Lessons from Enron. (Customer Satisfaction).

In the wake of the collapse of Enron, hundreds of articles have appeared that seek to explain what happed to such a powerful company--at the time, the sixth largest in the Fortune 500. Some place the blame on greedy, self-promoting management. Others say it was due to faulty security analysis and the lack of in-depth investor due diligence. While the complete story is still not fully known, all agree that it was a shocking event. The good to come from it is the postmortem analysis of what went wrong and in lessons learned.

like a bank run

A recent article in the Wall Street Journal explained it this way. Enron, like many other "new economy" companies sold investors on the idea that company valuations today have gone through a sea change and are based more on potential future value of "intellectual assets" (read "good ideas") than physical assets. And, that a key to Enron's bandwagon success was its ability to trade old economy gas pipelines for new economy Web-based trading rooms. Jeffrey Skilling, Enron's CEO, made the point that intellectual property produced more true value for shareholders than costly tangible assets, which had to be financed the old-fashioned way with cash. For a while, he was successful. But when it became apparent that all was not as it appeared in the financing of Enron's intellectual assets, the value of the company disappeared in a flash, He was quoted in his testimony before Congress as saying, "It was like an old-fashioned bank run." What he meant was, once it became clear that the Enron folks were not to be trust ed, customers fled and the company was gone. When companies with tangible assets have financial trouble the assets themselves serve as a protection. Kmart, for example, while going through bankruptcy, will likely survive in some form because it has stores, goods, distribution systems and other assets that are hard to duplicate.

This sad tale eloquently makes the point that a critical element of any service business that does not depend on physical assets is the trust and goodwill employees engender with their clients. If a factory or office building goes out of business, somebody else can buy the assets and put them back to work. In a professional services business like banking, the key assets are the people who provide the services, If they become disenchanted with their management and leave, the customers often follow.

Customers value personal connections

Market research shows clearly that banking clients value the personal aspects of their banking relationships more than anything else. Banks participating in the ABA's Financial Client Satisfaction Index studies (www.clientsatisfaction.com) learn that the "attributes" customers almost always value the highest are things related to the personal connection people have with a banker. Of course, they enjoy and use all the modem technologies (and other good ideas) to make their lives easier, but these are easily duplicated by other banks and do not differentiate as powerfully as people. Banks that really distinguish themselves and carve out hard-to-match competitive positions almost always do it on the basis of "top echelon" people supplemented with well-conceived and executed behavioral protocols and support systems.

From time to time we all get enamored of the latest business fad, whether it be the Internet, CRM, new products or whatever. The truly wise strategist looks beyond the latest technology and asks the question, "How does this help me create a better relationship with my most valuable customers."

L Biff Motley is president of Motley & Associaties, New Orleans. He can be reached at [phone].