By Gregory Morris

In 1974 , the Special Assistant to the President for Consumer Affairs and the United States Office of Consumer Affairs contracted with Technical Assistance Research Programs , Inc . to conduct a study of consumer complaint-handling practices ( see sidebar , page 30 ). Half a century after that landmark survey , the persistent perception in the popular and business press , and especially on social media , is that customer service just keeps getting worse across many sectors .

Travelers wait in line at the Southwest Airlines ticketing counter at Nashville International Airport after the airline canceled thousands of flights in Nashville , Tennessee , on December 27 , 2022 .

Given that ubiquity , it seems impossible that senior corporate executives and boards of directors are unaware of the situation . So it would seem that poor customer service has become more of a feature than a flaw . Not in every sector , but especially in those where the company is large , competition is limited or customers are somehow beholden to the company ( see table and chart ).

In the long run , there is no question that customer service does affect competitiveness , but poor customer service seems to have become an acceptable daily reality in the name of maximizing near-term profitability . Given shareholder primacy , the questions become : which shareholders and over what time frame ? The costbenefit analysis is often skewed toward the bottom line for the current quarter , the current year or top executives ’ compensation packages .

In the 1950s , the zeitgeist was “ what was good for the country was good for General Motors and vice versa ,” as Dwight Eisenhower ’ s Secretary of Defense Charles Wilson , a former president of GM , said at his confirmation hearing .

The decline of industrial America in the ’ 60s and ’ 70s has been extensively studied . One mitigating development was an opening for companies with a more customer-oriented approach . Jack Welch , chairman and CEO of General Electric from 1981 to 2001 , was a champion of the concept of pleasing the customer .

By the mid-2010s , however , the tide was turning again . In 2018 , a milestone paper titled “ Why Customer Service Frustrates Consumers : Using a Tiered Organizational Structure to Exploit Hassle Costs ” found that “ many customer service organizations reflect a tiered , or multi-level , organizational structure , which we argue imposes hassle costs for dissatisfied customers seeking high levels of redress … Our main result is that a firm can be more profitable if it uses a tiered CSO to induce consumer hassles .”

That paper was written by Anthony Dukes , then professor of marketing at the Marshall School of Business , University of Southern California ; and Yi Zhu , assistant professor of marketing at the Carlson School of Management , University of Minnesota , Twin Cities . Even given his

28 FINANCIAL HISTORY | Summer 2024 | www . MoAF . org