Friday, November 21, 2008

Putting Detroit Back on the Road to Recovery

For twenty-five years General Motors, Ford and Chrysler have resisted common sense. Now, their leaders have flown into Washington, D.C. on their corporate jets begging Congress to give them billions in another federal bailout scheme. They just don’t get it. These auto giants are grossly mismanaged and misdirected from the top down. Their woes are self-inflicted. Under their current management apparatus the Big Three are unworthy of any federal bailout. Let them take the first step on the road to recovery by filing for bankruptcy.

Certainly, consumers don’t want these companies to go out of business. But, to provide them with billions of dollars from the federal government will only exacerbate the current problem. What Detroit needs is a leadership lobotomy -- from the head down.

For starters, the Big Three can eliminate many of the perks that are symbolic of management’s arrogance. I’m talking about the corporate jets, the executive dining rooms, and the huge bonuses senior management has received for over-promising and under-delivering to shareholders.

Secondly, the United Auto Workers needs to wise-up. As Lee Iacocca once remarked in the 1980s, “We have jobs at $40 an hour, but we don’t have any jobs at $75 an hour [adjusted for inflation].” The UAW needs to approve new labor agreements that bring workers’ costs in line with Honda, Nissan and Toyota which are capturing increased market share because their unit costs are considerably lower than the Big Three.

Retiree benefits must also be reduced so that the Big Three’s pension costs are in line with their foreign competitors. Workers deserve a reasonable wage, but under the current labor agreements, the Big Three cannot compete. Unless the UAW agrees to dramatic wage cuts its members will find themselves unemployed and Detroit will suffer.

Next, the boards of General Motors and Chrysler must bring in new management teams. The ideal leadership will come from outside the auto industry. They need to break the mold as Ford Motor Company did by hiring Alan Mulally from The Boeing Company. While Mulally is struggling, he is making progress and instituting long-overdue changes at Ford. Fresh thinking and innovation should rule the day at the Big Three. Quality must be rediscovered and incentives for eliminating defects should be instituted to inspire workers to build quality cars and trucks the first time!

The Big Three’s biggest challenge is to project into the future and understand what consumers want and need. That’s pretty simple according to most consumer surveys and the recent spike in gasoline prices. Consumers want options. Consumers want fuel efficiency -- and I’m talking about 50 miles per gallon not a measly 21 mpg. And, we want electric cars and other types of clean fuel-burning motors that don’t pollute the environment. These types of innovations will invigorate the huge supply chain that feeds off Detroit. Certainly, the thousands of suppliers deserve a chance to demonstrate their talents in terms of going Green and helping a revitalized Big Three enter a new era of auto-making. But, they will remain stuck in neutral as long as Detroit continues to think backwards.

Finally, shareholders and bondholders need to pony-up. They gambled on the Big Three and, frankly, they lost. Let’s not burden American taxpayers without first putting the onus on those investors who clearly understand the odds associated with any stock purchase. It might be smart to remind them of the old adage, “Sometimes you win and sometimes you lose.”

Ironically, despite their serious financial problems, General Motors, Ford, and Chrysler have an abundance of talented people throughout their ranks. These people have great ideas that should be solicited and implemented. Often times, it’s the workers who know best how to fix management’s mess. It’s time Detroit got some inspired leadership that abandons the re-treaded ideas of the past that have gone flat. What the Big Three desperately need is a plan for success instead of trying to further bleed American consumers and taxpayers with another ill-conceived bailout.

About the Author:
Thomas Hinton is president of the American Consumer Council. He can be reached at tom@americanconsumercouncil.org

Tuesday, October 14, 2008

What I Did on My Summer Vacation

By Bill Kalmar

For some, Labor Day signals the end of summer as preparations for autumn and the accompanying holidays begin. As is customary in some locales, warm weather clothes, including one’s white wardrobe and shoes, are returned to the closet until next spring. Children and students go back to school, much to the delight of their parents, and hopefully to the excitement of their teachers.

Chances are one of the kids’ first assignments will be to draft a report on the activities of their summer vacation. Not to be left out of this assignment, I thought it appropriate that I pen a few lines about one of our recent trips. There were no death-defying rides on some monster roller coaster, no surfing in shark-infested waters or aerial descents with a parachute from a plane, just a sensible trip to Chicago for my wife and me.

What made the trip so memorable was something I wrote about in my August column for QualityInsider (Online at www .qualitydigest.com/content/quality-insider.) The column recounted several encounters with poor service, and thus I concluded that I was in fact a magnet for service personnel and organizations that don’t practice performance excellence. Well, traveling to Chicago convinced me that somehow I had been demagnetized, at least on this one occasion.

Off to a good start

Our trip began early on a weekday as we departed our home in Lake Orion, Michigan. Our first stop was The Big Apple Bagel. As we opened the door, the aroma of fresh bagels and coffee wafted into our nostrils. Three upbeat and smiling clerks greeted us with a hearty good morning--and this was 7 a.m. It’s no wonder that this particular location is well frequented by regulars and transients alike. We left, bagels and coffee in hand, knowing that our trip was off to a great start.

Motoring to Chicago took us on the Indiana Toll Road. Often, those manning the toll booths are cranky and don’t engage in many pleasantries. Perhaps the toll road commission had everyone read Jim Collins’ book Good to Great ( Harper Collins, 2001 ) because we were met with friendly greetings at each booth. Somehow that lessened the strain of doling out a couple of bucks every 50 miles or so.

We arrived at our hotel, blocks away from the Magnificent Mile, just after noon. Our room wasn’t ready, so to take the sting off our having to wander the streets of the Windy City in our traveling clothes, the hotel gave us a room upgrade.

After a five-hour trip, which included the last 30 minutes in typical Chicago traffic, we were ready for lunch. One of our favorite haunts in the Toddling Town is Gibson’s Steak House on Rush Street. Sitting on the enclosed street-level porch gives one a view of the horse-drawn carriages trekking through town and the hundreds of shoppers toting their bags laden with one-of-a-kind purchases that can only be found in Chicago. It seems that no one in the town realizes that there is a recession underway. The streets were crowded, and restaurants and hotels were at capacity.

Our lunch was an epicurean delight even though my medium-rare steak was a bit overcooked. Our waitress, Deena, noticed the lack of rare red beef on my plate and suggested that she would have another one prepared. I politely declined and stated that it was still just fine. When our bill arrived, Deena had unexpectedly taken the cost of my steak off the bill. She did this without my having to raise an eyebrow or growl about the preparation. This signaled to me that I was in the process of being demagnetized.

After lunch we wandered into the Neiman Marcus store. Prior to our trip, we had received a phone call from a Neiman Marcus employee, Naomi, indicating that some items I might be interested in were on sale, but that after the first of the month the prices would be increasing. As we walked into Naomi’s sales area, she greeted us by name and was genuinely excited to see us again. Our last visit had been the previous year, but her ability to remember names and faces is uncanny. While in the store, I noticed that Naomi maintained a huge three-ring binder of the names and phone numbers and past purchases of all her customers. Her practice of contacting customers personally when sales develop is no doubt one of the reasons why Neiman Marcus regularly posts sales increases and profits while other stores are incurring losses.

Those of you who are watch aficionados like me would certainly enjoy window-shopping at the Tourneau store in the Water Tower. Being greeted by name by Michael, the salesperson who sold me a watch three years ago, is something that still makes an impression on me. Like Naomi at Neiman Marcus, Michael remembers names and even the type of watch I purchased. Maybe he anticipates me buying another one shortly?

Quality experiences continue

The next day saw us walking over to another of our favorite restaurants--Tucci Benucch. It’s a small Italian restaurant in the Bloomingdale’s building. For us, a trip to Chicago isn’t complete without enjoying the great salads at this little nook on the sixth floor. To our surprise and disappointment, the restaurant had now morphed into “Frankie’s Pizza,” although we were told that it was under the same management. We dined, but it was difficult to hide my disillusionment at losing our favorite lunch haunt. Our waitress must have picked up on my vibes because when we returned home there was a message on our voice mail from the restaurant’s manager indicating that many of the same menu items from Tucci Benucch could still be ordered if we asked. Just another indication to me how embedded customer service is in Chicago.

Even the cabbies get it!

Cab drivers were equally pleasant and customer-focused even though it took us several days to catch our breath from the Indy 500-inspired drivers who dart around the downtown area as if they were vying for the pole position for the next race.

As you can see, our voyage to the Windy City was an example in performance excellence. And it didn’t end there. When we returned home, I received an e-mail from The Wall Street Journal, which is indicative of its strong focus on customer service. Here is an excerpt: “We see that delivery of your Wall Street Journal was scheduled to resume today after a temporary suspension and are following up to check that it did.” Wow! Is that great service or what?

In other news

I hope that you’ll permit me to opine on some other topics.

I recently purchased a polo shirt from Macy’s and attempted to have Lord & Taylor match the price. I wrote Lord & Taylor about the incident, and their reply indicated that I would hear from “the appropriate department and someone will be in touch with you within five to seven business days.”

After a wait of three weeks, I contacted the store again. A reply finally arrived indicating that “Lord & Taylor does not have a practice of matching prices.” Perhaps the delay was attributed to the management formulating a policy? Who knows, but it tells me a lot about how it resolves customer service questions.

More and more defective products continue to enter our country from China. We are now told to check our tire pressure in the wake of a recall of as many as 30 million replacement rubber valve stems. These defective parts can crack prematurely and cause tires to lose air. At highway speeds, this loss of air could result in a loss of control with a resultant crash. It’s time we boycott Chinese products until such time as that country raises its level of quality. At this juncture, what with all the lead-based products that we have banned, I think a total ban on products from China isn’t out of the question. What do you think?

If you have noticed a downturn in customer service in some segments, let me offer an explanation. Here in Michigan, there are thousands of automotive professionals who have been outsourced, downsized, or as we say--fired! These highly qualified people now find themselves working in positions much below their level of expertise, and as such, their attitude and demeanor in dealing with customers isn’t what you would characterize as exemplary. As we frequent the various restaurants and stores in our area, I often question how long the person has been employed. What I’m finding is that there are many college grads and MBAs who are now flipping burgers. This no doubt does not make for a pleasant experience for them or the customers.

Speaking of restaurants, the Ruby Tuesday chain is looking at changing its theme by eliminating the 1980s-style d├ęcor of black-and-white checked tablecloths and Tiffany-style lamps with brass rails. There will be a new menu and a more contemporary look. Let’s hope that the consultants who are working on this project aren’t the same ones who worked on Bill Knapp’s restaurant chain. In my opinion, changing the theme and focus of this chain ultimately put them out of business. How I miss those chocolate cakes!

What would one of my articles be without a plug for my favorite hotel--The Ritz-Carlton. The J.D. Power & Associates 2008 North America Hotel Guest Satisfaction Index Study finds that the Ritz-Carlton won again as the top-scoring chain in the luxury category. Others that led in the survey included Embassy Suites in the upscale category, Hyatt Place for mid-scale full service, Drury Inn & Suites for mid-scale limited service, and for the seventh consecutive year, Microtel Inns & Suites took top honors in the economy/budget category.

Back to the hammock

Well, as I’m writing this article, the dog days of summer are coming to an end and cool nights are upon us once more. Hanging out in the hammock is still my top choice for a restful afternoon, and I hope all of you have that special place where you can relax and maybe, if I’m not being too presumptuous, ponder these words. If something resonated with you or some of my rants irritated you, please let me know by writing to the e-mail address at the bottom of this page. I personally respond to every e-mail. Until next time, remember the quote from Jonathan Swift: “You cannot reason a man out of something that he did not reason his way into.”

And by the way, as a result of our trip to Chicago, where we experienced wonderful service, I no longer attract metal shavings to my body. I have been poor-service demagnetized--at least for the moment.

Wednesday, September 24, 2008

Crying “Wolf” Over Wall Street’s Credit Crunch

by Tom Hinton

As President Bush addressed the American public last night on America’s latest crisis -- our nation’s economic credit crunch -- I couldn’t help but recall what Marcellus said in William Shakespeare’s play Hamlet. “Something is rotten in the state of Denmark.” Certainly something is terribly rotten in the United States when a crisis of this magnitude mushrooms overnight and requires a $700 Billion solution. What in the world is going on with our national leaders?

Americans are being told by the president that our national economy -- the same economy that just last week was “fundamentally sound” according to Senator John McCain -- is facing a near-Depression disaster due to a meltdown of the credit markets which resulted in the failure of three major Wall Street banks that controlled hundreds of billions of dollars in devalued mortgages and other questionable loan derivates. The Bush Administration’s solution is simple. Congress should hand over $700 Billion to Secretary of the Treasury Henry Paulson, a thirty-year veteran of Goldman Sachs, one of the two remaining giant Wall Street firms that are teetering on the brink of collapse due to poor investment decisions,

There’s no denying we have a serious problem. But, the question that must be resolved by Congress before it hands over $700 Billion to Secretary Paulson to dole out as he sees fit is this: Is this Wall Street’s problem or is it Main Street’s problem? If the answer is Main Street, we have a serious crisis and Congress needs to take immediate action. However, if the answer is Wall Street, perhaps Congress needs to take a deep breath and try to understand the ramifications of the problem before endorsing the Bush Administration’s two-page, $700 Billion bailout solution.

American Consumers are very skeptical of the Bush Administration’s solution for ailing Wall Street financial companies. So far, consumers don’t like what they’re hearing. According to a Bloomberg/Los Angeles Times poll, Americans say Congress should reject the Bush Plan. By a margin of 55 percent to 31 percent, Americans say it's not the government's responsibility to bail out banking companies with taxpayer dollars, even if their collapse could damage the economy. Furthermore, Americans are now blaming Wall Street and President George W. Bush for the credit crisis.

The debate is running so hot that political analysts are suggesting that any member of Congress who supports the Bush Bailout is in jeopardy of losing their seat in the November 4th election. This is causing both Democrats and Republicans to take pause and reconsider their options -- and they should! The right solution has not yet been found.

If the problem is a potential failure of major Wall Street banks, which are holding hundreds of billions of dollars in depreciating loans such as mortgages, a different solution will be required so that consumers can still access money for various loans such as auto loans, mortgage loans, college tuition loans, and so forth. Small businesses will also need money in the form of loans to purchase inventory, make payroll, and capitalize their businesses. These are important issues that the Bush Administration and Congress must evaluate. To allow a credit freeze to occur among the major banks could have serious negative consequences for Main Street.

But, having said that, the bigger issue is what will happen to Main Street if Congress does not act and the remaining Wall Street banks fail or face a fire sale? This is the dominant issue that concerns consumers because most of their money is deposited in local banks and credit unions not in Goldman Sachs and other vulnerable Wall Street financial institutions. It’s the Main Street banks and credit unions that control the 90-day revolving loans of their small business clients. It’s the Main Street banks and credit unions that will reject new loans and demand higher cash deposits if credit is tight. But, this is not yet happening. In fact, some of the large banks are eager to make loans at below-market rates. So, given the doom-and-gloom messages coming from the Bush Administration, someone in Congress needs to call a time-out and ask for a replay. What is really happening here?

Is this a case of Wall Street and the Bush Administration crying “wolf” in an effort to bailout their long-time supporters and cronies? Or, is this a serious financial crisis that could paralyze the global economy? Many consumers don’t care what happens to the Wall Street firms. Perhaps, this is being narrow-minded on their part, but consumers are more concerned about keeping their jobs, paying their bills, and avoiding foreclosure.

Certainly, the one area that must be addressed immediately by Congress is the troubling number of home foreclosures. I believe this is the number one problem in the American economy because so many industries are linked to home ownership. According to government figures, there are nearly 10,000 home foreclosures taking place every day. This is a very serious problem that Congress must fix in the next thirty days because home ownership is the bedrock of America’s middle class. It is also the primary source for most local and state taxes. To allow millions of homeowners to be foreclosed on due to rigged sub-prime loans and a series of complex financial equations that baffle most economists is unfair and will undermine the American economy faster than any other single economic problem.

I recommend three steps to help solve our current economic crisis. First, Congress needs to immediately freeze all home foreclosure actions for one year and create a new agency, The Homeowners Resolution Trust Corporation (HRTC), which would purchase all troubled mortgages and renegotiate those loans with homeowners through local lenders and banks. By creating a one-year moratorium on foreclosures, the federal government can buy time to sort through all the troubled home loans, arrange for refinancing on those mortgages that can be salvaged, and retain the deeds of trust as a means to protect taxpayers from getting fleeced. This would give threatened homeowners some breathing room to resolve their financial problems. It would also allow local and state governments to recoup back taxes that homeowners have failed to pay. Finally, it would pump money into hundreds of local economies through local banks and credit unions that agreed to sell their troubled mortgages back to the HRTC and close their books on those mortgage loans. This step would give local banks more lending capital to revitalize local communities and small businesses. The HRTC would create federal standards and guidelines to ensure only valid mortgages are re-purchased by the HRTC from certified banks, credit unions, and other lenders.

Secondly, the federal government should tighten the requirements used by Freddie Mac and Fanny Mae for buying federally guaranteed mortgage loans. Just thirty years ago, prospective homebuyers had to meet very clear criteria before they could buy their dream home. We need to return to those days of fair and reasonable guidelines to ensure stability in the home purchasing process..

Thirdly, Congress should reinstitute stiff regulations and severe criminal penalties -- including prison time and hefty fines -- for those corporate officers and directors who violate SEC laws and try to fleece shareholders and taxpayers. The era of Anything Goes on Wall Street needs to end! Tough laws and enforcement by federal agencies can eliminate the shady dealers who are peddling under-valued derivatives and sub-prime loan schemes.

Those unscrupulous people who perpetrated this financial ponzi scheme on Wall Street would like us to believe that consumers, who purchased their homes on good faith and credit, are to blame for the current economic mess. But, Americans know better. The real culprits are the very people who are now crying ‘wolf’ and lobbying Congress -- and the American taxpayers -- to bail them out. You’ll see their ads in major newspapers and on the television networks. Beware of them. There are three culprits who got us into this pickle and now want us to bail them out. They include state and federal regulators who allowed banks to shift billions of dollars of questionable credit off their balance sheets and into the hands of unsophisticated foreign investors who were lied to. They also include hedge-fund managers and pension-fund managers who purchased sophisticated high-yield debt instruments they didn't understand and now cry mea culpa. Finally, we can blame the over-educated economists and bankers who fabricated mathematical equations and promoted their flawed lending models that enticed unsuspecting banks to purchase those high-yield debt instruments.

There’s no question that there is a hungry wolf out there. But, Congress should act cautiously as it attempts to sort through this economic mess. Certainly, we must avoid a credit meltdown. But, if Main Street can still function without burdening the American taxpayer with $700 Billion of Wall Street debt, perhaps logic and reasoning dictates we save Main Street and leave the bulls and the bears to the wolves.

About the Author. Thomas Hinton is president of the American Consumer Council, a non-profit consumer education organization with 85,000 members. He can be reached at: tom@americanconsumercouncil.org

Saturday, August 2, 2008

Discovering Gold by Going Green


It has taken corporate America nearly fifty years to climb aboard the Green movement. The primary reason corporate America ignored the cries of environmentalists, the United Nations, and green advocates was that no one in the Green movement was speaking their language. I’m referring to the twin engines that drive and sustain every business -- customers and profitability.

Now, corporations and national governments are finally getting the message and responding to Green initiatives. At the same time, consumers are stepping up their commitment to the Green Movement by purchasing products from green companies and adopting recommended practices to reduce their carbon footprint.

What caused the change on the part of business to go Green? Certainly, it took leadership from within. In 2005, when General Electric’s CEO Jeffrey Immelt announced his company’s major investment in green technology, companies decided to jump on the green bandwagon and find a way to make money. Within a few years, most companies have figured out how to make money from their Green initiatives. Soon, profits will follow.

National governments are also getting the message. A recent example are China’s leaders who have taken dramatic steps to reduce pollution in Beijing in time for the 2008 Summer Olympic Games. They understand that televised images of Beijing under clouds of toxic pollutants will hurt China’s prospects for foreign investment and tourism. China’s leaders also understand they must find a way to manage their rapid growth without incurring the wrath of Green leaders.

We’ve come a long ways since former first lady Lady Bird Johnson first raised our nation’s consciousness in 1964 to beautify America’s highways and public landscapes after being angered by the site of junkyards, billboards, and roadside litter. But, have we come far enough? Not really. There’s still much work to be done to ensure the continued viability of our natural resources and a healthy environment.

So, how can your business discover the gold by going green? Here are three proven ways to benefit from going Green:

1. Produce products and offer services that compliment the environment. It’s no surprise that gas guzzling vehicles like the once-envied Hummer are no longer selling. Consumers are turned-off by cars that are not fuel-efficient and pollute the environment. This is why hybrids and electric cars have waiting lists. Consumers want economical choices. Products that are biodegradable or compostable are also very popular among consumers as are organic restaurants and health-based grocery stores. Anything that legitimately touts the green label will catch the eyes of consumers -- even if it costs a few pennies more. Among service-driven companies that are making Green gains are hotel chains such as Starwood, Hilton, and Sofitels to name a few. Many hotels have taken steps to reduce their carbon footprint by conserving water and electricity, reducing the use of chemicals, educating employees on green practices, and encouraging guests to participate in their sustainability efforts. These positive measures not only make sense in terms of attracting more guests, but they are also good for the bottom line. A recent hotel industry report shows that during the last quarter of 2007, green hotels experienced a six percent jump in occupancy compared to their competitors who did not make a similar commitment to going green. This proves that consumers will support Green initiatives.

2. Tout your Brand’s Environmental Benefits. More businesses are promoting the environmental benefits of their products and services. Manufacturers of products ranging from hair spray to cereal have found a way to spin the environmental benefits of whatever they’re selling. Of course, consumers want to see the proof and not just the sizzle that claims that your products/services are environmentally-friendly. So, be prepared to prove your claims. This leads to the third factor.

3. Get Certified. The fastest way for any business to build credibility with consumers is to get certified by a legitimate green certification organization, or have its products certified. In the product certification area, there are several credible organizations that will review specific products against rigid standards that typically are linked to the ISO 14000 Environmental Management Standards. The most noteworthy are the LEED Program for new and existing buildings. This progressive program is sponsored by the non-profit U.S. Green Building Council. Green Seal is another reputable product certification organization. For companies and organizations seeking an Organizational Certification, the American Consumer Council is among the few non-profit organizations that provide an independent certification for companies that meet its rigid Green C Certification criteria. ACC also recognizes applicants that meet or surpass the Green C standards.

But, a word of caution… as more companies go Green, consumers need to be leery of unscrupulous marketers who simply want to position their products as politically correct without substantiating their commitment to environmental compliance or corporate social responsibility. This includes profiteers who masquerade as environmental auditors and self-appointed industry groups that are entering the certification business for only one reason -- to make a fast buck. That’s not to suggest that consultants and environmental auditors should be avoided. On the contrary. There are many reputable companies that can guide your company as it goes green. But, choose wisely and do your homework, Make sure any certification criteria will challenge your company to raise its environmental performance bar. Also, be sure consultants who claim to be auditors haven’t just hung out their shingle. Look for bona fide non-profit certification organizations or seasoned consulting practices that have a strong track record in this area.

Finally, be sure there is some kind of recognition component to your environmental certification process. This way, you will not only be doing good things for the environment, but you’ll also make your marketing team happy because they can leverage your Green achievements and showcase your best practices! This will give you a leg-up on the competition which translates to more customers and higher profits. Also, a Green Certification that has a strong public image will mean something to your customers and prospective customers.

About the Author: Thomas Hinton is president of the American Consumer Council which administers ACC’s Green C Certification Program. He is a popular speaker on Business, Environmental, and Corporate Social Responsibility issues. Mr. Hinton can be reached at: tom@americanconsumercouncil.org

Sunday, June 15, 2008

Empowering Your People to Act

by Bill Kalmar

I think most of us would agree that there are a handful of attributes that separate average companies from those that should be held up as role models. Some of those traits would be: a strong and achievable strategic plan, management interaction with staff and customers, well-trained employees, a passion for excellence, a silo-free organization, an open-door policy, and a team of professionals who are empowered to perform their job without constant management intervention, to name just a few.

Of all those traits, I would place empowerment at or near the top. Organizations that properly train and empower their staff operate more efficiently and do a better job of meeting and exceeding expectations of customers. There’s a minimum of lag time in resolving problems or disputes with customers because each employee can take the appropriate action without kicking it upstairs.

In examining the reasons for employees’ lack of power, one has to conclude that managers are afraid to let go of their decision-making domain. Carrying that concept a bit further, I contend that quality is greatly diminished in an organization unless people are empowered.

Most of us have at some time been involved in a transaction that required a company’s agent to seek guidance or approval or permission from another person. This is a time-consuming practice that irritates customers and humiliates employees because he or she realizes that they’re nothing more than a figurehead lacking authority to perform even the most mundane tasks.

Permit me to provide you with two examples of an extreme lack of empowerment. In my tenure as director of the Michigan Quality Council, my office was at a major university. Once when I needed a meeting room, the conference rooms in my department were all occupied, so I wandered onto another floor seeking an unoccupied room. There was an available room in the history department, but my request would have to be approved by the department head, who was out for the day. No one else could give the OK, because he hadn’t deputized anyone to act in his stead.

The receptionist said that if the Keeper of the Keys learned that the room had been used without his approval there “would be trouble.” Armed with that information and the theory that it’s “better to seek forgiveness than approval,” I used the room anyway, much to the dismay and consternation of the history department. For the absent professor, I left a short write-up on the advantages of empowerment with the receptionist. I wish he had responded.

The second example is from a national restaurant chain where my wife Mary and I frequently dine. As with numerous other dining establishments, this restaurant provides their guests with a card whereon visits are logged—after the purchase of eight meals you get a free dinner. We dutifully bring in our cards each time and have the cards stamped by the staff. After we surrendered our cards for a free meal, we discovered that the restaurant had exhausted their supply of new cards. We were to bring in our receipt at our next visit, when more cards would have arrived. I’m nosy, so I asked why someone hadn’t noticed earlier that the supply of cards was low and ordered more.

It seems that a vice president at headquarters, let’s call him the King of Cards, is the only person responsible for ordering these cards. All requests have to be routed through the king, who then doles out the cards to the various restaurants. My suggestion that each restaurant be responsible for ordering its own cards met with agreement from the restaurant management, but as in many organizations, altering an existing procedure through a labyrinth of senior management is cumbersome and difficult. I’d like the Keeper of the Keys to meet with the King of Cards and see what other blockades they could invent to stifle productivity. Both of these management dinosaurs should be jettisoned from their organizations, or at least made to write the phrase “Empowering my staff adds to customer and employee satisfaction” a thousand times on a blackboard.

Baseball and showerheads
Motoring to New York recently to watch the Detroit Tigers play the Yankees at Yankee Stadium taught me two life lessons: Mayor Michael Bloomberg is genuinely a man of the people, and when it comes to height standards at a national hotel chain, size does matter. Permit me to explain.

For my 65th birthday my son and I attended opening day at Comerica Park in Detroit. The Tigers lost but the day was salvaged when my son presented me with tickets for an upcoming Tigers/Yankees game in New York on his birthday and, as most baseball fans know, this is the last year for The House That Ruth Built—Yankee Stadium.

I wanted to surprise my son with upgraded seats, so I contacted Mayor Michael Bloomberg, Governor David Paterson, and Yankee owner George Steinbrenner and suggested that, if their seats for the game weren’t being used, perhaps a couple of out-of-town fans could be the new occupants.

Well-run organizations always respond to customers whether by phone, e-mail, or snail mail. I have made a habit of contacting organizations when I receive excellent service or when I have a complaint. Organizations that value their relationships with customers always respond, and those are the ones that retain my business and admiration. Then there are the companies that never acknowledge the contact, and that tells me everything I need to know about the management. Their lack of concern cascades onto everyone in the organization. No wonder service is shoddy.

Mayor Bloomberg took the time to respond, stating that he in fact doesn’t have season tickets but he sent a personalized letter to my son for his birthday hoping that he would enjoy his stay in New York. This reflects why he’s so revered in the Big Apple. On the other hand, judging from the poor condition of the reserved box seats, Bloomberg may be waiting for the new stadium to purchase season tickets.

We never received the courtesy of a response from Steinbrenner or Paterson. I realize that both of them receive numerous letters and requests every day but a simple “No, are you crazy?” response to my letter would have been a nice gesture. So Bloomberg goes to the top of my list of world-class mayors.

Let me say at the outset that the staff, the ambience, the food, and the surroundings at the Hampton Inn were first class. What was a bit disturbing was the showerhead, of all things. Entering the shower in the morning was like being a Lilliputian in a Brobdingnagian world. I’m 5'10", and the showerhead was positioned so high that I could adjust the water stream only by standing up on my toes. I’d just turned 65 and already I seemed to be shrinking. Upon checking out later that morning, I mentioned my experience to the front desk staff. Their response was simple and straightforward: Hampton Inns had done a survey and determined that the majority of their business traveler guests were 6'2", and the showerheads were adjusted to accommodate them. They raised the sinks, too.

I sent an e-mail to Hampton Inn management regarding this incident, which elicited the following response from the general manager: “Please accept my apologies for any inconvenience you experienced with our showers. Our hotel was constructed to Hampton brand standards, which specify showerhead heights. Until these specifications change, a solution would be to request a room with accessible features that have handheld showerheads”. In response I asked what would happen if I returned with a broken arm. How would I hold the shower wand, and would the hotel supply someone with a loofa to help me bathe. As with Steinbrenner and Paterson, I haven’t received a response.

All in all, it was a great trip. The Tigers swept the Yankees, and I’m doing stretching exercises in the event we return to New York and I need to take a shower.

As you read this, I’m resting comfortably after June 2 robotic prostate cancer surgery at Henry Ford Hospital in Detroit. The hospital is the pioneer in this type of surgery, having performed more than 3,000 such operations for people from all over the world, so I knew I was in good robotic hands. What makes it even more appealing (if surgery can be appealing) is that the hospital has partnered with the local Ritz-Carlton Hotel and thus patients for this procedure are transported back and forth to the hospital by hotel staff, and special arrangements are made at the hotel for pre- and post-surgery dietary needs. If one has to experience this type of operation—I’m told one in six males will—it’s comforting to have the best at one’s disposal.

As I relax in my hammock contemplating my next column, I just might arrange for a conference call with the Keeper of the Keys and the King of Cards so we can discuss empowerment. Wouldn’t that be a hoot?

About the author
William J. Kalmar has extensive business experience, including service with a Fortune 500 bank and the Michigan Quality Council, of which he served as director. He has been a member of the Malcolm Baldrige National Quality Board of Overseers and a Baldrige examiner. He’s also been named quality professional of the year by the ASQ’s Detroit chapter. Now semiretired, he’s a freelance writer for the Detroit News and writes a monthly column for Mature Advisor newspaper. Kalmar is a mystery shopper for several companies and a frequent presenter and lecturer. He also does radio voice-overs and competes in duathlons.

Wednesday, June 11, 2008

How to Avoid Green Schemes When Getting Green Certified

by Thomas Hinton


Last week, during a speech to business executives, I was asked about the proliferation of Green schemes and how a company could evaluate the credibility of a Green Certification Program. Given the number of misleading web sites and schemers who are trying to make a fast buck from the Green Movement, here are five questions your company should ask before applying for a Green Certification program.

1. Is the Green certification program sponsored by a credible non-profit organization?

I strongly encourage companies to avoid for-profit ventures that claim to offer certification programs but, in fact, are fronts for some money-making scheme. The leading Green Certification programs are administered by viable non-profit organizations or associations that are legal entities and led by volunteers and a professional staff. Most non-profit organizations have been established for the public good and have bylaws and members. While non-profit organizations will charge a fee for their certification program, they do so to sustain their programs and pay their professional staff. Among the leading non-profit organizations that offer outstanding Green certification programs are the U.S. Green Building Industry Council, the American Consumer Council, the Forest Stewardship Council (FSC), Green Steam, and Green-e, which is operated by the Center for Resource Solutions. They are many more credible non-profit organizations, but these non-profit organizations are leading the way in the area of Green Certification.

2. Does the Green Certification program have written criteria and standards that govern the application and certification process?

Yesterday, someone sent me a link to an online green certification program managed by a mom-and-pop website. The alleged certification consisted of 32 yes/no questions. If the applicant answered a majority of the questions correctly, they earned the right to affix the website’s green-certified logo on their company materials. This type of green certification is bogus and does a disservice to the many valid green certification programs that have formal criteria and rigorous standards. Any Green Certification program that does not require your company to complete a detailed application and respond in-depth to serious questions regarding environmental compliance and sustainability is suspect. I should note that Green Certification for a specific product is even more rigorous and often requires some type of ISO-related certification compliance.

3. Does the Green Certification Program have a verification and validation process as part of its certification?

Two common elements among all credible sponsors of a Green Certification program are the verification and validation of the information contained in a company’s application for certification. In order to verify and validate the contents of a company’s application, an independent team of assessors or auditors is trained and certified to review the contents of the application against the criteria and, in some cases, conduct a site visit to verify that certain claims by the applicant are, in fact, being performed.

The certification of assessors or auditors should be done by the sponsoring organization or the American National Standards Institute (ANSI). In the case of the American Consumer Council, our Consumer Green Council is responsible for recruiting, training, and certifying its Assessors. Only then are certified Assessors assigned to review an application. Also, an independent Board of Judges reviews all recommendations for certification prior to any certification being awarded. In this way, there can be no collusion or conflicts-of-interest. This process ensures that only qualified applicants receive ACC’s Green C Certification designation. Other non-profit organizations have a similar process in place to ensure the integrity of their certification program.

4. Once your company is Green Certified is there an accountability step and a process for continuous improvement?

The most progressive Green Certification programs not only have contemporary standards and a strong verification process, but they also have a way to hold certified companies accountable to those standards after certification has been earned. In other words, a company cannot earn its Green certification and then engage in practices that violate the spirit of the certification program. Organizations like the Forest Stewardship Council (FSC) and the American Consumer Council have high standards in this regard and frequently review the practices of certified companies to ensure they are in compliance and striving to reach higher levels of certification.

5. Does the Green Certification Program have credibility in the marketplace?

Let’s face it, most companies are not altruistic. Very few businesses decide to go Green because they want to save the rain forests. Instead, their motives range from increasing their profits to boosting market share. Frankly, that’s fine. As long as there is integrity in the certification process, it doesn’t matter what motivates a company to get certified.

Based on my observations over the past few years, I can say that consumer acceptance of a brand or product that bears the Green C certification (or some other Green designation) is a strong reason for any company to go Green and get certified.

I’ve also witnessed an interesting transformation among executives as their companies go through a Green certification program. Typically, three things happen to executives. First, they begin to truly appreciate the growing number of Green Consumers and their purchasing power. Secondly, they begin to understand that their company is capable of doing many small, but significant things, to sustain our natural environment and planet. Thirdly, executives realize that their employees genuinely care about our planet and going Green is a smart way to engage employees in the workplace and stimulate innovative solutions to reducing costs and making their company more efficient.

About the Author: Thomas Hinton is president of the American Consumer Council and serves as the executive director of the Consumer Green Council, which administers ACC’s Green C Certification Program. He can be reached in San Diego, California at tom@americanconsumercouncil.org

Tuesday, May 13, 2008

Lufthansa Airline is Customer-Focused

by Thomas Hinton

Recently, I flew Lufthansa Airlines round-trip between Los Angeles to Frankfurt. While I have traveled internationally many times, this was my first international experience with Lufthansa. Given the mediocre in-flight service I’ve received from various U.S. carriers in both coach and business class, I must confess my expectations for Lufthansa were not very high. Boy, was I surprised! Not only were the Lufthansa airport representatives and in-flight personnel exceptional, their courteous service in both coach and business class exceeded my expectations.

While courtesy, kindness, and in-flight comfort aren’t rocket science, very few airlines have mastered these simple pillars of superior customer service. It’s too bad because studies show that good service breeds customer loyalty. Lufthansa understands this simple equation because Lufthansa has analyzed its’ in-flight customer experience and determined how to make a ten hour flight a pleasant experience instead of agony and torture like many of their competitors.

I realize there are certain costs associated with providing passengers warm hand towels, a free glass of wine, complimentary newspapers and magazines, and in-flight entertainment programs including two movies. But, these simple in-flight niceties demonstrate that Lufthansa has moved beyond the “bean counter mentality” and makes operational decisions using a higher principle. That principle, namely, is customer satisfaction! Lufthansa has figured out that customer loyalty generates repeat business and repeat business is money in the bank!

While there’s still (leg) room for improvement -- especially in terms of the leg room and hobbit-sized seats most airlines use in coach class -- I think Lufthansa earns kudos for its exceptional service and challenging its airline competitors to raise the customer service bar! I look forward to my next exceptional experience on Lufthansa!

About the Author: Thomas Hinton is president of the American Consumer Council, a non-profit consumer education organization that represents 85,000 consumers in North America and administers ACC's “Green C” Certification Initiative that promotes environmental compliance and sustainability for businesses, non-profit organizations, and government agencies. He can be reached at tom@americanconsumercouncil.org

Wednesday, April 16, 2008

Not Another Survey!

by William J. Kalmar

As customers, we have all come to understand the importance of customer surveys. Customers are the lifeblood of any organization and to achieve a certain level of success, the needs, wants, and expectations of customers must be understood. Role-model companies exceed the expectations of customers.

My take on the subject of customer surveys is fairly simple: No new product or service should be launched without first involving customers in a review process. Failure to do so could result in a process that is shunned by your clients or, worse yet, in customers flocking to another company.

The Checkbook Debacle
Let me give you an example of just such a scenario. When I worked for a large national bank, we prided ourselves in having an extensive training program modeled after the Malcolm Baldrige National Quality Award. The goal was to introduce every employee in the organization to the Baldrige criteria for performance excellence. The training went on for years, and we emphasized the concept of being in lock step with customers.

Somewhere along the line, we lost sight of this very important concept when it came to something as mundane as new checkbook orders. Our demand deposit department, in meeting with a vendor, learned that by eliminating one style of check reorders, the bank could save $500,000 a year. It meant that instead of offering side- or top-stub tear offs, we would only be offering checks that were attached to the stub across the top. Now $500,000 is nothing to take lightly, so it was full steam ahead to implement this new process.

Well, guess what? When customers began to reorder checks and discovered that their favorite way of tearing checks from the folder had been eliminated, there was an uproar. The branch offices were filled with irate customers, and phone lines in the customer service areas were swamped with customers threatening to move their funds to banks that offered both features.

Someone in management asked for the customer survey that was done before we made this change--of course, there wasn’t one. The bank quickly retrenched and again began offering both features for check reorders. The upside was that we used this as an example of what happens when customers are not brought into the brainstorming process. Weighing the loss of many customers and good will against a savings of $500,000 was a no-brainer.

Health care Focus Group:
As a follow-up to this concept of customer involvement, I recently participated in a focus group staged by a major health care company. The organization was exploring the introduction of some new products that would supplement Medicare. There were ten of us in the group--people who had just signed up for Medicare and others in the throes of reviewing their various options. I have participated in many focus groups over the years, and this one stood out: It was well organized, it kept on point, and it paid each of us $75 at the conclusion of the two-hour session. (Expediting the payment for our involvement was key in my accepting a role in the focus group, which I will expand on.)

As I participated in the roundtable discussion, my thoughts wandered off to this article on customer surveys. As a result, I concluded that more organizations should avail themselves of this technique before launching any new product or service. The participants represented a cross-section of the target audience, and the participants were allowed to voice opinions on subjects not originally outlined in the instructions. The health care organization came away from this with a clear understanding of the expectations of its customers.

Various Paths to Information
Other organizations have approaches to surveying customers as varied as the organizations themselves. In addition, we as consumers often look to the results of survey recommendations before we buy a particular product or service. How many of us have viewed a movie only because it was given “two thumbs up” by a certain pair of reviewers? How often have we eaten at a particular restaurant or stayed at a resort because a survey has designated it four stars? As consumers, we seem to depend on survey results to guide us to the best establishments. Let’s examine for a moment how some of these establishments entice us to participate in their surveys.

I mentioned earlier that the focus group I was involved with provided us with payment, as promised, at the conclusion of the session. In fact, being the cynical person that I am, my participation hinged on their paying me for my time and doing so at the end of the session. As a retiree I no longer offer advice pro bono.

Many companies conduct customer surveys on their receipts. Here is just a small sampling:

OfficeMax--”Tell us about your shopping experience and enter to win one of five prizes.”

Walgreens--”How are we doing? Enter our monthly cash sweepstakes. This month the prize is $3,000 cash.”

Panera Bread (Saint Louis Bread Co.) --”Tell us how we are doing and you may win $2,000.”

Montana ’s Cookhouse -- ”Please tell us about our serv ice and you could win $1,000.”

Caribou Coffee Co. --”Tell us how we are doing. We would like to hear about your Caribou experience. Enter our monthly sweepstakes. Ten $100 Caribou Coffee gift cards awarded monthly.”

Romano’s Macaroni Grill --”Win $1,000--a winner every week.”

Meijer--”How are we doing? Rate your shopping experience and you may win a $1,000 gift card.”

Are you seeing a pattern here? These companies want our opinions, and if we participate, we may win a prize. Candidly, I am not inclined to assist them, because, as I mentioned earlier, I am somewhat mercenary: I want instant gratification. When I complete the survey, I want a coupon that I can download for a free coffee at Caribou, or a complimentary donut at Panera Bread, or a $5 coupon at a department store.

Here’s my quandary: While at each of these establishments, I have queried the employees about these surveys and information on any of the winners, and to date no one has been able to share with me the names of winners, or details of any payouts. Do I think that these promotions are bogus? Well, until someone comes forward to contradict it, my answer is yes! Therefore, don’t expect me to spend my time commenting on my veal piccata at the Macaroni Grill unless there’s a complimentary cannoli in it for me.

Some companies that have survey information on their receipt and promise nothing--Kohl’s, Macy’s, and On The Border, to name just a few--are saying, “We want your opinion and feedback, but unlike other companies who promise you a chance at a prize but may not deliver, we are being straightforward in telling you that there is no prize. The prize will be better customer service if you participate.”

These are what I would call after-the-fact surveys. I think a more effective way of exploring the needs, wants, and expectations of customers is to survey them while they are involved in the service or sampling the product. I call this method on-site, live surveys. A company that does it best in my estimation is the two-time winner of the Malcolm Baldrige National Quality Award--The Ritz-Carlton Hotel Co. Let me give you a recent example of this methodology.

It’s no secret that the “Ladies and Gentlemen” (as the staff are called) of the Ritz-Carlton constantly update a guest database that contains each guest’s special preferences. For instance, if a staff member notices that a guest prefers a specific wine, that information is entered into the database so that upon a return visit, a similar bottle of wine will be in the room upon check in. Permit me to provide you with a couple of personal examples.

While dining at our local Ritz-Carlton in Dearborn, Michigan, I opted for an appetizer of scallops. Our waitress overheard me remark to my wife, Mary, that “these are the best scallops I have ever eaten.” Evidently that information became part of the on-site, live survey information that was entered into the database, because every time we dine at a Ritz-Carlton establishment, I receive a complimentary scallop appetizer.

Then there’s the incident that occurred about a year ago that to this day still resonates with me. Mary and I periodically enjoy high tea at the Ritz-Carlton. It’s decadent, very soothing, and relaxing. On one occasion I requested extra finger sandwiches. Our waitress, a lovely lady named Anoushka, smiled and kept bringing me the sandwiches, much to my delight. Moving the calendar up two months found Mary and me enjoying another high tea. As we sat down, our waitress came up to us and said, “Anoushka is on vacation in Florida, but she called moments ago to make sure we provided you with extra finger sandwiches.” Now that’s service and an example of taking survey information to the next level. Is it any wonder that the Ritz-Carlton regularly ranks at the top of surveys when it comes to meeting and exceeding guests’ expectations?

Rather than survey guests at the conclusion of their stay, this hotel conducts surveys on an ongoing basis. This is a methodology that other companies should implement because it demonstrates to current customers that they are valued. The hotel also provides survey cards in each room.

Besides surveying customers about their services, many organizations hire mystery shoppers to conduct on-site reviews. I am one of those mystery shoppers. My responsibilities include visiting restaurants, fast-food chains, national department stores, and even a national transportation company. What I have been most impressed with is that clients take it as a given that their food is going to be delectable or that their products will be care-free, so the emphasis is on customer service. Naturally I review the food and the products, but the bulk of my report is about interacting with the employees. Absent great service, it doesn’t matter how good the food is or how sound the products. If employee service is mediocre, customers don’t return.

Conclusion
It is critical to be in lock step with your customers, and there are myriad ways to do so. Each organization needs to establish a pipeline of information from its customers and then make sure that those needs are met or exceeded so that the company will attain legendary status. Don’t get caught up in some money-saving gimmick without first surveying your customers.

Also, please don’t provide me with a receipt and a chance at a cash prize. If you want my opinion or feedback, I prefer a reward on the spot--a coupon for a free dessert or a free coffee would make my day.

Well, time to go. I have to complete a survey from the local hospital where I was a patient recently. They are offering a drawing for a free lobotomy. Who knows, it might just be on the level. If I win, it would be an opportunity to somehow put this dreadful, frigid, Michigan winter out of my mind.

About the Author:
William J. Kalmar has extensive business experience, including service with a Fortune 500 bank and the Michigan Quality Council, for which he served as director. He has been a member of the Malcolm Baldrige National Quality Board of Overseers and a Baldrige examiner. He’s also been named quality professional of the year by the Detroit Chapter of ASQ. Now semi-retired, he’s a freelance writer for the Detroit News and other national newspapers; serves on the USA Today vacation panel; writes a monthly column for Mature Advisor newspaper; writes a monthly column titled “Hammock Thoughts” for Quality Digest’s e-newsletter QualityInsider ; is a mystery shopper for several companies; is a frequent presenter and lecturer; does radio voice-overs; and competes in duathlons.

Monday, March 10, 2008

The United States Air Force Shoots Down Boeing

by Tom Hinton

Last week I watched the Congressional hearings on why the U.S. Air Force awarded a contract to Northrop Grumman Corporation and EADS North America to build its next-generation of aerial refueling tankers. The contract is estimated at $40 billion, and the deal includes 179 planes to be delivered over the next 15 years.

The Air Forces opted to give the new kid on the block a chance over the more experienced Boeing Company which has been building air tankers for 75 years and recently unveiled its new, state-of-the-art KC-767 which has already been delivered to Italy and will soon be delivered to Japan. What do these countries know that our own United States Air Force doesn’t?

For the record, EADS is part of Airbus, the foreign-owned and heavily subsidized aerospace giant. It is also The Boeing Company’s toughest competitor for military and commercial airplanes. It should also be noted that the initial Air Force contract will create an estimated 20,000 jobs -- including several thousand jobs in Alabama and Kansas -- while costing Boeing and its suppliers approximately 20,000 jobs in the state of Washington and other locations where is has facilities and suppliers who would build the KC-767 air tanker.

The Boeing Company estimates that if the Air Force moves forward with the contract award to Northrop Grumman and EADS -- and Congress approves the bid award -- some 40,000 jobs (current and new positions) will be affected in the United States. The EADS tanker airframe is based on an Airbus A330 commercial jet assembled in France; and, most of the assembly work would be done in Europe according to Northrop Grumman sources.

As I watched the congressional hearings I shook my head in disbelief. The U.S. Air Force’s top acquisition officers, led by Assistant Secretary Sue Payton, Lt. General John Hudson, and Program Manager Terry Kasten and answered the panel’s questions honestly and directly. They staunchly defended the bidding process, the contract review process, and the awarding of the contract based on the proposal criteria. But, they also acknowledged that certain criteria such as jobs and the economic impact to American workers, were not part of the proposal and, therefore, were not evaluated or considered as part of their review. As Assistant Secretary Payton told Congress, “jobs and economics are not part of the proposal criteria or bidding process.”

While I understand the Air Force must follow specific criteria and acquisition laws, it begs the question, why in the world is the U.S. Department of Defense undermining the American economy? This is like giving a child a loaded gun and then advising them not to shoot you! It makes absolutely no sense to the average American who is worried about jobs, industrial capacity, and making ends meet. Now, America's own military is shipping jobs overseas. I could understand their rationale if Boeing was incompetent, but it is not. In fact, Boeing’s Airlift & Tanker program continue to be recognized as a best-in-class company by no one less than the president of the United States who recognized The Boeing Company on two occasions with the Malcolm Baldrige Award, our nation’s highest presidential honor for workplace excellence.

So, let’s examine the impact of this decision and how it all came about. The current air tanker tango began in 2003 when Arizona Senator John McCain complained bitterly about pork barrel politics because the Air Force was about to award The Boeing Company a new air tanker lease contract. Never mind that Boeing had been building and supplying the Air Force with air tankers for over 50 years. McCain said the deal was wrong.

According to the Everett Herald, Senator McCain "nearly single-handedly killed Boeing’s multi-billion dollar deal" to lease 100 Boeing air tankers to the U.S. Air Force. As the Everett Herald explained, “In 2001, McCain's laser-like probe of defense budgets unearthed a $30 billion earmark to pay for leasing 100 KC-767 jets from Boeing -- without first following a competitive bid process. McCain’s criticism stopped the program three years later and caused a round of investigations that led to Boeing paying fines for its contracting practices, and major changes in the Air Force’s procurement and contracting procedures.

Subsequent federal investigations resulted in two Boeing executives, Chief Financial Officer Mike Sears and Darleen Druyun, a former Air Force Acquisitions official and then-vice president of missile-defense systems at Boeing, being fired for illegal actions relating to Air Force contracts. Druyun was also convicted of federal violations for her illegal actions and was fined and sent to prison.

Boeing's board of directors acted quickly after concluding Sears improperly offered Druyun a job in the fall of 2002 because Druyun worked for the Air Force. At the time, Druyun was reviewing the proposal for the Air Force to lease 100 Boeing 767 airborne-refueling tankers. Needless to say, these Boeing officials made a serious mistake and paid the price for their stupidity and illegal actions.

Boeing hired a new CEO and hoped the firings would convince Congress and the Defense Department that the company was acting decisively to right its ship. Then, the Pentagon stripped Boeing of $1 billion worth of satellite launches after another investigation showed the company used trade secrets stolen from Lockheed Martin, its chief competitor, to help win the launches. Instead of getting better, hings got worse for Boeing.

In March, Boeing Satellite Systems acknowledged it made improper technology transfers to China in the wake of two failed satellite launches in 1995 and 1996.

Finally, in 2006, when Boeing’s new chairman W. James McNerney, Jr. appeared before Congress and apologized at a Senate hearing for the company’s illegal and unethical tactics, and promised higher ethical standards, Senator McCain responded with praise for Boeing for "truly reforming and starting fresh."

But, the damage was done and Senator McCain had sent a clear signal to the U.S. Air Force Acquisition office -- no more deals with Boeing. That set the stage for a new round of air tanker bids which last week the Air Force awarded to Northrop Grumman Corporation and EADS North America. While the letter of the law was followed, it appears from circumstantial evidence that the U.S. Air Force had already made up its minds not to do business with Boeing’s Airlift & Tanker program.

In the midst of all these investigations and problems with a few bad apples at Boeing, Senator McCain and his colleagues forgot to ask one important question: “If not Boeing, who else will build the Air Force’s new air tanker?” But, McCain knew the answer was the Europeans and Airbus. He also knew his actions would cost some 20,000 Americans their livelihood. Certainly, McCain's tactics pushed the Air Force too far and caused them to avoid steer clear of doing business with Boeing. That's a serious mistake on the part of the Air Force and Senator McCain.

Rep. Norm Dicks, a powerful figure on the House Appropriations Committee, who represents the Everett, Washington area which his home to many of Boeing’s aerospace workers, predicted a "firestorm of criticism on Capitol Hill" over sending so many jobs overseas. Rep. Dicks added of McCain: "I hope the voters of this state [Washington] remember what John McCain has done to them and their jobs."

Some people suspect that this was “payback time” for The Boeing Company. But, Assistant Secretary of the Air Force Sue Payton said in her testimony that previous contracting issues and illegalities with Boeing had no bearing on the 2008 air tanker award. She indicated that Northrop Grumman Corporation and EADS North America won on the merits of their plane, a modified Airbus A330 that is bigger than the modified KC-767 that Boeing offered. Payton also noted that by law, the Air Force must consider European allies on equal footing with American manufacturers.

Assistant Secretary Payton is referring to laws such as The Buy American Act (41 U.S.C. § 10a–10d) which was passed in 1933, mandating preferences for the purchase of domestically produced goods in direct procurements by the United States government.

The section of The Buy American Act that the U.S. Air Force referenced in terms of the air tanker contract is an outdated provision which stipulates that foreign companies can be considered when “purchasing the material domestically would burden the government with an unreasonable cost (the price differential between the domestic product and an identical foreign-sourced product exceeds a certain percentage of the price offered by the foreign supplier), if the product is not available domestically in sufficient quantity or quality, or if doing so is in the public interest…”

Given the fact that The Boeing Company already has built a new air tanker, The Buy American Act is ridiculous and works to the detriment of America’s economy and declining manufacturing base. While the U.S. Air Force must adhere to the law, Congress should move immediately to strike The Buy American Act and ask the Air Force to re-bid the job so that Boeing has a fair chance -- assuming fairness is even possible given the McCain bias against Boeing now rooted in the U.S. Air Force.

It;s important to note that EADS, is a European entity that is heavily subsidized by foreign governments. The Boeing Company does not enjoy any government subsidies, so the playing field is not level. Already, the competition is unfair. The Boeing Company cannot compete fairly against such rules and antiquated laws that work against the competitive spirit of American businesses.

Another concern was raised by Congressman Dicks, who accused the Air Force of “bait and switch tactics” by telling Boeing that the Air Force wanted a medium-sized tanker, not a larger tanker which Airbus proposed. Then, the Air Force accepted a larger aircraft from Airbus, the modified A330. “Had Boeing known that the Air Force wanted a bigger jet, Boeing would have bid the 777," Rep. Dicks said at the Congressional hearing last week.

Interestingly, while Boeing was building the KC-767 tankers for Italy and Japan, it asked the Air Force if it wanted something bigger in its new air tanker -- like the Boeing-777. The Air Force told Boeing no, But then, the Air Force proceeded to select a tanker based on the airbus A330 specifications which is larger than Boeing’s 767 and almost as large as the 777. This is why Rep. Dicks accused the Air Force of “switch and bate” tactics -- accusing the Air Force of saying one thing to Boeing but doing another in dealing with Northrop Grumman Corporation and EADS North America. It appears the Air Force was not dealing honestly with Boeing because of the pressures from Senator McCain.

In awarding the new air tanker to Northrop Grumman Corporation and EADS North America, other questions have been raised by aviation experts as to whether the Airbus A330 is going to fit into Air Force infrastructure including airplane hangars that currently house KC-135's that use half the space. When the two planes are compared size-wise, the wingspan of the airbus is 42 feet wider than the 767. The airbus plane is also 34 feet longer and seven feet taller at the tail.

"You're going to need massive construction plans to rebuild hangars at airbases all over the world," complained Rep. Dicks.

Secretary of the Air Force Wynn defended the contract decision and told senators the planes were judged on nine key criteria and "across the spectrum, all evaluated, the Northrop Grumman airplane was clearly a better performer." In addition, he said the Boeing proposal was judged to be more risky and more expensive.

But, this statement also raises questions among Aviation experts who noted that the Boeing contract bid was considerably lower than the EADS bid, and the Boeing aircraft is already operational while the airbus KC-45A is still is the design phase.

Also, it has been noted that Boeing’s Airlift & Tanker program has won the prestigious Malcolm Baldrige Award for its quality and overall excellence.

The Air Force has complained that it is still flying Eisenhower-era air tankers built by Boeing and it needs to replace its aging fleet as soon as possible. If this is the case, experts ask, why delay the process when you already have a reliable, state-of-the-art air tanker being built by Boeing?

Finally, what about American jobs being shipped overseas to build a U.S. Air Force air tanker? Does this make any sense given the state of our economy and the need for skilled aerospace workers such as those employed by Boeing?

Responding to criticism of the contract award, Northrop Grumman officials said the KC-45A tanker will produce 2,000 new jobs in Mobile, Ala., and support 25,000 jobs at suppliers nationwide. The EADS/Northrop Grumman team plans to perform its final assembly work in Mobile, although the underlying plane would mostly be built in Europe, and it will use General Electric Co. engines built in North Carolina and Ohio.

While Northrop Grumman Corporation and EADS North America are good companies, this decision has made many Americans angry, and rightfully so. It smacks of politics and unfair competition which is exactly what the U.S. Air Force should be avoiding.

Boeing’s past acquisition mistakes have been corrected and paid for, literally. Boeing has been under new, leadership since 2006, and Boeing’s Airlift & Tanker program is second to none in terms of quality, business practices, and overall management excellence. If the United States Air Force is prohibited from considering economic factors, certainly the United States Congress and White House need to get their heads out of the clouds and step-in to make sense of this decision before Northrop Grumman Corporation and EADS North America fly away with American jobs and taxpayer dollars!

About the Author: Tom Hinton is president of the American Consumer Council. He can be reached at: tom@americanconsumercouncil.org

Saturday, March 8, 2008

Southwest Sacrifices Airline Safety for Profits


by Tom Hinton

Over the years, I’ve admired Southwest Airlines for doing things right. It seemed that when other airlines were lowering their standards and compromising their commitment to service and quality, Southwest Airlines struck to its knitting and honored its words and promises to customers. In the process, Southwest created a successful and profitable airline. By offering low fares, frequent flights, a strong safety record, and motivated employees -- who had fun on the job and cared for their customers -- Southwest Airlines became one of America’s most admired companies and desirable places to work.

Now, Southwest is under fire by Congress, consumer groups, and the FAA for allowing more than 100 un-inspected planes to fly despite the fact that some planes had cracks in their fuselages. Four jets were found to have four-inch cracks requiring immediate repair. Six jets had signs of cracks starting to show.

Southwest admits that it allowed its planes to fly with cracks, but denies that it ever placed its crew or passengers in jeopardy. In a statement addressed to its customers, Southwest Airlines said, "We assure our customers that this was never a safety of flight issue." Aviation experts told NBC News that the early damage would not be catastrophic, but cracks could lead to serious problems.

Inspections of airplane fuselages became mandatory in 1988 after an Aloha Airlines Boeing-737 jet cracked open at 24,000 feet while enroute from Honolulu to Hilo killing a flight attendant and injuring seven of the 89 people aboard. Ironically, a passenger noticed a sever fuselage crack as she stepped aboard the Aloha Airlines jet in Honolulu, but never mentioned it to the flight crew.

To its credit, Southwest discovered the inspection oversight and notified the FAA. But, for reasons not explained, Southwest continued to fly the un-inspected planes on more than 1,400 flights. Federal law requires that planes be grounded until they are in compliance. Southwest cooperated with the FAA throughout the inspection process and told the media is was surprised when the FAA proposed a $10.2 million fine for violating federal regulations.

Is this just a series of misunderstandings and communication breakdowns, or is it -- as the head of a congressional committee suggests -- collusion between the FAA and the airlines it’s supposed to regulate?

Rep. James Oberstar, who chairs the U.S. House of Representatives’ Transportation and Infrastructure Committee, believes the FAA and the airlines have become too cozy. Oberstar said the committee's investigation was begun after two whistleblowers approached congress after years of trying to correct the inspection problems.

Oberstar called for the FAA to "clean house from top to bottom.” According to Rep. Oberstar, “the relaxed relationship between the FAA and the airlines have led to the sort of lax enforcement that allowed Southwest Airlines to fly at least 117 aircraft past mandatory inspection deadlines.”

Oberstar also said he believes similar violations may have occurred involving other airlines, but that those persons who have such evidence are afraid to come forward. What does this disturbing situation say about the integrity of senior management at the airlines and the independence of regulatory agencies like the FAA? Should consumers be worried? The short answer is a resounding yes! The reason is a lack of trust and integrity on the part of airline executives and the FAA.

When government agencies such as the FAA, the U.S. Consumer Product Safety Commission, the Food and Drug Administration, and the U.S. Department of Agriculture are compromised to the point where leaders fail to lead objectively, and government inspectors fail to perform their duties and uphold the sacred public trust, it is time to “clean house” and change the culture of those organizations as Rep. Oberstar suggests.

What is happening here is more serious than just coziness and a few omissions by business leaders and government agencies. What is happening here is a blatant disregard for consumer safety and the welfare of our citizens. If warranted, the Department of Justice and federal prosecutors should be asked to investigate and bring criminal charges against those government officials and corporate leaders who knowingly abused the law and abdicated their sworn responsibility to the public by placing an unsuspecting public in danger. In China, they shoot officials who disgrace their office and disregard the public good! While such penalties are extreme, a harsh message needs to be sent to those men and women we have entrusted with the safety of our airlines, drugs, food supply, and products. That message is simply this: honor your oath by doing your job; and, uphold the laws you swore to obey and enforce. If you cannot do this, quit your job. If you fail to uphold the laws, you run the risk of federal prosecution and prison.

I believe this is where the Southwest Airlines incident crosses the line. When airline executives knowingly thwart the law and risky public safety, it is criminal intent. You cannot convince me that Southwest Airlines, which is managed by hundreds of intelligent and competent people, overlooked one of the basic safety issues of an airline -- compliance with FAA inspections. It is no longer a matter of sloppy documentation and lax oversight; it is criminal behavior on the part of Southwest Airline executives and FAA inspectors who looked the other way. Rep. Oberstar is correct in calling for a top-to-bottom investigation. In order to stop these types of blatant violations, it will require much more than a slap on the wrist. Southwest and the FAA must be held accountable to the full extent of the law.

About the Author: Tom Hinton is president of CRI Global, LLC, a training and consulting firm that helps its clients create a “Culture of Excellence” in the workplace. He is the author of four books and a popular speaker at corporate and association meetings. For information, email him at: tom@criglobal.com or visit: www.tomhinton.com