Empowering People

Harvard Business Review posted what I thought was a good business article some time ago. It focused on adaptability. In a nutshell, it believes that in the inter-connected world, companies that adapt quickly is the new competitive advantage.

Adaptation, according to the authors, is built on four pillars: Reading a signal, experimenting, managing the morass of intra-company and industry framework,  and mobilizing the new strategy that comes from it. Today, these four things have to happen very quickly.

One line caught my eye: "Perhaps most important, they have learned to unlock their greatest resources—the people who work for them."

Yesterday (and yes I realize this has been beaten to death) United booted that fellow off the aircraft and is in a heap of trouble. It probably could've been easily avoided.

Employees are empowered to implement policy, not think on their feet, or use game theory. In fact, in a lot of large companies, employees thinking on their feet is discouraged (especially in litigious countries, like the US).

According to corporate policy (or legislated, depending on what country you're in) the airline can go up to $1,350 for cash outlays for 4+ hour delays, but much more with flight credits (because the marginal cost of a flight half full approaches zero). For long stays it's even more.

When an enterprising employee is empowered, he or she could auction off thousands of dollars of flight credits for a seat; in this case to 150 or more passengers. Someone(s) will take you up on it, and it might even be turned into a customer service win.  Instead, hamstrung, he or she delivered customer service horror, and a brand hit.

This lack of empowerment that a lot of folks talk about really hits home in racing to me.

They shall remain nameless, but I've talked to front-line or mid-management employees in racing who understand gambling quite well. They want to read signals, experiment, implement, based on their knowledge of what's happening in the trenches.

I guarantee there were people at Santa Anita who cringed when the TOC and CHRB were upping the juice. I am sure there were people at Twinspires who look at data, see what rewards do, see what winning more money does to their customer base in terms of betting volume, who wondered why Churchill was raising the rake. We can use copious examples throughout racing history, with its numerous policy violations.

They unfortunately aren't empowered to do anything. They might read a signal and bring it somewhere. There may be the experimentation phase, allowed by a senior manager. Then, even if it works, it hits the c-suite, and the c-suite looks at the third pillar - the morass of stakeholders - and it dies.

Racing employees who understand and want to do something are United flight attendants who aren't allowed to go over a set amount for a cash credit; a credit to potentially thwart a multi-million dollar company problem.

As someone who chats with horseplayers and customers often (and am unapologetically biased towards them) I tend to hear this : "People are so dumb in this sport. No one understands us"

I think there are scores of people who understand customer issues. Scores. But they aren't empowered to do anything about it.

United versus Churchill, Who's Worse?

So, in one corner we have United Airlines. We all heard about that today - they overbooked a flight, offered the usual bonus on the booking (in this case, they went up to $800) to get someone to leave the plane, and when no one took them up on it, they had the cops forcibly remove a dude from his seat.

That's some bad mojo.

Overbooking, as a rule, is something often done, accepted, and not without reason. It's economically sound. But, as they say, the cover up is worse than the crime. Man, it's worth typing again, that's some bad mojo.

In another corner, we have the Churchill Downs pick 6. In this instance, one lucky ticket holder was poised for a chance at a $750,000 score on a 20-1 shot in the last leg of a jackpot pick 6. The last leg was cancelled after a brief delay due to the weather. Snooze you lose Mr. Customer. Don't measure the drapes!

This could be described as economically sound as well, because if a pick 6 carries over, the track makes mucho moola with the next carryover, and the next and the next. It's some serious scratch.

So, the big question: Who is worse in this customer service tete a tete of evil?

If we are looking from a customer service perspective, they both get some bad marks. It's like trying to decide if Waterworld was worse than the last Nicholas Cage movie.

Economically, though, we can explore this a little further.

If you or I overbook, we are offered cold hard cash, or flight credits. I got over $2,000 once and I gladly sat down and waited for my next flight (I played Aqueduct while waiting and lost $500 of it, but what else is new). A decent rule of thumb - you get paid 400% what your ticket is worth. So, your inconvenience has a number.

For Churchill Downs, this bettor didn't get any utility; unless he masochistically got some enjoyment from getting the shaft.

What would Churchill have to do for it to equate to what United or other airlines do?

Well, if the player had a 5% chance to hit for $750,000, CDI would have had to offer the man or woman a chance at winning 4 times that amount, or give him or her 4 times the chance to hit $750,000. In effect, they'd let the ticket holder play roulette, where landing on 20% of the numbers earn them $750,000, or 5% of the numbers earn them $3,000,000.

That's pretty fair. In fact, I'd hope for rain, kinda like I hope getting kicked off a plane. 

So, in terms of expected value, we may conclude United is Goldfinger and Churchill is the Death Star.

But, where this gets more interesting -  we can probably take points against United for being boneheads (they went to $800, they just had to keep going up by a Benjamin until someone said yes .... $1,000 should've done it). And again, the poor sap who had his chances at a life changing score at Churchill didn't get forcibly removed from his bedroom in his underwear by baton wielding coppers.

I think it's fair we call it a tie.

Have a nice Monday everyone!

The Press is Treated in Polarizing Ways

The Masters begins tomorrow, but for those in the press pool it began earlier this week, because, for them, something changed. Augusta National invested millions in a state of the art, brand new press room and restaurant for the world wide reporters and commentators covering the event.

 Golfer Rory Mcllroy:

•  These guys [the press] are not going to want to leave. You’re going to want to cover Harbour Town next week from there. Just get a feed and like stay there.’ It’s nuts. It’s unbelievable. It’s a bit of a museum as well, there’s so much cool memorabilia from the Masters and years gone by there, it’s, if I wasn’t playing in the thing I know where I would want to be hanging out that week.”

The Masters is an older event, and they've always catered to the press. In fact, it is scheduled in early April because Augusta National wanted to accommodate the press; the press who were driving back to east coast cities from spring training. There's definitely been a relationship.

Meanwhile, in horse racing, we all remember Churchill Downs, back in 2013, moving the press area from the finish line.  

• What had been the Joe Hirsch Media Center overlooking the track has been transformed into a high-rollers area renamed, “The Mansion at Churchill Downs.” The reason is simple: Money. According to Ray Paulick of Paulickreport.com, the track figures to haul in $8 million over three years with the new luxury seating. “Like any casino company, Churchill Downs Inc. now thinks in terms of revenue per square foot,” Paulick writes in an email. “The press box generated zero actual revenue, although it could be argued good press is worth something.”

It's tough to have a strong opinion that Churchill Downs was "wrong", because the world has changed. Reporting on an event that anyone can watch, via dozens of mediums, on phones, tablets, TV's; on youtube, or tweeted in gifs, is today's world. The print press is being decimated.

But, it is interesting to me. Augusta National's brand is about the history of the event, and always has been. It's who they are. They, through things like the new media center, embrace that and spend money on that tradition. They're not about wasting money, so they certainly feel the long-term health of the event is helped by this added cost.

Racing - another traditional game - doesn't seem to have that same vision.