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A long time ago I waited tables at a nice restaurant in Savannah, Georgia. Savannah is home to a large Irish Catholic population, and St. Patrick's Day is the biggest day of the year. People come from all over the globe to enjoy the world's second largest St. Patrick's Day parade and the accompanying revelry. Everybody is Irish for a day!
I remember one year at the restaurant on St. Patrick's Day in particular. As usual, we were slammed; people were lined up down the block waiting to get in. The manager responded to this situation by seating twice as many people as we could realistically serve well, and that's when the mayhem started.
Frustrated by poor service, customers began berating their waiters and yelling at them across the dining room to bring things to the table. I had one large party of 20 people, which is usually a tipping bonanza, but after their very late (and probably cold) meal the entire table walked out of the restaurant. Not only did they not leave a tip, but they didn't pay the bill either. This sort of thing happened repeatedly that day.
I'm sure many people left our restaurant that day frustrated and disappointed, and I'm sure they vented about this bad experience many times over the subsequent years. "Yeah, St. Patrick's Day in Savannah is great, but don't ever go to the Acme Restaurant. We had a horrible experience there!"
Instead, what if the manager had just let in the number of people we could have served well? We'd have had less gross sales for that one day, but the people we did serve would have bragged on us to their friends, and we'd have been more successful over the long run. From this and other leadership mistakes, the restaurant failed not long after.
More businesses fail from rapid growth than from revenue starvation. David Packard, the co-founder of Hewlett-Packard, perhaps said it best. "No company can consistently grow revenues faster than its ability to get enough of the right people to implement that growth and still become a great company. [And] If a company consistently grows revenue faster than its ability to get enough of the right people to implement that growth, it will not simply stagnate; it will fall." This has become known as Packard's Law.
All business people, and especially entrepreneurs, are often very focused on growing revenue; first to survive, and then to grow profits. Just keep in mind, however, that whether you're the low-cost leader or the high-end provider in your niche, most customers won't return for shabby quality (value for the price) in a product or service.
It's always better to have a smaller business with a good reputation than a larger business with a poor one. Once you become known for poor quality, you'll ruin your brand in the marketplace, and then all your customers will go away at one time.
As Packard's Law tells us, there is an immutable truth in the great game of business. After you've created a product or service that people are willing to pay for, then sustained success becomes primarily about attracting and retaining talent; i.e., the right people to grow the business while maintaining quality.
High-Performance Habits
Quality (value for the price) is king; customers won't return for a shabby product.
Don’t grow your business faster than you can hire the right people to maintain your quality.
It’s much better to be a small business known for quality than a big business (for a short while) known for shabby work.
Copyright Terry "Doc" Dockery, Ph.D. All rights reserved.