Those who still believe that ”policy” is a stale and detached endeavor — the stuff of three-ring binders on dusty shelves in the Human Resource department — should attend the tale of Blockbuster, and the chaos wrought by a single policy change. Back in December 2004, the company announced its bold plan to discontinue its late fee policy…allowing renters to keep their DVDs for a few days more. By all accounts, the new policy was confusing and convoluted (no late fees, but we’ll charge you the full price of the movie if you keep it over a week longer, and we’ll charge you a ”restocking” fee if you return it after that). But the policy shift had a significant impact on the company’s cash flow, and in turn on its relationship with stockholders and major suppliers.
Says Video Business:
Blockbuster’s cash problems began with its strategic decision to eliminate late fees. The No Late Fees program, aimed at stimulating rental growth, has cost the chain an estimated $400 million in revenue and $250 million to $300 million in operating cash flow this year.
Now the company is working to extend payment terms with the studios to ease their cash crunch, declining a dividend payment to stockholders, and working out new revenue-sharing arrangements with some studios to reduce the need for up-front cash. The Video Business article suggests that Paramount Home Entertainment was even holding shipment of a new release to Blockbuster — The Longest Yard — until payment terms could be finalized (although, if that particular movie didn’t ever make it to Blockbuster, I wouldn’t be upset).
The point here isn’t to rag on Blockbuster (although that’s fun), but rather to underscore the idea that ”policy” is not abstract and detached, but directly connected to the whole ecology of what makes organizations work — finance, cash, audience, donors, staff, board governance, and so on. Sure, there are plenty of other factors eating Blockbuster’s cash (cable and satellite TV, pay-per-view, soft economy, and so on), but the late-fee change flipped the switch on much of the turmoil.
While it’s hard to imagine that a butterfly in Beijing can alter hurricane patterns in the Atlantic, it should be easier to see how an organization’s policies on ticket returns/exchanges, rush seats, membership discounts, box office surcharges, or other seemingly minor issues can lead to more or less cash, larger or smaller audiences, or happier or angrier donors.
There’s a policy wonk inside each of us…set it free.
