Make Sure Your Objectives Align with Your Practices
By Peter Lyle DeHaan, PhD
To avoid the huge depreciation loss that all new cars undergo, I buy used. However, there was a season when I bought new. This story is about one of those times.
Although it wasn’t my practice to go to the dealer for maintenance, my new car changed that habit. There was warranty work and the enticement of coupons for low-cost oil changes.
Soon my default destination for auto service changed. It was smart marketing on their part. When the discounts stopped, I still returned to them for service. Too bad their later actions drove me away.
An Expensive Oil Change
It was time for my regular service, and I had a list of other things needing attention. Since I’m not a mechanic, I tried not to tell them what work to do. Instead, I informed them of symptoms. I wanted to make sure that I didn’t ask and pay for a tune-up when the problem may have been a loose vacuum hose. It only took one passive-aggressive mechanic to do what I suggested—while ignoring the real problem—to make me change my approach.
When I dropped off my car, I said, “It’s time for an oil change. Also, it pulls to the right, and it starts hard and runs rough.” I left expecting they would change the oil, do a front-end alignment, and give my car a tune-up. Based on their posted pricing, I estimated the cost would be $100.
When I picked up my car, they presented me with a $175 bill. As I read the paperwork, my mild surprise changed to anger.
Change oil: Oil, lube, filter, labor: $24.95.
Car pulls to right: Test drove car; recommend front-end alignment: $19.95.
Hard to start: Instruct driver not to press gas pedal while starting vehicle: $56.00.
Runs rough: Perform engine analysis; checks okay; do tune-up in 3,000 miles: $75.00.
For $175, I had my oil changed and received some costly advice. My complaints to the service manager accomplished nothing, so I left and never returned. Once again, my local mechanic, whom I trust to do quality work and charge fair prices, is servicing my cars.
Like many businesses, car dealers measure the work their employees do. Garages monitor mechanics to make sure they’re productive throughout the day, document and bill for all their work, and complete repairs within the standard time allotment. Mechanics who meet expectations receive raises and promotions. Mechanics who don’t, even when it’s in the customer’s best interest, earn poor reviews and lower raises. Or they’re fired.
Some garages pay their mechanics based on billable work. Therefore, the more they bill, the more they make. I’ve been to those places too. At one shop specializing in foreign car repair, it seemed every bill was always around $500—sometimes more. They weren’t in business long.
Other people also bill by time. Lawyers and accountants come to mind. A lawyer once told me to never use an attorney trying to make partner. To get the partners’ attention, they must log over 2,000 billable hours a year, and their clients pay the price.
A Costly Failure
I once called my CPA’s office to discuss converting my IRA to a Roth IRA. I talked with the junior member they’d assigned to me, asking if there were any other tax ramifications I should know about. She said there weren’t and offered to do an analysis for me.
“That’s not necessary,” I replied. “You confirmed what I needed.”
“But we just got this new program that I want to try out,” she begged. “Will you let me run an analysis?” Assuming I was doing her a favor, I consented. The call took less than a minute. A few days later, I received a one-page spreadsheet confirming I should switch to a Roth IRA, along with a bill for $100.
The managing partner agreed the charge was unwarranted, but insisted I pay it anyway. He promised to make it up to me later.
I found a different tax advisor.
An Inflated Bill
Though people don’t have their TVs repaired anymore, this wasn’t always the case. Long ago a friend landed a summer job repairing televisions. He earned 20 percent of whatever he billed. An enterprising guy, he analyzed the rate chart and determined how to add $35 to each bill—for which he’d earn $7—for only a minute and a half of additional work.
He would take the back off the unit and hit it with a burst of compressed air, charging $8.00 to “clean chassis.” Next, he would squirt the tuner with cleaning spray, charging $10.50 to “lubricate tuner.” Then he would turn on the set. If the filaments of the vacuum tubes glowed, he would bill $16.50 to “check all vacuum tubes.” With $35 of basic tasks completed, he would then repair the problem, adding even more to the bill.
He earned a lot of money that summer.
Measuring Business Success
There’s an old business saying (of disputed origin), that “What gets measured gets done.” Some have tacked on a follow-up adage that “What gets paid for gets done better.”
Consider what you measure in your business and how you compensate your staff. The goal is to improve your operation. This could be to pursue greater efficiency, increase production, decrease costs, or maximize revenue.
Consider the consequences with care.
Attempting to please you, maximize their rating, or earn a raise, employees may do things that drive away customers, lower quality, or hurt your business. This is the wrong outcome.
If you monitor productivity, do your staff members alter their work habits to appear more productive? Do staff assume they need to work faster, setting aside quality? If your customer service staff, programmers, or project managers track project time, is unnecessary work performed? Are time logs padded? Do they assume they need 2,000 hours of billable time a year to get a raise?
Might your commissioned sales reps sell customers what they don’t need or want just to meet their quota or earn a bonus? Do you have a policy of not giving credits, either stated or implied, that leaves staff with no viable solution for frustrated customers?
Last, consider billing. What message do your invoices send? Are they easy to understand? Can your staff explain every charge in a way that makes sense to customers? Are you billing surcharges and blaming it on outside forces?
Yes, there may be sound business reasons for each task that you measure. These practices can leave your business stronger and on a firmer financial footing, but there’s also a risk. Take care in measuring business success. Be astute and pragmatic—from the customer’s perspective—to produce the results you want.
Customer Service Success Tip
Make sure that what you measure and pay employees to do balances your business’s financial goals with what’s in your customers’ best interest.
Even better, strive to keep customers happy. That’s the best way to maintain a viable business.
Read more in Peter’s new book, Sticky Customer Service, to uncover helpful customer service tips, encouraging you to do better and celebrating what you do best.
Peter Lyle DeHaan is an entrepreneur and businessman who has managed, owned, and started multiple businesses over his carer. Recurring themes included customer service, sales and marketing, and leadership and management. He shares his lifetime of business experience and personal insghts through his books and posts.