Whats most important in business

Why Being Customer-Centric Is The Most Important To Secret to Business Success

I’m going to share with you one central concept mentioned by billionaires to help you succeed in business.

It’s simple and yet no one really emphasizes it. In fact, if you quizzed any business owners, they couldn’t give you an instant answer (even though they should).

What is it?

I call it the priority hierarchy:

Customers first, then employees, then investors.

A lot of billionaires are very clear on who they should serve and take care of first and foremost. And I think it’s central to the success of their business.

Here’s what average and mediocre businesses do:

They don’t care about any of this. They treat everyone the same: horribly.

They treat their employees, customers, and everyone else really bad.

They don’t bother to read articles like this.

You’re not like that. Good for you!

Now how do we understand this to operate on a higher level?

According to billionaire Jack Ma of China’s Alibaba..

“It’s customers No. 1, employees, two, and shareholders, three. It’s the customer who pay us the money, it’s the employees who drive the vision, and it’s the shareholders who when the [financial] crisis comes, these people ran away. My customers and my people stayed.” –Jack Ma, UpStart Business Journal

Watch the video starting at 4:35 to see:

But here, we see other successful billionaires telling you to put employees first.

Let’s see what AsiaAir has to say:

Employees come number one. Customers come number two. If you have a happy workforce, they’ll look after your customers anyway.” -Tony Fernandes (net worth $650 million)

If the employees come first, then they’re happy. A motivated employee treats the customer well. The customer is happy so they keep coming back, which pleases the shareholders. It’s not one of the enduring green mysteries of all time, it is just the way it works.” -Herb Kelleher, founder (net worth $2.5 billion)

Richard Branson has agreed with this::

“Put your staff first, customers second, and shareholders third” – Richard Branson

Watch this video (notable time stamps are 0:43 and 1:42):

Danney Meyer (net worth $350 million) says this:

When you really take a perspective that the customer comes second, which is counter-intuitive in a society that always puts the customer first, you also end up attracting stronger employees over time, which increases the odds that your technical and your emotional and hospitality performance are going to be competitive.” -Danny Meyer

Let’s continue. What does the chairman and billionaire CEO and founder of Starbucks have to say?

We built the Starbucks brand first with our people, not with consumers. Because we believed the best way to meet and exceed the expectations of our customers was to hire and train great people. We invested in employees.” -Howard Schultz, net worth $2.9 billion

Vineet Nayar, former CEO of HCL Technologies, wrote a Harvard Business Press bestseller called “Employees First, Customers Second.”

He argues employees should come first in the video below:

And finally, we have one of the richest people in the world, Jeff Bezos of Amazon. In the book The Everything Store, it’s clear as day that he puts customers first before employees. Even though the company was already making millions, he blew up when he found out a TV was bought for a break room without his permission. Hundreds of his C-level executives have left the company after only a couple years because there was no work-life balance, just 60+ hours a week of work.

Yet Jeff made it a point to make the customers the happiest they could ever be. He kept driving down prices for the goods he sold on Amazon.com even to a point where the customer wasn’t making money. He drove down the “Free shipping with a $100+” offer all the way to $25 and he intends to get it even lower.

Warren Buffett has applauded Jeff and said that he’s “changed the world” because he’s constantly went out to please the customer.

“All he thinks about is he wants the customer to have a smile on their face.” -Warren Buffett on Jeff Bezos

See Warren talk about it in the video below for details:

So what’s most important?

Well then, which ones first? Should you value customers first? Or employees? Or something else? After studying all these different sources, I think it’s the wrong question. It’s like asking if your lungs or heart is more important. BOTH ARE!

First off, let me commend you for even caring. You are thinking and looking to execute on a higher level. You will do better than others.

But if I had to choose… customers have a slight edge.

Customers >= Employees > Shareholders and Owners in it for the long term > Any investors who will leave you the instant it seems like things are going wrong.

Customers and employees both matter. How you treat them both impact the bottom line immensely. If you’re looking for some excuse to treat or neglect one group, you’ve got it all wrong. Just take care of them both.

I used a greater than or equal to sign for “Customers” because arguably, treating your employees well is almost as important. And you can hit a cap of treating your employees too well when they don’t deserve it.

I agree with Jeff Bezos’s frugality (maybe not to his extreme) because a lot of billionaires have achieved similar wealth by being frugal yet efficient.

I listened to an episode of The Marketing School podcast where the host, Neil Patel, said that he managed millions of dollars for one of his clients. And this client literally could have got the same advertising results with $2 million rather than the $5 million they spent. They voluntarily chose to waste $3 million in budget just because the marketing department wanted that budget.

Compare this stupid company to Jeff Bezos’s frugality. Of course Jeff is going to win. Frugality and efficiency matters because it’s not about how much money you have but how you use it. Movies, for example, with a fraction of the budget of other movies have performed much better in the box office because they used what they had more efficiently.

As explained by studies and books like Drive: The Surprising Truth To What Motivates Us by Dan Pink, money becomes less of a motivating factor as you give more. It becomes increasingly less effective and costly to pay someone hundreds of millions of dollars to go to work. They should be motivated by an internal motivator beyond money to perform at the highest of levels. Therefore, I think taking care of employees hits a cap before customers.

As long as you’re focused on things customers actually care about, you can usually keep raising the bar on how much you delight your customer. Amazon will never hit the point where you can order everything you want on there for free and get a free massage with it. But they are moving towards it by constantly lowering their prices on quality items.

But again, it’s just my theory. Which one is not nearly as important as simply taking care both groups as much as you can.

The big issue is that most businesses do not go to great lengths to take care of their customers and employees incredibly well. It’s mediocre at best. They might think they’re doing a great job. But you don’t need a sophisticated survey to tell that some of them aren’t as delighted after spending money with you as they are when they buy from Amazon or Apple.

So, for most people, the emphasis should just be on finding out what really matters for these groups and doing your best to satisfy them. If they’re being paid minimal wage, money matters. If they’re already being paid millions, maybe you want to fulfill their other problems (work-life balance, fulfillment, etc.).

Google (Alphabet Inc.) has been known to take care of their employees on an incredible level. They pay for day-care, massages, gourmet food, gourmet coffee, huge salaries, bonuses, benefits, and more. There is great truth in what Sam Walton of Walmart said in his book Made in America: if you treat your employees right, they will treat your customers right.

And Warren Buffett has said that generally speaking, when you treat your customers right, they will take care of you (which means you’ll make a lot of money). It’s a trickling effect. It’s not rocket science; it’s actually quite simple.

Warren makes it simple. Delight your customer. If your customer comes out of your store with a bad taste in his or her mouth and a vow to never return, you’re losing the long game. Even if you made a profitable transaction.

Trust Bezos

“You don’t do things for business reasons, you do things for customer experience reasons & find business ways to fund it.” – Jeff Bezos

Jeff Bezos, has been hailed by top business minds, like Warren Buffett, as one of the best CEOs of the century. In countless interviews, he has said that Amazon’s success comes from being customer-centric first rather than employee-centric or business-centric.

Be like Bezos and keep looking for ways you can further delight your customer.

Frugality is Important But There’s A Difference Between Being Cheap and Being Efficient

I believe that Bezos has gone a little too far in sacrificing employee enjoyment in the pursuit of profits. If he took some more time to take care of his employees, he’d find he would make more money anyway.

As far as Google, I think they may have cap of spending too much on materialistic items to please their employees. You get diminishing returns  when you do that and eventually you start wasting excessive money on tiny improvements in satisfaction when it could have been put to better use.

Warren Buffett has mentioned in his shareholder letters that he frowns upon banks that make a lot of money, then start spending it on fancy, expensive, unnecessary decorations in the bank. Do you really think that a$500,000 marble table will help close the sale more than a $10,000 one? Quite frankly, most people can’t tell the difference between them anyways.

These banks ended up losing a lot of money in the long run because of this philosophy. Although he is talking about furniture rather than people, the central concept of being the most efficient with your money is the same.

How To Put Employees First: 3 Surprising Tips on Taking Care of Them

1. Give Them More Money

This is the most obvious and the one that most people jump to first. They give employees bonuses and raises. As mentioned, Dan Pink shows that this clearly helps for people who make very little money and work manual labor.

But what’s startling is that it loses its effect as you start making a lot more money or when you are engaged in a creative work focused on your own fulfillment. The truth is that most of us hit a point where we have enough and we look to other motivators and goals.

2. Give Them Others Benefits and Higher Standards of Living

You can do what Google does and really spend money so that their lifestyle and standard of living is better. Money is just a means to an end and often one of their goals is to have a more pleasant life.

Many companies kill two birds with one stone with a company gym membership. They pay for something that their employees would have paid for anyways. Plus, it encourages exercise, which improves people’s productivity, focus, energy levels, longevity, health, attractiveness, and many other factors important to career success and networking.

In T. Boone Pickens’s book The First Billion Is The Hardest, he said that he made a point to make fitness a priority for his company. By doing so, their profits, happiness, and productivity increased dramatically.

3. Give Them Work That Fulfills Their Passion and Purpose. Improve Their Work-Life Balance

Many people have finally gotten rich only to realize that they have lose their sense of purpose. They ask questions like, “Is there all there is?” and “What’s my purpose on this Earth?”

When people make enough money, they start looking to other motivators like what interests them, what they have the most fun doing, and what fulfills a bigger mission. I have read a few stories of ex-Google employees. They were paid incredibly well with all the amazing benefits mentioned. But they chose to leave because these higher purpose motivators were not in place.

To retain and cultivate the best talent, you need to work to satisfy these. Naturally, many companies define higher purpose values. From there, they attract people who align with these. You can go a step further by encouraging employees to a job that fulfills them more or shift them around yourself.

Sam Walton was great at doing this. He would move around C-level executives to completely new roles if he didn’t feel something was right. He embraced change.

Ideally, you want employees that love what they do so much that they work 20 hour days 7 days a week for you excitedly. But that doesn’t always happen. Women have children they want to spend time with, for example. Another way of taking care of employees more is really seeing what matters to them and letting them have that flexibility.

Sheryl Sandberg, founder of the #LeanIn movement and female billionaire of Facebook, said left work at 5pm every day because she cared about spending time with her children so much. She proved that she could still make her company into something great without spending all night at her start-up company.

Step into the shoes of an employee and a customer to see how they experience things and go above and beyond to make it better.

The Real Money Is In The Follow-Up. Here’s What This Means and Why.

I had heard about the power of checklists from a couple successful businessmen and references to the book The Checklist Manifesto. Despite that, I did not use checklists for a long time.

After I finally read the book, I finally did because it showed great extensive detail on the results of using checklists across numerous industries.

The Checklist Manifesto dilemma is that numerous things I talk about on happiness or productivity don’t ever get exercised because they’re “too common sense” or you don’t really understand the importance of them.

This is like the story in the book, The Happiness Advantage, where a guy starts arguing with the author of the book in a lecture, saying that all the happiness stuff he says is common sense. After the talk, his coworkers went up to the lecturer and told him that he is the most toxic, negative guy in the organization.

It’s interesting how people think they’re doing things they aren’t. 

So the point is: nurture your customers and employees.

I will do my best to prove the importance of this with examples.

Richard Branson (again see the video above) explains this simply:

If the person who works at your company is appreciated and treated well, they’re going to be smiling and happy, and therefore, the customer will have a great experience.

The inverse is true, if you don’t give the employee the right tools, don’t appreciate or treat them well, the customer will be treated in a way where they don’t want to come back.

As you can see, how you treat your employee bleeds down to your customer.

Hal Rosenbluth, author of The Customer Comes Second, grew his small family business into a global leader that has grossed over $6 billion (among other awesome things). One of the big points he stresses is that putting employees first will directly impact the well-being of the customers:

 “… if you genuinely want to put customers first, you must put employees more first.”

“Care about your people and they will care about your business. Forget that and watch profits go down the drain.”

So directly or indirectly, your employees matter a ton.

Or you can run it in reverse: if you make customers your #1 priority, to give them the best experience, you have to treat your employees well so they treat your customers well.

Arguably, I can see why Branson favors employees first.

There are definitely businesses that start mistreating their employees for a better customer experience: maybe telling their employees they have to go above and beyond by massaging their customers feet and walking them to the door.. but at the same time, underpaying and under-appreciating the employee for doing so.

My take is that you can do both. You can really treat your employees and customers well. And that will come back in time with greater profits, which will allow you to treat your customers and employees even better.

Obviously, it gets tougher to do the larger a business becomes because it gets bloated and bureaucratic. And maybe there’s too many people to really keep an eye on.

However, I think for most businesses, there’s always room for great improvement.

There’s always stuff you can do. Virgin Airlines has gotten pretty large and yet they’re still doing pretty well in terms of customer and employee care.

Google is known to this day for providing gourmet catering, massages, and all sorts of perks to its employees. And its one of the largest businesses in the world.

As a special note though, there is a danger of over-spending on frivolous stuff and sending your business to bankruptcy. Click here to see the article where I talk about that. My conclusion was that you should avoid it if it is just pampering the higher-up executives, clearly an exploitation of cash, and the results don’t produce some level of measurable return (acknowledging that there are some un-measurable intangible’s). An example would be CEO’s and top executives spending the business’s cash on personal vacations to golf courses on a monthly basis.

Also, take a look at TV show Undercover Boss where the CEO disguises himself as a low-level employee to learn what it’s like and uncover hidden mistakes. These things work well and it’s a nod at what Sam Walton of Walmart would do back in the day.

Speaking of Sam Walton, let’s see what he has to say about this.

First off, if you don’t know, Mr. Walton grew Walmart from one store into a multi-billion dollar company and he’s arguably made more money than anyone in the history of mankind if you adjust for inflation.

According to Sam Walton:

The way management treats the associates is exactly how the associates will then treat the customers. And if the associates treat the customers well, the customers will return again and again, and that is where the real profit in this business lies, not in trying to drag strangers into your stores for one-time purchases based on splashy sales or expensive advertising.  Satisfied, loyal, repeat customers are at the heart of Wal-Mart’s spectacular profit margins” -Sam Walton, Made in America

Sam Walton goes to great depths in his book about how important it is to hire A very similar method to what I’ve talked about already. Check out his book Made in America for great details.

The point is, he would also agree that customers and employees should really be taken after and appreciated. Both of these elements are critically important.

So how do you take care of an employee?

  1. Show appreciation (written notes, thanking them, in-person meetings, small gifts, etc.)
  2. Give them the proper tools to do what they do. Make sure they’re the right tools.
  3. Look after them.
  4. Make and keep them happy. (See my article on The Cyclic Effect on the great importance of happiness)
  5. Get the right employees in the first place. If you hire someone who’s toxic or wrong for the job, it’s not worth it to go above and beyond. It’s draining and they may affect your other hires. See this article for details. 

Let’s look at one last example.

The airline industry is very, tough, competitive industry.

Many airline businesses make hundreds of millions in sales, but after accounting for costs, they often lose money.

It’s interesting because some people say that in order to make a ton of money, you have to provide a lot of value.

I think it’s more right to say that you have to provide a lot of value and intelligently capture some of that value in an ethical, win-win way.

“Creating value is not enough—you also need to capture some of the value you create.” -Billionaire Peter Thiel from the book Zero to One

So it’s interesting that I keep hearing about Southwest Airlines. They’re definitely not the only airlines to jump off the page (Turkish Airlines is another).

But there’s only a few that do.

In the book Start With Why, the author talks a lot about the success of Southwest Airlines.

Apparently, it’s one of the most profitable airlines in history.

It also got a ton of customers sending in checks to help it out after September 11th because of how good it has been to them.

Southwest really cares for its customers and employees as well.

In the book Nuts! Southwest Airlines’ Crazy Recipe for Business and Personal Success, the authors let us look behind the curtains of the nation’s largest domestic carrier. And what we find, is employees first.

According to its blog:

We put our Employees first, then our Customers, then our Shareholders.  Many companies feel you have to appease the customers or shareholders first, but Southwest Airlines has the magic formula that makes us an admired company:  Happy Employees=Happy Customers=Increased Business/Profits=Happy Shareholders!  We believe that, if we treat our Employees right, they will treat our Customers right, and in turn that results in increased business and profits that make everyone happy.

Southwest seems to get it.

They also understand that you don’t have to spend large amounts on employees to do it right:

“Many companies may ask what is the best way to treat employees right? They say they don’t have the money to do much, but really…how can they afford not to?  Their employees can be their best and most cost-effective source of advertising, and you don’t have to spend a fortune.  While Southwest does save and plan for Companywide celebrations, we also realize that a little can go a long way in making an Employee feel special as a person, and not just a number in work force of 35,000 Employees.  A card or hug/handshake and a sincere verbal thank-you from a Coworker or Leader can go a long way in making an Employee feel appreciated.  These actions are simple, don’t take much time to do, and don’t cost much money.”

Investing in your employees seems to pay off for Costco. They pays their average worker $20.89 an hour, much more than their biggest competitor, Sam’s Club.

In complete alignment with the benefits listed in the book Good To Great, this has lead to much lower turnover and saved costs on recruiting and hiring.

“Costco’s employees generate nearly twice the sales of Sam’s Club employees. Costco has about 5 percent turnover among employees who stay at least a year, and the overall rate is far lower than that of Walmart. In turn, the reduced costs of recruiting and training new employees saves Costco several hundred million dollars a year.” source

In the book Make More Money by Making Your Employees Happy, a study is cited that was done across 26,000 employees across numerous types of businesses, big and small. They found that companies that effectively appreciated their employees had a return on equity and assets that were triple the firms that didn’t.

Shareholders Last?

What’s unanimous seems to be putting shareholders last.

I think what they mean by this is that shareholders are usually mean to represent corporate or large organization investors. They may have their own motives and their own opinions.

But the core to business success starts with appeasing the customers and employees, which will in turn bring incredible profits and appease the investors.

The issue is when you start listening to shareholders that will leave you when the going gets tough or gives you advice on how to run your company that is wrong or misguided.

This is one of the big reasons Richard Branson bought back one of his companies and turned in private again after making it public with an IPO to investors.

As a special note, Warren Buffett (and his mentor Ben Graham) sometimes talks about the importance of valuing shareholders. This may seem contradictory, but what he means by shareholders are usually not the stakeholders that represent money managers or large funds. He usually means the common man who’s invested in a very small percentage of a business through a stock for his or her retirement fund. And he’s usually talking about businesses that are clearly using the cash generated from a business selfishly rather than distributing it back to shareholders. This gets a bit complicated and is beyond the scope of this article (and beyond my expertise). It gets into stuff like using cash for greater growth rather than distributing it through dividends (a case-by-case basis for what is right or wrong) versus spending profits on fancy cigars and unnecessary private jets for the CEO’s and billing it as “business expense” rather than distributing it to shareholders through dividends.

In conclusion,

TREAT YOUR EMPLOYEES AND CUSTOMERS WITH TREMENDOUS AMOUNTS OF RESPECT AND APPRECIATION.

GIVE THEM AN INCREDIBLE EXPERIENCE: GREAT SERVICE, PRODUCTS, AND THE PROPER TOOLS.

If you go above and beyond to care for and nurture them, the profits will come back to you many times over.

Recommended materials:

Recommended documentary: Crocodile on the Yangtze

If you have the time, I highly encourage you to check out the documentary on Alibaba, Crocodile on the Yangtze. You really see the economics and history of how Alibaba beat its 800 pound gorilla competitor Ebay. They did it through understanding the differences in culture and making it completely free for its users to capture market share at the cost of burning money for many years. I don’t recommend this for every business, but it seems to be a common thing among the most successful tech and social media companies. Many businesses try to monetize too quickly

Recommended books: These are relevant books on this topic: Made in America by Sam Walton, The Virgin Way by Richard Branson, and Creating Magic

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