Tag Archives: Outsourcing

The Business of life Chapter 38 – when a dream goes sour

“I’ve lost my job!” were the first words David uttered when he turned up to see me in early 2002.  David and I had known each other for well over twenty years, since our time in the lighting industry running competitor companies.  Despite the intense rivalry between our organisations we had always enjoyed each other’s friendship when we met at industry functions.  We had lost touch with each other when David had moved to the south for a new role but he had recently relocated back to Yorkshire again.  We spent time together discussing what had happened and the options David had for his next career move.

Our business crest & motto “Strength through knowledge”

It was some months before I met David again, but when he came calling it was to set my career off in a new direction and widen my portfolio of roles still further.  “I’ve got an idea for a business.” was David’s greeting that second meeting, “Are you interested?”  He went on to say that he had paid a large sum of money to sign up with what claimed to be a not for profit organisation that provided re-training for executives wishing to move into business consultancy.  David’s view was that the course he had attended had provided poor value for money and he believed we could do far better in setting up our own competing service.

I was noncommittal that first day but said that I would research the sector and see if the concept of a competing business made sense.  I went through the process of producing a draft business plan.  After reviewing the company in question, all similar businesses and the Small and Medium Enterprise (SME) sector I came to the view that, given David’s recent experience, we could well put together a superior service.  When I added in our respective experience and skills I became convinced that this was a viable proposition.  I met up with David once more, took him through my findings and we quickly trashed out the actions required to get our new business started.

Within a short period I had registered a company (The Academy of Business Consultants), obtained a VAT registration, taken out the required insurances, produced a corporate identity, leaflets and business cards, created and implemented a website and sketched out a marketing and operations plan.  I was driven!  Working with David proved to be extremely productive as we found that we had a synergistic effect upon each other that made creating concepts and resolving problems a simple and enjoyable process.  Within six months of our initial discussions we had our business and launch plans complete and placed the first advertisement of our advertising campaign in the Sunday Times.

The concept we had developed involved refining the enquiries we received from the advertising campaign, getting the candidates to complete an online personality profiling questionnaire and inviting them to an evening seminar.  During these seminars we would outline a genuine array of career options open to them, present a profile of the SME sector and its needs, pitch our training course concept and provide valuable feedback on their behavioural preferences and how these might impact upon future roles.  The responses we received to the advertising were good and we ran seminars in the North, Midlands and London.  However, despite receiving healthy attendance and strong interest it quickly became apparent that we had a failure on our hands.  We had encountered an insurmountable problem.

We had offered a better and more relevant training programme, set our price at a more attractive level and matched the offering of refined leads and continuing support to those completing the training programme.   There was, however, a critical element of our main competitor’s offering that clinched business for them but one we had chosen not to follow.  One of the key factors that invariably clinched the sale for our competitor was an ‘income guarantee’.  Having reviewed the documentation that David had been given it was clear that the guarantee was all but worthless, so hedged around with conditions and procedures that it was almost inconceivable that anyone could succeed with a claim.  Little wonder that they boasted that they had never had to pay out!  We decided that it would be unethical to match this misleading offer and we changed the direction of our business.

Whilst David had found that the ‘hot leads’ he had been provided by our competitor were at best on the tepid side of stone cold he had, nevertheless, succeeded in building a strong client base of his own.  An interesting and resourceful turn of events had been David’s success in persuading a local firm of chartered accountants to sub-contract the provision of business advice for clients to him.  This experience had led him into a similar arrangement with other firms.  The accounting firms were all members of a national marketing membership organisation (we’ll call them XYZ) that provided help and assistance to members to enable them to run a better business.

We knew from research conducted by Strathclyde University that accountants were the most trusted source of advice amongst private business owners.  However, David’s experience was that beyond the traditional areas of accounting and tax, most small and medium sized accounting firms shied away from offering other forms of business related advice.  “Why don’t we offer our business advice service to more of XYZ’s members?” I suggested. “They obviously see the commercial wisdom of offering advice to clients but don’t feel confident or expert enough to do so themselves.”  David agreed and this was the genesis of our new business venture.

I joined David (in my ‘spare time’) in widening the number of firms we approached and we quickly succeeded in winning further clients amongst the members.  Convinced that the service we were providing was potentially of real value to XYZ, we decided to approach them.  This was not a simple matter and it took many attempts over six months before we sat across a desk from one of the two founders.  The meeting went well and we came away with an agreement to trial our service to a sample of their members.  We recruited another highly experienced business advisor to join us and once again proved we could deliver results.  Some months later the trial was extended to a further region and the results continued to improve.

A short way into our extended trial the three of us started to uncover the same situation time and again.  It was the practice owner rather than their clients who was in most urgent need of face to face business guidance and support.  Despite being highly qualified and experienced chartered accountants the vast majority of practice owners lacked the wider business skills to get the most from their teams and their clients.  The answer we soon implemented was to commence a coaching programme with the practice owner in addition to our work with their clients.

We had implemented a client satisfaction feedback process whereby our researcher, interviewed every practice owner and client we worked with following a set period.  The feedback we received was invaluable and showed our service to be rated either first or second out of the whole XYZ offering.  It also enabled us to take corrective action where required and ensure that our service continued to meet members’ needs.  We also fed back the results to each associate and the XYZ management.  The change of direction was extremely successful and led to a real breakthrough when XYZ asked us to provide a national service for every new member they recruited.  We then formed a new company with XYZ as partners.  Given that we were now about to create a business with effectively a sole customer, we argued that such a shared destiny required a reciprocal shareholding in XYZ.  We were not successful in this but settled for the right to attend and participate in their board meetings.

Faced with a national launch far beyond the geographic capabilities of three of us we started an intensive recruitment campaign to cover the entire UK.  Within a short period we assembled and trained a team of 20 associates, each of whom had previously held at least one role as MD or chairman.  Ironically, each of these new associates had been uncovered via our previous competitor’s online network!  Based on the experience that we had gathered from our existing work, our model was based upon a mix of coaching and mentoring.  We knew that pure coaching methodologies (the coach questions and the coachee provides their own solutions) can provide strong results.  However, our own experience showed that a combination of coaching blended with appropriate guidance (based on the vast experience of our associates) enabled a time-efficient and professional solution.

By this stage I had been running businesses for thirty years and been an owner of various different organisations for ten.  These organisations had been many times larger than the one David and I had created and they had given me rich and varied experience.  But having created a successful organisation together from the failure of our initial concept was richly and uniquely rewarding.  To start and build a successful business is something really rather special.  We were now helping many business owners and their teams to be more successful as organisations and more fulfilled as individuals.  David and I had continued to make a truly synergistic team where difficulties were merely fresh challenges to be overcome.  With David’s superior interpersonal skills and my research, analysis and organisational work we were a powerful team.

David and I also worked closely with our new partners, resulting in an initially a strong relationship.  However, management changes took place within their organisation after a couple of years and differences of opinion started to emerge over strategy.  As time moved on I found that I was spending more and more time attempting to negotiate a resolution of these differences.  I became to realise that the rich feelings of satisfaction with our business that I had enjoyed so much had all but evaporated.  I could see only opportunity squandered and a loss of personal freedom stretching ahead.  A concept that both David and I had planned to run on into retirement had become something from which I could no longer derive satisfaction.

Following lengthy discussions over the situation we both seemed to realise that events had changed so much that we could never recapture the fun and satisfaction we had previously enjoyed.  Subsequently, following discussions with our partners, an offer was made to buy out my stake in the business and in 2010, after 8 great years working with David, I departed.

Reading over this last chapter I realise that it ends on a very low note but that accurately reflects the way it felt at the time.  There is a very much more complex story that I have abbreviated into a few short paragraphs but legal reasons preclude me from going into greater detail.  I really missed what David and I had created but time and circumstances had moved on and I had to do likewise.

David continued to run the business with our previous partners for another two years until the situation changed once more and the contract was terminated.  He is now continuing to offer business coaching and advice to a much wider spectrum of professions and still working with most of our previous associates.  I wish him every success in what remains a valuable endeavour.

We had succeeded in building this business together whilst I was still heavily involved in the running of ABC, Trisk and Bison as well as chairing Hallamshire.  I still don’t know how it all fitted together into 365 day years – perhaps the extra day in leap years helped.  And yes, whilst I was having fun in all these businesses, there was always the time I spent each week in Newcastle with the big investment I had made in Metal Spinners Group.  And events there were becoming ever more involving.

Less than a month after my departure an event took place in Newcastle that was to have far reaching implications.

 

Destroying loyalty

Why do companies seem to have given up on attempting to retain customers?  Why do I now feel ashamed to mention my early career in marketing?  Where did it all go so wrong?  The answers are rooted in many short-termist, introspective and isolationist policies on the part of management.  Businesses are not by and large run on a holistic basis and are frequently focused on strictly functional issues.

Image courtesy of pawposse.com

On average, US corporations lose half their customers every five years.  Research by the US Customer Care Institute reveals that:-

  • Seven out of ten customers who switch from one company to another give poor service as the reason.
  • Dissatisfied customers tell twice as many of their friends and families about poor service as do satisfied ones.
  • It is five times more expensive to gain a new customer on average than it is to satisfy an existing one.

Recurrent studies have found that the longer a customer stays with a company, the higher the profits generated.  This is not new and my time in businesses large to small tells me we are no different here in the UK.  The following are but a few of what are sadly common barriers to customer loyalty:

  •  Building labyrinthine complexity into pricing plans – have you tried to decide which the best value mobile phone tariff is recently?  Do you believe that any phone company genuinely offers its multitude of pricing plans so that we have more choice and will be more satisfied? Is it any coincidence that we have to threaten to move supplier before being offered a better tariff?  If you do think so, move along now, nothing more to read here.
  •  Outsourced ‘Customer Care’ departments  – a trend that started 30 years ago and  one that is till going strong clearly treats engagement with customers as peripheral and no more worthy of direct involvement than cleaning the office washrooms.  It’s not merely cultural or language differences that are created when you move your customer interaction functions to India (or toGlasgow or  anywhere outside the company), it’s the creation of a total barrier that isolates management from the true customer experience.
  •  Moving to part-time staff – some staff appreciate the ability to work part time but many have this practice forced upon them.  The ultimate extension was that most cynical policy, the “Zero Hours Contract” where staff is guaranteed no work hours at all, merely being required to respond at short notice when required.  In a well-documented and infamous variant, staff in a well-known hamburger chain was required to sit unpaid in the staff room when the restaurant became quiet. Any guesses as to how they felt about this practice? Research has shown that retail chains that stayed with full time staff experienced higher customer retention and higher profits than chains that turned to part time working.  Full-time staff was also found to be more loyal to their employer, more knowledgeable and was rated more highly by customers.  It is no coincidence that good staff retention goes hand-in-hand with above average customer retention.
  •  Creating loyalty premiums – many years ago I found to my horror that the interest rate on my hard-earned savings had been dropped to near zero by a certain northern British bank; my account, once paying a top interest rate was now classified as ‘obsolete’.  Hitherto unknown, this practice quickly became commonplace amongst our banks and building societies and the public quickly learnt to check rates and shuffle their savings accordingly.  How can the banks have imagined that this insidious technique would engender loyalty?  Instead, having inflicted this monstrous, zero sum game of monetary musical chairs upon us, we, their customers are now referred to as ‘rate tarts’!  Having rapidly moved my money, I watched the fortunes of this bank soar and then noted with grim satisfaction when they became the first to be exposed as insolvent in 2008.
  •  Inflexibility of some industries – if I want to buy a car, I can choose from a vast range of standard product offerings (all capable of easy price and performance comparison).  If I wish to wait longer and customise my new vehicle then I can choose from a vast range of options to turn it into something that as closely meets my needs as it is possible to get.  In comparison I remember an almost surreal conversation with my local bank manager some years back.  No, I didn’t want free breakdown service, travel insurance or yearly meetings with a financial adviser.  All I wanted was a stable interest rate for my savings (e.g. linked to the base rate) and the phone number of the branch manager to ensure I got problems resolved easily.  At the time I had business banking for three separate companies in addition to my personal accounts, so I wasn’t quite at the bottom of the pile.  After an hour of wrangling (I was bored that day) I managed to get the phone number (after I ultimately promised only to use it in the direst of emergencies).  No rate guarantees though.  Nothing else.  And the phone number was a pyrrhic victory; a few months later the manager moved and the phone was diverted to the call centre.
  •  Drip Pricing’ – I have blogged before on this subject (‘Don’t be a marketing drip’) but I am still amazed at how more and more companies are using this technique to pad out the price of a purchase.  It is common to find that on a like for like basis the ‘low cost’ airline is more expensive than the ‘full cost’ one.
  •  The small print – entering into any form of business with a bank, insurance company or many of the largest companies really requires the service of a commercial lawyer to unravel the terms.  It is quite beyond the capabilities of the average consumer to understand this legalise jargon. The banks and some insurance companies are also now following the lead of our politicians and issuing ‘amending terms’ which require you to sit for hours comparing documents and deciding what effect the simple change of one word has on a clause. Pure obfuscation.
  •  Complete dishonesty – No other way to put it – some companies simply lie or knowingly promise more than they can deliver.  Some examples: a mail order company advertises a product knowing full well that if they don’t get x number of orders they won’t either place an order for the goods from their supplier.  The airline tells passengers that the flight will depart in 30 minutes when in reality they simply don’t have any idea when the necessary parts to fix it will arrive.  The travel company offers flights toNew York “from £329” knowing they have no flights available at anywhere near this price.

Some companies have improved to the extent that they are shining examples.  After a recent visit to a Jaguar dealer I found a slight scratch on my car (it simply polished out, no harm done) when the customer feedback email arrived I mentioned the scratch.  Firstly, I got the service manager on the phone for half an hour, genuinely concerned, very interested in both my car and me.  I was quite satisfied with his apology but accepted the offer of a no-charge valet when next passing.  A few days later I received another call from ‘Jaguar’ extremely concerned and courteous, wanting to know if I was satisfied.  The matter of the scratch resolved, he passed on to seeking my opinions on the car and again we chatted for half an hour.  Being suspicious, I quizzed him as to where he really worked.  Not only did he convince me he actually worked for Jaguar’s design department but insisted I took his full name and phone number in case I ever needed assistance in future.

Eating my lunchtime sandwich one day, I took to reading the small print on the receipt I had received with a delivery from Lands’End (I really do get bored easily).  I discovered that they offered to repair any item of their clothing that might have become damaged – whatever the reason or age of the garment.  I sent back an old favourite casual shirt that had a torn seam and, sure enough, a week or so later, it came back completely repaired with a compliment slip.  A perfect generator of customer loyalty.

Do you recognise any of the above practices?  Do they happen in your company?  Or do you have any shining examples of companies that really set out to build customer loyalty?

No way to run a health service

In and amongst all of the fun I’ve had in business, I’ve had experience of our health service on many occasions.  Apart from boring personal ailments, I have also been through the life & death process with family loved ones (precious and humbling experiences) and was privileged to be married to a truly dedicated state registered nurse.  I’ve also had my life saved on 2 occasions by teams of dedicated professionals.  So, I can sing the praises of the best aspects of our National Health Service; but I have also seen at first hand the parts where it has never been put right from the very beginning, has gone astray and has been ruined by factional infighting, politicians and dogma.

Image courtesy of Business Leaders Learning

 

So, what’s this got to do with a business blog?  Where to start?  Over the second half of the 20th century business really learned to create and deal with mass markets.  It learned how to ascertain the needs of the customer and to meet those needs, invariably at lower and lower cost, whilst still providing value.  I know it isn’t always perfect but the progress that has been made is remarkable.  How is it that companies can get ever more profitable whilst selling at lower and lower real price levels?  It’s experience, constant learning and competition; if you have competitors snapping at your heels you get better or you go to the wall.

Now, consider our NHS; how many of you know that at its inception the cost of providing this comprehensive service free at the point of delivery was simply not known?  It was a leap of political faith and governments of the day have been trying to fund it ever since.  Demands made upon the NHS are growing exponentially, the costs of modern treatments are sky rocketing, people are leading more unhealthy lifestyles and simply living longer.  Not much of a business plan, was it?  And, since 1997 money has been lavished upon the NHS (more than doubling) but it has produced little or no net efficiency gains.  Not much of a management performance either.  Now, tell me about a business that was planned and run like this over 60 years ago, that still survives and is slavishly protected by government of all sides of the political spectrum?

One of the reasons many businesses succeed is that they are focussed upon a clearly understood goal; they may have a mission statement, a vision, a clearly understood strategy and a well-defined core process.  Take a look at the M & S plan on their corporate website ; fairly clear and concise, you know what they do and are going to do. Now try to find anything comparable on the multitude of NHS websites.  OK, you can find ‘NHS Choices’ which is filled with detailed information but the real key facts are opaque e.g. try finding out how to interpret Hospital Standardised Mortality Rates (HSMR).   In most businesses it is the core process that gets the attention; waste is eliminated, cost reduced, throughput speeded up, quality is improved and the customer satisfied.  Profits produce efficiency and satisfied customers

Teamwork is one of the real Achilles heels of the NHS – factionalism rules.  For example, even before the formation of the NHS, the Royal College of Nursing has been desperately attempting to raise the status of its members to compete on equal terms with doctors and consultants.  They have succeeded in part but at what cost to the patients they are supposed to be caring for?  Yes, the nurses have succeeded in raising their training, qualifications, status and salaries.  However, it has been a zero sum game with patients frequently losing the personal attention that used to be an essential part of the nursing role.

Targets are a concept borrowed from business (at the behest of politicians), clumsily applied and without an apparent thought as to the unintended consequences.  You want a maximum of four hour waits in A&E?  Simple; take resources from elsewhere where there are no targets, put patients into a medical ‘limbo’ and, if the timing is really critical, just keep them in the ambulances that are then prevented from hastening to other emergencies (and the ambulance service can worry about its own targets).

Of course, these are only a tiny few examples of what is bad in a vast organisation but our entire health system is neither operating in the patients’ best interests nor is it using efficiently the vast sums of our tax money poured into it.  It seems structurally incapable of focussing upon the needs of its customers and suffers too much from the continued central interference of our politicians.  What to do?  Outsource the lot.  Tesco Care, Your M& S Care anyone?