customer serviceEver wonder why good customer service seems to be the exception rather than the rule? Are good employees really in such short supply?

Not necessarily.

In many cases, bad customer service isn't caused by negligent or incompetent employees. Instead, the blame for poor service lies with their bosses -- or, more specifically, the policies put in place by the higher-ups that undermine the employee-customer relationship.

It's the pursuit of short-term growth that often drives businesses to engage in practices that end up alienating the very people they should be treating like royalty -- customers. Consider the following business practices that often lead to shoddy customer service.

1. Hyper-Focus on Selling to, Not Serving, the Customer

Greg Smith, a former executive director at Goldman Sachs (GS), raised a ruckus when he publicly aired accusations against his former employer. He said that the company's focus was no longer on serving their clients; it became, instead, about "how we can make the most possible money off of them."

Problems like these are partially caused by difficulties in balancing long-term success goals with quarterly revenue growth goals. While long-term success depends on quality products and good service, short-term growth is sometimes best achieved by cheating customers.

2. Short-Changing Employees

For years, Costco (COST) has been pressured to pay its employees less. After all, the company is pretty generous with its compensation package compared to its peers -- with average per-hour pay about $6 to $7 higher than what is offered at Walmart's (WMT) Sam's Club. In addition, Costco offers better worker benefit packages than most of its competitors.

So how does lower pay translate to worse customer service? Consider employee turnover. Higher-paid employees are more likely to be satisfied in their jobs and less likely to quit. Costco's employee turnover ranges from 6% to 20% each year, compared to 20% to 50% of Sam's Club employees who quit each year.

Customers benefit from employee loyalty. Costco customers are more likely to be served by experienced customer service representatives who can assist them quickly and competently, for example. Also, Costco can afford to keep prices low if it doesn't have to shell out a lot for expenses associated with recruiting, hiring, and training new employees.

3. Policies That Penalize

Ever been confronted with a team of employees who are eager to help, but all lack the authorization to solve your problem? Perhaps the item you wish to return needs to be processed by a manager. And that manager just happens to be unavailable at the moment because she is too busy carrying out other small tasks. Or perhaps the employee you're talking to is near the end of his shift, and can't go into overtime to solve your problem without management's approval.

Policies like these are often developed after some employees abuse their power by taking unnecessary overtime, or by helping their friends make a few extra bucks by refunding discounted items at their full price. In other words, some businesses create these policies in an attempt to minimize the opportunities employees have to rip off the business.

However, such policies cost businesses money in other ways. They create a situation in which customer needs are only met after long delays, or not at all. The result: Consumers take their business elsewhere.

And the only thing worse for a business than bad customer service is having no customers to serve at all.

Motley Fool contributor M. Joy Hayes, Ph.D., is the principal at ethics consulting firm Courageous Ethics. She doesn't own shares of any of the companies mentioned. Follow @JoyofEthics on Twitter. The Motley Fool owns shares of Costco. Motley Fool newsletter services have recommended buying shares of Costco and Goldman Sachs, as well as creating a diagonal call position in Walmart.

Increase your money and finance knowledge from home

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

Economics 101

Intro to economics. But fun.

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

Just got off an hour long conversation with US CELLULAR, a company with whom I have done business for over 20 years. Seems they "lost" my payment?? say what?? Silly me did not jot down my confirmation number on said payment, having been with them for so long and trusting them. Will I be looking for a new carrier. You betca. The customer service rep was rude and cared only about what her computer screen showed as my balence. I am investigating new carriers, probably today.

May 29 2012 at 3:12 PM Report abuse +1 rate up rate down Reply

Funny how true this is. I worked for a company that had all those issues. Customers are the ones that suffer for the company to make extra money. One thing that they did not add here was the fact that companies cut employees hours so far back that sometimes you will walk into a store and find that you can not get any help because they do not have enough people on to help!

May 29 2012 at 3:07 PM Report abuse +1 rate up rate down Reply

Just got off the phone with US Cellular, a company with whom I have done business for over twenty years. They "lost" my payment?? Having trusted them in the past, silly me did not jot down the confirmation number. I am livid but must have a phone at all times. "Did they care?? NOOOO. will be breaking my contract and finding another very soon.

May 29 2012 at 3:07 PM Report abuse rate up rate down Reply

We have had a huge shift in the last 40 years. Top management made 15-25 times the salary of the workers, but considered them an asset. Now they make 125-150 times the workers and treat the workers like a liability. The work ethic of workers as a whole is not as good, but the good ones are an asset.

May 29 2012 at 2:49 PM Report abuse +3 rate up rate down Reply

Evidently poor customer service is profitable for companies, because they keep providing it.

May 29 2012 at 2:20 PM Report abuse +3 rate up rate down Reply

99.9% companies.....hyper focus on selling ...doesn't matter if in the country or out..

May 29 2012 at 1:39 PM Report abuse +2 rate up rate down Reply

I have shopped for years at NORDSTROM and can't say enough about their customer service. As a large retail chain they have consistently set a standard of quality in both the products they sell and the customer service they provide. If you ask to try on a pair of shoes, or rather, THEY ask you if you would like to try a pair on, they bring out not one, but four pair of the type and style in which you showed interest. Their "no questions asked" return policy goes above and beyond expectations. They hire good people and work to retain and promote them. Thus far they have succeeded in maintaining a loyal customer base, and have an excellent service reputation for which their known. Rarely if at all, have I ever heard the name NORDSTROM and poor customer service mentioned in the same breathe. There, the sales people work for the customer, more than they work for the store.

May 29 2012 at 1:32 PM Report abuse +1 rate up rate down Reply

I sometimes shop at Walmart. I expect little or nothing from their tortured employees. I find this pathetic level of service the same with some online companies, and expect nothing more. I do not go back to the poorly serving online companies. I go back to Walmart as I go there for their low prices - no other reason.

May 29 2012 at 1:13 PM Report abuse -2 rate up rate down Reply
dr scott kanner

The big chains ask their store managers to do everything while cutting employee hrs. Something always suffers and it is usually customer service.

May 29 2012 at 12:26 PM Report abuse +4 rate up rate down Reply

As customers, this country has gone to sh**. Why has customer service gotten so bad. Because people want something for nothing all the time. BTW people always come back. It doesn't matter. You can say you'll never shop in a place again because your 3 dollar purchase wasnt handled like you were someone with royalty but you always go back.

May 29 2012 at 12:00 PM Report abuse +2 rate up rate down Reply