Roger Martin is Professor Emeritus at the Rotman School of Management at University of Toronto where he served as dean from 1998 to 2013. He was named the world's number one management thinker and has published 11 books including Creating Great Choices and Playing to Win. He's a frequent contributor to the Harvard Business Review. He's also a trusted strategy advisor to many CEO's and global companies including Procter & Gamble, Lego and Ford. Roger's latest book is “When More Is Not Better: Overcoming America's Obsession with Economic Efficiency.”
In this episode, Dustin talks with Roger Martin about his book, When More Is Not Better: Overcoming America's Obsession with Economic Efficiency.
You'll discover how our obsession with economic efficiency has forced too much pressure in a pursuit of perfectionism. Roger and I discuss how this has resulted in a dangerously unbalanced economy that lacks resilience. Roger gives practical tips on what business executives, political leaders, educators and citizens can do to achieve the overall balance between efficiency and resilience.
Roger says, "Efficiency itself is not the problem, it's the proxies we use for efficiency." Using proxies like quarterly earnings or cost reduction might show improved efficiency, but this is not the same as effectiveness. If you focus on the wrong proxies in the short term, you will do things that are damaging in the long run to achieving the best results, like providing excellent customer service or delivering long-term shareholder value.
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Links Mentioned in The Burleson Box:
Efficiency vs. Effectiveness with Peter Drucker
Aristotle, Nicomachean Ethics and Happiness
Four Seasons: The Story of a Business Philosophy
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Dustin Burleson:
American democratic capitalism, the force which put the U.S. at the center of success and once created a better life for most citizens is in imminent danger. More than 40 years ago a dangerous decline began that has created an unprecedented state of economic disparity. Our shared model of the economy, that of a machine was supposed to produce a large and prosperous middle class, but something entirely different is happening instead. We'll be back in a moment to talk with Roger Martin about his new book When More Is Not Better: Overcoming America's Obsession with Economic Efficiency. But first, here's a message from our sponsor.
Dustin Burleson:
Roger Martin is Professor Emeritus at the Rotman School of Management at University of Toronto where he served as dean from 1998 to 2013. He was named the world's number one management thinker and has published 11 books including Creating Great Choices and Playing to Win. He's a frequent contributor to the Harvard Business Review. He's also a trusted strategy advisor to many CEO's and global companies including Procter & Gamble, Lego and Ford.
Dustin Burleson:
On today's episode Roger and I discuss how our obsession with economic efficiency has forced too much pressure in a pursuit of perfectionism, resulting in a dangerously unbalanced economy that lacks resilience. You'll discover what business executives, political leaders, educators and citizens can do to achieve the overall balance between efficiency and resilience. I'm excited to dig into these and many more lessons on another episode of The Burleson Box.
Dustin Burleson:
Today I'm so honored to have Roger Martin on the program discussing his new book When More Is Not Better: Overcoming America's Obsession with Economic Efficiency. Roger, thank you for being here.
Roger Martin:
It is my pleasure Dustin. Thank you for having me.
Dustin Burleson:
So many books, they present a problem and then they agitate the problem and they look at the problem through 20 different lenses. Your book however refreshingly presents a significant amount of solutions. In other words, here's what we can do about this problem. The book is brilliant. I'd love to know why did you decide to write it?
Roger Martin:
Well, I was just worried about stuff I'd seen in the economy. I guess I'm a person who loves both democracy and capitalism and I saw it not providing the kind of promise results that it had long done and said, "Wow, if somebody doesn't take a look at why that's the case and help create some solutions for that, we may lose something that I think is terribly precious." I guess I also saw the challenge of a model, which is sort of totalitarian capitalism, right, which China has now pursued rather than a communist socialist kind of economic system. It's an increasingly capitalist system but done in a totalitarian way and believe me Dustin, I would like democratic capitalism to win over totalitarian capitalism.
Dustin Burleson:
I'm in the same boat as you. We can talk later about it. I'd love your opinion on whether you think or when the renminbi will become the world reserve currency. We can save that for later in the discussion but talk about... And I 100% agree, so if you're listening to this podcast and you're a member, you've received a copy of the book and our study guide. I hope you're getting through it and enjoying this as much as I did. You say in the book this version of capitalism that we've set up as this hyper efficient machine, it was supposed to produce an even distribution, like a bell-shaped curve, right, the middle class prospering and then small groups of either extremely rich or extremely poor on either side, but that's not happening. Can you talk about that?
Roger Martin:
Yes. I mean, that's right. I think that was probably an implicit assumption behind this economy and that's why we care so much about the middle class. Much of a political dialogue is about well, is the middle class doing well? Is the middle class doing well? It's because we believed that that would be the case and not only did we believe that that curve would be bell shaped largely, it would also, if you will, move to the right smartly every year. I.e. the median family would have an improved economic condition in most years. From 1776 to 1976 that happened to the best of our kind of ability and statistics, but that happened in over 90% of the years. Right? So, it marched to the right. Marched up so that the poorest people in the economy got less poor, the median family moved ahead. In fact, at a rate that caused it to double every about 30 years. So, kind of every generation. So, you could look at the across the kitchen table to your kids and say they'll have twice the real income that I have when they're my age. Not bad.
Roger Martin:
But what's happened since is the stagnation of those middle incomes and the extension of the high incomes, so that that tail of the distribution on the high side has gone out nearly to infinity, stretched out, and the cost of that has been to take too much of the increased economic activity. So, if the GDP of the economy goes up a dollar, too much of that dollar is going to people who don't really need it, right, who are exceedingly rich. The consequence of that, I'm not so worried about the fact that they're getting rich. If that's kind of... That in and of itself doesn't bug me. What bugs me is now the equation is that the median income since 1976 has been on a pace to double every century. Literally, Dustin, rather than every generation, 30 years. Every century, and it's actually a little more than a century if you want to be precise.
Roger Martin:
So, now looking across the table, the kitchen table to your kids, you can now say oh, my kids' kids' kids' will be almost twice as prosperous as we are. That's hardly something to write home about, right, as something to feel a sense of pride about, a sense of optimism about. That's fundamentally what's changed between the period 1776 to 1976 and 1976 to the present and at least the foreseeable future until we change things.
Dustin Burleson:
You argue in the book, and I agree that that's really put us in an economy that lacks resilience. Right?
Roger Martin:
That's right. That's right. This sort of push for the extremes of economic efficiency have put kind of resilience in the backseat. We've gotten more mono cultures. I mean, I talk about ones that don't matter to much of the world, like 80% of our almonds are grown in one valley in the world, the central valley in California, and we just sort of do that because it's the most efficient way to grow almonds even if it means shipping bees in from all over America for the week that they need to pollinate the blossoms on the trees. It's sort of like oh, no big deal and we wonder why bees are dying. Well, they're dying of the... One theory at least is they're dying of the stress of being shipped around the country for this sort of thing. But that's happening kind of throughout the economy where we are seeing kind of I don't think we have as resilient news anymore. Right? That's because we have fewer and fewer providers of news and it's been consolidated. Is it more efficient? Yeah, probably, but is it resilient to the notion of having multiple views and a variety of those views? That's just sort of gone by the wayside as we've said, anything that creates greater efficiency is an inherent good.
Dustin Burleson:
In the book you present some prescriptions because it's easy to say, oh, this is just business executives getting richer at the expenses of the door, but you go through five different categories from business executives that clearly is one of your many areas of expertise as the dean of the Rotman School in Toronto for 15 years or more, that also includes political leaders, educators and us as citizens. So, I kind of want to dig into that a little bit because particularly at the time of this recording, it's really easy for political leaders to say we have the solution. Can you kind of speak to that a little bit and why it's really going to take all of us?
Roger Martin:
Yes. Yes. I mean, that, to be honest, that's got me a little bit worried, the degree to which we kind of one party says oh, thank goodness we're in charge now and we've got the solutions. The period that I'm talking about, 1970's to 2000 has been almost equally Republican and Democrat, right? So, there've been 30 years of Republican Presidents and 20 years of Democratic Presidents since 1970 and 30 years of Democrats in charge of the Congress and 20 years of Republicans. So, this problem has been created equally by Democratic leadership and Republican leadership, full stop. Any argument... To me, there... I cannot... I mean, I can't even begin to take seriously any argument that says it's one versus the other. So, like hopefully everybody in the country is hopeful about this administration, I am, but I'm less hopeful when they act like now that we're in charge we'll solve this. We got into this in a systemic way and we got to get out of it a systemic way. Executives have to do things about it. Political leaders have to, educators have to and citizens have to.
Dustin Burleson:
One of the solutions for... Particularly in politics is to extend time horizons and I picked up a book, I think it was before the pandemic. It's by an American economist Garett Jones, he's at George Mason University and the title was 10% Less Democracy and I thought oh, this is interesting. Right? I read the book and I thought oh wow, this is actually... There's some really good points and that's one of the solutions I think that Garett argues is that we're so shortsighted in politics that in the house in the United States they're really campaigning constantly and Senator's vote differently as their re-election year comes closer. So, can you talk about time horizons and both maybe in business as well because that's an issue as well. Yeah.
Roger Martin:
Sure. Yeah. No, no, absolutely. Maybe I guess I have maybe a slightly different spin on time horizons too than other people have, which is in politics there's a belief in permanence being good. So, you fight a huge fight in Congress between the executive branch to write the perfect legislation to solve whatever you think the problem du jour is. You write it as if it's going to be there forever and then all that happens... So, in some sense that's a funny way, it's a long time horizon, right? This is going to be around forever. But all that happens is that people immediately game that, right? They game whatever system is put in place and I mean, this happens on kind of on Wall Street kind of all the time. You change the rules and... The Clinton administration thought oh, the way we will solve executive CEO compensation getting out of control is we will say... And this is when it was on average less than a million dollars for big company CEOs, we will say that only the first million dollars of CEO compensation is deductible for tax purposes and that'll really discourage them from paying more than a million dollars. Right?
Roger Martin:
So, what happened? Did all the boards of directors say oh, here, President Clinton has said we must keep compensation down and below a million dollars? No, they said we'll pay them a million bucks but we'll give them all sorts of this new kind of thing called stock options. Within 10 years of the passage of the bill, CEO compensation had gone up 10x. Right? I mean...
Dustin Burleson:
Exactly.
Roger Martin:
Why? It's because they gamed the game. This is why I say the economy's a complex adaptive system, the players in it adapt constantly so no matter how clever you think your legislation is, they will game it. So, that's why I say write revisions into every law you make. Say this has to be reviewed and revised and admit... I wish politicians would just admit we often get it wrong and what we hope to accomplish, we don't, we accomplish the opposite and we can... Don't assume that we'll get everything right. Don't judge us by not getting everything right. Judge us on the basis of when we saw it wasn't working well. Did we tweak it quickly to fix it? That would make for much better laws, much better advance of legislation than what we have now. So, it's a little different take on the short term. While they're being short term, they're acting as if they can be longer term than anybody can possibly be. Nobody is that smart.
Dustin Burleson:
I love that assessment and it reminds me always of the power of unintended consequences.
Roger Martin:
Yes. There are models of this, right? In Canada the most important financial services regulation is a really big one that would be bigger than any U.S. regulation all in one. It's called the Bank Act and it organizes and legislates essentially all of banking. When it was put in place, literally in 1871, four years after the birth of Canada as an independent company, some wise group of legislators said put in a clause that says it must be by law revised... Sorry, reviewed and revised every 10 years.
Roger Martin:
In fact, that worked out so well. So, it's nonpartisan. Right? It's not, oh, it's because Conservatives are the governing party and they don't like what the banks are doing and so they're going to make it political or the Liberals are or the New Democrats, the Socialists. No, it's because 10 years is up. Right? So, it's not political and it's required. You can't just as a government say ah, nah, it's looking pretty good. No, it's required. It's worked so well that in 1992 they shortened it to five years. Right? I'm sure... And there are many reasons for this but in the global financial crisis 2008, 2009, no Canadian bank got into financial distress. There were no bail outs of banks. They sailed through it wonderfully. Why? Well, they had less than five year old regulation at the time that was suited for the current environment whereas the U.S. banks had lots of ancient regulations that weren't suited for the environment. So, it's utterly doable, it's just not done very often.
Dustin Burleson:
I'm glad you pointed that out. I wanted to say, and I wasn't sure because I'm not an economist but I wanted to chime in and I think the Canadian banks did really, really well when we imploded here in the United States.
Roger Martin:
They did. They did. You can even use a sports analogy. Dustin, I don't know if you like that but the NFL does this. America's most successful sport commercially has a competition committee that at the end of every season it meets and it tweaks the rules to make sure that offense and defense are in balance. Right? So, it's done all of these things for football aficionados that when the West Coast Offense, Bill Walsh and West Coast Offense made offense start to dominate defense they went in and just tweak the rules. They didn't say you're a bad man, Bill. They said you're a great coach and you've won a couple Super Bowls quickly, but your offense system could destroy the game. So, we're going to tweak the system to allow quarterbacks to chuck the wide receiver once within five yards of the line of scrimmage. I mean, think about how arcane a rule that is, but it was put in place to tweak the competitive dynamics to put them back in a way that would make for the most exciting game. Why can't we have laws work that way where we just say we thought these were going to work well but we have to tweak them in this way and have somebody saying we have to do this on a regular basis, that is our job. The competition committee does meet at the end of every year and it does make tweaks to the game.
Dustin Burleson:
We've had on this program Paul Carroll who was a journalist at the Wall Street Journal and his book Billion-Dollar Lessons really explores that where in business, so if we translate... And I love that example of the NFL, that's great and I will encourage our listeners and people who maybe aren't listening to this to come check out that section because it's brilliant, the business analogy is that we just kind of stay the misguided course. We think of GE and IBM and a lot of these firms that at a certain point, General Electric had so many subsidiaries you didn't really know what the core of the business was, that inability to revisit and say where are we headed, right, and is it sustainable? I'm going to talk a little bit about sustainable goals, particularly at the time of this recording and I'm thinking of companies like General Motors and Ford, I know you sit on the advisory for. Warren Buffet and Charlie Munger and these billionaire investors for a long time had been calling on Wall Street and regulators to say listen, let's stop putting so much pressure on these CEOs to perform quarterly because it's causing them to set goals that are not sustainable. Can you speak to that a little bit?
Roger Martin:
Yeah, no, absolutely. It's one of these systems that's in some sense, it's been so sort of efficiency driven and what I say the book is efficiency itself is not the problem, it's the proxies we use for efficiency. So, we use a proxy for efficiency which is that did your earnings go up this quarter or did your costs go down this quarter? We use those as proxies but that's not effectiveness, right? Peter Drucker talked about effectiveness as opposed to efficiency and yeah, so we set these things up as proxies. I will call you more efficient if our labor costs are down by a percent this quarter.
Roger Martin:
Well, I mean, what if by driving down our labor costs we've driven down the customer experience to a greater extent? I give the example of 3G and Kraft Heinz, right, they came in and said oh, we can make this more efficient and they cut two and half points out of their cost structure and then their margins went down by three point eight points. Right? Then so it's sort of like so, that's more efficient huh? Well yes. Yes in some narrow, narrow sense. But in a broader sense it resulted in one of the biggest write-downs in the history of U.S. business, a 15 billion dollar write-down because their brands were worth that much less because they had become quote more efficient.
Roger Martin:
Buffet and all of those folks are right, it's because they're saying we're going to measure ourselves in these short intervals when that... A, it doesn't matter in the cosmic scheme of things what you're earning for this quarter, but if you focus on them you will do things that damage the long run and that's why... So, one of the reasons why I say one of my recommendations for executives is make sure you have more than one measurement that you're going to judge yourself by because what happens when you have one measurement, you get this phenomenon that people call surrogation, right, in which the measurement becomes in your mind the thing. Right? So, for Wells Fargo they wanted deeper customer relationships, a good thing. But their measurement was accounts per customer. On average, how many of the customers in your branch, how many accounts does the average customer in your branch have. Right? Then they said, well, the way to get that number up is to give people incentives for getting customers to have more accounts with Wells Fargo and if they don't, there'll be punishments for them not doing that.
Roger Martin:
So, what started out as a good idea, deep customer relationships, became a measure, how many accounts, and a tool, paying branch members and incentive to get them to open accounts, which resulted in people in branches feeling that pressure opening accounts that people didn't ask for. They get a credit card statement and they said I never signed up for one or another bank statement that they never signed up for, which caused billions of dollars in fines, the destruction of a long and auspicious reputation. But that's what happens when you have one thing. Right?
Roger Martin:
It's better to be like Southwest Airlines and say, you know what, we want to be the lowest cost, highest customer satisfaction, highest employee satisfaction and most profitable airline in America. Your first reaction might be whoa, those don't fit together, how can you be lowest cost and highest employee satisfaction? Well, the answer is, it's hard. Right? You actually have to think cleverly and make intelligent trade-offs, and one thing that you're never going to have happen when you have a situation that's like that, is for people to think that what we're trying to accomplish is this one measure. Because they'll be reminded oh, but there's a measure that feels like it's almost polar opposite to it.
Roger Martin:
So, we aren't the measure. What we do is not the measure. What we do is make clever trade-offs to figure out how to do this. In the case of Southwest it's we'll figure out a system that takes fewer employees per passenger seat mile to run the system so we can pay all of our employees more than they get paid at any other airline. So, they are happy as a clam working for Southwest but we still have a lower cost structure. Right? That's what brings greatness, is when you do that rather than having the one measure. This is where when your measure is shareholder value maximization, you start to do all sorts of things, commit all sorts of sins to get that one thing because that's what you're about. You don't do the clever thing, which is what Southwest does.
Dustin Burleson:
We get blinded by it. You write about in the book sometimes we double down on that thing.
Roger Martin:
Absolutely. We think... One of the great ironies of the modern capital markets and business world is people think that the pursuit of shareholder value results in more shareholder value. The wise, wise, wise man way back when, Aristotle, one of my favorite thinkers of all time, the Greek philosopher pointed out that if a person sets out in life to be happy they're unlikely to end up happy. If instead they set out to live a good life, by which he meant a life of servitude to your fellow man, to society, you'll probably end up happy. So, saying you want something does not necessarily mean you're more likely to get that thing. It may make it less likely.
Roger Martin:
I think when you say I want to maximize shareholder value and shout it from the treetops as CEOs will do, what on earth do their customers think? They'll say, "Oh so I've got a large target painted on my back that you're trying to extract as much from me as possible. Oh, that sounds great. I'm glad I buy from you. And employees, right, they leap out of bed in the morning, leap to their feet and say hooray, I'm going to work today to increase shareholder value. Boy, am I motivated. Who's motivated by that? The answer is nobody. But if instead the company stands for... P&G's one of my favorite companies, making the lives of the world's consumers a little bit better everyday, I think I could hop out of bed and say that's worth going to work for and guess what? You're going to increase shareholder value a lot. Or J&J, their credo, carved in granite in 1948 at the insistence of the founder Robert Wood Johnson, our customers, he called them patients because it was mainly health care, our patients come first, our employees come second, the communities in which we work come third and last, come the shareholders.
Dustin Burleson:
As it should be.
Roger Martin:
Notice, he didn't say next. He said last, but... And he said but, if we do the first three well, shareholders will earn a fair return. The market capitalization of Johnson & Johnson is something north of 300... I haven't checked lately, 300 billion dollars. It was... And I don't know in 1948 it was probably 50 million dollars. So, he's right. He's right. That's another example of it's a complex system. Right? The economy and business is a complex system. It's not like there's a straight line that goes from X to Y.
Roger Martin:
What Robert Wood Johnson says is you may want Y but here are all the other things you do and out pops the thing that you want and that's how the economy works. It's complex, it's as we said before, adaptive. It's a big system and we've got to think about it that way and think of managing it that way, and that's why revising laws and having this sense of tweaking is the case, having multiple measures. Educators, right, stop teaching kind of certainty. Stop teaching that we know this will cause that because we don't. For most of things we simply don't and even the things we're sure we do, we end up not being right about. Right? We taught newtonian physics as the truth for close to two centuries until until a patent clerk who didn't wear socks and along came Albert Einstein and he said it's mainly right, he's got it mainly right but here's the ways in which it's not quite the way he said it. But we taught it as the certain truth for over a century. Let's stop that. Right? Are we giving people, are we giving students an advantage in life by telling them more things are certain and so you can just sort of fire and forget on more things than not. I would say a big no sirree. No sirree. We're making them more vulnerable I think by doing that.
Dustin Burleson:
I agree. It's a challenge for our listeners who come from professional schools, medicine, dentistry, law, where they're taught rote memorization, they are taught to be professional students. They take tests for four, six, eight, 10, 11 years and they come out and then decide they're going to enter the business world and run a private practice and that doesn't bode very well for making these things coalesce. I'm curious your advice for the listener, the small business owner who says okay, maybe we've been focused on the wrong measurement. Maybe not I hope to the extent that Wells Fargo in the example we shared but maybe they realize a current model they're in isn't going to achieve the results they want and I want to point to something amazing you achieved at the Rotman School. I read either in the book or maybe in a previous interview that I think when you showed up at Rotman the budget was 13 million or somewhere in that ballpark and you were able to 10x the budget and understand the model you were in wasn't going to achieve the world class school that you built. Can you kind of walk the listeners through that?
Roger Martin:
Sure, yeah. No, no. Your numbers are exactly right. The budget I inherited was 13 million although we were running a one billion dollar... One billion... One million dollar deficit and when I left we were running a surplus and had 130 million dollars of revenue. So, lots of people would say wow, you really did a lot of good things at Rotman. Well, yeah, you can do a lot of good things with 130 million versus 13 million. It doesn't take actually a rocket scientist to do that, but I mean, I think what I tried to focus on are the things that I would tell your business listeners, which is be really careful of the modern tendency towards reductionism. Right? This is finance as distinct from marketing as distinct from operations as distinct from HR and you go to each of those silos and give them instructions to optimize their silo. That's where little companies should have a big advantage over big companies. Big companies almost do that by necessity because these functions are so big and a little company don't. Right? Have those people work together. Don't reduce things to these narrow classifications. Think across the business. Think about how your marketing decisions influence your finance decisions and influence your operations decisions. So, it's a modern phenomena that these things have been narrowed and siloized. You got to reject that.
Roger Martin:
Also, kind of recognize that slack is not an enemy. Right? So, everything that doesn't appear that it's being utilized fully today, it's not necessarily waste. It might be really important slack and we certainly have learned in COVID all these hospitals that didn't want to have any extra ventilators, didn't have anything but a couple of days supply of PPE, that they would replenish kind of quickly to keep their inventory and carrying costs down. They learned a big lesson, that slack is not... It's not equal to waste. In fact, the greater... W. Edwards Deming, one of the greatest kind of management thinkers of the twentieth century pointed out that he was against waste and getting waste out of systems, but he said slack, there's always an optimal amount of slack in an operation or a system and it's never zero. So, that's kind of the advice I'd give.
Roger Martin:
I guess, the other thing I would just say on wages. There's so much focus on getting wages down to make you productive. I just think that it's so simple to do that and it's hard to have awesome customer service. Every time you say can we get a cheaper person to do this, I think you have to ask the question what is this going to do to customer service? I mean, really. Let's think carefully before we do this thing.
Roger Martin:
I don't know if... Excuse me. I don't know if your listeners love shopping at Costco but I do and lots of people do and it's arguably the most successful retailing model in the country at this point. Nobody in a Costco makes less than 20 bucks an hour and it's retailing. Right? The home of low wages. You could say how can they compete in the club store segment, that's very, very price sensitive, club store segment with those super high wages. Not just high wages, like almost ridiculously high wages.
Roger Martin:
It's because co-founder Jim Sinegal and still kind of CEO and chairman of it just says you ain't going to get a great customer experience paying $12 an hour. You're going to have people worrying about feeding their kids, putting a roof over their heads and you ain't going to get them coming to work excited if you only give them their hours, their schedule a couple days in advance and don't think about their lives. If you pay them a lot, you train them a lot, you cross train them, you give them a variety of opportunities and you promote almost entirely from within, if you want to be CEO, a future CEO of Costco the best way to start out in it is getting a job on the sales floor or as a cashier.
Roger Martin:
If you do all of that you'll have employees who will serve the customer in such a delightful delighted way that they'll come more often, buy more stuff and you will prosper and that's exactly true. But it takes that kind of more systemic approach that says what we pay people relates to customer service. Whether we cross train them or not relates to their happiness which relates to customer service. Whether we promote from within or not relates to how much they try to advance themselves with the company rather than going elsewhere to advance, which will have more long service employees who will know how to solve customer problems and internal problems and make us more effective. That's what I'd say to everybody is, is think about the complex dynamics of your business. Don't simplify. I don't say complicate things, but just recognize the complexity and don't shy away from it.
Dustin Burleson:
Absolutely. I want to say Costco has one of the lowest employee turnovers in that category, correct?
Roger Martin:
Absolutely. I think the lowest. Now, Trader Joe's also has a similar philosophy and so Trader Joe's may be as low as Costco too, but yeah. Stunningly low. It's like Four Seasons hotel chain, right? Hotel turnover in the global hotel industry is about 70% a year. Just think about what that means. That means the average person in the average hotel across the world is on their way to a 16 month career in that hotel.
Dustin Burleson:
Wow.
Roger Martin:
Four Seasons is five [percent]. So, the average person you meet in a Four Seasons is on their way to a 20 year career. Just think about that. Think about the difference. Do you think they're going to know how to treat you, know how to get stuff done on the way to a 20 year career? Do you think they're going to be invested in the company and invested in giving you service? Heck yeah. But none of those things would happen if you have this sort of narrow minded focus on proxies for efficiency that you say, if I could just get my labor cost down... One way to get your labor cost down is to fire all your long service employees and replace them with new employees at the bottom of the wage scale. Right?
Dustin Burleson:
Exactly.
Roger Martin:
Easy but then your service goes absolutely to hell in a hand basket and you're like 3G and having to suck up a 15 billion dollar write-down because you were indiscriminate in getting two and a half points out of your cost structure.
Dustin Burleson:
And long term consequences. You share that example in the book. For listeners going through the study guide it's on page 120 through 123. Pointing back earlier to your conversation on reductionism, talk about that. I mean, here's the world's premiere luxury resort, the Four Seasons.
Roger Martin:
Yeah.
Dustin Burleson:
With exceptional service and in the book you highlight that they don't have a head of guest experience. They don't have a department for guest services, which most hotels do. That's phenomenal.
Roger Martin:
Yeah. Yeah. No, no. That's because Issy said, Issy Sharp, the legendary founder of the chain said we want everybody to think their job is customer service and he also said, the only way that we're going to get our employees to treat our guests the way we want them to treat them is to treat our employees the way we want them to treat their guests. Right?
Dustin Burleson:
Yeah.
Roger Martin:
So cool. Just so cool. It's like... And then he jokes, I've seen him giving a talk about this and he's a very self deprecating guy and he says "Oh, that's really original, huh?" Somebody called that the golden rule and you're right, kind of it is, it is in some sense incredibly simple. Sometimes those simple things are what really makes things work. I mean, I've been thinking about it. I'm actually going to write an article on business models and how you can tell they're going to get you in trouble versus not. I think the rule you should follow is if that business model is not something that you would think that a human being would follow, then it's a bad model. Right?
Dustin Burleson:
Exactly.
Roger Martin:
Just ask if you've kind of taken the humanity out of a model. Right? I would say shareholder value, right, takes the humanity out of a model. That's not how human beings work. I think, I literally think that at-will employment isn't how human beings work. Oh, if we... You may have served me... You may have been my friend for 20 years but suddenly I decide I don't need you and I dismiss you as a friend with no reason having to be given, no discussion. Right? That kind of a model doesn't have humanity in it and is going to get you in trouble, is my view. The assembly line was that. Right? Henry Ford, bless him, said how come every time I hire a pair of hands it comes with a brain attached? Right? That's sort of saying I don't really want to hire a human. I want to hire hands. What happened over time, right, terrible worker strife, terrible quality problems of workers on the line not being attentive to quality. Well, it's partially because you took the humanity out of it. It wasn't obeying a human rule. So, that's just one of the things I've been thinking about since the book is giving people a way of testing whether the models they're using to operate their business are ones that are full of humanity or have the humanity kind of stripped out of them.
Dustin Burleson:
That's brilliant, and it's everywhere. I mean, there's decisions that are being made that aren't only bad for companies but bad for the employees and you argue in the book, for the country overall.
Roger Martin:
Yes. Yes. They add up in little ways to a kind of a big thing and I think it's a real challenge. Right now people are questing in capitalism. If you ask young people they're saying socialism, let's give that a try. I mean, I'm not very enthused about that prospect, I can tell you that, but it speaks to the discouragement over how capitalism is functioning and it's all of our responsibility, if we want that wonderful combination of democracy and capitalism we have got to make capitalism work for humanity. That means making it more human rather than less.
Dustin Burleson:
Particularly for our younger workers who graduated, most of them, that were coming out of college in the financial collapse of 2008, 2009 and now getting their feet under them in their first kind of career with the COVID pandemic is a huge issue and in one of our key niches in dentistry, I think a half a million dental health care workers were laid off overnight. I mean, that's not...
Roger Martin:
Wow.
Dustin Burleson:
There's no slack in that system.
Roger Martin:
Yeah. Wow. That's a big number. That's bigger... I think most people not intimately involved in the world of dentistry would have never guessed it's that many. That's a very, very big number.
Dustin Burleson:
We were consulting and coaching clients don't do this. Right? Because it's going to be very hard to maintain their trust. You've had a dental hygienist, you've had an associate doctor, you've had dental health care workers assistants and phones administrators working in your practice for 20 years and suddenly times get hard and you let them all go apply for... That was the excuse was well, they can apply for unemployment. I said well, how does that build trust? When you finally want to bring them back, guess what, a lot of them didn't come back.
Roger Martin:
Yes. I can believe that. No, I think there... Yeah, I think there are always better solutions, right? I mean, it's easy... The easiest thing in the world to do is to declare force majeure. Right?
Dustin Burleson:
Yeah.
Roger Martin:
There was nothing I could do.
Dustin Burleson:
Yeah.
Roger Martin:
No, there was. There were 20 different things you could've done. Some of them maybe upon further reflection, a horrible idea, but some of those 20 would be a much better idea than declaring force majeure as if that person's life doesn't matter. It's interesting you say that because we have a dentist that we really like and I was in getting my teeth cleaned and I was asking in I think November, yeah, and I was asking Cathy, the dental hygienist, well, what did Dr. Nool do during it? She kept them all on and I think it was for the reasons you say. She wasn't going to get them back and they figured out accommodations and there was pain felt by everyone but it wasn't Dr. Nool doing just fine by sacking Cathy and all of the people in the office. It was far from that and I'm sure that she built loyalty and Cathy was her normal cheery self with this particular consumer and so yeah, there's a way. There's always a way.
Dustin Burleson:
Yeah. If you think about that, you tie that back into the Ritz Carlton or just the principle of resilience. Your dentist has built a practice that is resilient.
Roger Martin:
Yeah.
Dustin Burleson:
They likely had ways to navigate that challenge and didn't just say the person at the top is going to be fine and everyone else is going to have pain. We're all going to feel pain.
Roger Martin:
Yeah.
Dustin Burleson:
In a pandemic, in that example. So-
Roger Martin:
The efficiency-oriented person would've looked at her practice in June and said you're being grotesquely inefficient. Right?
Dustin Burleson:
Yeah.
Roger Martin:
I think Dr. Nool would've probably... She would've responded well maybe, but I am being resilient and I think she's just plain right. Now, I understand maybe if she had a gigantic financial problem going into it, just to survive she might've had done something but that's just again, not paying attention to resilience. Financial resilience, so that when you have a downturn you have no transom the way it's come flying over. But I think... I'm sorry to hear that so many people in your profession were let go that way. That does feel callous and I think there's a long, long, long tail to that. Much longer than those employers think.
Dustin Burleson:
Absolutely, and if you go back and either just take snippets from this interview or dig into the book you'll kind of see a master class on how to prevent that, hopefully with many people taking action in the profession but at least in your own practice going back through these recommendations from Roger and thinking about where were we over-focused, for example, one metric most health care practices measure and focus on relentlessly is new patients, new patients, new patients and then return on invested capital with human capital. If you're not looking at net promoter score, you're not looking at referrals, you're not looking at how you're supporting the community, employee satisfaction, we're really missing a huge opportunity to survive the next downturn because there will be another one.
Roger Martin:
Yes. No, I couldn't agree more. You sound like a strategist to me, my friend.
Dustin Burleson:
I know I've learned from great people like you reading good books and learning what I can. I want to kind of highlight, by the way, for those of you listening if this is your first exposure to Roger Martin he has I think 10 or 11 other books and writes frequently for the Harvard Business Review and I'd like to give him a chance to maybe share... You shared one article where you're going next, but maybe where people can find more about you as we pull to a close here.
Roger Martin:
Well, I got some advice from a friend 10 years ago or so to put... He said Roger you write so much it's hard for people to find it, organize it on a website. So, I have. So, if you like what you've heard, I have a website and it's just www and then my name with a middle initial, rogerlmartin.com. If you do rogermartin.com and forget the L, L for Lloyd, if you forget the L you'll get a Houston car dealer who's very nice. He often sends me stuff that comes to him. So, www.rogerlmartin.com and all my writing is organized and you have links to be able to buy the books if you so desire. As Dustin said, I write for HBR regularly but I started last summer writing for Medium so every Monday I have a column on Medium if you like that platform. So, you can look for that.
Dustin Burleson:
I do. Yeah. That's fantastic. We'll include those links in the show notes and I just want to thank you for writing the book. Not only for business leaders, but really for our politicians, those of us who teach and for the country at large. It's a great contribution to society. So, thank you.
Roger Martin:
It's my pleasure and thank you for taking the time to spend with me and for reading the book and asking such great questions. That always makes me joyful coming off one of these interviews. So, thank you very much Dustin.
Dustin Burleson:
Thank you. It's been an honor.
Roger Martin:
Take care.
Dustin Burleson:
You've been listening to another episode of The Burleson Box, where we bring you and your team leaders into the conversation with today's best authors and business leaders. If you enjoyed today's program please share us with a friend or colleague. Visit theburlesonbox.com where you can sign up to receive my monthly reading list and study guides for each of the books and authors we interview. Call us at 800-891-7520 to discuss how a Burleson Box membership, monthly coaching and our annual leadership conference can work for you and your team leaders. Be sure to listen each month for new resources to help you and your employees serve your patients with excellence. Until next time, remember the words of Dr. Seuss who said, "The more that you read, the more things you will know. The more that you learn, the more places you'll go." Go, make it a great month and I'll see you right here next time on The Burleson Box.