'Tis Labor Day in the U.S. of A., the holiday that honors the average worker -- a perfect time to point out a truth that's obvious to anyone who's ever worked in a sales team:
Sales pros know more about what's going on in their industry than the CEOs.
This fact became clear to me last weekend when I went car shopping. While on the lot, I had a fascinating conversation with a sales associate, who was unbelievably frustrated. The lot was full of giant SUVs and trucks that they weren't selling, even with steep discounts. "Everybody here knew that gas prices would eventually go up," she told me, "And we all knew that sales would tank. The only people who couldn't figure that out were the %&$!#$ at corporate headquarters who kept sending us these land yachts."
CEO woodenheadness is far from unusual. Here are some more examples, right off the top of my head:
- The PC Industry. Most folk buy a new computer every four years, but every time a person goes out to buy a new PC, they look at every brand and generally buy the cheapest, which means that the original vendor usually loses a customer. Any idiot can see that a PC that could be infinitely upgraded without replacing the entire machine would keep the customers in the fold. But PC executives are stuck constantly seeking new customers with no way to encourage brand loyalty other than with a sticker on the front of the box and lousy customer service. Unbelievably stupid.
- The Software Industry. Right now, Best Buy is offering a service where they, for a nominal fee, will remove all the bloatware (the "free" programs that are really software ads) from your new computer. People who buy computers hate bloatware, but the software industry continues to push the stuff onto machines, and now have become dependent upon this distribution method for a percentage of their profit. Anti-bloatware services were INEVITABLE, but the CEOs who work inside the software industry were obviously clueless and have apparently been completely blindsided.
- The Semiconductor Industry. Guys who sell semiconductors and chips designs have often told me that the CEOs in their industry are idiots. Why? Because the semiconductor industry continually invests in new fabrication plants whenever there's a boom in semiconductor sales. Because it take a year to build a fab, by the time they're built, the buying cycle is reversed and the new capacity causes oversupply and an industry crash. It's happened about 20 times and the CEOs still can't figure out that they should invest during the slump rather than the peak. Doh!
- The Airline Industry. It is obvious to every travel agent in the freakin' world that people will pay about 15 percent more for comfortable seats and good service, provided they knew that somebody else wasn't getting the exact same service for half of what they paid. Even so, airline executives continue selling off tickets at a loss in order to fill seats, thereby destroying any reason for anybody to pay full fare. Obviously, idiots are running the airlines. There's no other explanation.
- The Music Industry. Every person involved in the sale of CDs know that online distribution is clobbering CD sales. Even so, music company executives keep trying to bundle 11 crappy songs with one good one and expect people to pay $20 for the CD -- when they can get the song they want for less than a dollar. You'd think some CEO in the music business would get a flash of light that nobody wants those 11 songs and stop trying to cram them down the consumer's throat. But no... Idiots!
- The Movie Industry. A couple of days ago, I went to a brand-new stadium theatre. The screen was splotched with light from the hallway and also showed odd patterns (grids of large dots) during dark scenes. You could clearly hear the soundtrack from adjacent screen, and the food was wildly overpriced ($3 for 5 cents worth of popcorn). The experience was in every way inferior to even a middle-of-the-road home theatre. What are the CEOs of these companies thinking? They're pursuing a go-out-of-business strategy. Dumb, dumb, dumb!
Whenever I hear about CEOs getting enormous salaries, it burns me up. I've interviewed hundreds of CEOs and (with very few exceptions) they are models of mediocrity. The idea that a CEO should be paid hundreds of times more than the average worker would be insane, even if the CEOs were twice as smart and perceptive as the average worker. But the opposite often the case.
So, then, why are CEOs paid so much? Easy -- because the people who set the pay structures are CEOs themselves.
CEO pay is an enormous scam that's been foisted on the investing public, with the assistance of the mainstream business press, which continues to lionize CEOs as if they were gods among men. It's stupid, it's ridiculous, and it's time to put a halt to it. I can't control the media, but I can control the contents of this blog. And this is my commitment to you is that I will NEVER, EVER pretend that the average CEO is anything more than an overpaid blowhard.
Because it's the truth.
Note: this post is continued in my afternoon post "How Dumb are CEOs? This Dumb!".