Baghdad (International) Green Zone by James Gordon
Does this sound familiar?
Jane works for a company that is fairly successful. The product it produces is beer and has moved from being a local favorite to a regional favorite to a favorite in pubs across the entire U.S. Jane’s role is customer service and she takes calls from, mostly, happy customers every day, thanking her for producing a really great beer with a great taste and a solid heartfelt brand. One Monday morning, the companies executives round up all of the employees for a big meeting and tell them that, because of the great success thusfar, the board has decided to go more nationally aggressive with the company. The company is getting a boost in funding and will be hiring a whole bunch of new people to handle the expansion. Jane is excited. More customers equals more great phonecalls for her.
As they expand, things start to change…but not in the directions Jane thought they would. The biggest addition seems to be to the sales team - a group of beverage sales specialists. In order to help Jane out, they hire two other people, quite junior as part of her customer service staff. The sales team sticks to their own, which baffles Jane a little. The smaller company always hung out as a team, so they would know exactly what was happening in each department, from executive to sales to customer service to science to even the staff that were brewing.
The pressure is on to sell and produce more beer and there are rumors that the strict quality process they had before isn’t being adhered to. Jane and her new team are receiving more negative phonecalls than usual, and, because of the national focus of the new sales, the customer service lines are constantly busy, giving Jane no time to monitor or train the new people. One day she is pulled into the office of the VP Marketing who tells her there have been complaints about customer service. She works unpaid overtime to put together scripts and quality control documents for her staff. She puts in a request for a CRM system so that she can keep track of the calls, but is told that customer service is a ‘loss leader’, so the request isn’t approved. Meanwhile, the sales department is furnished with a foosball table, and they are all given expense accounts to wine and dine their customers.
Jane is frustrated, and, as things get worse and worse, she starts to hate the job that she once loved. She feels powerless to help the customers who are calling her daily unhappy - she doesn’t know what is going on, and when she does (as far as the quality rumors go), she can’t say anything. Then the decision comes to ‘tighten the belts’ of the company as sales are waning. Who do they cut first? Jane’s team. She is left with one staff member. Even the quality of Jane’s customer service plummets as she can’t handle the volume of calls…and when she does, she is powerless to help the customers. She is called into the office of the VP Marketing again. This time the news is really bad. They’ve decided to outsource their customer service and, other than handling the transition, Jane is no longer needed. The poor performance of her department just doesn’t warrant keeping it local.
This is a classic story that I’ve heard from many companies over the years, but other than a different idea of what is important (what you measure, matters), I just thought it was the way most businesses handled themselves.
It wasn’t until I read Naomi Klein’s latest work on Disaster Capitalism that it occurred to me that what happens in this country with the social system is tightly connected to what happens to the parts of a business like customer service, that are seen as ‘extraneous’.
In her writing, she discusses the growth of Green Zones - the ‘free market’ influx of private companies coming in to solve public services for a profitable venture - while the Red Zones - the public services that remain in place to serve those who cannot afford to pay for the Green Zones that are underfunded and forgotten until they are enough of a problem to wipe out altogether (housing projects, for example) - are used as an example to demonize the public system and further grow Green Zones.
This happens in business like the above examples. The Green Zones are the profit centers of the company and the Red Zones are the cost centers of the company - the cost centers, of course, support the growth of the profit centers (providing customer service, marketing, support staff, quality control, etc), but on the books are seen as pure loss leaders. So, when a company needs to cut back costs…those centers are hit, not the ‘profit’ centers like sales. After enough cutbacks, the performance of the cost centers suffers, which gives enough validation to outsource or get rid of them altogether. Because the sales team is showing numbers (even though those numbers would not exist if it weren’t for the corporate Red Zones supporting them), they are shown as an example of what works in the company.
Now, I don’t know if Klein would want me to twist her metaphor to support my thesis, but I do believe it is the core of what is failing with business today. The Yin and Yang of it need to be kept in place and both cost and profit centers rely on one other to exist and flourish. Jane’s story above ends in her getting a new job that she can love again and her old company struggling to stay afloat, not understanding why things went so badly after the expansion…maybe even returning to their roots years later and re-gaining their customer’s trust.
In the public sphere, we must be wary of Green Zones and the creation of Red Zones, but we must also be aware of it in terms of our professional sphere. Is your company creating a Green Zone/Red Zone atmosphere? I urge you to read Klein’s work either way and tell me if you see the parallel yourself.
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7 Comments
Tara-
I had never heard of Naomi Klein’s latest work on Disaster Capitalism until I saw your Twitter yesterday. Since then I have read a lot of what she is saying. Very interesting … and thank you.
I think you know I worked for the Thatcher family through out the 80’s and 90’s, and I personally saw over $27 Billion (small in terms of our latest financial system bail-out) of privatization / public-private partnerships in the UK. We employed many of these approaches in Sugar Land as I was mayor, and it enabled us to have the second lowest tax rate in Texas (in our peer group) and create a vibrant economy (true effects of Supply-side Economics), yet we were able to lean on the private sector (the Green Zones) for a myriad of the municipal services (the Red Zones) in which you reference in your blog.
The citizens need to understand that as elected officials we MUST focus on providing the highest quality service, at the lowest possible price (tax rate). Sounds like a cute business mission statement, but it works in both the private and public sectors.
I agree with you that the Yin and Yang of it need to be kept in place and both cost and profit centers rely on one another to exist and flourish. Just as in the case of public - private partnerships (where the Green and Red zones work hand-in-hand), both sectors MUST work together to create equilibrium so that the citizens do receive the highest quality service, at the lowest possible price.
Great intellectually stimulating blog. I appreciate it Tara.
Since I’m studying business and analyzing every company i get to know or visit i can find that it’s true that leaders want to wipe out the “red zones” at whatever cost because they lose money, but the problem is they don’t know how to measure (in the best case) or don’t even bother to measure (in the worst case) the contribution made by the red zones.
Red Zones actually are making money, but no one is measuring how much or interested i knowing how because it’s not easy to do or it doesn’t appear in the management theory.
To use your example, Good Costumer Service makes people repeat the buy, be happy with the company and finally drink more beer. So the contribution of that “Red Zone” is difficult to measure but finally it’s part of the spinal chord of relationships with costumers which are finally the ones that make the sales repeat.
The problem is that we have a addiction to easily measurable numbers and a short term goal fixation. And that creates finally the red zone/ green zone atmosphere. I’m on a Internship at a company (which name i cannot mention because of contract stuff that i don’t agree with) and they actually do this. They are so focused on the green zones that they ignore any innovation or proposal from red zones that will help red zones to make costumers happy to continue to use our services.
In conclusion, we need to measure costumer satisfaction and numbers, not just numbers not just costumer satisfaction. Red Zones make a big contribution, it just needs to be measured. So they can be turned green.
It’s my honest belief that a lot of people running these companies are simply too stupid to put two and two together. I used to work doing customer service for a particular cellphone network in the UK, and the corporate message that came down from on high was that as the pricing of service levels of the big four companies was so similar the only real differentiating factor was customer service. Yet they provided no support to us, outsourced most of it to companies for whom it wasn’t in their best interest to provide good quality service as long as their work was sufficient for their arbitrary metrics, and generally acted as though customer service was their lowest concern. Hell, when I first started they were charging their customers premium rate just to phone in with a problem. You can imagine how many customers actually felt good about their service after I told them they were paying 50p a minute to speak to me.
Stupidity, stupidity, stupidity, but as ever it’s never the correct people who ultimately pay for the stupidity when the company’s fortunes inevitably tank.
Very true. It is ironic how many “customer centric” companies completely underfund customer service. I don’t like the terms loss-leader or cost center. Nothing is a pure loss or cost (unless the business is set up terribly), they exist for a purpose. Usually it is a long-term hard to measure purpose, but the purpose does exist.
It often happens as a slow but steady erosion until they take every bit of chocolate out of what used to be a double chocolate chip cookie. It’s as if they’ve never played Jenga before. The tower gets taller, but the game only ends one way.
Daniel from VividCuriosity
Today, ‘customer-centric company’ is almost an oxymoron. Companies, by MBA definition, exist to make money and not to serve customers. (Put aside that customer service actually helps making money.) In the extreme you can consider every department but sales red zones and cut them. You just take money for stuff you don’t have or intend to make. That’s illegal, of course, but the logical consequence.
Indeed big corporations try to sail as hard on the limits of law as possible, and by this they create a constant trickle of consumer protection laws. Can MBA even imagine a company whose reason to exist is to serve, and only to take money for that to be able to continue to serve?
Looking back through my old blog, I found the following relevant stuff:
An article by Robert E. Prasch in the Journal of Economic Issues (Vol. XXXVII, No. 2, June 2003), entitled “Technical Change, Competition and the Poor”, raises some interesting questions.
Prasch goes on to give the credit card and automobile as examples.
Without that support from the political establishment, such services were condemmed to decline. Likewise, Prasch points out the increasing disappearance of affordable pay phones with the advent of the cell phone. This raises the question of whether “adding the additional channel” of the internet for government services is will result in “upping the bar” for the poorest sector of society. As Prasch points out, the poor do not always have ready access to centralised services, such as libraries and local government offices, where internet kiosks are most likely to be located. Furthermore, where these services are decentralised, there are strong centralising pressures from cost-cutting.
Taking a step back, we should note that Prasch equates poverty with a loss of capability “for minimal economic and social participation in the larger society”. This is an approach based on the capabilities framework developed by the Nobel laureate Amartya Sen. Essentially, Sen stated that focussing on how much you earn is less useful than focussing on whether you are able to participate economically and socially in society.
When we consider that the minimum adult wage is less than NZ$7 (from memory) - giving a 40-hour week wage of less than NZ$280 gross - the cost of web access and a cell phone seems quite steep. Of course, those on benefits would be really stretched to cover all this, and one must question their ability to participate economically and socially in society. (And not be surprised that some people in such situations would provide a ready market for receiving cheap stolen goods.)
Tara, very thoughtful. Not to lower this to the basic, non-MBA level here, but the bottom-line is that yours is an example of bad management & a lack of understanding on how consumers have changed (along with the technology they use), pure & simple. In the economy like we have today, marketers are always the first to go also. Why? Because they are viewed as the red zone regardless of how hard they work very hard to justify every dime spent. Typically, on a whim from sales (i.e. I can’t just call and get a PO, so the lead stinks), all the leads, all the relationships, etc. can be tossed out of the window. Companies need to be smarter about how technology has changed customer interactions (connections & conversations that lead to trust). This includes educating everyone from the CEO to the mail room. The red zones and green zones need to merge into a gray zone (neutral) so that in the end customer satisfaction is the bottom-line the keeps the revenues recurring.
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