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Last Year We Lost $3.77 Billion, However…

“Last year we lost $3.77 billion” was the message Warren Buffett had to personally deliver to Berkshire Hathaway shareholders at the 2002 annual meeting. What’s a CEO to do with news that’s as bad as that?

I first learned about this in the summer of 2004 when Robert Cialdini was a guest speaker at several State Auto agency partner meetings. As Cialdini talked about influence and how to frame a message he shared the Buffett story with us.

As many of you know, Warren Buffett is one of the richest men in the world and Berkshire Hathaway has recovered quite nicely from its disastrous 2001. Nonetheless, having to tell shareholders their company value decreased by nearly $4 billion (6.2% in total value) was not something Buffet looked forward to. Fortunately he and his long time partner Charlie Munger were huge fans of Robert Cialdini and his work on ethical influence.

Let me lay the groundwork for how Buffet delivered his message: From 1965 through 2001, the overall gain in “annual percentage change in per share book value” of the S&P 500 was 4,742%. Not bad! Over the same time period Berkshire Hathaway’s gain was 194,938%!! Yes, you read that correctly, 194,938! (Click here to see the 2001 report). Put another way, if you had invested $1 in the S&P 500 in 1965 it would have been worth $48 by 2001. However, that same $1 invested in Berkshire Hathaway would have been worth $1,950 by the end of 2001. Wow!

So how did Buffett address shareholders? Paraphrasing, he said the following:

“Last year the value of your company went down by $3.77 billion. However, I’d like to remind you that the management team that’s been in place at Berkshire Hathaway for the past 36 years has outperformed the S&P 500 by more than 190,000%.”

Unbelievable! You’re left not focused on the company loss but rather the incredible long-term success of Berkshire Hathaway. What if Buffett had said this?

“I’d like to remind you that the management team that’s been in place at Berkshire for the past 36 years has outperformed the S&P 500 by more than 190,000%. However, last year the value of your company went down by $3.77 billion.”

Ugh! You can feel the difference. Now you’re focused on the loss, not the incredible long-term success of the management team.

I hope you realize the words and facts are the same in both cases. What Buffett realized, and few people pay attention to, is this: people remember what comes after transitional words like “but” and “however.” You know it’s true because you just felt the difference.

If you want to be a master persuader you have to understand this truism and always be conscious of what you want your audience to remember. There are times you want them focused on the negative to prompt action and there are times you want them focused on the positive. How you order the information makes all the difference.

The next time you have to deliver good and bad news think about what you want the audience to remember. Then think about the comparisons that will make your message shine. Last, be sure to order the information correctly. Following these three tips might not make you the next Warren Buffett but they can make you much more persuasive than you are today. Who knows, that might be your first step towards Buffett-like success!

When the Good Becomes Bad

Have you ever noticed how something good can slowly become bad? I’m thinking of things we start for good reasons that end up getting distorted and becoming bad. Here are some examples:

  • In the Bible, the Pharisees, a religious sect of Judaism, aspired to be right with God. They knew the commandments but wanted to understand them more deeply. They knew “Thou shalt not work on the Sabbath” but wanted to understand exactly what work was. They set out to define it and laid a heavy burden on people in the name of God. It became work just to keep the law.
  • Public schools have set standards for graduation because people thought our education system was slipping on the world stage. However, rather than bolster learning we started hearing about teachers “teaching to the test” and in some districts misrepresenting student scores. On the topic of school, grades are used to measure performance. After all, “What gets measured gets done.” Seeing a student with a high GPA is usually a good thing unless students are more concerned with the grade than what they’re learning.
  • Faithfulness to marriage vows is a good thing. But what about couples who “stay together for the kids” and end up exposing them to a toxic environment at home?
  • In business, bonuses are used to incent people to do certain things like increase profits or sales. Offering people incentives to work harder, longer or more creatively is good unless people begin to do some unethical things to hit the numbers.

As I noted in the opening, many things start out with a good intention but end up getting perverted in some way as people lose sight of the original intention. So what are you to do?

I believe we all need to understand why we’re asked to do what we do and occasionally we need to remind ourselves. I work in the insurance industry and I’m proud of that. Insurance isn’t a sexy industry like banking or financial investments but it’s every bit as necessary. When people ask me about what I do, I tell them I’m proud to be in insurance because we do two important things:

We help people. If someone has a loss (car accident, home damaged, business destroyed) we step in to help them get back on their feet and lessen the financial burden they would face otherwise. No one ever said, “Darn my insurance agent for selling me the right coverages and limits” after a loss but many have said, “Darn my agent for not selling me the right coverages and limits!”

We help the economy. What bank will lend you money to build a house or buy a building if you can’t guarantee to repay the amount in full if the property is damaged or destroyed? No financial institution would do that but with an insurance company promising to make that guarantee, money is lent, buildings are bought, which employs people to build them and building materials are sold. This creates a positive ripple throughout our economy.

This brings me more specifically to what I do at work 9 to 5 and with Influence PEOPLE. I teach people how to ethically persuade others. The driving force for me in this endeavor is to help people professionally and personally. I believe:

Professional success depends in large part on your ability to get others to say yes to you. Sales are not made without getting to yes. If you’re a manger your success depends on your team buying into your vision and strategy – getting a yes! Even if you’re not in sales or management you’re asking people to do things all day long. 

Daniel Pink, author of To Sell is Human discovered through a survey of more than 7,000 business people that the typical non-sales employees spend upwards of 40% of their time trying to persuade others!

Personal happiness is quite often a result of getting a yes. Most people I know find that life is more pleasant when their spouse, significant other and/or kids willingly say yes to them. Understanding how to ethically persuade others can go a long ways toward making this happen.

If you’re like most people I’ve met, and including myself, then you may have things in life you started for the right reasons but may have “lost that loving feeling” and slowly slipped into a bad place. If that’s the case, step back and take time to remind yourself about who you are and why you choose to do what you do. If you can’t regain that old feeling and have the ability to let go of some things, then do so because you’ll enjoy what you pursue with passion more than what you have to drag yourself to do.

A Scientifically Proven Way to Be Persuasive

The following is an excerpt from Yes! 50 Scientifically Proven Ways to Be Persuasive, co-authored by Robert Cialdini, Ph.D., Noah Goldstein, Ph.D., and Steve Martin. I wrote this several years ago, prior to becoming a certified trainer for Dr. Cialdini. I looked at what State Auto had to offer that was genuinely scarce, then honestly described it in a marketing email and we got terrific results. I hope it stimulates ideas for you to do something similar.

One of my responsibilities is to help recruit new independent agencies to represent our company. In our effort to do this, we sent marketing materials to prospective agencies so they could learn more about us. While we hope most agents read our communications, seldom did we receive any direct replies.

After learning about the principle of scarcity we realized we were missing out on an opportunity that had been right in front of us all along! We don’t do business in every state, and each year we set a modest goal for appointing new agents in our operating areas. We never thought to incorporate those facts, or our current progress, into the communications we were sending.

Understanding how scarcity can move people to action, we began to include something like this near the end of our communications: “Each year we have a goal of selecting just a few new agencies to partner with us. For 2006 that number was set at only 42 agencies across our 28 operating states, and so far we’ve appointed more than 35. It’s our sincere hope that your agency will be one of those remaining agencies we appoint before year end.”

The difference was noticeable immediately! Within days we began to receive inquiries. No extra cost, no new marketing campaigns, no product or system changes needed. The only change was adding three more sentences that contain true statements.

What does your company have that is scarce and can’t be gotten elsewhere? It may be that your uniqueness comes not through one feature but a combination of features. Your challenge as a persuader is to identify that combination of unique features then honestly inject them into your communications. Will you hear “Yes” every time? No, but it’s a sure bet you’ll hear that magic word more than you are today. I confidently assert that because science tells me so and our experience bore that out to be true.

Brian, CMCT®
influencePEOPLE
Helping You Learn to Hear “Yes”.

Knowing Your Audience is a Key to Persuasion

In late October, I was in Arizona to address the Arizona School Administrators on the science of influence. Jane and I went out early to enjoy the weekend in Scottsdale and spend time with friends. During our stay we had the good fortune to share lunch with Robert Cialdini, PhD., and his wife. The morning we were to dine, while on the treadmill, I pondered what we might talk about and what gem I might take away from our time together. In the midst of that run I came up with my own gem.
Understanding the science of influence isn’t a magic wand and it’s certainly no guarantee you’ll get everyone to do what you want. There are still plenty of times when I don’t get the response I want and even the master himself, Dr. Cialdini, doesn’t always get what he wants.
As the treadmill sped under my feet and my mind raced along I thought about a story Dr. Cialdini shares quite often when he speaks. Many years ago he was a member of a gym and one day he happened to lock his keys and wallet in the trunk of his car upon arriving at the gym. He asked Paul, the guy folding towels behind the front desk, if he could use the gym’s phone and was promptly told no. He persisted, explaining his situation and reminding Paul he’d been a member of the gym for years and that surely Paul recognized him. Paul didn’t budge from his original answer because of a bad experience with another member who abused the phone privilege the week before. Dr. Cialdini announced, “You’ve just lost a customer,” and walked out. Despite his best effort he was no better off and had to panhandle a quarter in order to call someone to come help him out.
A couple of principles of influence were at play in the conversation – liking and scarcity. Liking was at work because of Dr. Cialdini’s and Paul’s familiarity with each other. The connection obviously wasn’t strong enough because it didn’t persuade Paul to let him use the phone.
Scarcity was at play because Dr. Cialdini let Paul know he stood to lose something, a long-term customer. This didn’t move Paul either because he still didn’t allow him to use the phone.
As I thought about this it took me back to my day job – sales training with State Auto Insurance. In sales we place a lot of emphasis on knowing your customer because they’re not all alike and different things motivate different people. For example, at independent insurance agencies, a field rep wouldn’t want to talk about winning trips and earning a bonus to customer service reps because they usually don’t get to enjoy those awards. In fact, talking about those things can cause resentment. Understanding what motivates the CSRs then tailoring communications using the principles of influence will be far more effective.
Back to Dr. Cialdini and Paul. It’s my guess that Paul was probably a minimum wage guy and wasn’t about to possibly get in trouble by allowing anyone to use the phone after getting an earful from his boss the week before. Dr. Cialdini, likely caught up in the emotion of the moment, announced the gym would lose a customer but even that didn’t matter to Paul because it’s doubtful his pay was tied to customer retention. He was paid to follow the rules and guidelines.
So what could Dr. Cialdini have done differently? Setting emotions aside and understanding his audience might have changed his actions. Perhaps there was nothing that was going to get Paul to change on the phone issue but recognizing Dr. Cialdini as a gym member he could have allowed him inside where Dr. Cialdini might have used someone’s cell phone or borrowed a quarter from a familiar face. Either option would have been better than panhandling strangers to get the needed quarter.
I first heard this story many years ago and I’m not sure why it came to the surface at this time but whatever the reason, we should all be encouraged. Even the master fails sometimes so we should never let failure deter us. The right response should be to learn from the situation and resolve to try a different approach the next time. Do so and soon you’ll find yourself successfully persuading more often than not and that will lead to more professional success and personal happiness.
Brian, CMCT® 
influencepeople 
Helping You Learn to Hear “Yes”.

Customer Service Success = Under-promise and Over-deliver

I was listening to the “Mike and Mike Show” on ESPN radio on the way to work one morning when I heard Mike Greenberg utter a familiar phrase for those of us in the sales arena, “Under-promise and over-deliver.” Even if you’re not in sales you might have heard the phrase before. What you may not understand is why it works so well.

Under promising and over delivering helps make happy customers because you set expectations you should be able to deliver on and that’s the key. For example, does it bother you when you call a customer service number and hear, “Your call is very important to us and will be answered in the order it was received. Right now your estimated wait is five minutes,” and the wait ends up being seven or eight minutes? I know it bugs me.

How do you feel when this happens, “Your call is very important to us and will be answered in the order it was received. Right now your estimated wait is ten minutes,” and the wait ends up being seven or eight minutes? If you’re like most people you feel pretty good…or at least better than you did in the first scenario.

Why is this so? It’s simple. In one case the expectation wasn’t met but in the other it was exceeded. It didn’t matter that in both cases the actual wait time was the same. This is a classic case of “compared to what?” which derives its power from something know as the contrast phenomenon in the study of influence. What we compare something to can make all the difference in our experience.

Most people make the mistake of over promising and then under delivering. For example, a company wants to get a new order and they bid too low only to come back later and raise their price…or try to raise it and anger the customer. They may have gotten the contract but an upset customer will talk to a lot more friends than a happy one so it ends up hurting business in the long run.

Here’s something most of us face on occasion – time away from the office.  When we leave the office we change our voicemail and turn on the out of office message to alert people that we’re away. When I take family time I clearly tell people I won’t be checking voicemail or email but when it’s not family time that’s different. If I’m traveling for business I’m still more difficult to reach so I might us a message that incorporates something like this:

“While I’m away my access to voicemail and email will be limited. I’ll do my best to reach you while I’m traveling but it might be Monday before you hear from me.”

We live in an almost fully wired world where people expect 24×7 communication unless we set a different expectation. When people call or email they’re not thinking about how busy we might be unless we let them in on that fact. My message doesn’t promise the other person will hear from me but when they do I usually get a response along these lines, “Hey, thanks for getting back to me. I know you’re out so I wasn’t expecting to hear from you till Monday.” Do you think they’re happy? You bet they are because I exceeded their expectation. I under promised and over delivered.

I say this often; understanding persuasion isn’t a magic wand that will get you what you want every time. And let me add to that there are always exceptions to the rule. Sometimes there’s the difficult customer who doesn’t care what you’re doing because they want an answer now. For folks like that I always make sure to include in my message a way to reach a real live person in my absence so they can get immediate help when needed.

I love what I do and the company I work for – State Auto Insurance – but I’m not an employee 24×7, nor is work the most important thing in life. I have parameters in my life and to remind me of that my personal mission statement concludes with this – I work to live, I don’t live to work. I’ll never sacrifice my faith, family or personal well being at the expense of my career.

So let me encourage you; set the parameters on whatever you do and remember that under promising and over delivering is the better strategy to take because the science tells us so.

Brian, CMCT
influencepeople 
Helping You Learn to Hear “Yes”.