Years ago my economics professor harped on the need for companies to control costs and expenses, and to maximize profits. He was adamant that any CFO worth his salt would do anything possible to reduce costs in order to produce greater profits. That seems rational on the first read, and I think most MBAs learned that lesson very well. At least those I have known over the years seem to behave as though that rule was sacrosanct, including moving overseas for cheap labor.
For instance, to get ahead in the world of commerce required no particular sense of rightness, propriety or planning, just ruthless ambition and great timing, in that the wise guy who could slash costs would be rewarded and promoted, while the poor smuck who was so unlucky to follow in his place had to clean up the mess left behind, and took a beating. The plan was to gut the operation in every possible way, then get the promotion reward and move on, leaving the dead and wounded behind. I saw that happen too many times in the company ranks, when those cuts resulted in great numbers for the first quarter reports, and into the second quarter, but the house of cards came crashing down if the game went on much longer than that, 18 months seems to be about the extent the game will last.
The fall out from that practice is easy to see, once one takes off the corporate blinders and reads the results over time. I had that opportunity in several capacities in my career, and it seemed a stupid way to run a business. The short term results were impressive, I admit, and that was the goal, so the player was in the game as it was set up by upper management. The long term results were disaster. The poor replacement guy was under the gun to fix the mess, and no matter how good a job he did, the deck was stacked against him. There was no way for him to succeed or survive.
What the problem here is that the managers swapped quality business operations for short term gains that eventually undermined the success of the operation. They ignored the number one rule of any successful business: Quality First, Quality Always. Never cut quality, no matter what. I think Ford Motors finally figured that out.
That basic rule of business came to mind a few days ago as we were eating lunch at what was a favorite burger joint in Roanoke. This place is a specialized shop which serves only burgers and hot dogs of various kinds, and has won accolades over the years for their high quality at fair prices. They are not cheap like other fast food places, but they were covered up with customers who appreciated really fresh hamburgers, ample sized servings, and a fair price. They enjoyed a great reputation for good food, so that people became regular customers. I was one.
Over the past few months, we have stopped there for lunch for a regular burger and fries. The burgers were excellent, a high quality product at a fair price. We have been going there for several years. So it was a real disappointment that the burgers yesterday were much smaller, over cooked, and much more expensive. The quality has been cut, at the same time the prices have been hiked. They once were better than “Five Guys” and about the same price. Now they are no better now than the fast food competitor burger chain across the street. And more expensive by double. The patty was tough, dry, and small. and the fires were stale, old oil taste. Not something I expected at my (once) favorite place.
The “quality” maxim came to mind as I chewed on my not-so-great meal: Never Cut Quality. If you must raise prices to keep in business, do so. Customers will understand small price increases and as long as the quality stays great, they will still be customers. Cutting quality is a short term solution for quick profits that leads to long term disaster. If you reduce quality, they will stop buying your products or services, no matter how cheap the price.
And the price was way higher than the last visit. I could tolerate the price if the quality was still high, but those two factors mean I will probably not be back there again. It is sad to see a once great product go the way of the Dodo. By the way. the customers were fewer than I have ever seen at lunch time. Sorry, pal. Lose quality, lose customers.