Home Depot, Amazon, Walmart and UPS or FEMA: Who Is the Real Cavalry?

August 31, 2011

On Tuesday morning, Jim Cantore of the Weather Channel was reporting on the devastation to Vermont from Hurricane Irene. He ended his report by saying the cavalry is finally on its way in the form of thirty large FEMA (Federal Emergency Management Agency) trucks with food, water, and generators.

Indeed, parts of New England have suffered from devastating floods, and some families have lost their homes. But who is the real cavalry? Are Vermonters really dependent on FEMA for food and water? (Notice, that not FEMA but the Vermont National Guard is flying helicopters into towns stranded by washed-out roads.)

Last Wednesday the news reports about Hurricane Irene became very alarming. The potential devastation from the storm over a wide area was terrifying. Living in a sparsely populated rural area as I do, I understood that if our power went out, along with millions of others, we would likely be at the end of the queue for power restoration. My family was simply not prepared for a power outage that had the potential to last for a week or two.

So, on Wednesday, the first thing I did was shop at Amazon. I’m an Amazon Prime customer and anything I ordered would arrive by Friday at no shipping charge. I ordered LED lanterns, a portable battery powered phone charger, cases of canned, natural foods, and five gallon water containers. (We are on well water; if the power goes out we have no water pump.)  This bounty was available at prices equal to or less than the prices in retail stores.

On Thursday, I shopped at Walmart, loading our van with ten cases of water and an ample supply of batteries. No one had to tell the Walmart team that batteries and water were going to be in demand. I could hear the walkie-talkies of Walmart associates crackle as they diligently worked to place supplies strategically all over the store.

On Friday, UPS arrived and unloaded all of my Amazon merchandise. My wife and I then turned our attention to securing our property. Fortunately, we suffered nothing more than a 24-hour power outage, tree damage, and erosion as fast flowing water washed over the road and found its channel in our yard.

It was not just Walmart, Amazon, and UPS that worked heroically to prepare Americans for Irene. Watch this short video about Home Depot’s command center as they stocked their stores in preparation. Indeed, all through New England, Walmart and Home Depot stores were fully stocked and ready sources of needed supplies. Admittedly, this is small comfort to those who suffered the biggest losses; but FEMA has already announced that it has no available funds for rebuilding flooded roads, damaged schools, etc.

To those who believe that government is the entity that will solve their problems, it is counterintuitive that, compared to FEMA,  Walmart, Home Depot, Amazon and UPS do a better job in preparing for a disaster as well as the aftermath of a disaster. Walmart, Home Depot, Amazon, and UPS are driven by profits, while it is said that FEMA employees are motivated by public service. Some might reason that those motivated by public service must be more caring and responsive than those motivated by profits.

Indeed, many FEMA employees may be motivated to serve their fellow Americans; but clearly, others among FEMA’s ranks are not. They are motivated by career advancement, power, and money. The image of the incompetent and shallow Michael Brown, director of FEMA, bumbling during Hurricane Katrina is a lasting one.

But can any director of FEMA be competent? Of course, a person in that position may be competent and caring. But, even then, would he or she be have the motivation, knowledge, or capacity to balance all of the competing human needs that arise in face of a disaster?

During the Nazi siege of Leningrad, the population of the city endured hell on earth. In 1941, as the Nazi’s closed their circle around the city, what did Communist Party chief of the city, Andrei Zhdanov, do? Did he work tirelessly around the clock to bring in needed food supplies before the circle closed? No. He worked tirelessly around the clock to arrest “spys.” A spy was defined as anyone who spoke a foreign language or had a foreign connection. Spies were often harmless senior citizens, but Zhdanov was doing the job that seemed important to him, rather than the job that was needed. And, he was very efficient at performing this terrible deed.

Admittedly, this is an extreme example; but it illustrates a point. What a bureaucracy thinks is needed and what is really needed can be two different things. In contrast, the goal of earning profits in a competitive market is what compels Walmart, Home Depot, Amazon, and UPS to deploy the energy of their employees towards what is really needed. Walmart, Home Depot, Amazon, and UPS earn money only when customers voluntarily purchase goods and services from them. Thus, their employees are benevolent towards people they have never met because it is in the self-interest of their organizations. And, it is also true that self-interest is joined by genuine feelings of goodwill as two parties interact in non-coercive trades.

In contrast, FEMA exists in a coercive relationship with American citizens. They earn their revenue in a political way; and FEMA’s success does not depend on pleasing American citizens. Indeed, like the public school system, the more their efforts fall short or outright fail, the more FEMA can argue it needs more tax revenue.

In short, no matter how efficiently FEMA uses tax money, no matter how caring FEMA employees are as a hand out water off the back of a truck to long lines of people, because FEMA is not subject to the discipline of the market, they will never match the operational efficiency and genuine caring of the employees of Home Depot, Amazon, Walmart and UPS.

To Mr. Cantore, I say, if New Englanders were truly dependent on FEMA, the cavalry would have been too little and too late.


No Empathy, No Profits

February 1, 2011

A friend recently called to ask the name of the shovel we use to remove snow. It looks like a sled pushed by a bar, and it moves tremendous amounts of snow quickly.

Years ago I may have been stumped by the question. I may have gone to look at the shovel and found, as in this case, that its name was not stamped on the handle. I may have tried to remember the name of product and the store at which I purchased it. Even if we could remember that information, our friend may have found the product no longer available at a store near her.

But, this is not years ago; and we were able to find the answer very quickly. Why? I had purchased the product—the Suncast Big Scoop—at Amazon. As a consequence, within minutes, I was able to provide our friend the link to the shovel at Amazon; and she was able to order the product that same day without doing hours of her own research.

Indeed, if I am asked, I can tell you the date of my very first purchase at Amazon. It was March 6, 1997; I purchased four books for $57.01. How do I know? Amazon keeps the records for me and makes them readily accessible.

The same week, I needed to retrieve information for taxes. When I went online to my bank account, I found that the bank maintains only six months of my banking records. The cost of server space to maintain records is basically the same for the bank as it is for Amazon—zero.  Amazon chooses to make my shopping experience almost always delightful, and my bank choose otherwise.

During the 1996 Summer Olympic Games, my brother visited. He works in a technology field, and my wife remembers that he and I had a heated discussion about the commercial viability of Amazon. Amazon had sold its first books online in 1995, and my brother was certain they were doomed for failure. I thought otherwise; but unfortunately, when Amazon went public in May 1997, it didn’t register with me to begin to accumulate their stock.

In his seminal monograph Profit and Loss, Ludwig von Mises observes, “If all people were to correctly anticipate the future state of the market, the entrepreneurs would neither earn any profits nor suffer any losses.” Of course, it is literally impossible for that to happen; and that’s why there are disagreements about the viability of emerging companies.

Von Mises goes on to point out in Profit and Loss, “Profit and loss are generated by success or failure in adjusting the course of production activities to the most urgent demand of the consumers.” Yet, if you asked the management of my bank, they would tell you that they are as interested as Amazon is in meeting my most urgent needs. My bank, like almost any organization, would explain how they are committed to customer service. They would be blind to the fact that they don’t deliver.

So that brings up a question: How are Mises’s observations on profit and loss, which are admittedly written in the realm of economics, helpful to managerial decision-making? A recent book helps to bridge the gap. Author Dev Patnaik has probably never read Mises; but in his book Wired to Care: How Companies Prosper When They Create Widespread Empathy he writes, “If you want to create products and services that other people care about, you should put aside your problems and start caring about other people’s lives.”

This statement is operationally meaningful. Would a bank that cares about the lives of its customers post just six months of banking statements in order to save pennies in online storage space expense? The answer is of course not.

Patnaik gives the example of Harley-Davidson, a company that mandates “that leaders throughout the organization spend measureable amounts of times out with motorcycle riders.” No, they don’t mandate that their leaders ride a motorcycle—just that they take steps to increase their empathy for their customers.

There is no formula for how an organization creates a culture of empathy for their customers. But genuine willingness to be empathetic begins with a willingness to give before receiving. Most organizations cannot even get to the starting gate for a culture of empathy because there is no willingness to do the inner-work necessary to examine the dysfunctional beliefs that prevent empathetic behavior.

What are these dysfunctional beliefs? At their core is the belief in a static, win-lose world. In a static, win-lose world, receiving must come before giving, or at best, business is conducted like a hostage trade off—We’ll give you something, if give us something of the exact same or greater value. The individuals who work in such organizations battle with their colleagues to get ahead. What about me? is the mantra repeated silently throughout the day.

Why aren’t more organizations empathetic with customers? One could easily ask why aren’t more people empathetic with other people? The answer is very clear: When one chooses their ego for guidance, the world is evaluated through the ego’s lens whose central concern is What about me? The guidance that follows from that question is sure to be stingy and uncaring.

In my book The Inner-Work of Leadership I provide specific guidance for recognizing our ego and turning away from our ego. Importantly, I cover the specific ingredients that are necessary for an organizational culture to evolve to support the inner-work journeys of their employees. In a declining economy and an increasingly competitive global marketplace, an organizational culture of empathy with the customer is no longer optional: no empathy, no profits.

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