Profiting from poor service is unsustainable

An article titled Some Absurd Airline Rules in the August 18, 2016 Wall Street Journal caught my attention. What stood out to me was that each of the six rules highlighted in the article increased airlines’ ancillary revenues at the expense of overall customer satisfaction.

North America’s airlines charged nearly $11B in a la carte fees in 2015 and this number is only projected to rise. Meanwhile, services that used to be provided in the ticket price are being withheld. And I’m not simply referring to baggage handling and meals. Most airlines now charge at least $25 to buy a ticket from an agent over the phone – even if customers feel they need help with reservations that can’t be found online.

With all that added revenue contributing to record profits, why should airlines bother to consider the effect on overall customer satisfaction?

I have two thoughts regarding this question, both of which can be attributed to Stephen Covey’s book, The 7 Habits of Highly Effective People. My first thought is that airlines, cable providers, banks, insurance carriers, and other companies that willfully subordinate customer service quality to profits are in violation of principles – natural laws that are timeless and self-evident – such as justice, fairness, integrity, honesty, service, quality, and excellence. Of the principles contained in his monumental movie, The Ten Commandments, Cecil B. deMille observed, “It is impossible for us to break the law. We can only break ourselves against the law.” Profits that are earned in violation of principles – natural laws – are unsustainable. (Think: Enron, Lehman Brothers, MF Global, Barings Bank, Martha Stewart, Leona Helmsley, Bernie Madoff.)

My second thought is rooted in Covey’s theory of Production (P)/Production Capability (PC) Balance. While the P/PC Balance theory may sound boring, it’s quite interesting – and quite true. Essentially, it’s the principle behind the popular Aesop’s fable of the goose and the golden eggs. As you may recall, the greedy farmer, in his attempt to achieve great wealth quickly, killed the goose (PC) that laid the golden eggs (P). Alas, there was no stockpile of golden eggs, only a dead goose.

Every business, including airlines, can take shortcuts to profitability at the expense of customer service quality and, as a result, perform better financially in the near term. Over time, however, companies that violate principles and exploit customers (PC) in their myopic pursuit of profits (P) learn, as did the greedy farmer, that this strategy is unsustainable.