Unless you've been too busy refreshing your UK garden with a watering can for the last few weeks - not impossible, but unlikely - you'll have been aware of the increasing frequency, magnitude and unfettered joy in the press coverage of shareholder's revolts.
This got me thinking: if righteously angry and disaffected customers respond with equally rebellious behaviour, and even join up with the shareholders, then the brand damage to companies would be even greater and financially more punitive. However, the end result could be a sea change in how a business responds to all stakeholder concerns and ultimately result in a better managed and financially successful company and a giant boost to customer service.
The reason for thinking this way is that while unhappy shareholders may eventually jettison their shares in the company, and a mass share sell-off is potentially very damaging, the shares will probably be bought by others in the hope that the out of favour company will recover, and they've got a bargain. On the other hand, unhappy customers are now beginning to vote more expressively and readily with their feet, while at the same time unleashing a torrent of negativity across social networks. Think "United Breaks Guitars" and "Cancel AOL". These customers not only take their business away, but they also have the guilty joy of schadenfreude to sustain them as they see the offending company under persistent bombardment from all sides, and sinking fast.
This is definitely hazardous to company survival: while not all distraught customers set out to wreak life-threatening havoc on these truly deserving companies, they also don't care if their actions do result in premature corporate expiration. Whereas shareholders, while unhappy at the results, and, potentially with more to lose, do want the business to survive and prosper.
The Shareholder Spring in the UK which features both employees and shareholder actions, recently took on Barclays, Aviva, and Trinity Mirror, to great effect, with Andrew Moss of Aviva and Sly Bailey from Trinity Mirror falling on their swords. While many have sought to politicize the various protest movements, the economic train wreck that has enveloped most countries has had broad ranging effects on most segments of society, except perhaps senior executives! The resultant letters to the editor, and affirmative action, has come from the bien-pensant of all political stripes. Most shareholder revolts have been focusing on executive level remuneration, poor financial returns and benign, benevolent boards. Shareholder activists would do well to keep a sharp eye out for the gathering storm of austerity-plagued, enraged, avenging customers, dispensing justice by taking their business elsewhere and trashing the company into the bargain.
As they see this fractious scenario unfold, shareholders will begin to question corporate reports, which sanctimoniously, and, perhaps a little disingenuously, preach about "increasing shareholder value" and wax lyrically about the "importance of the customer experience". They'll be momentarily encouraged to also see the statistics that jump jauntily out of most executive surveys, stating unequivocally that improving the customer experience, or focusing more on customer service, is the "most important corporate initiative" on their agenda. And if they caste a similarly discerning eye over research from American Express that indicates that 61% of Americans say that first class customer service is more important to them in today's difficult economy, and will spend an average of 9% more when they believe a company provides excellent service, their joy will know no bounds.
However, this happy feeling may be premature and short-lived, when they find out that for many companies this "important corporate initiative" means spending eye-watering amounts on branding, disconnected vacuous mission statements and high-priced celebrity adverts to make us feel all warm inside. At the same time these organizations seem to be missing the research from Harris Interactive, showing that 86% of consumers stop doing business with a company because of a bad customer experience.
Consequently the shareholders activists will see that many businesses are making short- sighted, ill-informed decisions to cut costs, especially those associated with reduced investment in staff education, hiring and technology that actually end up decreasing the value and profitability of the company (think Trinity Mirror and Thomas Cook). These reactive decisions are based on the companies' perception of shareholders concerns, perhaps ironically, and are self-defeating insomuch as the opposite could actually deliver improved financial performance. In many cases companies are deciding not to invest at all in initiatives that could actually have a beneficial effect on customer service, based on the flawed theory that doing nothing and hoping that customers will "get over it", is financially responsible. Ironically in many cases, the potential cost of investments such as these, pale in comparison to even moderate executive remuneration.
When the shareholder activists look at companies that consistently get rave customer reviews, such as Zappos, John Lewis and Metro Bank, they'll make another valuable connection. They'll see that these companies, which actually invest more money to improve the quality of service, staff, technology and processes (rather than just spewing out the rhetoric and auditioning the stars), are not only making money, and yes, increasing shareholder value, but are staying under the combative press radar and away from the toxic headlines that, regardless of how good their product, are deadly for customer relations and employee morale.
This should lead to shareholders asking awkward questions, and looking for hard evidence, of these types of investments and initiatives within the companies they own. They'll recognize that losing both customers and employees is not a formula for long term financial success. While cutting costs by reducing staff is one way to eliminate some of the deadwood, and show some short term balance sheet benefits, it has an alarmingly related effect of driving employees out that you might actually want to keep. This just drives another stake through the heart of a positive customer engagement strategy that can do much to increase trust, loyalty and customer value.
So, as with other fast moving revolutions, shareholders may just have to look beyond excess executive pay as the cause of poor performance and dig deeper into customer and employee feedback to see where the bodies are buried. While not all customers will be shareholders, it's a pretty good bet that many shareholders will be customers, and possibly employees, and their respective needs and wants are not necessarily mutually exclusive. Happy customers, happy employees and increased customer value and profitability are not just serendipitous, but based on numerous recent studies showing that these are not just casually, but potentially inextricably, linked.
What the Shareholder Spring is definitely doing is bringing shareholders closer to the day-to-day running of a business and its main stakeholders: the customers and employees. As shareholder activists realize that customer value and shareholder value are remarkably similar, and see their interests frequently colliding with those of customers and employees, this may well be the tipping point that gets these new "strange bedfellows" together in a more formal alliance or coalition. In the UK, the business secretary Vince Cable is pressing ahead with his plans to hand investors new powers to clamp down on excessive bonus saying that, "investors are taking control of the companies they own."
While increased government involvement isn't necessarily always good for business, it's clear that Mr Cable is accurately reflecting the mood of both shareholders and the general public, who in turn are customers and employees. If "taking control" can be extended to other areas of the business, such as having voice in investments in proven customer service initiatives that increase overall business value, then this would be a rare and enviable win for shareholders, customers and employees. While not yet a universal truth, there is growing evidence that organizations that scrimp on customer service perform far worse in terms of profitability, customer satisfaction, employee engagement, and survival, than those that consistently invest in customer service improvements. Author Gary Weiss calls it the "Lousy Customer Service Factor" and in a recent article Dell, Apple, And The Customer Service-Stock Price Connection, he provides factual, financial evidence of the rapid decline of businesses where poor management and poor employee morale lead to their customers being short changed (possibly to fund excessive executive pay).
While achieving lasting harmony among the key stakeholders (investors, customers and employees) may seem a challenging task for many businesses, those companies that have successfully achieved this such as Zappos, South West Airlines and John Lewis continue to reap the benefits, even in difficult economic times. If shareholder activists bring customer and employee groups to the table and align their respective objectives, then a powerful coalition will be created that even the most benign boards and autocratic executives will find hard to ignore. While recent history has shown us that not all coalitions are successful, it's possible that this one, with barbarians on both sides of the gates, could deliver a resounding victory for all concerned (even the CEO).