LTYM - Don't Legislate Exceptions

Letters to a Young Manager

Don't Legislate Exceptions, #39
LTYM > Process and Operations Management

Dear Sophie,

***

In his book, Growing the Business, Paul Hawken starts a chapter by describing how a returns policy evolved as a result of four problems encountered with single customers [1]. Here's the policy, as printed on a large sticker on each file cabinet he purchased for his company:

"This merchandise left our store in first-class condition and shall not be returned for any reason without proper authorization. We definitely are not responsible for any damage whatsoever incurred at any time to any of our products while merchandise is in transit. Any merchandise returned to us will be refused. You must file a claim for damage, cost of repairs, shipping charges or replacement parts.'"[2]

This is an example of the problem of creating policies based on single instances of something gone wrong. It's legislating exceptions rather than recognizing that an exception is exactly that, an exception from the norm.

While legally correct in protecting the cabinet company, would you want to do business with them? What happened to the simple phrase "satisfaction guaranteed"?

Contrast this with the story of the customer who returned snow tires to a Nordstrom store and received a full refund. The thing is that Nordstrom doesn't sell tires; they are a retail clothing store. But they firmly believe that the customer is always right [3]

Most policies are in response to a few bad experiences (real or anticipated). They punish the 95% of your good customers who deal honestly with your company. The lesson: don't legislate exceptions!

***

Sincerely yours,
Ed

________________________

[1] Paul Hawken, Growing a Business, 1988
[2] Hawken, , pp. 191-192 as told in chapter 10, "You are the customer, you are the company".
[3] See Spector, Robert and Patrick McCarthy, The Nordstrom Way, New York: Wiley, 1995, p. 26, as quoted on Snopes: http://www.snopes.com/business/consumer/nordstrom.asp
[4] See Tom Peters, Thriving on Chaos, New York, 1987, p. 91,"A study by Technical Assistance Research Programs [TARP] revealed these facts: Twenty-six of every twenty-seven customers who have had a bad experience with you fail to report it. The principal reason is not surprising: They expect no satisfaction if they do bug you. The scary part comes next --some 91 percent of those who complain won't come back. Scarier yet, the statistic dropouts holds as true for $1,000 purchases as for $1.79 ones. And perhaps worst of all, the average person who has been burned tells nine to ten colleagues; 13 percent of the malcontents will spread the bad news to twenty or more people."

Takeaways:

Don't legislate exceptions; just state the rule.

Discussion Questions:

1) To how many people would you tell the cabinet story? The snow tire story?
2) Read the famous TARP study on telling things gone right and things gone wrong [4]. How does the social media era change this?
3) See the story of Renee McPherson on Dana Corp. rewriting the 22.5 inch thick policy manual on one page in Peters and Waterman's classic In Search of Excellence. p. 247. Contrast Nordstrom's employee manual: "Use your own best judgment". Where would you rather work? (See a reprint of the handbook, here: http://www.businessinsider.com/nordstroms-employee-handbook-2014-10 .)

For Further Reading: