www.stevesavage.com ι October 2009

Last month I told you how FedEx and Northwest drove decisions down. Let me tell you about my own business. It gives me great pride to tell you that we gave our employees all kinds of power back in the 1980s—that was before the idea of “empowerment” became popular. We gave them much more power than FedEx gave their people with the hundred-dollar credit, and we went way beyond Northwest’s free round-trip ticket. We told our customer-service reps that they could do anything to make the customer happy.
We had a small company with a big name: Institutional Financing Services (IFS, for short). Our business was fund-raising, specifically for schools. Our specialty was fashion jewelry, and our average school bought $5000 worth of products.

Anna was our first customer-service rep—I wish you could have met her. She was twenty-eight years old, enthusiastic, intelligent, and passionate about her work. Within three months, she was managing ten other customer-service reps. I told her, “Look, Anna, my two partners and I want you to make customer service decisions. You’re smart. We trust you. And we want your people to make decisions. Don’t ask us what to do. Just do whatever it takes to make the customer happy. Pretend IFS is your company, Anna, because you really do own the customer service department.”

Then we got all ten of the customer-service reps together and told them, “We have asked Anna to make decisions without consulting us. Now we want you to make decisions without consulting Anna.”

About the same time we hired our first professional manager, a controller. His name was Dave. So picture this: The company, IFS, had three crazy entrepreneurs full of ideas, ten customer-service reps full of enthusiasm—and Dave.

Dave thought we were nuts. He did not like letting those customer-service reps make important decisions. “It won’t work. They’ll give away the company. We’ll go broke.”

Within six months, however, Dave began to come around. He analyzed the decisions our customer-service reps had made. Although he did not like to admit it, most of those decisions were sensible, with very few mistakes.

Yes, they made mistakes, but we said to Anna, “Go ahead and make mistakes. It’s OK. If you ask us to make the decisions, we’ll make mistakes also. And you’ll never grow. If you make a mistake, we’ll analyze it calmly, but we’ll never get mad.”

We told the customer-service reps, “Look, these schools are buying $5,000 a year from us, on average. That means they will buy $25,000 over the next five years. Let’s not lose that school over a stupid little fifty-dollar misunderstanding. If you think they deserve credit, or a prize, or extra merchandise, that’s your decision. Even if the worst should happen and the school wants to cancel the sale and get a $5000 refund, you can accept it without consulting us.”

You should have seen the letters we got from the schools we worked with. I remember a school principal who wrote me: “IFS is the best company I have ever dealt with. Your customer-service people are enthusiastic, and they can take care of every situation on the spot.”

You are probably thinking, “OK, Steve, that works fine with ten employees. But I work with a thousand employees. I can’t let them make those kinds of decisions.”

Well, let me describe how our company grew. We went from ten employees to six hundred. And our sales went from zero to $60 million in six years. And our philosophy never changed.

It was not easy. As we grew, we had to hire more professional managers, like Dave. We needed experts in production, operations, quality control, and management-information systems. And you know what they wanted? More rules! Yes, every day we discovered a new rule—they would impose a rule; we would remove a rule.

You may be wondering about training these people, and you’d be absolutely right. You must train them. You don’t simply tell your people, “OK, you’ve got power. Make decisions. You’re on your own!” We had weekly sessions in which all employees who dealt with customers brought up case studies of problems they’d confronted and strategies they’d created. Everyone got to talk. We learned from and stimulated each other.

You also may be wondering about employees who simply don’t want to make decisions. That’s fine; there are plenty of jobs for them. But keep them out of the front line. Don’t let them deal with customers. You want your customers to deal with people who can make decisions.

© Copyright 2009, Stephen Savage