The CEO’s Dilemma

President Jones runs a company (Fit-Ed) that sells five-year health and fitness programs as part of America’s “Get Fit and Save Money” initiative.  Each plan can be partially subsidized with federal grants based on family need.  There is even a federal loan program for those that don’t have adequate cash flow or financial discipline to afford the programs. Unfortunately, the Feds have put in place performance metrics requiring at least a 60% Program Completion rate to continue to allow customers of a given company to access the federal subsidies and loans.

At a recent meeting of the CEO and vice presidents:

“Folks, we are sucking wind. We have a 44% Program Completion Rate and no one can tell me why. We simply don’t have a market to exist without the subsidies. We need a solution.”

VP Operations: “Sir, what do you want us to do? We have optimized our recruiting as best we can, but our business model won’t support upgraded facilities with bigger pools, saunas, and all the luxuries.”

“What do you mean we’ve optimized recruiting the best we can?’

VP Operations: “It’s like this. Everyone wants fancy facilities, especially pools and saunas, and family water features. But the localities where we have boxes don’t have family incomes to support those things. We would need a larger population of wealthy families. And let’s face it, wealthy families are those that most likely to exercise and stick with a program. Poor people, well, they are just too busy being poor. Nearly 80% of our market is receiving the subsidies or loans.We’ve targeted recruitment as best we can, the wealthier population has a greater number of options and is more willing to travel to exercise.”

CIO: “You know, maybe this is a data problem. The metric is all wrong.”

CEO: “Tell me more.”

CIO: “Well, maybe our failures aren’t really failures. Maybe they just leave us for our competitors.”

CEO: “Sounds like a failure to me.”

CIO: “Is it? From a a business perspective, from our business perspective, it certainly is. But this federal program is about getting Americans fit. So does it really matter *where* that occurs as long as it happens? If we could find a way to track our customers, we could add those that go to other programs to the numerator and argue that it is a better, more complete measure of success.”

CEO: “Damn. I like that. Let’s make that happen.”

VP HR: “Sir, wouldn’t this be terribly misleading? Wouldn’t we be taking credit for another company’s success? After all, these clients left us.”

CEO: “I don’t give a rat’s ass. We need to survive. Besides, who’s to say we don’t deserve credit for the fact some of clients are more successful elsewhere.”

 

 

Be nice. It won't hurt either of us.

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