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This chapter is from the book

Neglecting the Heart of the Business

To see how dealing and financial machinations trumped building the business, look closely at how the customer is treated.

The customer base is at the core of every company. Successful companies always seek to protect their reputation in the marketplace. Serving the customer’s needs was an obvious component of almost every corporate decision. Loyal customers were a critical part of the company’s "crown jewels" to be guarded at almost any cost.

In sharp contrast, it has become acceptable to deceive, even "con," the customer in some major companies. Again, the motivating force is obvious: the focus on short-term financial appearances and executive self-interest. The extremes of short-run thinking and the derogation of the customer may be an explanation of what otherwise is inexplicable.

There are horrific examples in recently exposed corporate transcripts and email of investment banking traders and stock analysts being derisive of their clients and taking pleasure in their deceptions and exploitation.4 Some of the most obscene are the tapes of Enron trader phone conversations joking about the plight of "grandmas" during the California energy crisis. Investment analysts had no remorse when they recommend stocks to clients at the same time they bad mouthed them to colleagues, saying candidly that the stocks being pushed are dogs and likely to go belly up.

Management encouraged or countenanced self-destructive policies that must have looked good in the very short run but were devastating within a few short years. Surely, most readers of these widely published business stories must have asked themselves, "But how could they? What could management have been thinking?" The two corporate examples cited at the beginning of the chapter: CitiGroup (in Japan) and Marsh & McLennan (with its bid rigging when its major clients sought new insurance) are almost unbelievable examples of mistreating your customers.

In broad segments of American business, disturbing conflicts of interest have been revealed in the last several years. Organizations entrusted with making certain purchases for clients have been shown to have investments in their preferred list of sources. In several well publicized cases, suppliers got on a preferred list by paying kickbacks. Such practices, of course, are familiar ways of doing business in less-developed parts of the world. Most of us presume we are a more advanced capitalist society.

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