So Herman Cain has suspended his presidential campaign. Pardon me while I yawn. This was never a campaign, so much as a book tour. No one on the Republican side has more than a snowball’s chance in hell of winning anything. Cain was never going to get the nomination, which is why it has always amused me that anyone took him seriously at all. But this column isn’t about his doomed candidacy; it’s about this notion that Cain’s main qualification (besides his having the right skin color to allow right wingers to think they could be forgiven for their racism) was that he was a brilliant businessman.
He wasn't. Not even close.
Has our definition of “good businessperson” become so perverted that we think anyone who claims to have made a profit qualifies? Doesn’t that make your average meth dealer a “good businessperson”? What about the kid who sells marijuana and pills to the other guys at the frat? For that matter, using the neocons' basic definition, any snake oil salesman is a "good businessperson", which would go a long way to explaining why they thought selling unbacked mortgage securities was a good idea.
When most sane people think of "good businesspeople," we generally think of people who started a new business from scratch and through blood, sweat and tears built that business into a winner, year in, year out. Anyone can sell a few widgets and make a few bucks in the short term. Good businesspeople make widgets an indispensible part of people’s lives, and make theirs the widgets people must have, above all others.
Did Herman Cain turn around Godfather’s Pizza? It depends on who you ask. Even if you accept that he did, he did so in a way that largely makes him a good bookkeeper, not a "good businessman." He fits the Republican ideal of “good businessman,” though, which is a hell of an indication as to why our economy isn’t doing as well as it once was.
Pillsbury acquired Godfather’s almost by accident. It purchased a company called Diversified Foods to get about 300 Burger King franchises, and got 800 Godfather’s Pizza stores that came along with it. At the time, the pizza chain was known for terrible pizza, terrible service, and largely a terrible place to work. Pillsbury assigned Cain to run the place, to see if perhaps he could “turn it around” and make it somewhat profitable.
There are two ways to turn around a struggling business. The easy way is to take what you have, trim the “fat,” and figure out a cheaper way to do the same thing the company's been doing all along. The other way is to do things completely differently, and to do things BETTER than everyone else does it.
Cain chose the easy way. As you can see from this well-sourced blog post from Jay Raskin, I’m not sure by what measure anyone could consider Godfather’s a success. During his time there, the number of stores dropped by more than 200, and sales figures show little or no real movement. In fact, two and a half years after he took over the company, Pillsbury sold Cain and a management group the company, citing underperformance. From 1986 to 2002, when Cain finally stepped down from their management board, Godfather’s sales went from $275 million to $287 million. Though in 1987, he boldly predicted 1000 stores by 1990, the total number of stores when he left was 540. And Cain refuses to cite profit figures, which is strange, given the massive success he is now claiming as a legacy. While Godfather’s was the fourth largest pizza chain in the country when he took over, it was eleventh when he left. Moreover, the number of employees dropped by nearly 10,000 in that time, and he depressed wages during that time, and slashed employee benefits. He even took time off to lead a fight against Clinton's health care plan, because he would have actually had to do the right thing.
Why is someone who basically creates an inferior product, creates more unemployment, and who is so concerned with his costs that he fights minimum wage increases and the Clinton health care plan considered a “good businessman”? And if that’s become the model for “good business” in the United States, is it any wonder we’ve gone from being the richest creditor nation in the world to being a biggest debtor nation in the space of about 30 years?
A truly “good” businessperson would have made a BETTER pizza, not a cheaper one. Every community is chock full of little pizza shops; the most effective way to compete is to do it better than the other guy. In the neighborhood I grew up in, there are no fewer than seven pizza shops within a four-block area. The one that does the most business doesn’t deliver; it simply makes the best pizza and subs anywhere. Anytime I go back to the area, I head straight for that place.
A good businessperson would create a great place to work and keep working. To make a quality product requires a high level of skill, even with something as seemingly simple as making pizza. And a high level of skill requires good employees who love their job and gain something from it. The pizza joint I mention above has at least 10-15 employees who have been with them 15 years or more. They all make more than double the minimum wage, and they get paid health, dental and life insurance. And a 16-inch pizza doesn’t cost any more than those sold at the big chains.
A good businessperson should welcome an increase in the minimum wage, especially if they were in the pizza business, because it means more customers. I know, I know, this kind of notion gets a right winger’s head to spinning, but it’s true. First of all, no businessperson in his right mind pays anyone minimum wage, whatever that means where you are. See, when you do that, you demonstrate that you place no value in your employees whatsoever. Worse, you demonstrate that you place no value in what your business offers. Even worse than that, you demonstrate that you place no value in your clients/customers whatsoever.
But think about this; while you have to pay a little more to your employees, thousands of others in your area are getting a raise, and have more money to spend on pizza. Go figure, huh?
A good businessperson knows that, while some people buy based on price, many more people do not. The major reason why so many smaller businesses fail when a chain moves in is because they forget this simple reality. If you want to beat the competition, you have to create value in your product and provide service that goes above and beyond everyone else’s. This notion that people will only buy the cheapest product is what has driven our economy into the ground during the neocon era, and the notion defies reality. If everyone buys everything based solely on price, why are there no longer any Yugos and Daihatsus on the road? How do companies like Sony survive? How did Apple become one of the largest companies in the world?
Nordstrom will never make as much money as Wal-Mart, but they thrive in the retail world, because they offer a level of customer service and quality that is unsurpassed by the massive chains. They also train their employees well, and they pay them a good salary and benefits for doing so. I would also point out that one of Wal-Mart’s direct competitors, Costco, pays a living wage to their employees, and provides them with health insurance and other benefits, and actually enjoys a higher “profit-per-employee” than Wal-Mart. Yes, that’s right; Costco pays more, 82% of their workforce is covered by health insurance, and they still enjoy a HIGHER profit than Wal-Mart. Again; one can imagine right wing heads exploding all over the place.
Starbucks has a good quality product, but they also pay their employees a good salary, and benefits and they train them to do what they do. If you think you can open a coffee shop and pay people $10 an hour to work there and skip on benefits, expect to fail. Ben & Jerry’s probably doesn’t sell as much ice cream as some of the cheaper chains, but they make a healthy profit and pay their workers a decent wage plus benefits.
And look back at our past, when we became the largest economic power in the history of the world. Back from the post-war era through about the mid 1970s, union membership averaged around a third of the workforce. And we thrived. The largest corporation in the world at the time, General Motors, had one of the strongest union workforces in the country. Very few companies paid the minimum wage, and companies usually competed for workers. In fact, one of the reasons why company-provided health insurance became a standard in the first place was because companies were looking for some way to attract the best workers. During World War II, there was a wage freeze in effect, so companies started offering free health, dental and life insurance as an incentive to get the best workers. Now, an increasing number of companies look at employees as something of a nuisance, and they actually find benefits and the minimum wage to be a nuisance to be avoided.
Cain was a good bookkeeper and from what I’ve read, he was a very good motivational speaker when he worked at Godfather’s Pizza. But a truly good businessman would have made Godfather Pizza into the highest quality pizza chain in the country, he would have paid his people well, and made his workforce into the best in the business, and he would have created a market in which everyone looked for a Godfather’s pizza in whatever city they were in, because the taste was that good. He didn’t do that.
Good businesspeople make money by increasing revenues, bnot by decreasing overhead.
Cain’s attitude, of course, stems from the neocons’ obsession with supply-side economics. Businesspeople like him don’t care about customers, or employees, or even vendors. They only care about executives and shareholders. And that, in a nutshell, is why our economy is falling behind those of other countries.
If you look at the great brands that have gone down in flames over the last 30-40 years, in almost all cases, their demise was caused by over-attention to the bottom line, and a lack of attention to products and services and their customers. It’s a model that fails miserably. You can gaze in awe at the Wal-Mart model if you want, but while it’s a cash machine for executives and shareholders, and it’s a disaster waiting to happen. If you doubt that, ask the folks who used to run the former #1 retailer, K-Mart, and the one before that, Sears. Wal-Mart only increases its revenues and its profits by doing several things. It has to build more stores. It also has to negotiate smaller and smaller contracts with vendors. And it has to continue using Medicaid as its health plan, and Food Stamps and welfare to supplement its pay. If it has to pay decent wages to its employees and supply them with a decent health insurance plan, they will have no choice but to raise prices, which will hurt their business model, which is largely based on starving everyone who makes them money, in favor of huge bonuses for executives.
The Costco model, in which customers, vendors and employees are considered equally with executives and shareholders, is the only model that will actually move our economy forward. It’s no coincidence that our companies are largely being overtaken or taken over by companies from Europe and Asia. It’s no coincidence that workers in other developed countries are largely happier than we are. And it’s no coincidence that, since the neocons took over, our economy has become increasingly dependent on a series of bubbles to make it “look good.”
If this country is ever going to pull itself out of the economic doldrums we find ourselves in, we’re going to have to change our definition of “good business practice” to something other than simply “making a profit.” Making a profit for a year or two is easy. Building a business that is good for consumers, good for employees, good for society and good for executives and shareholders requires a balance that neocons and their supporters seem incapable of understanding and acknowledging as necessary to making the economy hum again.
We can either be like Apple or Ben & Jerry's, and move the country forward, or we can be Wal-Mart and Godfather's Pizza and continue funneling our money to the 1%. It's OUR choice. But stop calling Herman Cain a "good businessman." It's an insult to good businessmen.