Helping the Chronically Overworked Find Life Balance

Chick-Fil-A’s “Golden Rule Approach To Business”

Chapter 3: The Corporation, The Real American Idol Part 9

In the previous post, I argued that companies that incorporate elements of people-first values into their culture have a competitive advantage.  In his book The Loyalty Effect, Frederick Reichheld, head of Bain Consulting’s loyalty practice, and inventor of the Net Promoter Score, has built a career showing that businesses that put people first have better financial returns, at least in certain industries.  Reishheld argues that often a loyalty culture, i.e. one that values long term relationships with employees, customers, and investors is a productive business strategy.  For example, he shows that State Farm Insurance has an advantage over its competitors because it has found ways to retain agents longer, and these older agents bring in more business[i].

Ironically (given the current controversy), The Loyalty Effect paints a very favorable view of Chick-Fil-A for its people-first values, especially with regard to the way it compensates managers and employees in a way that encourages low-turnover.  He goes so far as to say that Chick-Fil-A’s takes a “Golden Rule approach to business.” He calls the founding CEO Truett Cathy (father of current CEO Dan Cathy) “so earnest a Christian that all Chick Fil A stores are closed on Sundays which makes their financial success all the more impressive.[ii]”  I agree with Reishheld’s further observation, that being closed may be an advantage for attracting talent that doesn’t want to work 7 days a week.  I would add that because the Sunday closure is a global company rule, no one person can gain competitive advantage for putting in the extra hours on a Sunday.

Reishheld argues that the financial advantages of a loyalty culture are not universal – it depends very much on the type of industry.  “Commodity suppliers like oil companies and certain high-tech businesses where technological breakthroughs can overwhelm customer relationships are examples of companies were loyalty economics can make a difference, but probably not a decisive difference.[iii]

This resonates with me big time.  In the genomics industry, where I worked, the dollars followed the latest technology, and seemed to be largely independent of how well those companies treated either their customers or employees.  In fact, I think the technology superiority bred a certain arrogance, which came back to haunt the companies when the next technology came down the road.

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[i] The Loyalty Effect:  the Hidden Force Behind Growth, Profits, and Lasting Value. By Frederick Reichheld.  Harvard business School Press (1996) p. 127-128.

[ii] The Loyalty Effect:  the Hidden Force Behind Growth, Profits, and Lasting Value. By Frederick Reichheld.  Harvard business School Press (1996) p. 111  It is unfortunate that Cathy’s people-first values have a common shortcoming.  In his mind, they seem to apply only to certain people.

[iii] The Loyalty Effect:  the Hidden Force Behind Growth, Profits, and Lasting Value. By Frederick Reichheld.  Harvard business School Press (1996) p. 306

Comments

  1. It’s true that CFA talks a good game about valuing their employees, and perhaps their official policies are better than many fast food restaurants, but there have been numerous stories out there about ill-treatment of front-line workers.

    • Greg Marcus says

      Paula, you bring up a good point. This may well be a case where the written values do not match what is actually practiced in the overall corporate culture. I think Reishheld is correct from an academic standard – CFA has policies that encourage retention, which in turn lead to better financial results. But it is hard for me to say that CFA has people-first values when the company is tolerant of franchises that harbor an anti-gay culture. http://www.huffingtonpost.com/2012/08/01/chick-fil-a-anti-gay-controversy-employees-speak-out_n_1729968.html Could be another post here, because as I think about it, Cathy is following the written rules in The Bible, but missing the deeper lesson.

      • The deeper you analyze the corporate culture at CFA, it becomes quite apparent that biblical precepts in fact serve as the core of CFA’s shared values. The various practices that marks CFA as distinct such as the golden rule, closing on Sunday, philanthropic efforts is an extension of living out a Christ-centered lifestyle in the context of the business.

        The objective of Cathy family’s business goes beyond the parameters of general business metrics. They see the organization as a steward for helping others to know Christ, and most importantly glorify God. The business results of higher engagement, customer satisfaction, increasing sales are a positive byproduct of their core beliefs.

        Now, any organization how strong its shared values and healthy its corporate culture will encounter outliers. The focus needs to be on how the organization manages the situation. Check out the following website for more information: http://nexus.som.yale.edu/chick-fil-a/?q=node/93

  2. Greg Marcus says

    Paul – thanks for your comment and I agree completely. I have long been fascinated by Chick-Fil-A for this very reason. It is possible to run a business based on a broader set of values than simply the bottom line, and I’m not surprised that it has paid off for them. I think the reason that The Golden Rule has persisted for so long is that it works, meaning that people who practice it in the end will come out ahead of the selfish in this world.

    Which is why, perhaps, I am so troubled by the Cathy’s focus on the gay marriage issue. I don’t want to debate the biblical justification for their opposition to gay marriage. My question is this: why is it such a priority? Of all the ills in this world, poverty, sickness, unhappiness, and with of all the sins in the Bible, murder, adultery, theft, why is gay marriage even on the radar?

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  1. […] What differentiates the values of the companies classified as Excellent when compared to the lower performing companies?  The Excellent companies put people first. <<Previous Next>> […]

  2. […] the last post, I have discussed the values of Chick-Fil-A, a private company whose corporate values reflect the […]