The June 14 issue of Fortune magazine featured an interview with Vanguard CEO William McNabb as a part of their C-Suite series. McNabb became CEO on August 31, 2008, two weeks before Lehman Brothers failed. Many more companies lost employees, customers, and certainly, a lot of money during the crisis. In contrast, Vanguard emerged stronger, with more customers and $210 billion net new investments from 2008 to 2010.

A number of questions were on how McNabb managed the organization through the biggest crisis. What struck me the most is about his biggest management decision during the crisis that Vanguard would not have any layoffs, even though many of their competitors did.

His thinking behind it was “If our crew were distracted by ’Do I have a job or do I not have a job?’ there was no way they were going to serve clients well.” and “It’s incredibly important to send a positive message to our people ’Focus on the client, focus only on the client. We are going to be fine as an organization.’ ”

This is a great example of effective communication of “customer focus” by action of the leaders, not just their words. As in my earlier blog Customer Focus, the real demonstration of “customer focus” is when leaders make a conscious decision among real viable choices, such as between laying off people to boost short-term bottom line vs. supporting employees to serve the customers. Vanguard’s leaders understood what it took to develop a true customer-focus organization and stayed with the principle despite the crisis.

You can find the C-Suite video excerpts at

You can read more examples on how Vanguard’s founder John Bogle and previous CEO Jack Brennan created customer value and built employee trust in Loyalty Rules! by Frederick F. Reichheld. In addition, I highly recommend this and Reichheld’s other books on loyalty principles and practices for leaders who want to build an organization that delivers long-lasting value for customers, employees and investors.

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