Big is Good?

Bigness versus Greatness

Thursday, May 23, 2013

Almost always we find people talking about how big a company that they are associated to. We hear them proudly relate to working or partnering with big companies. Some of the measures that follow to flaunt the idea of ‘big is good’ are the huge number of employees that the company employs, the handsome revenue it reports in a quarter, its large market capitalization in a stock exchange, its command of market share and such.

But these numbers only tell about how big a company is. It could also imply the confidence the beholder’s claim in the stability or long-term prospect in associating with such companies. However, this only tells half the story of a company.

Such measures may demonstrate the Bigness of a company, but it does not necessarily reflect the company’s Greatness. How do you measure greatness? What makes a company a great place to work? Why some companies have great reputation versus companies that merely exist? Why customers gladly wait in long queues to get their merchandise while there are companies that customers frown even at the thought of getting there? What these great companies doing differently from many others with large sum of money but have poor customer relationship?

Great companies are those who do not only excel in its financial performance but also have a great reputation. And this reputation is not what the PR department or advertising agencies tell them. It is the reputation built by the customers who became loyal for how they were treated. 

Great companies live by the Golden Rule - a universal rule that is to treat your customers the way you want to be treated. This becomes the guiding principle for the management of great companies such that it translates policies, systems and procedures to reflect the rule.  The management team has high ethical standard in ensuring that their company does not accumulate bad profits at the expense of customer relationship and its reputation. 

Employees working in great companies have higher sense of pride and loyalty, not because of big salaries, bonuses or any tangible rewards.  They like to work in such companies because they can have a clear conscience that the company has high ethical standard and employees are not penalized for reporting any suspicious practice or irregularities. Employees are empowered to do ethically and economically right things to delight their customers. Delighted customers become promoters and help the company grow much faster than their competitors. Its common sense because great companies will create more promoters who stay longer, buy more, refer their friends and provide constructive feedback that in itself expedite the growth. In fact loyalty leaders grew 2.6 times faster than their competitors. (Bain & Co)

Greatness is about how a company enriches the lives of its customers it touches every moment. It is about having ethical business practices and genuinely helping customers in solving their problems.  It is not about extracting value out of a customer to maximize profit but instead creating value to the customer. In so doing, the outcome is good profit - profits generated by enriching customers’ lives, which grows rapidly.  

No, you cannot find good or bad profit in your traditional accounting system because such systems are not able to differentiate loyal customers. At best they are able to map profitability of each customers and it will have no clue of how the profitability will look in the future. Projection or forecast is based on soft data that will conveniently change when it did not meet with reality.

But since the world is all about measurements, benchmarking, rating one another, best in class and so on, how do you really measure greatness? Just like reputation, the customers evaluate on a great company. By asking customers if we have treated them well enough worthy of their loyalty, we could gauge the company’s greatness. The short hand to that question is how likely are you to recommend this company to a friend or colleague.  It is the ‘Ultimate Question’ that probes if a customer is loyal or not. 

Netpromoter® is based on the Ultimate Question - the one question that you need to ask your customer and measure the outcome as Netpromoter. But Netpromoter score is not just a measure of service quality, employee or customer satisfaction. It is also your ethical gauge to measure how well you and your company live up to the Golden Rule.  When a company finally gets this right – treating its employees and customers well, all other measures of bigness will follow through. Greatness leads to Bigness, and not the other way round. Not all big companies today arrived Bigness through this path of Greatness. In fact it becomes more difficult to become great company when a company is already entrenched in being big.

Satya Narayanan