Verizon Case Study: Dissecting the Waste and Poor Experiences of Shareholder Capitalism

This diary of a single purchase of a Google 7 Pro smart phone documents the waste of organizations lacking a strategic and systematic approach to stakeholder engagement across the enterprise. Multiple Verizon employees off the record confirmed that this experience and the underlying causes are common at Verizon. It demonstrates the need to embrace a better way to measure the impact of low productivity, quality, and customer service if organizations hope to achieve a better return on investment on their engagement of employees and customers.

By Bruce Bolger

The Marketing and the Phone Work Great: It’s the System That Breaks Down
Estimating the True Cost of Aggravation to the Bottom Line

Note: It is against the editorial policy of the Enterprise Engagement Alliance to use the personal shopping experiences of editors or contributors to call out individual companies or use our media properties as leverage to resolve personal disputes. An exception is made in this case only because I am happy with the resolution of the matter and seek no recompense or revenge and because my personal experience so graphically makes a point about the inefficiencies of a shareholder approach to capitalism. Clearly, many Verizon investors, customers, and employees fall victim to similar situations whose costs to the bottom line are probably not being tracked and certainly not disclosed.

A primary premise of Stakeholder Capitalism is that organizations build waste into the management of customers and employees just as they did poor quality in manufacturing in the 1980s; that is, until the Japanese elevated customer expectations for quality around the world through Total Quality Management and forced US manufacturers to change.

While Verizon is a dominant player in a dynamic field with a sticky business model and relatively few customer options, it’s five-year stock performance is unimpressive (it’s now trading at a five-year low despite a hefty 6% dividend.) This single customer experience demonstrates how companies build inefficiencies and poor experiences into their business models, just as they did with defects before the era of TQM, without a clear understanding of the potential link to profitability.

Why are more investors clamoring for organizations to apply a strategic and systematic approach to management. It’s perhaps because they have similar experiences and begin to wonder what the cost must be in terms of wasted time and money, lack of innovation, low engagement, etc. What is missing are better metrics to reveal the true costs of bad customer and employee experiences.

This single transaction with Verizon, which three employees verified happens in one way or another with frequency, demonstrates not only the sum of money and time wasted on poor people systems and lack of alignment between departments, but the unnecessary aggravation caused to both customers and employees. As indicated below, without proper metrics, this type of experience can be repeated numerous times without an obvious impact on the bottom line. And since the company’s financial statements or other disclosures do not include such metrics as Human Capital ROI or Human Capital Value add; or costs, profitability, willingness to refer per employee and customer, or DEI (Diversity, Equity, and Inclusion), safety, or wellness metrics, there’s no way for investors to evaluate the potential impact of poor systems and low engagement on profitability.

The Marketing and the Phone Work Great: It’s the System That Breaks Down

Symbolic of the state of quality in business today, I am very satisfied with the quality of the Google 7 Pro so far. The marketing enticed me to upgrade, and I am also satisfied with the business plan I’m on, it’s features, and cost. What broke down was everything that involved Verizon systems and their employees who must deal with them.

To avoid the inevitable tedium of retelling customer service fiascos, I will break it down into the essential findings. Essentially, a transaction that was supposed to take five minutes over the Internet and a quick trip to my local Verizon company-owned dealer turned into a five-hour fiasco that exposed:

1. Dubious quality control of Verizon’s smart phone and Internet transactional applications (one-must always account for the probability of user error as well, but well-designed systems mitigate user error.) Even though the system processed my credit card, it would not let me finalize the transaction. Because I have a business account and the office was closed when I tried to make the transaction, I ended up going to my local Verizon store.

2. Poor internal communications between people who handle business versus personal accounts. To be fair, my experience is as a business customer, but is it unfair to expect that the experience for a business customer would be as easy as for a consumer? Apparently, only one person in the store could effectively help business customers, leading to an inevitable wait; without his proactive involvement, there is no way I would have taken full advantage of the available business plan and features.

3. Employees operating at average engagement levels. Besides the surprisingly proactive business account representative, the employees I encountered were generally friendly, but two of them made mistakes that required me to return to the store. During these encounters, employees I met while waiting told me that many store employees had recently received big pay cuts, that there was no meaningful system or culture recognition or appreciation, and that employees do not feel involved in ways to improve the business processes.

On a positive note, I was told that that the company had retained full-time store employees during the Covid-19 closures and offers good benefits, which they said does inspire loyalty.

4. Employees do not appear to be involved in any formal system of continuous improvement that rigorously involves and empowers everyone to address the type of breakdown that slowed this sale. Every employee I spoke with said they have ideas on how to improve processes but that there is no system they know of to seriously contribute ideas.

5. Estimated costs of this transaction to the organization. Not including driving to and from the store twice, I spent at least three hours waiting on the phone and in the store on three different occasions. Employees spent a similar amount of time. At an estimated fully loaded cost per employee of at least $70 an hour, that’s $210 of waste that is not being recorded anywhere. However, this is where it gets complicated.

Estimating the True Cost of Aggravation to the Bottom Line

Recording over 500,000 new phone additions in 2021, Verizon can argue that even if 5% of people have an experience like mine, that’s only $5 million, or $10 per unit if spread over total sales. This would be much like the thinking about Total Quality Management in the US in the 1980s, when many companies decided it was less expensive to build defects into the business model than to address the issue. While the Japanese went to work on making quality cars, US companies simply built the cost of defects and aggravation into their business models until consumers voted with their feet and transformed for all time automotive market shares in the US.

In manufacturing, outputs are measured in basic terms, cycle-time, productivity, quality, safety, and continuous improvement, and in the best of cases involve the interests of all stakeholders—including employees, customers, distribution, and supply chain partners—in a process of continuous improvement. In TQM, the process builds in clear opportunities for employee voice and autonomy, gainsharing, both materially and spiritually. Rarely do organizations apply the same rigor to their people management strategies outside of TQM-oriented manufacturing plants, even though the same principles clearly apply with similar types of stakeholder management metrics that can have a direct impact on earnings. In his new book, Irresistable, Josh Bersin, the HR consultant estimates than no more than 12% of companies in most industries have optimal people management strategies.

Verizon management and investors would have a much better handle on the true cost of low engagement if the company measured and disclosed the five basic metrics of human capital management: Human Capital ROI; Human Capital Value Add; revenues, costs, profitability of customers and employees and their willingness to recommend, as well as DEI effectiveness, wellness, and safety. Tracking progress over time on these metrics against profitability likely will show a correlation between the profitability of stores with high levels of engagement versus those with low levels of engagement.

While my personal experience with Verizon is not sufficient for me to break a relationship going back to the early days of the cellphone, not once have I ever received any recognition from Verizon for that loyalty, nor was this recent experience a complete aberration from other upgrades in the past. So, if asked by someone if I would recommend Verizon, it would be difficult for me to do so enthusiastically. Because there’s no way to measure the impact of customer ambivalence, we need to rely on more global metrics such as the ones listed above that are known to have an impact on earnings.

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