Archives for July 2010


In the January 2, 2010 edition of Horse Racing Business, the topic was “Outlook for 2010,” which was an analysis and forecast of the U. S. economy in the upcoming year, as well as an assessment of how the racing and breeding industry would fare. Following are two paragraphs from the analysis:

“The best estimate here is that the U. S. economy will slowly recover in 2010. Here’s why I say slowly: The consumer, whose spending accounts for about 70% of GDP, is still generally scared for his/her job or is out of work. The individual’s house may be under water in that the mortgage exceeds the dwelling’s worth in the marketplace. This negative wealth effect provides neither the capability nor the inclination to spend. These factors, coupled with misguided government policies of out-of-control spending, almost assuredly higher tax rates to pay for it, and an increasing reliance on China to buy U. S. debt, portends trouble four or five years out. Even if there is a fast recovery in GDP and employment, it may be short-lived once the Congress and the Federal Reserve take away the punch bowl of colossal spending and easy money.

Anyone running an equine-related company can look to the future with hope, but hope is not a strategy. Incorporate into your plans a lukewarm-growth scenario (perhaps 2.5%- 3% GDP for 2010 and a year-end unemployment rate of 8%) with a high probability of occurrence. Anything better will be a pleasant surprise, and you will still be in business.”

At mid-year, this evaluation is on target, except that the unemployment rate is about 9.5%.

Economic prospects for the remainder of 2010 look to be mediocre. The unemployment rate is stubbornly high and the current 9.5% metric is misleading. Many people have given up looking for full-time jobs, which means that they are not counted as being unemployed. Others are underemployed in jobs they would normally be too qualified to fill. Credit scores for millions of people in the United States have hit new lows. FICO, Inc. data reveal that 25.5 percent of all consumers—or close to 43.4 million individuals—currently have a credit score of 599 or less. The U. S. home market is very fragile and things do not look set to improve much anytime soon.

Companies are flush with cash (an estimated $1.8 trillion on their balance sheets), but they are understandably reluctant to hire new employees because the president and the congress are doing little or nothing to assuage concerns about what 2011 will bring in terms of taxes and regulation. Strong anti-business rhetoric and legislation is coming out of Washington and protectionism is finding favor. Moreover, the Bush tax cuts will expire on December 31, 2010 and there is uncertainty among individuals and company leaders about whether Washington will permit the greatest tax increase in U. S. history to proceed. Raising taxes in a period of tepid economic growth is a poor idea. Finally, the American public has lost confidence in Washington’s willingness to cut spending to mitigate runaway budget deficits. One possible bright spot is that Treasury Secretary Tim Geithner told CNBC the Obama administration “hopes” to have a 20 percent tax rate on dividends and capital gains. But the word “hopes” itself creates doubt.

All of this confusion causes businesses and consumers alike to be more cautious. The renowned late economist Milton Friedman is responsible for the permanent income hypothesis, which, boiled down to its essence, says that consumers make choices based on their long-term income expectations, rather than on current income. With so much job insecurity among people working, coupled with high unemployment, the remainder of 2010 looks to be stagnant from the standpoint of economic activity.

The second-quarter corporate earnings that have been released this week are overall better than expected, although the reason is more cost containment than top-line growth in revenues.  However, key economic indexes such as manufacturing and retail sales indicate that the economy is losing steam. Yesterday’s release of the University of Michigan’s Survey of Consumer Sentiment revealed that consumer optimism plunged in early July to its lowest level in 11 months, from 76 in June to 66.5 in July.

The Federal Reserve said this week that economic activity for the remainer of 2010 will be lackluster and that it will take 5 1/2 years to again reach a 5.5 percent unemployment rate. Prudent businesspeople will proceed accordingly, especially in an industry like racing wherein so much of the spending that supports it is discretionary.

Copyright © 2010 Horse Racing Business


Virtually every adult has a horror story to tell about pitiful customer service. Racetrack patrons, unfortunately, probably have many, as racetracks in general have a notorious reputation in this regard.

A problem of inadequate customer service seems to be endemic in today’s society. Consider some failures outside racing:

  • Several news reports of late have told of an airplane full of passengers being parked on a tarmac for hours on end, and in at least one instance the passengers did not have the benefit of food and water, air conditioning, or even a restroom facility.
  • Apple’s iPhone 4 had a reception-interference issue. Steve Jobs reportedly advised purchasers “to hold it differently.” In other words, it was the customer’s fault, not Apple’s. Rather than do what is right, blame the customer. This episode is contrary to Apple’s usual strong showing on customer service.
  • Time Warner Cable offers a “deal” periodically if an individual will sign up with the company for a land line, cable TV, and an Internet connection. Lo and behold, within a few months of installation the “deal” price has escalated by 20 percent with adjustments and fees. Bait them in with a low price and then switch the “marks” to a high price.

Close to one hundred percent of you could provide multiple anecdotes from personal experience about a disregard for you by a company or a government organization? Here is my most current example.

Have you ever had a dispute a with cell phone company over technical problems or overcharges? Recently, I purchased a brand-new high-tech LG cell phone from Sprint. Problem is, I found that the phone would send email accurately only part of the time. I told Sprint that 50-50 odds of an email message arriving were not acceptable. To make matters worse, the new phone quit completely within three weeks of my purchasing it. Sprint gave me a rebuilt phone to replace it, telling me that I could not have a new one because I had misplaced the cardboard box that the malfunctioning new phone came in. The old “hide behind corporate policy” runaround. When my next monthly bill arrived, it had a $75 charge for Internet and email usage, even though Sprint, at my request, had disabled the data package on my phone because of the technical problems Sprint could not fix. The disable date preceded my supposed data usage by eight days. Only after a lot of contact with Sprint via phone and three or four trips to one of its stores, did I get the $75 charge partially ($60) reversed. No adjustment was made for the three days I was without a phone at all while my replacement phone was being shipped.

What an aggravation and waste of time! When I consulted Consumer Reports and several other online sources for ratings on the various cell phone companies, I found that none of them fare particularly well on customer service.

Racetracks per se, like the cell-phone firms, are known for wretched customer service, though there are exceptions. This includes mediocre food, unclean surroundings, indifferent or rude employees, and an overall uninviting atmosphere. In my experience, the quality varies greatly from track to track, so it is not an immutable law that racetracks must treat their patrons in a shoddy manner.

A racetrack executive told me that some of his pari-mutuel reps were impolite to customers and that there was not much he could do about it because it was almost impossible to discipline or fire anyone due to the employee union. While I understand the obstacle, this kind of “give up” mentality is hard to fathom because there are other organizations with unions that deliver well on customer service. Pari-mutuel reps are under stress not to make a monetary mistake, but this does not mean that they have to be sour apples to the very people who account for their paychecks.

Any organization can improve customer service if management makes it a priority. For racetracks, at least for many of them, this has apparently not been the case.

Service is a key component of customer retention and racing cannot afford to let the patrons it has vote with their feet by leaving and never coming back. Moreover, racetracks will never get a second chance to make a good impression on first-time customers. One bright spot for racing is advance deposit wagering operations, which, in my judgment, overall get high marks for interacting with and servicing customers.

Ever read online customer evaluations of restaurants or hotels? Sometimes it is perplexing how the same business can receive reviews that are 180 degrees apart. One customer says the place is great and another person writes that it is lousy. Even businesses that overwhelmingly receive high marks typically have a few former customers who write negative things about them. The most effective way for management to discern how customers really feel about their business is to throw out the outliers–the comments that say the customer-service experience is the worst ever or the best ever—and listen carefully to what the remainder of the people have to say.

High-quality customer service is an ever-elusive goal. It requires hiring the right people and training them on an ongoing basis and dismissing employees as need be. It is no accident that the people who work at companies like UPS, FedEx, and Marriott are cordial and helpful. Corporate culture and management processes make it happen.

One of the most valuable and eye-opening jobs I ever had was as a host at a fairly upscale steakhouse during my college years. What I saw made a lasting impression about the vital role of customer service that one can not adequately learn in a book or a training session. Therefore, my suggestion would be for the chief operating executive of every racetrack to spend at least an hour on business days actually intetermingling with bettors of all strata–from $2 players to the high rollers–observing and soliciting their comments. An executive might even work periodically as a service employee (a pari-mutuel clerk, concession worker, etc.) to see what life is like on the frontline. What the racetrack is doing right and wrong will crystalize like no market research report can convey.

The now-retired chairman of one of Fortune magazine’s “most admired” companies told me that he spent many Saturday mornings at his firm’s retail outlets chatting with customers in order to get their feedback. Call it management by walking around. Call it commitment to customer service. Call it savvy.

Click here to see the 2010 MSN Money “Customer Service Hall of Shame.” 

Copyright © 2010 Horse Racing Business


A shorter version of this article appeared originally in the Blood-Horse. Reproduced by permission.

Sheikh Mohammed bin Rashid Al Maktoum’s vision for a premier globally-oriented management training program pertaining to Thoroughbred breeding and racing came to fruition in 2003 with the launch of Darley Flying Start.

The DFS curriculum takes two years to complete and a first-year class and a second-year class run concurrently. Each echelon is comprised of 12 students, whose backgrounds are diverse, running the gamut from fields such as business, law, and veterinary medicine.

In a typical year, about 50 of 150 applicants are chosen for additional consideration. Initially, these 50 men and women take online aptitude and competency tests and furnish a video demonstrating their ability to ride a horse. Each must have experience with Thoroughbreds and be fluent in English. Next is an actual in-person interview, wherein a candidate completes written and group assignments and converses with Clodagh Kavanagh, the DFS course manager in Ireland, and Joe Osborne, the managing director of Kildangan Stud and a DFS trustee.

The dozen individuals ultimately selected for DFS receive a scholarship covering their course-related expenses, plus a monthly stipend. Students spend five months in Ireland, two months in the United Kingdom, six-to-seven months in the United States, four months in Australia, and three months in Dubai—where they learn and work under the guidance of part-time DFS regional coordinators.

Students divide their time between classroom instruction and actually gaining hands-on experience with breeding and racing stock. Subject matter varies from business management to industry-specific topics; curriculum modules have been certified by universities in Australia, Ireland, and the United States.

DFS has graduated five classes. Fifty nine alumni from 15 nations are employed in some facet of racing and breeding, and are spread out over eight countries and five continents. Their occupations encompass a wide range of activities, including, for instance, racehorse trainer, bloodstock agent, and television personality on a racing channel.

Todd Pletcher, who has employed DFS students and graduates, says, “One of our assistant trainers, Michael Dilger, is a former Flying Start student. We have also had three students intern with us. All were very well prepared for what we asked them to do. They were reliable and dependable. Darley is providing a valuable service to the industry.”

Clodagh Kavanagh believes that DFS “has added a new level to the career structure in the Thoroughbred industry, which encourages talented young people to pursue their interest and commitment to Thoroughbreds. In the long term, this should translate into an industry that is strong and adaptable though a human foundation of committed, influential, and educated people.”

I have conducted a seminar with the DFS students twice in Lexington, Kentucky and found them to be bright, articulate, and enthusiastic. Almost all of the DFS graduates are employed in some facet of Thoroughbred horse racing, which bodes well for the industry.

As a longtime university professor myself , I know a strong educational program when I see one and DFS is such a program. The syllabus is very well thought out in terms of achieving the learning objectives. In particular, the students are required to interact with people with a diversity of backgrounds and interests and also must demonstrate that they can apply what they have learned in a classroom setting. Consequently, the program is neither too theoretical nor too vocational.

Copyright © 2010 Horse Racing Business