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Customer Service Leaders Financial Returns

For over 30 years I have been reading the financial annual reports from Service Leaders. I find that some annual reports are full of smoke because they manipulate data and just dream about being a service leader. Authentic Service leaders, on the other hand, do a great job.

I have highlighted key ideas so you can review quickly some of the reports below;

Amazon is the service leader throughout the world. They seem to do everything right. Sales were up $55 billion in 2018 again making Jeff Bezos the wealthiest person in the world. I think every leader in your organization should read their annual report.  Read here.  The excerpt below is just an example of a key idea from Amazon.

Failure needs to scale too

As a company grows, everything needs to scale, including the size of your failed experiments.  If the size of your failures isn’t growing, you’re not going to be inventing at a size that can actually move the needle.  Amazon will be experimenting at the right scale for a company of our size if we occasionally have multibillion-dollar failures.  Of course, we won’t undertake such experiments cavalierly.  We will work hard to make them good bets, but not all good bets will ultimately pay out.  This kind of large-scale risk taking is part of the service we as a large company can provide to our customers and to society.  The good news for share-owners is that a single big winning bet can more than cover the cost of many losers.

Home Depot is another service leader. Over 400,000 employees. The world’s largest home improvement retailer. Read here. The excerpt below is just an example.

Investment Highlights

We believe that when a customer comes to one of our physical stores, it needs to be a great experience.  Our customers asked us to reduce several pain points around store navigation and checkout and we made great strides in 2018

Southwest Airlines is the most customer driven airline in the US. It is the only service leader I am aware of that has had 46 consecutive years of profitability. Revenue last year was $22 billion. They started June 18, 1971. Everyone reading this newsletter could learn a lot from Southwest. Read here.  The excerpt below is just an example.

Marketing

During 2018, the Company continued to aggressively market and benefit from Southwest’s points of differentiation from its competitors.  For example, the Company’s Transparency campaign emphasizes Southwest’s approach to treating Customers fairly, honestly, and respectfully, with its low fares and no unexpected bag fees, change fees, or hidden fees.

Southwest continues to be the only major U.S. airline that offers to all ticketed Customers up to two checked bags that fly free (subject to weight and size limits).

Costco Wholesale a $135 billion retailer, employing over 245,000 people, operating over 750 warehouses and serving 94 million members worldwide. Read here.  The excerpt below is just an example.

Performance/Compensation

Our financial performance depends heavily on our ability to control costs.  While we believe that we have achieved successes in this area, some significant costs are partially outside our control, most particularly health care and utility expenses.  With respect to expenses relating to the compensation of our employees, our philosophy is not to seek to minimize their wages and benefits.  Rather, we believe that achieving our longer-term objectives of reducing employee turnover and enhancing employee satisfaction requires maintaining compensation levels that are better than the industry average for much of our workforce.

“My research shows that service leaders

out-perform their competition”— John Tschohl