Don't let the wolf in your hen house

Last week, my plumber hired a drywall guy to come to my home and patch up some holes from a plumbing repair. After completing the job, the drywall guy handed me his business card and said, "Let me know if you ever want to do any remodeling - I specialize in kitchens and baths." The problem? My plumber also has a remodeling business that specializes in kitchens and baths.

This situation is a modern-day example of sending a wolf to check on your hen house. Sure, the wolf has excellent references and works for a reasonable rate, but the wolf ultimately wants to eat your chickens! Any situation where someone you hire has very different interests than yours can result in unwanted consequences.  Economics fans refer to this as the principal - agent problem: both parties are guided by their own self-interest, so it is important for the principal (the plumber) to create the proper structure so the agent (the dry wall guy) doesn't work against the principal's interests.

Here are some more examples of wolves in the hen house:

• A customer service rep is hired to provide outstanding service. The customer service rep wants a an easy, stress-free job. The result: the customer service rep only provides outstanding service in situations that are stress-free.
• A company hires a salesperson and pays her a commission on gross sales. The sales rep wants to make as much commission as possible, so she offers discounts to make the product more attractive to customers. The company's sales look good, but their margins are so poor there is very little profit.
• A company hires a technician to make house calls and do in-home repairs. The technician loves the technical work, but can't stand dealing with people. The repairs are always done correctly, but the company's customers frequently complain about poor service provided by the technician and often take their business to a competitor.

The solution?

These situations aren't necessarily simple to resolve, but the starting point is deliberate alignment. You can use our simple competency model to work this out for anyone you plan to hire -- before you hire them! Download our competency model.

Your accounting department could be costing you money

Companies routinely allow their Accounts Payable and Accounts Receivable departments to have direct customer contact. Unfortunately, many of these people are programmed to have a "numbers and rules" mindset, and that's exactly how they approach people outside the organization.

The results often include inefficiency, damaged relationships, and a vicious cycle that starts all over again.

Accounts Receivable

Your A/R department can hurt your image and ultimately cost you money in two ways.

The first is through poor billing practices. Earlier this week, I received a bill from a vendor. The job I hired them to do wasn't complete and I was told I would be billed for the entire job once it was finished, but the bill came anyway. To top it off, the bill was dated 13 days earlier and the terms were net 10. Yup - I received an unexpected bill that was already overdue when it arrived.

The second problem comes through poor collections procedures. Every business person knows cash is the lifeblood of the business, but many A/R employees are stubborn, stern, and anti-social. There are certainly many outstanding A/R people out there, but if your company doesn't employ any of them, the net result could be angry customers AND slower payments. Double whammy!

Accounts Payable

It's a time-honored tactic for A/P departments to sit on invoices until they feel like paying them. Some A/P departments have a blanket "net 30" or "net 45" policy, and the time clock usually starts when they receive the invoice (not when the company receives the invoice or the job is done). How can this hurt the company? Let me give you a few examples:

• Upset vendors = declining service. Try asking a vendor for a big favor after you've developed a pattern of paying late, you have aging bills outstanding, or your company's A/P department is just a plain ol' hassle to work with.
• Upset vendors = tightened credit. Poor treatment from your A/P department could lead to stricter credit terms or no credit at all. That means more cash up front for purchases or you'll need to tap into a secondary source of credit to make purchases. (The opposite is often true too - treat your vendors well and they are likely to be more flexible.)
• Late fees aren't assigned to MY cost center. Good ol' cost center accounting ensures that any late fees assessed by your vendors are typically passed along to the department that originated the work, not the A/P department that sat on the bill. This means no incentive for them to change behavior, but it also means your company is paying more than it needs to.
• No pay, no work. Many companies a firm policy of cutting off all business if too many bills are outstanding. It makes sense, doesn't it? We work to get paid, so if we aren't getting paid, we don't work. (Seriously, would you keep coming to work if your company didn't pay you?) The problem here is you may have an urgent need on one hand, but a belligerent A/P department means you also have no credit. Yikes!

The bottom line is your accounting department shouldn't be exempt from treating your customers, vendors, and even your employees with respect, professionalism, and a spirit of cooperation. It's cheaper and easier to work this way, plus you can brag that you have one of the few "cool" accounting departments.

Three Customers You Shouldn't Serve, Part 3 of 3

This post is the third in a three part series on customers you shouldn't serve.

In part one I identified three customers you shouldn't serve:

1. They want what you can't deliver well
2. You can't serve them profitably
3. They are abusive

In part two I outlined a few strategies for handling these customers. Ah, but no strategy is fool proof. Sometimes, you have to part ways. My company has said "No" a few times and fortunately, these situations have generally gone well.

They wanted what I couldn't deliver well

A client of mine wanted me to facilitate our time and priority management workshop for their team. I conducted a needs assessment and discovered that the training program wouldn't yield any results, but a few simple changes to their workflow would increase their productivity by at least 10%. The client insisted we do the training but didn't want to make the changes, so I was left with a dilemma. On one hand, I could accept the paying assignment and conduct a training class that would probably disappoint the client in the long run.  On the other hand, I could walk away from the engagement. 

As a middle ground, I proposed the client make some of the changes first and then I would conduct the training. The client agreed to this change, but procrastinated on making the requested changes because they were "too busy". I continued to check in over time until eventually it became clear we wouldn't move forward. Too bad for me? Not really. Sure, I would have loved to help the client achieve some real results. However, this was the next best thing. We avoided a confrontation and they eventually just faded away. Sometimes, that's the best option.

You can't serve them profitably.

Consulting firms are notorious for charging large fees. Consultants will tell you that companies are notorious for trying to get consultants to provide free services in exchange for PR opportunities. I guess it's a vicious circle.

I've had quite a few potential clients ask me to deliver a complimentary keynote or workshop at a company meeting. The promise is always some variation of "all our division heads will be there and they'll get to see what you can do -- they may even hire you." As a novice consultant, I fell for this line of reasoning a few times until I realized it was unlikely any business would come of it.  Meanwhile, I had spent a day or more of my time preparing, traveling, and delivering the presentation. Not very profitable indeed!

My new strategy is to counteroffer. For example, I referred an alumni group to a speaker who actually went to that school. I gave another client the option of applying my fee to any subsequent business their division heads threw my way (they declined). A third client agreed to pay a smaller fee in exchange for me advising them on creating their own program. In each of these situations, the client was still relatively happy while I didn't engage my firm in an unprofitable activity. Gotta love options!

They are abusive.

I've found that politely offering to end the relationship is an outstanding cure for an abusive client. On a few occasions, I've told a client "I'll give you two options. First, we can treat each other with respect and courtesy or two, we don't have to do business together.  I'll be OK with either choice that you make."

Every time I've given my "two options" speech, the client or customer has picked option one. OK, that may be 5 or fewer times, but I'm still at 100%. My theory is customers are often abusive because they think they can get away with it. Give them two clear choices and their change in demeanor has always been instant. Nobody wants to walk away because they couldn't control themselves!

Three Customers You Shouldn't Serve, Part 2

This post is the second in a three part series on customers you shouldn't serve.

Last week, I shared three types of customers you should avoid.  This week, I have a few suggestions on how to work with these customers should you inevitably encounter one. (Do nothing at your own risk -- these customers all have the potential to hurt your business!)

1. They want what you can't deliver well

Customers often ask us to provide products or services that are outside our "sweet spot". It may be tempting to try our best to give them what they want, but this can be a recipe for future failure. Instead, consider a few alternatives:

• Re-frame the customer's request to see if you have something you can offer that will meet their needs.
• Refer your customer to someone who can do the job and do it well.
• Provide your customer with resources that will allow them to find a solution.

2. You can't serve them profitably

Unless you are running a charity, you need to make a profit to stay in business. Here are a few suggestions to make customers more profitable:

• Fix problems. If your service is poor or you've subjected your customer to problems, you should fix those first. Getting it right the first time is almost always cheaper in the long run.
• Hold late-payers accountable. Customers that habitually pay late (or cause other damages) should held accountable through late fees or a discontinuation of service until their account is current.
• Renegotiate. Consider renegotiating your price or terms of service if your margins are too thin.

3. They are abusive

Politely, but firmly let your customer know that abuse will not be tolerated. The revenue you receive from an abusive customer is rarely worth the stress it causes employees and the high cost of servicing these customers.

Three Customers You Shouldn't Serve

This is the first post in a three-part series on customers you shouldn't serve.

The customer is always right and we certainly aim to please by going the extra mile and never, ever saying the word "No" if we can possibly help it.

Of course, you may be doing more harm than good if you don't identify the Three Customers You Shouldn't Serve. Yes, dear reader, I'm recommending you don't do business with these folks if you can help it. *GASP*

1. They want what you can't deliver well.

You wouldn't call a pizza place to buy a couch, go to a dentist for an oil change, or send your aqua-phobic dog to the dry cleaners for a bath would you? Of course not, but some customers want us to deliver far more than we ought to.

I recently had to replace the fabric on a lounge chair. I called Saddleback, the store that sold it to me, and they referred me to Tyler Uselman, an independent contractor. They knew they weren't experts at patio furniture repair, but Tyler was.  He came out to my house, did a great job on the repair, and I'm now very happy with both Tyler and Saddleback. By the way, Tyler's a whiz and charges very fair prices, so email him if your patio furniture needs sprucing up.

2. You can't serve them profitably.

Any smart business will take on a few expenses in the interest of customer goodwill, but you still need to make money on customers over the long run. It's best to end the relationship if your margins are so thin or your service costs are so high that you'll never make a profit.

I once had a client who often caused delays, additional expenses, and required additional time to complete projects for them. Since I was paid a flat rate per project, these unanticipated items made the work unprofitable over the long run. To top if off, the client typically paid late, so I usually had to spend more time chasing down their accounts payable department. I executed my duties to the best of my abilities, but we gracefully parted ways once our contract was up.

3. They are abusive.

There are certainly situations where customers have a right to be angry, but there's never an excuse for a customer to verbally abuse one of your employees. Curse words, insults, and threats have no place in customer service, even if they are coming from the customer.

Sadly, business owners and managers can be tempted to let a profitable customer get away with a little employee abuse. This short-sighted approach can lead to poor productivity, employee turnover, or worse yet, an employee lawsuit.

Stay tuned...

Next week, we'll discuss strategies for artfully handling these types of customers. In the meantime, I welcome your comments and suggestions for other types of customers we should avoid.

Do you receive more good, bad, or outstanding service?

A colleague of mine, John Curran, recently asked an interesting question. Do I receive more good, bad, or outstanding service? (Ok, John asks lots of interesting questions - follow him on Twitter and you'll see.)

So, I thought I'd answer the question on my blog but also invite your comments too. 

#1: I receive Good Service most often.
I define "good service" as service that meets the customer's expectations. Most of the time, I receive good service. Of course, that quite literally is nothing to write about. I write a lot of blog posts about bad service and a few about outstanding service, but nothing about good service. Why? Because it is literally forgettable.

We're programmed to notice exceptions.  We seek pleasure and run from danger, but noting every mediocre moment of the day would result in sensory overload. 

#2: I receive Bad Service less often than good, but more often than outstanding.
I define "bad service" as service that falls short of the customer's expectations. While I don't view myself as being particularly sensitive to poor customer service, I do have a blog to fill and customer service workshops to train, so I pay attention. Bad service does happen quite a bit more than I think it should.

Why? Too many reasons to list here, but I differ from many people on my #1 root cause. Most people I know blame the employee delivering the service. I tend to blame their supervisor first, because the supervisor hired the person, trained the person, and oversees that person's work. Sure, the employee is responsible too, but I've seen too many employees turn their performance around under the right leadership to think that most people can't do better. (That's why leadership development help is something my clients ask for so frequently.)

#3: I receive Outstanding Service least frequently.
I define "outstanding service" as service that exceeds the customer's expectations. This doesn't happen too often, but when it does, yahoo! Free publicity in my blog to anyone (or any company) that provides me with Outstanding Service!

Challenge: What would you do?

There are a million ways under the sun to improve performance. To mix it up and have a little fun, I'd like to know what you would do!

Please read the scenario below and post a comment describing how you would improve employee performance in this situation. I'll be collecting responses through next Tuesday, September 8. Next week, I'll reveal my solution and share with you what happened. 

Performance Improvement Scenario

A small office controlled access to their suite through an intercom system.  The Office Manager was responsible for using the intercom to screen visitors.  She would ask visitors for their name and who they wanted to see before letting them into the office.

However, a problem was occurring when the Office Manager was at lunch or had the day off.  Other members of the office staff were not following proper security procedures when greeting visitors. Everyone seemed to understand the general need for security, but other employees often forgot to ask visitors to identify themselves or the name of the person they were visiting.

What would you do?

Post your comment below to describe how you would ensure employees in the office followed the proper security procedures when covering for the Office Manager. I'm curious to learn how many creative (and effective) ideas are out there!