The Loyalty Partners

Monthly Archives: January 2009

Bad Service is Hard to Sell

I recently read the quip, “Service isn’t what it used to be; it never was.” One approach to service in the auto business is to include it in the price of the car. BMW and Mercedes do this the best and they generally deliver very high levels of service. Selling prepaid service is not a particularly new idea. Sears has been doing it for years in their appliance business and may other retailers attempt to sell product protection plans just in case your product breaks or otherwise becomes inoperable. Part of what’s being sold with the prepaid service is piece of mind. I say that now, but learning this was a hard lesson for me.

As Operations Manager for the Michigan retail stores, a significant part of my responsibility was to oversee the various service departments which served the customers of the Michigan stores. Ultimately the profit or losses of these service units folded into the profitability of the stores. Actually it was a very significant factor and the poor performance contributed to the profit ranking of the stores as 39th of 42 regions within the company. Obviously, improving the performance of the service units was a very high priority for me.

Of course, there were many factors in the poor performance of the service departments, but the most obvious need for improvement was in the area of selling prepaid service called maintenance agreements. The Detroit stores were particularly bad; in fact they ranked last in the entire company. Store salespeople either couldn’t or wouldn’t sell these agreements. The high levels of appliance sales from these very large sales producing stores, made it very difficult for the service department to compete with units in other parts of the country.

I attacked this problem with vigor. We had sales contests and many other promotional events to cajole the salespeople into doing a better job. No improvement. We had our people ride with service techs so they could see first hand how the service business was conducted and how important it was that we serve the business well. No improvement. Then we got tough. We told our people that selling these agreements was part of the job and if they were not able to do this successfully, they might not be right for that important and high-paying job. No improvement. This was not a short-term problem. It had existed forever and it seemed that it would continue. It was clear to me that without significant improvement in this important area of our business, the profit improvement we needed would not occur. Other regions made millions of dollars annually in service, but we never booked even a half million dollars.

Finally in desperation I agreed to visit the Memphis Region which led the nation in the sales of these agreements. I remember that I was not eager to make this trip. I doubted that there was anything I could learn there. This Detroit problem was just something that came with the territory, and would probably never change.

When I first arrived, I was directed to the call center where customers called to describe their service need and arrange for service to correct their problem. At first, the calls sounded the same as our calls, but after listening a little more carefully, I started to hear things I never heard in Detroit. Customers were asking for next day service and the folks on the phone were agreeing. Back in Detroit, we couldn’t possibly grant such requests. If we got to the customer’s home in less than 4 or 5 days it was considered a good response.

I checked the percent of time that the service call had to be repeated because the service van didn’t have the right part on board. Their percent of this was negligible, while ours was very high. This meant that their investment in stocked parts must be much higher than ours. While I saw the differences, I was unable to translate that into profitability at first.

As I talked to the managers, it became obvious to me that their level of service to their customers was so much higher than ours. Their service levels made selling the piece of mind that prepaid service offers a short jump. In Detroit, selling piece of mind was next to impossible because of the very poor level of service we provided our customers.

Another important factor in the service level we gave was the lack of confidence our service people had in our leadership. Our technicians were unionized and the conventional wisdom was that they didn’t care about the company. The truth was that the company had not communicated to them that they cared about the company’s customers or the technicians that provided that service. We rented a movie theater and brought in all 700 of our unionized technicians. I told them that the meeting would be a short one. We had decided to be the best in terms of service, but admitted that we didn’t really know where to start. We asked for their help and told them we had instituted an 800 number to record their suggestions and had appointed a bright young assistant manager who they respected to sort through the suggestions. I promised that every reasonable suggestion would be seriously considered.

The calls started slowly, but finally they came in. Give us more technical training, have the right parts in stock, update our tools, fix our old and decaying truck fleet and many more. We did them, but we also demanded that customers tell us when they wanted us to come rather than for us to tell them when we would be there. Managers were graded on the percent of promises they kept and the number of calls that were completed with one service call.

We reported these improvements to our store salespeople, and the customers reported them as well. Gradually, the sales of the maintenance agreements began to increase. It reminded me of a rocket launch in that it took a great deal of power to see any movement. Then it rose slowly, but finally it soared.

Detroit was not the problem, poor service was. Once we began to provide the type of service our customers deserved, our people had no trouble producing at high levels. Our reward was profits over twenty times greater that the best service profit year ever.

Continue Reading

Picking the Right Person

Human Resources 101

Most thoughtful businesses have a selection or hiring tool. The employment process somehow looks at the requirements of the job to be filled and try to match individuals who have the skills, interest and attributes necessary to perform the job in a very outstanding manner. This is probably the way all jobs should be filled, but I wonder if this is the way things are done in some very high profile hires we have been reading about.

To further prove the point that selecting the right people is vital to the success of any organization, just look at the firing of Mike Shanahan, the highly respected Broncos coach and General Manager. It’s apparent to most of us who follow the team that Mike’s dismissal was more because he had not made the right personnel decisions than the right coaching decisions. Somehow the defensive players he selected were unsuccessful and ranked near the bottom of the league in performance. It seems likely that our owner will select two individuals to replace coach Shanahan. One will select players and the other will coach them.

Another highly visible selection process involves our new US President. Of course, time will allow experts to judge the success of his picks. What seems clear so far is that he has tried to apply the business model selecting individuals who have demonstrated skills and achievements over pure political selections. He appears to be valuing pragmatism over ideological concerns.

Selection of the right team is perhaps the most important task any leader has. Many political observers feel that John McCain’s selection of Sarah Palin as his running mate was not the very best choice. Many viewed her selection as politically motivated rather than selection of the very best individual to replace the President should that become necessary. How one feels about this probably revolves around what they view the key Vice President accountabilities to be.

Other politicians have had varied approaches to selecting Senatorial vacancies in their states. In Illinois, it appears that there has been little concern about anything except “What’s in it for me?” Few would embrace this thought process. In New York it seems that the selection will turn out to be a popularity contest, again hardly the right model. Here in Colorado, I think the governor got the selection process right. He surprised everyone by selecting someone not even on the political radar. The governor told us that he believed that his selection was a person who had the correct attributes, personality and track record to play a part in helping solve the important problems facing our nation. Wow…what a concept!

Continue Reading

Happy New Year America

 

It’s that time of the year when we become reflective making New Year’s resolutions promising ourselves that we will do better in those areas where we see reform is needed. As we watch the news unfold revealing one negative event after another, perhaps our country needs to make some New Year’s resolutions.

Wall Street and Washington share responsibility for our nation’s financial meltdown. It’s a chicken/egg call to determine which came first Wall Street’s greed or Washington’s see no evil/hear no evil pose. What’s clear is that Washington schemed to make the economy look better than it was, and Wall Street saw the caper as an opportunity to make its numbers too.

For many years the folks on Wall Street have justified ridiculously over-compensating their leaders with the notion that shareholder value justifies the practice. Now when there is no shareholder value, they still insist that the bonuses are needed to retain those who led the downfall. Haven’t they seen Christmas Vacation which teaches us those bonuses should not be totally discretionary?

Baseball, America’s pastime shows some of the same lack of integrity as it allowed the use of steroids to make the game more exciting hoping to fill seats. They, too, see no connection between salaries and excellence paying lots of 240 hitters millions. The New York Yankees, Wall Street’s team, have made over-compensation an art form. They exceed the salary cap annually accepting a 23 million dollar fine from the league as a cost of doing business. The new Yankee Godfather dismissed the practice saying, it’s our family business, and we’ll run it as we see fit.

Pro football, America’s other love, has a new sheriff running the show. There are so many criminals and thugs in football that he has come to town with a new “We’re not going to take it anymore” stance. Meanwhile coaches spy on each other and owners continue to hire more thugs. Jay Leno quipped that the penitentiary has enough pro football players to win the Super Bowl.

College athletics has become such a big business that colleges like the Military Academies, Stanford, Notre Dame and others where the concept of student athletes still remains, can no longer compete with the semi-pro programs. As you would expect, the coaches who deliver millions to the University are compensated with the shareholder value/Wall Street model.

Even in our personal lives cheating is the order of the day. The Divorce rate is at an all time high in America and spousal cheating is the chief cause. Of course, even our government officials have affairs and cheat on nearly everything. They build bridges to re-election, cozy up to lobbyists and choose party loyalty over loyalty to the country and solving its problems. Church membership is down probably because we don’t like weekly reminders of rules we should consider following.

It would seem that I’m suggesting that we are an ethically bankrupt society on a one way trip to oblivion. That’s not what I believe. I believe that the information age is bringing us the wrong information. We are a basically good country made up mostly of decent folks.

We just need a few changes to get back on track….Perhaps some New Year’s resolutions.

Think back for a minute back in the day, when integrity was more evident. We were under the care of parents and teachers who had stricter rules. They made sure we understood the rules. They taught us that winning was also about winning with integrity.

We also understood the consequences of breaking the rules. A trip to the office probably included a whack or two with a sturdy paddle and double jeopardy when word of the misdeed got to our parents. It’s highly unlikely in the day that the Government would decide that the rules governing war prisoners didn’t apply to us because we were all about rules. Businesses employed internal auditors to insure that the company complied with the accounting rules. Now even external auditors have become business consultants focusing on making the numbers rather than auditing them.

So I’m suggesting that America set some new standards or rules and spend some time and energy changing our course as it relates to integrity. So here are my New Year’s resolutions for our country.

  1. As citizens we must tell our leaders we expect integrity to be the center of their values and operations. Punish companies who cheat and throw out politicians who fail to put the country first.
  2. In our personal lives let’s make honesty, including self-talk, the “way we roll”
  3. Reject the lunatic fringe ideas that get undo publication; favoring instead ideas that support balance and are grounded in our belief that we are the United States of America

HAPPY NEW YEAR AMERICA

 

 

Continue Reading