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Banking News dated 17th November 2018

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Banking News: November 17, 2018


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Government is Seeking Closer  Supervision of Reserve Bank of India


Government is Seeking Closer
Supervision of Reserve Bank of India

Siddhartha Singh
The Bloomberg News
Published on November 16, 2018


New Delhi, November 16 (Bloomberg): India’s government has proposed changing rules that will enable closer supervision of its central bank, people with knowledge of the matter said, a move that may undermine investor confidence in the world’s fastest-growing major economy.


Prime Minister Narendra Modi’s administration has recommended that the board of the Reserve Bank of India draft regulations to enable setting up panels to oversee functions including financial stability, monetary-policy transmission and foreign-exchange management, the people said, asking not to be identified as the discussions are private.

The move is meant to empower the regulator’s board, which includes government nominees, and give it a supervisory role, the people said. The central bank’s board is scheduled to meet on Monday. The tension mirrors central bank fights playing out in countries as varied as the U.S. and Turkey, and is a symptom of what happens when an era of easy credit ends.

The latest proposal may heighten tensions between India’s finance ministry and the central bank, which have been at logger heads over a host of issues that will be discussed at Monday’s meeting including transfer of surplus funds, easing of bad loan norms, and ensuring liquidity to the shadow-banking sector. While the government says the central bank isn’t providing support to boost growth, the RBI says fund transfers could undermine its independence and hurt the markets.

“This does look scary and comes at a slightly anxious environment for investors,” Hugo Erken, senior economist at Rabobank International in Utrecht, the Netherlands. “This does not bode well in the short term for confidence and the Indian rupee.”  One-month offshore non-deliverable rupee forwards fell 0.2 percent, snapping a three-day gain, to 72.32 per dollar as of 7:03 p.m. in Mumbai, according to data compiled by Bloomberg. The rupee will start trading in the spot market on Monday.

Finance Ministry spokesman D.S. Malik didn’t reply to two calls made to his mobile phone, while the central bank spokesman was not immediately available for a comment.  The recommendations being considered include setting up several committees comprising two to three board members each. The body has the powers to frame rules under section 58 of the Reserve Bank of India Act, 1934, and no legislative change is required, the people said.

RBI’s board regularly advises and guides the regulator, leaving decision making to the governor and his colleagues.

However lately, Swaminathan Gurumurthy, a chartered accountant who was nominated by the Modi administration to the board, and government nominees Subhash Chandra Garg and Rajiv Kumar have been vocal about perceived shortcomings in banking supervision, flow of credit to industry and easier financial conditions to overcome a crisis in its shadow-banking sector.

That prompted central bank Deputy Governor Viral Acharya to warn in a speech last month that a move to undermine the RBI’s independence will attract the wrath of the markets.

The government last month upped the ante by writing to the central bank to discuss issues where there had been disagreements, citing a rule that has never been used in the central bank’s 83-year-old history. Under Section 7 of the RBI Act, the government has the power to issue directions that are binding on the central bank.


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Rupee ends marginally higher at 71.92 per dollar

The Moneycontrol News
Published on November 16, 2018


Yesterday the rupee climbed to 2-month high on the back
of low crude oil prices and strong foreign fund inflows.

Mumbai, November 16: Indian rupee erased most of its intraday gain and ended marginally higher at 71.92 per dollar on Friday. During the day, the rupee rose to a level of 71.71.

It has opened flat at 71.99 per dollar versus previous close 71.98.

Yesterday the rupee climbed to 2-month high on the back of low crude oil prices and strong foreign fund inflows.

The dollar-rupee November contract on the NSE was at 72.05 in the previous session. November contract open interest declined 4.94% in the previous session, said ICICIdirect.

We expect the USD-INR to meet supply pressure at higher levels. Utilise upsides in the pair to initiate short positions, it added.


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Banks under PCA show progress,
but position still serious: CARE

The Business Line
Published on November 17, 2018


A clear picture will emerge only after
two quarters, says rating agency

Mumbai, November 16: The financial position of banks under prompt corrective action (PCA) norms seems to have shown some improvement, but an analysis by CARE Ratings says that a clear picture will emerge only after two quarters.

“The position of the PCA banks appears to be just about stable, but we will have to wait for another two quarters to get a clear picture on whether the asset quality issue has been recognised fully,” it said in a study on ‘Performance of PCA Banks’.

Noting that their losses at around Rs. 10,000 crore a quarter are still high, the analysis said that other factors related to their revival, in terms of capital, will also be important.

It found that only three banks, including Bank of Maharashtra, Oriental Bank of Commerce and Corporation Bank, have registered profits in the second quarter of this fiscal. “It needs to be seen if this is retained in the next two quarters too,” said the report.

At the other end of the spectrum, IDBI Bank ( Rs. 3,602 crore), Bank of India ( Rs. 1,156 crore), UCO Bank ( Rs. 1,136 crore) and Allahabad Bank ( Rs. 1,823 crore) have reported the highest losses this quarter.

The study analysed all 11 banks under the PCA framework of the Reserve Bank of India. With the restrictions on lending, it found that their advances have come down to Rs. 16.39 lakh crore at the end of the second quarter this fiscal from Rs. 17.65 lakh crore in March 2017. It also found that growth in provisions has slowed down in the last two quarters although, typically, the highest provisions are made in the fourth quarter of the year. Total provisions amounted to Rs. 23,010 crore in the July to September quarter this fiscal from a peak of Rs. 46,761 crore in March 2018.

Non-performing assets (NPAs) amounted to Rs. 3.49 lakh crore of these PCA banks as on September 30, 2018, against Rs. 3.46 lakh crore in the previous quarter. The NPA ratio increased from 16 per cent in March 2017 to 20.5 per cent in March 2018, and is marginally up to 21 per cent in September.

Noting that the growth in NPAs continues to be higher in the second quarter of this fiscal compared to the first quarter, CARE Ratings said it is uncertain whether the NPA levels have peaked, or whether there could be new additions in the coming months.


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Forex reserves drop by $121.2 mn to $393.01 bn

The Press Trust of India
Published on November 16, 2018


The overall reserves had increased by $1.054 billion to $393.132 billion in the previous reporting week, after weeks of decline

Mumbai, November 16 (PTI): The country's foreign exchange reserves declined by $121.2 million to $393.01 billion for the week ended November 9, largely on a dip in currency assets, RBI data showed on November 16. The overall reserves had increased by $1.054 billion to $393.132 billion in the previous reporting week, after weeks of decline.

For the week ended November 9, foreign currency assets, a major part of the overall reserves, declined $103.2 million to $368.035 billion, the Reserve Bank said. Expressed in US dollars, foreign currency assets include the effect of appreciation/depreciation of non-US currencies such as the euro, pound and yen held in the reserves.

The gold reserves were stable at $20.888 billion after a sharp rise last week, according to the latest RBI data. The country's reserve position with the International Monetary Fund declined $11.6 million to $2.628 billion. The special drawing rights with the Fund slipped $6.4 million to $1.459 billion.

The forex kitty had touched a record high of $426.028 billion in the week to April 13, 2018. Since then, it has been on a slide and is now down by over $31 billion as the monetary authority has been selling dollars to contain rupee volatility.


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Finance Ministry, RBI consensus likely
on some issues at November 19 meet

Surabhi
The Business Line
Published on November 17, 2018


Lending to MSMEs, capital framework,
surplus norms on the agenda

Mumbai, November 16: As the Finance Ministry and Reserve Bank of India work to reach a middle ground, sources say an uneasy truce remains and not all issues will be resolved at the November 19 board meeting of the central bank.

“There has been a softening of stance by both the Finance Ministry and the RBI but the board meeting will be a larger platform with all members having some views. Further, given the nature of many of the proposals, a quick solution to all is unlikely,” said a person familiar with the development.

According to sources in the know, the key agenda items to be taken up at the meeting will include fixing norms for the surplus reserves, easing of prompt corrective action provisions for public sector banks, liquidity support for the financial sector after troubles at Infrastructure Leasing and Financial Services (IL&FS), as well as improved lending and restructuring of loans to micro, small and medium enterprises.

“It is likely that there will be some middle ground on issues like lending to MSMEs as well as discussion on most issues on the agenda. The need to invoke Section 7 of the RBI Act should not be there,” said another source, adding that there is a mood emerging to broker peace as the current clash has impacted the image of both the Finance Ministry and the RBI.

RBI Governor Urjit Patel had earlier this month also met Prime Minister Narendra Modi and Finance Minister Arun Jaitley to discuss some of these contentious issues.

Apart from the speech by RBI Deputy Governor Viral Acharya on October 26 on independence of the RBI, which brought the differences between the two sides into the spotlight, the central bank has chosen to remain silent.

In a statement on October 31, the Finance Ministry had said “autonomy for the central bank, within the framework of the RBI Act, is an essential and accepted governance requirement.”

Economic Affairs Secretary Subhash Chandra Garg had also tweeted that the proposal under discussion is to fix an appropriate economic capital framework for the RBI.


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Apex industry body fears mass shutdown
of units and massive job losses in State

The Business Line
Published on November 17, 2018


Ahmedabad, November 16: Even as Gujarat Chief Minister Vijay Rupani is set to conduct a roadshow in New Delhi on Friday for the upcoming investment extravaganza Vibrant Gujarat Global Summit (VGGS), industries in the State are reeling under cost escalations and improper policy implementation.

Raising concern over the deteriorating business atmosphere in the State, the Gujarat Chamber of Commerce and Industry (GCCI) has claimed that industrial production in the State has fallen by about 40 per cent in the past 1.5 years and more units may shut down amid the dismal economic scenario.

Uncertain economy

“This has come as a fallout of multiple factors, including uncertainty on the economic front, improper implementation of GST and the demonetisation. We don’t want such a situation to cloud the Vibrant Gujarat Summit. So we are raising the issue with the government for remedial measures,” said Jaimin Vasa, President, GCCI.

The VGS is scheduled to take place in Gandhinagar in later part of January 2019. A representation will be made to the State government with suggestions for resolving the issues hurting the businesses — mainly the micro, small and medium enterprises (MSMEs).

Shutdowns feared

Vasa said the industrial crisis worsened in the State over the past four to five years. Urgent measures are required for MSME units, which are at the incipient sickness level. “There is a need to make timely resolutions to avoid the closure of units,” Vasa added.

The overall economic slackness is visible in the elongated payment cycles by about 45-60 days. “All sectors, including textiles, plastics, engineering, chemicals and dyes, are facing tough times. The domestic business is badly hurt, while due to escalation in overall costs, they are losing competitiveness in the international market also. This way they are unable to take advantage of a weak rupee in the exports,” he said, expressing concern large-scale job losses in the State. The textile industry, which is the backbone of multiple sectors, including yarn and dyes, is awaiting announcement of new textile policy in sync with the GST.

Delay in funds disbursal

GCCI also expressed displeasure over the State’s indifferent approach to disbursal of funds to MSMEs under various schemes since April 2017.

“There is inordinate delay even in the release of refunds under GST also. The red-tapism continues despite GST being an online system. Sectors such as textiles are left with no incentive under GST,” said Nayan Sheth, Chairman of the GST Committee of GCCI.

For the plastics industry in the State, environmental restrictions are posing a threat on over 2,000 units, which may result in unemployment for about 50,000 workers, they said.


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Panagariya’s protectionism warning
may not be correct

Chidambaran G Iyer, Senior Fellow,
Pahle India Foundation
The Financial Express
Published on November 17, 2018


Import duties can be counterproductive was the caution given by former V-C of NITI Aayog Arvind Panagariya, according to a recent news report in FE. He mentions India grew at a reasonable pace only after removing protective tariffs and shouldn’t go back to protectionism. There is enough statistical evidence for the point he makes and one cannot argue against it. But probably his opinion on import duty hikes may not be completely correct.

First, the last 20 years have been the golden years for globalisation and the only super power was, until recently, its strong proponent. It welcomed free trade, and India was also a benefactor of this policy. India capitalised strongly on the services side, and services exports from India helped us register the strong growth we had during this period. It is in this context that openness helped us. The political backlash against free trade in the US has tilted it towards protectionism and it has now adopted a tit-for-tat behaviour. Many countries are now taking a similar stance. This implies that a fundamental assumption in economics, namely ‘ceteris paribus’, is no longer applicable—that all the statistical evidence we had from openness in the previous two decades may no longer hold.

In these changed circumstances, India—among the largest markets—is being eyed by many countries for their slice of the pie. With the US closing doors and doing one-on-one trade deals with select countries, it is possible that the excess production slated for the US will find its way into an open India. This has a high chance of dampening our already subdued manufacturing sector. Supporters of free trade will argue that Indian firms need to be efficient to take on the world. This argument would have been valid had the firms been provided with world-class infrastructure at affordable costs, which is absent. Unsurprisingly, there are studies that documented declining productivity in Indian manufacturing during 1991-2001. It is plausible that this trend may have continued during 2001-11.

Second, global capital flows to finance us are slowing—UNCTAD finds that, as a percentage of global GDP, capital flow was 6.9% in 2017 compared to 21.4% in 2007. It also finds that though flows into developing economies rose, these were not in the form of FDI but debt-related flows, cross-border banking, and portfolio debt. In India, the financial system is dominated by banks, which provide capital both to infrastructure and organised sector. Given the huge NPAs of our banks, getting credit at lower costs has become difficult. In other words, local and global capital to finance our creaking cities, manufacturing hubs and organised firms has turned out to be more expensive, which will lead to lower productivity of our firms. This implies that products our firms churn out in an open India will not be able to compete with imports from our Asian peers.

That we have not been able to provide world-class infrastructure at required scale, quarter century after reforms, is a sad commentary on the state of affairs. But, given the aspirations of a demographically young India and a politically-competitive democracy, our policymakers have the unenviable task of creating policies that hopefully will generate enough jobs, and fast, for the 1 million per month addition to the labour force. The hike in import duty, now that countries have turned protectionist, fits the bill perfectly as an immediate response that seems to protect jobs as well as create the perception that the government is doing something.

The author is Senior Fellow, Pahle India Foundation


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The ups and downs of the start-up culture

K Giriprakash
The Business Line
Published on November 17, 2018


For start-ups, bringing in the next round of funds takes
precedence over putting in place HR processes and systems

Once upon a time, Infosys was a start-up too. Over the last 37 years, the iconic IT company has gone through birth pangs, sexual harassment cases, favouritism charges and even issues concerning financial fraud.

But during the early days of Infosys, the company was known more for its high corporate governance standards it set for itself even though it didn’t have to. Its co-founder, NR Narayana Murthy, was a disciplinarian and someone who had the vision to build an institution which could outlast him. So he put in place several good practices in place right from the beginning. The co-founders adhered to them as well, which helped the company to scale newer heights.

Along with Infosys which started its innings from a small office in Koramangala in East Bangalore, there were several other IT start-ups which were set up around the same time. Except for a couple or more, the others don’t exist today. The fact that the valuation of Infosys has grown from zero to $40 billion shows that the foundation laid by the promoters has stood the test of time. But the start-ups of the millennium, with quite a few launching their operations from Koramangala just as Infosys did more than three decades ago, are a different lot. Most of them received funding without earning them. An idea which showed promise or a proof of concept and held potential was enough to get angel, PE, VC funds to line up at their doors.

It was easy money, easily spent. When Flipkart’s Binny Bansal bought a house in Bengaluru for over Rs. 30 crore in a locality that had Infosys co-founders Nandan Nilekani and Kris Gopalakrishnan as his neighbours, the irony couldn’t be more evident. While one concedes the fact that the business models of an IT services company and that of an e-commerce one are completely different, profitability is at the core of any venture. The money for Bansal’s Rs. 30-odd crore house came straight from someone else’s pocket while that of Nilekani and Gopalakrishnan’s came from the profits that Infosys was making.

Here in lies the difference. Without taking away credit from Bansal whose venture was the pioneer of e-commerce companies in the country, start-ups conceived during the millennium and later, have remained the same. While the hires in the start-ups are full of adrenaline, bubbling with innovative ideas almost on a daily basis, the emphasis is more on playing the valuation game to get more funds during the next round, while putting in place processes and systems are alien in nature.

Different ‘DNA’

Perhaps the start-ups are wired differently: A bunch of talented set of people come together to create the next big wave or disruption and part ways either because they have achieved their goal or because the entire thing has come unstuck. The mushrooming of co-working space is most probably a good indication of where start-ups are conceived, grown and in the end either merged with another one or shut down.

There is absolutely nothing wrong with the business models of start-ups because the next big innovation in any field can only come from the sheer talent that promoters bring to the table and where ideas get monetised. To tie them down with processes or by bureaucracy is as good as stifling their creativity. This is perhaps the reason why multinationals have created start-up funds or organise hackathons to tap into the raw talent entrepreneurs bring along.

Therefore, to ask the promoters to dress up their start-ups with the best HR practices when they don’t know when and from where their next round of funding will come from and whether they will exist in the next quarter, can be quite cumbersome for them unless the ventures which fund them insist on putting in place such norms.

But these funds themselves are start-ups in some ways. What they bring to a start-up are funds which are tied down to milestones. As long as they are achieved, and the valuations keep going up, matters such as harassment at workplace are the least of their concerns, though, in the normal course, they ought not to be, as ethics and morality are not only the cornerstones of any successful entity but also that of individuals.


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Motor Vehicles Amendment Bill
for a world without road accidents?

Parvesh Sahib Singh Verma
The Financial Express
Published on November 17, 2018


In 2016 and 2017, on an average, 82% of the people involved in accidents had a valid driving licence. This means something is really wrong with the state of our licensing system.

Around 44,000 young people (under 25 years of age) became victims of unsafe roads in our country last year. Tomorrow, on November 18, as we observe the sombre occasion of the World Day of Remembrance for Road Traffic Victims, we have to remember those who lost their lives in road accidents and take a pledge to minimise these. Ironically, a majority of road accidents are preventable.

The United Nations will mark the 25th anniversary of the World Day of Remembrance for Road Traffic Victims—held on third Sunday of November every year. This year’s slogan is ‘Roads Have Stories’. Roads are not just physical connections from point A to point B. They are also the final resting places of the lives cut short. They tell stories, some of them tragic. India is a signatory to Brasilia Declaration (November 2015) and is committed in reducing the number of accidents and fatalities by 50% by 2020.

Time is less, and how can we approach this target should be mulled.
Being an elected representative from Delhi, it is saddening to know that, with respect to the number of fatalities, Delhi recorded the highest number of deaths in 2017 among cities. It is followed by Chennai and Jaipur, as per the report Road Accidents in India 2017 by the ministry of road transport and highways. This report presents a grim picture on the state of our road safety.

Across the country, a total of 4,64,910 road accidents took place, taking 1,47,913 lives and causing injuries to 4,70,975 persons in 2017. Thus, on an average, 405 deaths took place every day or 17 deaths every hour.

Road accident severity, measured by the number of persons killed per 100 accidents, saw an increase of 0.4 percentage points in 2017 over the previous year. Two-wheelers accounted for the highest share (33.9%) in total accidents and fatalities (29.8%) in 2017. In terms of road-user categories, the share of two-wheeler riders in total fatality has also been the highest (33%) in 2017.

Most startling among all the facts is that there has been a 33.1% increase over previous year where pedestrians have been hit—pedestrians are also the most vulnerable among all the road users.
The Lok Sabha showed determination and passed the much-needed Motor Vehicles Amendment Bill, 2017, in April 2017. Had the Rajya Sabha shown this sensitivity towards road accidents, many persons would have been alive today.

In short, those opposing the Bill are being funded by vested interests and they have no logical rhyme or reason whatsoever when the question of life and death is involved. In a survey by Consumer Voice, a civil society organisation, 97% of consumers feel the Bill deserves support from all parties and it is an important step towards reducing road crash deaths. Nitin Gadkari, the road transport and highways minister, has acknowledged the immediate need for comprehensive legislation on road safety that aligns with global best practices.

Also, in 2016 and 2017, on an average, 82% of the people involved in accidents had a valid driving licence. This means that something is really wrong as far as the state of our licensing system is concerned.
My father cannot be brought back to life, but we can try to minimise the number of people having the same fate as my father. Will those in power ensure that this important piece of legislation is cleared without any delay? We still follow the Motor Vehicles Act of 1988 and three decades have passed by.

The author is a Lok Sabha MP. His father, the late Sahib Singh Verma, ex-CM of Delhi, died in a road accident on June 30, 2007.


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Brexit blues

Editorial: The Business Line
Published on November 17, 2018


Not having a workable Brexit deal is not an option for Britain

There were always two certainties about British Prime Minister Theresa May’s Brexit deal: it would please nobody and it would be unworkable. Sure enough, five ministers resigned hours after the 585-page draft agreement was unveiled. By Friday evening it was clear that May’s own future was in doubt as hardline Brexiteers lobbied Conservative Party members to put together the 48 votes needed for a no-confidence vote. What’s still not clear is the position of Northern Ireland’s 10-member Democratic Unionist Party (DUP) which had always insisted that the Brexit bill must not weaken links between the province and the UK mainland. May’s minority government depends on the DUP to stay in power. Combine the DUP refusing to back her with the dissidents in her own party and it looks unlikely May can cobble together the numbers to get the Brexit agreement through Parliament. For that she would need the support of the opposition Labour Party, which looks unlikely.

Soon after the Brexit negotiations began it quickly became clear that the thorniest issue was Britain’s fiercely loyal Northern Ireland province. Under the 1998 Good Friday Agreement, which brought peace to the island, it was mandated there would be an open border between the Irish Republic and Northern Ireland. But since the Irish Republic is an EU member, border controls of some sort suddenly became essential. To get around this, the draft agreement introduced a ‘backstop’ under which Northern Ireland would continue to follow EU rules on products and food. And since the DUP was fanatically opposed to border controls between Britain and Northern Ireland it was finally agreed that Britain would stay in a Customs Union with the EU — and it isn’t clear when this arrangement would end. This would prevent the UK from striking its own trade deals and infuriated the Brexiteers who have grandiose visions of turning Britain into a fast-moving island nation freed from EU shackles. Another red rag to the Brexiteer bulls was that the European Court of Justice would continue to adjudicate customs disputes.

The best-case scenario now is that May gets the draft bill through Parliament and then struggles with the complex nitty-gritty of the deal. Alternatively, the worst-case scenario is that Britain crashes out of the EU without a deal, which could affect everything from airline flights to food imports. May says a second referendum on leaving the EU is out of the question but that is looking increasingly likely as the other options lead up a dead-end street. Brexit matters for us because London’s the financial capital of the world and the bridgehead into Europe for many Indian companies. For India, a second referendum that keeps Britain in the EU would be the best option.


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Would You Treat Your Mother That Way?
The Secrets of Great Customer Service

The Knowledge@Wharton
Published on November 164 2018


Author Jeanne Bliss explains why top-notch
customer service pays off in the long run.

There was a time when most companies followed the Golden Rule out of the belief that treating customers right created brand loyalty and repeat business. But many firms have lost their service component, especially as automation replaces human contact. As a customer service expert, Jeanne Bliss has spent her career helping major companies learn how to behave in the best interests of the consumer. She’s put her expertise into a new book, Would You Do That to Your Mother? The “Make Mom Proud” Standard for How to Treat Your Customers. She joined the Knowledge@Wharton radio show on SiriusXM to explain how increased competition makes customer service more important than ever for businesses that want to grow.

Knowledge@Wharton: You have spent more than two decades working as a chief customer officer. Tell us about your career.

Jeanne Bliss: I’ve been doing this work since 1983, and my entire career began because I answered an ad in the Chicago Tribune to train 2,500 phone operators at Land’s End. I started peppering Gary Comer, the founder, with questions about what we needed to do for customers and employees. After a year of that, he said, “Look, you come and report to me. You’re the conscience of our company. We’re growing 80% a year. We need somebody to help us all as a leadership team to keep ourselves together and united.”

That was the first version of doing what I call being “the human duct tape of the organization.” I stayed there for 10 years. The company grew and went public. We were wildly successful back then, and I decided I love this work. It’s right-brained, left-brained. It’s uniting an organization unlike any other role.

I deliberately moved industries. I went to Mazda Motors of America; the Miata and the RX-7 had just come out. They were trying to wrap an experience around those vehicles. Then I went to Coldwell Banker Corp. I was the senior vice president of franchise services, supporting a business-to-business model. Then I knew I needed to go really big, so I went to Allstate Corp. I reported to the president. I was the first person in charge of the customer experience there. Then finally I said, “You know, technology is the thing. I need to do technology.” I went to Microsoft and was the first general manager of worldwide customer and partner loyalty. And that kind of gave me my chops.

Knowledge@Wharton: What are some blatant examples of companies that don’t treat their customers like they would treat their mom? I’m thinking of Wells Fargo, most recently.

“We’re finding that the more high-tech we get, the more humanity we need.”

Bliss: You’ll notice that throughout the book that I do give the bad examples, but I’m not naming the companies because the point is you live your life through this book. If you go through the 32 case studies, it’s the story of our lives as customers. What’s interesting is that our human condition as customers, unfortunately, is what binds us. We’ve all been through waiting four hours for our cable guy or something. We’ve all seen a pen chained to a bank and go, “Really? I gave them my money and they’re chaining this pen.” What I wanted to do was give people a toolkit that offers them action items and is organized in a very simple way. You’ve got to get out of the way of the good people you hire. We don’t let our employees do the right thing. We lock them into rules and regulations, and policies. Would you turn your mom’s warranty claim down two days out of warranty?

Knowledge@Wharton: The title of your book reminds us of the level of respect we are taught to have as we’re growing up, then something happens when we enter corporate culture. It’s like a switch is flipped and things are totally different.

Bliss: Good people get stuck inside of a corporate environment, where we’re not able to have what I call congruence of heart and habit. It sounds kind of Pollyanna-ish, but it isn’t. Everybody comes to work, but things take over — silos, short-term priorities, red, yellow and green dots, saluting the flag of the board, short-term financial pressure. Those things come before long-term growth, or what I call strings-attached growth.

The companies that somehow find a deliberate way to grow [show] why the “make mom proud” question is a conscience question. That whole theory of REI closing on Black Friday is a deliberate move that says, “Look, here’s who we are. … Because if our whole foundation is around being outside, we’re not going to make money on a day where you should be outside and with your family.”

Knowledge@Wharton: How prevalent do you think that “make mom proud” mindset is at the C-suite level where the core decisions are made?

Bliss: I spent the majority of my career coaching the C-suite on this work. What’s happened in the past 10 years is we finally have this understanding that three things have shifted. No. 1, in most cases the C-suite recognizes now that organic growth is 10 times more profitable than simply going out [and acquiring] new customers. No. 2, social media is a burr in the side of C-suites who aren’t delivering an experience that customers want. … You can say what you are, but your customers are speaking what you really are. They’re speaking your values.

The third thing is the silos don’t organically unite. We’ve got something that we do with C-suiters all around the world that I call customer math. Did you bring in more customers than you lost? Are you keeping more customers than you’re losing? What we’re finding is that if we can make the metrics simple and around the growth or loss of the customer assets, it then drives them to [adapt] the behaviour to grow and honour that asset. But you’ve got to start with the customer asset from a growth standpoint. Otherwise, it starts to feel too much like “kumbaya” to many of them.

“It doesn’t do you any good to hire the smart, energetic, innovative human if you lock them into blanket policies.”

Knowledge@Wharton: Anybody who has stayed at a hotel has lived this story: You get to the hotel, you’re thirsty, you’re hungry. You want to go to the minibar, but you know that the prices are insane. In the book, you talk about Virgin Hotels changing that practice so the price of a candy bar is the same price that you find in your local convenience store.

Bliss: Raul Leal, the CEO of Virgin Hotels, and [Virgin Group founder] Richard Branson made a deliberate decision about how they would and would not make revenue. That’s leadership. [Leal] said, “We don’t ever want our customers to feel like [they’ve been had],” so they created this thing called street pricing. In fact, their managers walk around with note pads to make sure that they’re [charging] the street pricing of the local 7-Eleven or the mom-and-pop store down the street. They also don’t charge for delivering your meal, nor do they charge for WiFi. Raul Leal says, “We consider WiFi a right, not a revenue stream.”

There’s another great example in that same chapter about the Columbus Metropolitan Library. They are the first urban library in the world to get rid of late fees. It’s this kind of very deliberate choosing of how you will grow. Those fine print, ‘gotcha’ moments are the things that may get your customer short-term, but you’re not going to earn their love and admiration long-term.

I also think there’s something to be said about the times we’re living in. We’re finding that the more high-tech we get, the more humanity we need. Yes, you can possibly now have your refrigerator repairman indicate to you on an app when he’s going to show up, but it’s the man and how he shakes your hand and how he cares for your furniture that tells you the kind of mother he’s got.

Knowledge@Wharton: How do companies go about hiring people that share this philosophy?

Bliss: It changes everything. Wegmans waits until they find people that meet their core values before they open a market area. The Container Store only hires 3% of people who apply. We’re seeing more and more deliberateness around hiring to core values and hiring the human behind the resume. We’re walking away from reading the piece of paper. We’re watching behaviours. We’re putting people in situations.

Southwest Airlines for years, has had this whole role-playing exercise you go through for a full day so that they can see the human. These companies are changing how they hire, whom they hire, and making the employee experience as deliberate a path and priority as customer experience.

“You can say what you are, but your customers are speaking what you really are. They’re speaking your values.”

Knowledge@Wharton: These companies are trying to build a specific culture of camaraderie, which should have a positive effect on the bottom line. Correct?

Bliss: That’s right. That’s why I focused on that in the first chapter, which is titled, “Being the Person I Raised You to Be.” It doesn’t do you any good to hire smart, energetic, innovative humans if you lock them into blanket policies. Instead, you give them information, data, knowledge, and then trust them to make judgment calls that are right for the customer standing in front of them, which elevates them to ‘customer-rescue artists’ and customer development people versus policy cops and phone-answerers. That diminishes their spirit.

Knowledge@Wharton: Give us an example or two of companies that have been transformed by following these ideals for customer service.

Bliss: What I’ve tried to do in each of these case studies is give an impact in terms of what drives the growth of the company. CenterPoint Energy is a utility company. What’s interesting about energy companies is that we’re captive to them. But these companies are recognizing that there’s an imminent competitor in solar and other things. CenterPoint has created this experience that when your power goes out, it doesn’t mean that you’re in the dark from a human standpoint. They have set up a whole series of communications, responses, alerts. And they have put as much money into the product of communication as they have put into their power grids. They just won the top award for their market area and for their division around customer satisfaction and customer support.

There’s another example that’s super fun. All of us have had that experience of going to get our car repaired, then we bite our fingernails to the quick, waiting for the phone call for how much it’s going to cost. That $20 oil change is suddenly a $2,000 bill. There’s a garage in San Francisco called Luscious Garage. They mostly take care of hybrids, but I love their model because what they’ve done is they have gotten rid of that service adviser in the middle who basically plays telephone between you and the technician. Instead, you go in and meet your service technician right away, face-to-face, eyeball-to-eyeball. They have a mobile app where you stay in contact with them throughout the total time that they’re looking at your car. They’re sending you pictures. You’re communicating with them. They moved it from a one-way, fearful relationship to a two-way communication and partnership.

Knowledge@Wharton: Do you believe more firms will adopt this approach?

Bliss: Absolutely. We’ve got this younger group of people, whether you call them millennials or whatever, who are expecting Amazon Prime service no matter what you do. They’re expecting even higher value congruence in the behaviours of the companies that they will and will not work with because they are so fast to click “goodbye.” What we’re recognizing is that you’ve got to embed these things. You’ve got to make communication a product. You’ve got to make transparency a core value. And then you need to operationalize that — not only in your human beings, but also in the mobile apps and the other things that you do to communicate with them.

Source: Internet News papers and anupsen articles

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