sizzle of a self-actualized career woman and loving supermom in fashionable shoes. Who cares whether, somewhere behind it, there may be the equivalent of an undeveloped gravel pit and some unboxed disaster tents?”

Say it loud! I’m fake and I’m proud! Chocano believes that the scam economy might be entering its “baroque phase.” Even for the wary, it’s difficult to distinguish between real products and knockoffs, legitimate email from phishing, and honest companies from scammers. For the latest artifacts, check out Hoax Slayer or the US Federal Trade Commission website. Our culture and basic antipathy for commercial regulation has made the US fecund for “dissemblers, operators, and downright swindlers,” Duke University professor Edward Balleisen writes in his book, Fraud: An American History from Barnum to Madoff.   “Some of the psychological impulses that show up again and again in the history of business fraud reflect widespread aspirations or anxieties,” Balleisen says. In particular, “the passion for easily attained wealth.”

If you want an antidote, ask a preschooler. The Muppets, featured on the children’s TV show, Sesame Street, help young children develop skepticism, and might inoculate them to scammers. In one episode, a character named Lefty offers to sell Ernie one of his products. “I got something you need, and I can sell it to ya real cheap,” he says. Ernie gives Lefty five cents for a bottle of air, which he accepts. After pouring the air into Ernie’s furry hands, Lefty keeps the bottle, explaining that Ernie’s payment did not include the packaging. Other episodes show Lefty selling Ernie similarly worthless products, including an empty box and the number 8. Kids as young as three understand Ernie’s folly. In just 15 years, however, a child’s skepticism gets neutralized. Blame it on powerful sales messages, clever “content marketing,” or the constant drumbeat of honors bestowed to those who got rich quick. It’s a shame such memorable consumer lessons are only offered to the very young.

“The big generational shift since [the ‘70’s],” Chocano writes, “is from cynicism and avoidance to an admiration of the hustle and an enthusiasm for all the enthusiasm, which has dovetailed perfectly with the new laissez faire. The more Wild West the business environment, the more the hustler is elevated to folk hero or legend, much the same way that the robber barons once were.”

What distinguishes aggressive marketing from a con artist is intent. A revenue-driven marketer who lacks moral scruples meets the criteria for the archetypal con artist.  Companies should care about how they generate their revenue. So should the people who work for and support those companies. In the meantime, watch out for more Billy McFarland’s breathlessly hyping their digital snake oil online, and for more Fyer Festivals.

After the Festival debacle, Ja Rule, McFarland’s business partner, reportedly said in a Fyre Media Company meeting: “That’s not fraud, that’s not fraud . . . False advertising, maybe – not fraud.” Three denials in the same sentence – a scammer’s telltale tic. Lefty couldn’t have expressed it any better.

Will Today’s Essential Sales Skills Become Obsolete in the Smart Machine Age?

In 2015, nearly four million babies were born in the United States.  Today they are toddlers, and many will be asked what they want to be when they grow up. Expect hesitation. The question will not be as easy to answer as it was for my generation. By the time these kids hit twenty, many of the jobs their parents and relatives performed will have vanished.

According to author Edward Hess, professor at UVa’s Darden Graduate School of Business Administration, about half of all current US jobs will be displaced by 2040. His recent book, Humility is the New Smart, cites a 2013 study by Carl Benedikt Frey and Michael Osborne which examines the impact information technology will have on labor and employment. Frey and Osborne estimate that as many as 80 million US workers will be directly affected during this upheaval.

People may disagree with these dire predictions, but it’s hard to deny the profound influence that the Smart Machine Age (SMA) will have on how people will work, and on how many will be working. Nascent developments in artificial intelligence, robotics, and driverless vehicles show great promise. But for society and the labor market, not every outcome will be benign.

If half of today’s jobs will be displaced, which ones will endure? That’s hard to say, but right now, if a machine or algorithm does what you do, it’s time to dust off your resume, and pray that the software that judges it will respond favorably. There’s more displacement coming. In an article, Automation and Anxiety: Will Smarter Machines Cause Mass Unemployment?, The Economist magazine offers a glimpse:

“. . . most workers in transport and logistics (such as taxi and delivery drivers) and office support (such as receptionists and security guards) ‘are likely to be substituted by computer capital’, and that many workers in sales and services (such as cashiers, counter and rental clerks, telemarketers and accountants) also faced a high risk of computerisation.”

In the SMA, jobs that are easily substituted by computer capital won’t be highly paid, and there won’t be much need for workers to do them, either. Yet, there’s hope. Smart machines and AI remain persistently cruddy at performing a myriad of valuable skills. Hess believes that the ones that will endure “will require high-level thinking, creativity, and high emotional intelligence. The consensus view is that humans will be needed to perform those skills that either complement technology, or constitute what machines can’t yet do well, and that list includes critical thinking, innovative thinking, creativity, and the kind of high emotional engagement with others that fosters relationship building and collaboration.”

Given Hess’s prediction, sales professionals can be forgiven for feeling a tad smug.  After all, no profession better exemplifies this rare combination of abilities. At least that’s the message we repeat to ourselves. Such “killer skills” are consistently mentioned whenever a salesperson is honored, recognized, or rewarded for high revenue production. But before anyone gets bullish and puts a deposit on a designer surfboard or a Ferrari GTC4Lusso, a sobering thought: the SMA has already nibbled away low-level jobs in sales and retail. Ominously, technology has a pattern of progressing from nibbling to gnawing, before becoming a full-on feeding frenzy. Temptation confronts senior executives every day. You can’t find a CFO on the planet who is unaware of the ratio of Sales, General, and Administrative costs to overall revenue at his or her company. And the number is seldom “good enough.”

Sales survivors who believe their skills will be coveted into perpetuity might want to reassess their hubris.  The “essential” skills that portend success today won’t be especially helpful in the SMA. In fact, for a variety of reasons, some will become liabilities. First, the nature of work itself will change. Traditional employees will become outsourced contractors. Goal-directed teams will rapidly coalesce and evaporate just as quickly. Decision processes will become more opaque. These developments fundamentally change how goods and services will be sold. It doesn’t matter whether the product is industrial pumps or property management services. Second, strategic success – and its measurements – will undergo massive change. It won’t be expressed simply in terms of revenue. Consequently, sales enablement will become much different.

The New Mental Model. Success in the Smart Machine Age favors companies that adopt what Hess calls a “new mental model.” Today’s sales organizations champion some skills that will be valued in the SMA – but others that are currently popular will get in the way.

1. Legacy model: individuals win

    SMA: teams win

For many decades, sales forces have been designed, staffed, and managed under a model where reps are “individual contributors.” The concept permeates everything from culture to process to compensation to hiring and professional development. Today, individual quota achievement as the key metric of job success. In the team-oriented SMA, that model creates substantial risks.

2. Legacy model: play cards close to the chest

    SMA: transparency

While Hess is referring to the organizational tactic of hoarding information, sales operations have long engaged in this practice. When it comes to taking responsibility for activities on the customer “front lines”, corporate boards and outside departments are reluctant to get involved. “What happens in Sales stays in Sales!” In the SMA, revenue generation will become a key part of every department in the company – from HR to Legal to IT – as well as Marketing and Sales.

3. Legacy model: Highest-ranking person can trump

    SMA: Best idea or argument wins

The person who coined the aphorism, “[Stuff] flows downhill,” probably worked in Sales as a “direct report.” In the SMA, titles, job description, and tenure won’t matter as much as the quality of an idea.

4. Legacy model: Listening to confirm

    SMA: Listening to learn

Today’s sales rep listens for confirmation. Sure, sales pundits talk a good game about why salespeople need to “shut up and listen,” and how “telling is not selling.” But today’s sales managers and coaches still goad reps to focus on listening for “trigger events” and “buying signals.” Today, listening to learn without having a specific sales goal in mind is a luxury. In the SMA, it will be a necessity.

5. Legacy model: Telling

    SMA: Asking questions

A bright spot for the sales profession’s evolution into the SMA. Asking questions to expose the truth has been an enduring part of sales culture.

6. Legacy model: Knowing

    SMA: Being good at not knowing

This element represents prominent awkwardness for sales professionals. Today’s sales culture insists that salespeople possess business knowledge, industry knowledge, competitive knowledge, best-practice knowledge, and product knowledge, not to mention common sense and street smarts.  “Know everything you can about your customers!” For reps, admitting a knowledge gap isn’t a career-enhancing move. Hess believes this unattainable interpretation of knowledge is becoming obsolete. “In the SMA, Old Smart will become the new ‘stupid.’ . . . NewSmart is a new definition of human smart that reflects the increasing cognitive capabilities of smart machines and is measured not by quantity – how much you know – but by the quality of your thinking, learning, and emotionally engaging with others. NewSmart is not about always being right, being perfect, and knowing more than others.”

7. Legacy model: IQ

    SMA: IQ and EQ

Another bright spot! Building rapport has long been considered an essential skill for top producers.

8. Legacy model: Mistakes are always bad

     SMA: Mistakes are learning opportunities

Sales organizations aren’t forgiving about mistakes, which range from screwing up a demo to failing to get an appointment with a C-Level executive to losing a deal. That culture makes them very weak on learning. “Just move on . . .” A terse, but all-too-common synthesis following a failed revenue opportunity. In the SMA, successful companies will be more open to admitting mistakes, and using knowledge to prevent them in the future.

9. Legacy model: Compete

     SMA: Collaborate

It’s nearly universal in sales organizations for reps to be indoctrinated with competitive spirit. And not just us against rivals, but you against each other.  In almost every organization, salespeople are ranked against their peers. There are monetary bonuses and other perks provided to “top revenue producers.” Reps are lauded when their individual accomplishments merit recognition – but rarely appreciated for leadership, let alone encouraged to lead. Evidence? A verbatim job description from a website that typified many I examined: “This is an individual contributor position that will not coordinate the activities of others.” In the SMA, sales teams will operate as teams, and not just be referred to that way.

10. Legacy model: Self-promote

       SMA: Self-reflect

“Customers buy from people – not companies!”  Today, removing self-promotion from selling compares to the result when helium is removed from a “happy birthday” balloon. The message is still communicated, but not nearly as well. How will sales professionals adjust to the introspection needed in the SMA? I’m not sure. Maybe a good start would be to subdue the ethos that everything a rep does centers on him or her making quota.

Does the advent of the SMA mean that hiring executives need to discover skills in sales candidates that were previously not considered predictive of success? Emphatically yes, if they believe that buyers and sellers will engage differently, and that the definition of success will extend beyond an individual’s percent-of-goal to include outcomes not previously measured or rewarded.

In 2037, a sizable portion of the four million babies born in 2015 will be newly-minted college graduates – or at least the product of what we now call post-secondary education.  As we progress further into the SMA, will most companies rely on uniquely human skills to generate revenue? Will AI become smart enough to substantially cannibalize the roles of legacy sales hunters and individual contributors? Will “pure” sales roles even exist?  Fun to ruminate on, but hard to predict. As we enter the SMA, the only certainty is that the most valued job skills – the ones likely to provide health, happiness, and prosperity – won’t be the same as today.

Additional resource: for related articles about Professor Hess’s May 16, 2017 lecture at the Darden Innovation Summit, please click here.

 

Shaming Customers Drives Conversions, but at What Cost?

Magnolia (not her real opinion)

“Don’t put words in someone else’s mouth!” This sage advice from my first-grade teacher has stuck with me. I have my conversational faults, but I’ve steadfastly avoided this transgression. Yet, the gaffe persists in society today, and it’s growing.

We need a grass roots campaign to stop the spread. First, let’s adopt a more contemporary slogan. How about, “don’t put e-words in someone else’s e-mouth!” It tackles a new wrinkle to this older problem because some major online retailers force people to say things they don’t really think or believe.

“No thanks, I do not want fast, free shipping,” Amazon e-said for me last week when I completed my online transaction, declining their offer for the “free shipping” benefit. Generally, when I don’t want to purchase something, I find “no” a simple and effective response. One that gets my point across fully. No need to embellish.  Whatever . . . my need wasn’t especially urgent. I let Amazon’s default comment stand. I just wanted my epoxy in the next few weeks.

“No, I will not protect my rental car and I agree to pay for damages incurred,” were the e-words a car rental agency attributed to me in April when I populated their online reservation form, indicating to them that I didn’t want supplemental insurance coverage. A more accurate statement would have been, “No, I find these charges a rip off, designed to pad the agency’s profits.” But that choice wasn’t available. Nobody likes to be misquoted, but for now, I’ll have to live with this violation. Sigh. At least the e-words indelicately placed in my e-mouth provided the cost savings I wanted.

In fact, anytime I rent a vehicle, I drive it with the same care that I do for my own, which is pretty carefully. And my personal auto coverages extend to rentals, ergo, protection! For these reasons, the “I will not protect my rental car . . .” isn’t technically correct. Nor is the “I agree to pay for damages incurred,” if, for example, a driver runs a stop sign and hits my rental car. When the at-fault driver has auto insurance, their provider pays. Not me.

I understand the reasons for this subtle humiliation. Shame and revenue are connected. I wonder how many consumers vacillate on decisions, wavering the mouse arrow around that car rental insurance offer acceptance box. “Should I? Should I not? Should I? . . . What to do? I will NOT protect my car? . . . hmmmm. Well, NO! That seems so risky! I WILL protect my car . . .” The consumer reluctantly approves the add-on fee, and proceeds to mull the next needless upcharge. If I ran a car-rental agency, I’d ask to hear a ka-ching play through a loudspeaker at headquarters every time a customer succumbed to this slick online trick. The staff would figure out how to deal with the racket. “Team! All of it goes straight into our profit-sharing plan!”

In the early days of e-commerce, retailers used large bright on-screen buttons to encourage customers to accept an offer, to buy a product, or to release identity information. The alternative, decline, was low-key and polite – usually a smaller button with a simple “no” or “no, thanks.”

Today’s customers proceed through a sophisticated, choreographed “buyers’ journey,” and vendors are loathe to allow them off the path to Transaction City. Shaming has become commonplace. So much so, that the Nielsen Norman Group has even coined a term for the enabling mechanism: manipulinks. “In a desperate attempt to nudge users towards conversions like newsletter signups some websites are adding manipulative link text to their popup modals.  These user-shaming labels are called manipulinks . . . : they employ the practice of what is often referred to as confirmshaming — making users feel bad for opting out of an offer (logically, this practice might better be described as declineshaming).”

Nielsen Norman provides some stunning examples:

Sears.com To decline “Show Me The Deals” [sic], a website visitor must click on “No thanks, I don’t like deals.”

Women’s Health To decline “GET MY TOTAL BODY WORKOUT PLAN”, a website visitor must click on “No thanks, I don’t need to work out.”

Delish.com To decline “SHOW ME 14 SIMPLE DINNERS,” a website visitor must click on “No thanks, I’ll have a microwave dinner tonight.” (I laughed at this one, though I sense jocularity was not the company’s intent.)

I see a hand raised in the back of the room . . . . yes, on the left, blue striped shirt! Could you speak up so everyone can hear you? . . . momentary silence . . . then, a confident voice rings out: “We don’t call it ‘shaming.’ A/B testing has revealed that certain messages produce more conversions. That’s why companies do it.”

I see. Numbers often create compelling arguments. But, as Nielsen Norman explains it, “focusing on conversions to the exclusion of common sense is a recipe for disaster. It doesn’t matter if more people [sign] up for your newsletter if you had to bully them into doing it.” Hands down, that is the most eloquent, sensible CX wisdom I have read in a long time.

The problem is that some marketers are dashboard junkies, and don’t see the risks. While A/B testing provides answers on which message produced the preferred result more often, it doesn’t reveal a cruddy customer experience.

I think it’s a mistake to shame customers. You can discount my opinion. You can say that I’m stubborn, unable to accept new ways of doing things. True, in this case. I confess that when it comes to positive customer experience, I don’t readily budge from particular ideals. One of them is that when customers visit my company’s website, and those of my clients, I want them to feel like winners, not losers. Every customer decision should be respected, even ones we don’t like or disagree with. That insight didn’t come naturally to me, but was discovered and reinforced through many years of face-to-face B2B selling. Today, basic courtesy has been shoved aside. Marketing professionals take note: snarkiness directed at prospects and customers will inevitably bite you in the rear.

“Be all you can be!” Now there was a brilliant aspirational recruiting slogan for the US Army, thanks to visionary agency NW Ayer. A message that every person on the planet could relate to. What happened to spreading good vibes as a marketing tactic? I don’t know. Maybe the wrong people got promoted into the wrong jobs. Or, maybe people started putting too much credence in their A/B tests. And maybe those who knew better didn’t feel safe questioning what the results were “telling” them. That’s why we have the e-words “no thanks, I’ll have a microwave dinner tonight” shoved into our mouths when we have the temerity to opt out of something a marketer wants us to opt into.

Not every company follows the shaming herd. According to Nielsen Norman, “Ace Hardware employs a traditional and more direct approach to promoting its newsletter . . . It presents the offer directly without using a condescending tone. Users can simply say ‘no thanks’ or close the window and move on.”

Civil and respectful communication. What’s not to like? And customer sentiment will likely be reciprocal. A positive result that any marketer should want.

Draw from the social skills that your elementary school teacher insisted that you follow. One of them might accelerate your revenue achievement.

Why Companies Must Care about How They Achieve Revenue

Search online for the phrases crush your quota and rapid revenue growth, and you’ll get about 4,400 and 49,000 results, respectively. As a society, we not only adore revenue, we covet its fast and furious capture. As my district manager used to say to me, “I don’t care how you make your number, as long as you make it!” His comment reflected the culture that permeated the organization.

I could have taken his comment as license to embark on devious pathways. If he had any concerns, he didn’t share them. He should have. Dishonesty, heavy-handed persuasion, and customer harm are common problems in sales execution. It’s never wrong to discuss them. If you have worked inside a sales organization even a short time, you can probably relate an incident or two.

At my company at the time, sales reps pursued a single objective: make quota. Almost three decades later you’ll still find make quota as a top priority in most sales organizations. For many sales reps, quota shortfalls mean losing your job.  That creates other problems. When you wake up every day with a knife-sharp pink slip suspended above your neck, ethical scruples can interfere with job security. The ethical dissonance salespeople experience over their careers would stun outsiders. You would think that ethical conundrums would be a major topic at sales meetings. But over many years as a sales rep, I logged countless hours in meetings dedicated to “quota-busting tips and tricks”, but I don’t recall a single conversation where ethics, honesty, integrity, or moral conduct were even discussed.

That doesn’t prevent people from pointing the finger at “aggressive, manipulative sales reps” whenever a news story breaks about a company’s systemic deceit. The blame is often misplaced. Unethical business development practices are often a leadership issue that can be traced to the top of the org chart.

Consider the way companies hype their revenue machismo, while sweeping their ethical dirt under the rug. In its 2016 annual report, 21st Century Fox, parent company of Fox News, wrote,

“The Fox News Channel, under new leadership, is stronger than ever, and is on track to have its highest rated year in its 20-year history. There has been some speculation that Fox News’ unique voice and positioning will change. It will not.”

and,

“Selling, general and administrative expenses decreased 3% for fiscal 2016, as compared to fiscal 2015, primarily due to the sale of the DBS businesses and Shine Group partially offset by higher selling, general and administrative expenses at the Cable Network Programming segment.”

VW’s 2014 annual report reported revenue this way:

“The Volkswagen Group continued its successful course in fiscal year 2014, again generating record sales revenue and operating profit in an ongoing difficult market environment . . . The Volkswagen Group generated sales revenue of €202.5 billion in fiscal year 2014, 2.8% higher than in the previous year. The clearly negative exchange rate effects seen in the first half of the year in particular were offset by higher volumes and improvements in the mix. At 80.6% (80.9%), a large majority of sales revenue was recorded outside of Germany.”

At the very moment these self-congratulatory passages were crafted, 21st Century Fox was paying hush money to victims of Bill O’Reilly’s predations, and VW was violating regulations by rolling carbon-spewing vehicles off their assembly lines. That’s a truckload of eeeeeeewwwwwww fluffing up the financial reports for investors. These companies could write a how-to for converting their operational stench into the sweet-smelling perfume of ka-ching. They’re far from alone.

A more transparent 21st Century Fox would have written,

“Revenue and profits were up this year at Fox News due to lower than expected payouts to silence Bill O’Reilly’s sexual harassment victims. Legal costs decreased as well. As a result, SG&A expenses as a percent of revenue achieved its biggest decrease in five years. We expect that trend to continue, despite the obvious risks from Mr. O’Reilly’s unchecked predilections.”

And VW would have shared, “While our vehicle portfolio has achieved dramatic improvements in average mileage, VW has not reduced fleet CO2 emissions. However, the company has developed technology to circumvent environmental standards enforcement worldwide, resulting in unhindered sales, and significantly higher profits than could be achieved with legally-compliant vehicles.”

Fat chance! The excerpted passages are lies by omission. But we’re reminded of the intoxicating power of the word revenue. By itself, revenue commands gravitas and respect. Pad it with punchy words like “Achieve geometric revenue growth . . .” and readers willingly downplay ethical concerns – if they had them in the first place.

Don’t look for a change anytime soon. FASB guidelines don’t require companies to differentiate ethical revenue from unethical. We anoint it with a catchy catch-all: “The Top Line.” Not everyone realizes that some bucks are toxic, though I’m certain that the CFO’s at 21st Century and VW have since shared that epiphany with their successors.

On April 3, 2017, Forbes published an editorial stating that O’Reilly’s job was “safe” at Fox News. The reason? Money. The writer presented what he believed were forceful facts: “The O’Reilly Factor generated $446 million in advertising revenue for the network from 2014 through 2016, according to Kantar Media. Last year, the show brought in an estimated $110.8 million in ad revenue, according to iSpot.tv. That compares to the 2016 of $20.7 million in advertising for MSNBC’s biggest star, Rachel Maddow, who is on an hour later. Fox News makes up about 10% of its parent company 21st Century Fox’s revenue and about 25% of its operating income.” Given this adulation, it’s little wonder that O’Reilly felt unassailable. I’ve seen the same pattern within other organizations. The indiscretions of “top rainmakers” are tolerated – so long as they’re making rain.

Yesterday, the New York Times reported that Douglas Greenberg, among Morgan Stanley’s top 2% of brokers by revenue produced, continued to work at the company, despite four women in Lake Oswego, Oregon reporting that his violent behavior drove them to seek police protection. “For years, Morgan Stanley executives knew about his alleged conduct, according to seven former Morgan Stanley employees.” (Morgan Stanley Knew of a Star’s Alleged Abuse. He Still Works There, New York Times, March 28, 2018).

“’21st Century Fox certainly has an economic incentive to keep Bill O’Reilly on air,’ said Brett Harriss, an analyst at Gabelli & Company, adding that any backlash the company faces from advertisers would be temporary.” Just 16 days after the Forbes column published, Fox fired O’Reilly. Apparently, in his smug surety that revenue is king, Mr. Harriss forgot that preventing a valuable brand from winding up in the dumpster is an important economic issue, too. Poignantly, we should remind ourselves that no matter what, this debate brings no solace to O’Reilley’s victims.

The US Equal Employment Opportunity Commission (EEOC) reported that since 2010, employers have paid $699 million to employees who have alleged they were harassed in the workplace. The report “cited an estimate of settlements and court judgments in 2012 that racked up more than $356 million in costs. These don’t include indirect costs such as lower productivity or higher turnover,” according to reporter Jena McGregor of The Washington Post. The EEOC report didn’t distinguish how much of those fines costs were attributed to top revenue producers, but I’m willing to wager based on this evidence, it was a sizable chunk.

Here’s what “I don’t care how you make your number as long as you make it” looks like when it reaches the headlines:

  • We don’t care if our employees are grievously harmed. (Wells Fargo)
  • We don’t care if innocent people are sickened using our products. (Peanut Corporation of America)
  • We don’t care if our exploding airbags make people die. (Takata)
  • We don’t care if preserving our profit margins endangers the lives of our customers. (GM)
  • We don’t care if our pharmaceutical price hikes make life-saving medications unaffordable (Turing)
  • We don’t care if our customers are harmed in the boarding process. (United Airlines)
  • We don’t care if we deceive our customers. (Trump University)

What’s the remedy?

  1. Care. “I don’t care how you make your number, as long as you make it” should never be a sales mantra.
  2. Stop rewarding executives, marketing professionals, and sales staff exclusively for revenue achievement. Instead, compensate on value delivered. That’s more difficult, but it’s safer.
  3. Stop obsessing over maximizing shareholder value. One reason that many strategic decisions ultimately cause harm. According to Professor Bobby Parmer of the University of Virginia’s Darden Graduate School of Business, “Shareholders don’t own the corporation. Public companies own themselves. Shareholders own a contract called a share. There is no legal reason to put shareholder interests above anyone else. It’s a choice, but not mandated. There is no legal duty to maximize profit. As long as executives aren’t violating the law, the courts won’t interfere with their decision making . . . Across hundreds of studies, there is no evidence that companies that maximize shareholder value are more profitable.”

Would these changes eliminate all harm that corporations create? That’s unlikely. But we need to stop our fawning rhetoric about revenue. We need to redirect our infatuation, and instead honor and reward outcomes that provide more equitable and sustainable outcomes. We will always have good revenue and bad revenue. It’s important that we stop turning a blind eye to the difference.

 

Disobedience: A How-to Guide for Managers and Employees

Somewhere, a manager just ordered an employee to take a questionable action. To do something immoral or stupid. Something that causes harm to customers. There – it just happened again! In less than the time it takes to read this paragraph. Relentless wrongdoing. It happens all over the world.

It was a demand to ignore a customer’s legitimate complaint. An instruction to deny a refund when it was owed. An assignment to use big data to exploit vulnerable customers. A request to physically remove a passenger from an airplane because his seat was needed for someone else. “Follow the rules. Your job depends on it.”

The rule-following edict is a painful artifact of an abiding corporate culture that champions profits uber alle. Millennials, listen up: free thinkers are an impediment to efficiency. They don’t mesh with our manic, bottom-line obsessed business environment. “Objections are a luxury. We have a quota to meet, and there are only so many hours in the day.”

Tell that to the management of United Airlines, who are suddenly scratching their heads, wondering how to foster employees with less malleable backbones. Employees who don’t tremble when saying, “maybe we should consider another approach . . .” Good luck with that. The company just spent decades beating their employees into supplication.

When videos such as Dr. Dao’s violent removal from United Flight 3411 go viral, pundits echo the same three conclusions:

1. The corporate culture of the offending company is toxic,
2. There’s too much insistence on sticking to policy,
3. Employees need to be allowed to use their own judgement

If you’re looking for epiphanies, I suggest not reading any blog titled, What United Did Wrong. By now, we know. And among the “fixes,” you’re guaranteed to find employee empowerment, or some derivative of the idea. Hooray! Embedded in an Official Corporate Apology, we can expect a well-crafted sentence that contains the phrase, “our employees are now empowered to . . .” [Interesting note: that phrase – in quotes – received 175,000 search results].

When all else fails, try empowerment. We’re about it hear it like never before: Employee empowerment – or rather, employee empowerment! – get on the bandwagon now if you need a panacea for misguided corporate goals, bad policies, and ambiguous instructions! If only correcting scandals, scams, and commercial transgressions were that easy. Au contraire! Righting wrongs is not like flipping a switch. Or perfunctorily telling employees, “you are now empowered to . . .  Now, let’s get on with business as usual . . .” Alas, empowerment is never one-and-done.

In the context of an enterprise, empowerment, defined as authority or power given to someone to do something, is more a process than a word. For employees, empowerment assumes the ability to disobey immoral orders. I’ll go further: it imparts an obligation to do so.

To understand the complexities of this idea, I’ll revive a 1961 experiment by Yale professor Stanley Milgram, who wanted to learn whether men of various backgrounds would administer an electric shock to a stranger when asked by an authority figure to do so. The experiment resulted in 64% of the participants obeying the order, and 36% refusing. At the time, Milgram’s experiment concluded that there was no factor – demographic, age, occupation, marital status – that predicted whether a given person would be an order follower or resister. Not a comforting insight.

Fast forward to 2017. University of Virginia professor Bidhan L. Parmar conducted a new analysis on Milgram’s data, and he discovered heretofore unknown commonalities within the two groups. According to a February, 2017 article, Remove the Blinders: How to Disobey Immoral Orders, “After reviewing more than 1,000 pages of audio transcripts from the experiment, Parmar noticed subjects who ultimately disobeyed demonstrated distinctive speech patterns. They tested their assumptions, exercised “moral imagination” and speculated out loud about the consequences of their actions. (“Suppose he gets all these wrong, and I get up to a level where it’s going to be extremely painful?” asked one resistor.) The resistors were also quicker to personalize the issue and made more “I” statements. Said one resistor, “I can’t keep doing this to him” while another noted, “I don’t think I want to be part of this any longer.

“On the flip side, subjects who obeyed showed different verbal patterns. They dug into the procedural details of the task, which was to read word pairs and administer a shock if the unseen person could not correctly associate them (typical comments included ‘Do you want me to read these  fast or slow?’ or ‘Do you want me to write down the ones he gets wrong?’) The obeyers kept moral blinders on and read out word pairs, even as the ‘shocked’ person cried out.” (Note: nobody was physically harmed in the experiment. Milgram used actors as subjects, and the cries were recordings that were not created under duress.)

Parmar’s conclusion: “Resistors developed a moral understanding by asking questions, speculating and empathizing with “I” statements. Ultimately, they were able to override the authority’s instructions and make their own judgments.” Creating that outcome requires more – way more – than simply telling employees, “you’re empowered to . . .” Putting Parmar’s discovery into operation takes fortitude, planning, coaching, and – most important – giving employees room to question management’s requests, and to discuss their concerns. When executives cop an attitude that their policies are sacrosanct, when they lose ability to see wisdom from anyone other than peers, you get Dr. Dao bloodied while being dragged from his seat. That, and many, many lesser-known incidents resulting from the same hubris.

“In daily life, most people face choices in which there is a lot of ambiguity and the ‘problem’ isn’t always apparent,” Parmar says. “All of us are embedded in environments where we get conflicting orders, and often it’s not obvious what the right thing to do is.”

To boost the chances for employees to voice conscientious objection, Parmar recommends that managers should:

• Seek out dissenting views on key issues.
• Question routine actions: Ask why something needs to be done (or not) and what purpose it serves.
• Speak up when business imperatives conflict with personal morals.
• Protect those on your team who ask questions.
• Consider data from multiple angles.
• Make ethical reflection and discussion a regular part of team work sessions: How does our strategy affect customers, community, employees, the environment? Who might gain under this plan? Who might suffer?

Disobedience. Today, calling it moral imagination makes it sound more productive. That will keep the C-Suite happy. But it also might be the best liability protection a company can have.