Bottom-line Ideology Bites

The news-magazine show Sunday Morning had a fascinating piece this week on a new approach to debt collection. The story reported on a collection company that refuses to employ the typical tactics–harassing phone calls, threats and the like. Instead, the collectors work respectfully with the debtors, helping them to renegotiate what they owe and manage their finances more prudently. The founder’s basic premise: people would pay their bills if they had the money, and hounding them is unlikely to give them the means to pay.

According to the company’s owner, his firm is twice as profitable as those using the more traditional tactics.

Respect for people–what a concept!

Respect for the worth of one’s employees can also boost profits, no matter how counter-intuitive some “hard headed” businesses might find that simple premise.

I’ve written before about the difference between the approach of Costco and Sam’s Club to  their workers. Costco pays its workers, on average, twice as much per hour as Sam’s Club, and provides them with health insurance to boot. Yet it is far more profitable.

There is a self-defeating belief among some businesspeople to the effect that a healthy bottom line depends on cutting costs wherever possible, especially personnel costs. There is plenty of evidence to the contrary: employee turnover and disaffection can cost more than skimpy payrolls can save. That is a lesson that even Walmart appears to be learning. The company recently announced that some 35,000 part-time workers will be returned to full-time status–entitling them, not so coincidentally, to heath coverage as required by  the Affordable Care Act.

As Forbes reported, Walmart’s unwillingness to pay most of its workers a living wage has left the company without enough full-time workers to properly run a retail outlet. The result has been that the company has placed dead last among department and discount stores in the Customer Satisfaction Index for the last six years.

Furthermore, again according to Forbes, Walmart sales have been “sinking dramatically”–a state of affairs that even Walmart has concluded is the result of its relentless effort to avoid paying decent wages and offering health insurance.

This was a lesson learned by Home Depot in the early 2000s, when its CEO cut full-time staffing in hopes that the savings would boost the bottom line. It worked–briefly. Then customer service declined, and with it, same-store sales. Home Depot reversed course–and profits rose.

As the Forbes columnist noted,

Who  would have guessed that a well-staffed store filled with competent and reasonably paid employees might actually have an impact on the success of a company?


  1. There was a Green Day song that made reference to the “dead beats and the losers.” I’m not sure it’s the best way of labeling and dividing up the debtor universe, but in my debt collection practice, I saw one of my primary functions as distinguishing between the two. The dead beats were the ones that could potentially pay if they wanted to and/or tried harder; the losers were those who honestly wanted to pay and were doing their level best, but just couldn’t.

    You worked with the “losers” but needed to take a harder line with the “dead beats.”

    In any event, it is pretty remarkable how well people respond to being treated with courtesty.

  2. Several years ago I put my credit in a precarious position with two credit cards; Master Card through AFNB which I had for years as well as checking and savings accounts, VISA through Indiana National Bank which I had for only 2 years. When I couldn’t make full payments I called both asking what to do; both said to pay the interest and any of the principal I could till paid off. I did this each month, including calling them directly. The following year, when I received my tax refund I went to Indiana National Bank to pay off the VISA account. They were very polite, accepted full payment and thanked me for working with them to pay off my balance. I then went to AFNB where I had done all banking for years; paid my Master Card in full. Rather than thanking me after working with me for months, they asked for my credit card which they cancelled. I have never had another Master Card and I moved my checking and savings accounts to another bank. In my case AFNB and Master Card were the losers; Indiana National Bank and VISA recognized I was not a deadbeat. I still have my VISA. More flies with honey than with vinegar is a basic truth in business.

  3. There is a Walmart less than 2 miles from my home. I drive instead to Costco which is about 6 miles away to shop there for most of my groceries and household goods. I also shop at Krogers/Fry’s. I won’t step foot in Walmart and doubt even if they changed their disgusting behavior toward their employees I would ever consider putting one red cent into their bottom line. Taxpayers are supplementing their pay by providing their employees with food stamps and Section 8 Housing vouchers. That is corporate welfare!
    But I’ve also stopped shopping at Hobby Lobby, Chik-fil-a, and Papa Johns…as long as they spout their anti-American ideals, I’ll frequent other shops with our hard earned pay. Fair pay and health care are not something I take lightly and hopefully, shoppers are taking note and going elsewhere as well. Boycotts do work as Walmart has seen.

  4. Since the reply section is missing yesterday, I’ll post it here.

    (I recently worked with a student who wanted to understand why lower-income Americans so often vote against their own economic self-interest.)

    To quote the British press … (Quoted on a different subject, but fits this context)

    They are “prisoners of their own ignorance”

  5. I agree, “Red George”, and they are closely guarded by the Tea Party owned faction of the GOP who are “prisoners of their own stupidity”. No escape for or from either.

  6. Michael Lind, writing in Salon (“Tea Party Radicalism is Misunderstood: Meet the ‘Newest Right'”) reports that the Tea Party leaders are neither stupid nor crazy, but they are dangerous. They are actually the old Jeffersonian-Jacksonian right, mostly from the South and mostly upscale “local notables”. Their power and privilege is threatened by a strong central government from above and from below by the local poor and working class. Through various strategies (detailed in the article) they have manipulated and parlayed themselves through demagoguery into their positions to “Southernize” the U.S. (If you like Alabama, you will love what they have planned.) It’s an enlightening read that gives insight into the strategies used by Congressional Tea Party Reps. (e.g., Stutzman) as well as our own home grown denizens. (

  7. What is forgotten in this discussion is that the customer is always right and the customer is Wall Street. I remember about a decade ago when I was working for EDS. The word came down to cut costs and fire people. The Chicago manager showed how he could save even more money than requested and not fire a single employee. He was “promoted” to sales support and the new manager came in knowing what he needed to do. Heads rolled. Wall Street responded with a boost in the stock price, the CEO got his big bonus, and later got booted with his golden parachute.

    Most of the upper corporate management move from company to company. They “cut costs” and get big bonuses pleasing Wall Street. If the company fails a few years later, too bad. If they get caught in the downturn, there is always their golden parachute.

  8. Interesting article (Debt Limit Denial) in the USA Today section of the “new” Star this morning regarding the pros/cons of the default. Republicans are “voicing increasing schepticism about dire warnings that failing to raise the debt ceiling would result in catastrophic default.” Per Tom Coburn, R-Oklahoma, Monday on CBS This Morning, “We won’t. We’ll continute to pay our interest.” He and other Republicans argue that the Treasury Department could prioritize interest payments while delaying others (this is the bill the House has passed). This still leaves us owing the debt; they are NOT stupid enough to believe their own convoluted logic but, they DO believe we are either stupid or gullible enough to accept it. Not paying our debts would put us in the category of deadbeats; not among those who would pay the bills if we had the money.

    I keep receiving newsletters from many sources that polls show the Republican could easily lose their majority in the House in upcoming elections. That is past the October 17th deadline; inauguration of any elected Democrats will not happen till January 1, 2014; much too late to help with this current seemingly insumountable dilemma…kept alive by GOP scare tactics.

    I am only a high school dropout with a GED but I understand the difference between paying interest only on debts and paying debts. My above message refers to a situation that happened before getting my GED; but I fully understood the situation at that time. It does not take a rocket scientist to appreciate the delicate situation this nation faces thanks to the Tea Party backed GOP faction, led by Boehner, in the House. I did more research yesterday, seeking a possible way to impeach this cowardly, bought and paid-for Speaker, he can only be selected by members of the House and only they have the power to impeach him. The money of the Tea Party has been well spent – for themselves and recipients among our elected officials. Majority rules in Democracy has put this country in jeopardy in this situation; President Obama is only leading a minority of logical, common sense officials – he is preaching to the choir.

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