What if CEO’s focused on customer satisfaction rather than profits?

Having been on the end of some poor customer service from an airline recently, I noted with interest the recently approved pay offer to the CEO of Ryanair.  The package is worth €150m (£129m) and would give him options on 10m shares if he hits profit and share price targets, and stays at the helm of the Irish carrier until 2032.

That’s a lot of money.

The metrics by which he is being judged are also entirely in favour of the shareholders who will also receive lots of money from the profit and increase in share price.  However, it does not appear that the customers get much out of the arrangement.

While Ryanair is well known for cheap tickets, it is also equally well known for charging customers for every possible extra and making the experience less than great.  That may satisfy share holders but it seldom satisfies customers.  They may not complain that much as they are getting cheap flights and may not have many other options to choose from but that doesn’t make it reasonable to treat them that way.

So, what if we paid the CEO a bonus based on customer satisfaction?  How would the airline behave if their focus was on making their customers happy rather than the shareholders?

We might judge them on how many flights arrived on time, how many bags were lost, their safety record and the time it took to respond to customer complaints.

If the focus was on these measures, customer satisfaction would improve and people would be happier to fly with them.  What do you think might happen as a result of that?

This is not a novel idea. 

An ex-CEO of Continental Airlines focussed relentlessly on improving customer satisfaction and made it one of the best performing airlines in the world.  (https://en.wikipedia.org/wiki/Gordon_Bethune).

Paddy Lund, the “crazy Australian dentist” has written a number of books about how he focussed on customer happiness in his business and as a result worked less and made more money.  (https://www.paddilund.com/).

The problem is that the people who propose and agree these salary packages are the shareholders and guess what, they care more about profits than customer satisfaction.  They benefit from the CEO meeting share price targets and I’ll guess that they probably don’t fly with Ryanair that often.

It is such a shame that we ask business leaders to focus on profits rather than customers.