Friday, 4 November 2011

Sticks and stones

“Sticks and stones can break my bones but words will never hurt me.”

That’s what my mother would say when she heard that someone had been rude to me or to my brothers. The idea is simple, that mere words can do no harm to your feelings so long as you stay strong. Implicit is the idea that “actions speak louder than words”.

Sorry Mum but that’s rubbish. You don’t have to think very hard to remember words that have inspired revolutions, resistance or struggle. Think of the speeches of Martin Luther King during the American civil rights struggle, of Winston Churchill during Britain’s solitary struggle against the Nazis, think of almost anything Nelson Mandela ever said.

The bad news is that words can cause damage as well as inspire people. For instance, business people of my age in the UK talk about “doing a Ratner” meaning saying something that causes serious damage to a business, or in an extreme case, collapsing a company completely.

This is named after the infamous Gerald Ratner who ran his nationwide, family-owned jewelry business. Known for being cheap and selling low-end products, every town had a branch of Ratners. Their products were cheap but extremely popular. At a corporate dinner in 1991 he made a completely catastrophic speech. Talking about his products he said:
"We also do cut-glass sherry decanters complete with six glasses on a silver-plated tray that your butler can serve you drinks on, all for £4.95. People say, 'How can you sell this for such a low price?' I say, because it's total crap."
He then went on to describe their earrings as:
"cheaper than a … prawn sandwich but probably wouldn't last as long."
The immediate effect on his business was disastrous. The customers were dreadfully offended and it’s estimated that the value of his company dropped by £500 million, over P5 billion, as a result. All because of two cheap jokes in an after-dinner speech.

More recently Hewlett Packard, one of the world’s largest technology companies, has gone though a similarly dramatic experience. A few weeks ago Leo Apotheker, the company’s CEO, announced a number of key changes. Certain products lines were being cancelled in response to poor sales. There’s nothing wrong with that, sometimes a company needs to take brave decisions. However he didn’t stop there. HP, the world’s largest producer of personal computers was going to stop making personal computers. It was considering “spinning off” it’s PC business.

The effect was astonishing. Within moments it’s share price had nose-dived by 25%. The market was sending a message to HP that while bravery is commendable, recklessness is not. Couple that with Apotheker’s suggestion in an interview with the BBC that "I hope one day people will say 'this is as cool as HP,' not 'as cool as Apple'" and you see someone who needed to go.

Luckily for HP the IT industry is famed for ruthlessness. A month later Apotheker was fired and a new CEO was hired. He didn’t do to badly though, he walked away with a settlement package of around $13 million. Frankly I’d volunteer to screw up a company if they offered me that sort of money.

HP’s new CEO has just announced that she’s reversing the decision to stop making PCs.

Of course Apotheker’s offence was very different from Ratner’s. He wasn’t denigrating his company, he was just openly discussing a change of direction in a way that was too risky. However the lesson is simple. What you say in business matters as much as what you do. The quality of Ratner’s jewelry didn’t change after his comments but he’d slapped his customer’s faces and they didn’t like it. Apotheker so unnerved the shareholders that they started selling their shares like they were on fire when he announced they might shed what was perceived to be their core product.

Not all public statements can be as devastating as these but I do think the danger is there, even at a much smaller level. It’s not just in after dinner speeches or at conferences either that things can go wrong. It’s also the policies and procedures that a company publishes that can send just as dangerous a message. An example.

Last week we heard form a customer who had bought a cellphone from a store in Gabs. Eight days later it went wrong and she took it back to the store for something to be done. That’s when she was told that this particular chain of stores would not respect her rights. Instead she was told that if a phone goes wrong after a mere 7 days she isn’t allowed to return it. Instead, the rules state that she must phone a special phone number for help.

The problem, and it’s a big one, is that these numbers are all South African and none of them can be accessed from Botswana. Three are specific to Cell C, MTN and Vodacom and the fourth was for “Insurance”. None of these are relevant to us. The store flatly refused to help. When we called the company in South Africa they refused to help as well, saying it was up to the store to fix the problem, which of course they’ve refused to do.

I don’t need to mention that they’ve in breach if several sections of the Consumer Protection Regulations, do I?

This store runs the serious risk of “doing a Ratner” or an Apotheker. Their “statement” of their customer care policy is likely to lose them business. Frankly they deserve it.

No comments: