Back to the Future
The Baby Boomers are now passing the torch to a new generation, who will implement their new ideas and concepts. It can be argued that it’s time for the old guard to get out of the way so that progress can be made. Perhaps that’s true, but I beg your indulgence as I point out the positive contributions made by us “old guys” and the fact that not all change is necessarily good change.
For those of us in the business of providing service and support to the mission-critical machine, this current transition represents real opportunity for organizations wise enough to embrace new ideas while remembering old lessons. The real danger is the tendency for the business process to override the mission in the pursuit of profit.
Customer service is the heart and soul of our business. We all have experience with service response in our private lives. As a 17-year old apprentice electrician, I learned the importance of going above and beyond quite by accident. I was sent to install a light fixture over a sink. The sink in question was still full of breakfast dishes. Installation of the fixture required cutting a circular hole in the sheetrock valance over the sink. When the job was done I stepped back to admire my work and realized the sink full of dirty dishes now also contained the remnants of my work. I decided the best course was to clean up my mess; in doing so, I washed the dishes. Needless to say, the lady of the house was ecstatic, as was my employer. That day I discovered what smart business owners and CEOs know well, that aside from product innovation, quality, and reputation, personal customer service keeps customers coming back for more.
When I joined my first OEM service organization in 1980, I was under the impression that if you build a better product, people would buy it based on their comparisons of other similar products, the merits of that product, cost, and availability.
I soon found that life was not that simple. The fellow who owned our company was larger than life. His customers and employees trusted him. Establishing a niche in the mission-critical marketplace against much larger organizations required exemplary customer service, and the owner expected and demanded the same of his employees (God help you if he heard your phone ring more than three times before you answered). He also went above and beyond in terms of taking care of the employees. Lunch was on the house every day, and there was free coffee and Danish and nickel sodas. There were also three first-class parties a year and liberal share-the-wealth bonuses. We were treated like we were important, and we treated our customers in kind.
At that time, most OEM service organizations were organized as cost centers; they were charged with providing service support for products manufactured by the company. Cost centers manage to an annual budget, which often includes the manufacturer’s warranty costs. The obvious pitfall is that services may be limited and warranties not always fully supported in order to stay under budget.
By the mid- to late-1980s, organizations realized that service could be profitable, which changed many OEM field service organizations into profit centers. For large corporations, this found money had a positive effect on the bottom line.
Reorganizing as a profit center, however, brought some downsides. Profit centers must meet set goals and maintain margins. That means, for example, having a purchase order (PO) in hand prior to dispatch. This is not a problem for a planned shutdown, but try getting a PO at 3 a.m. in an emergency. The experienced service professional will take care of the customer without the paperwork and incur the wrath of senior management. This small example illustrates how corporate processes constrain great customer service and can overshadow the primary mission of customer service. Today, the majority of OEM service organizations are profit centers.
As the 1980s progressed, OEM service organizations continued to build their identities and competed with independent third-party service providers (profit centers from the start).
The cradle-to-grave maintenance package formerly included in equipment purchases was now optional. The argument had shifted to what organization was better qualified/equipped to maintain the mission-critical infrastructure, the OEM or the independent provider.
The independent-service provider argued that it was not constrained by the policies of a large organization, was much more cost effective, and provided more broad-based programs intended to maintain all manufacturer’s equipment compared to the OEM provider trained to maintain only one manufacturer’s systems..
The OEM maintained that only they were factory trained, maintained a large inventory of genuine factory replacement parts, and had pockets deep enough to fully support their products and systems.
In an effort to expand rapidly, some OEM organizations outsourced their service to third-party independent organizations and authorized service centers. It was the least-expensive option for the OEM, but in some cases costly for the customer in terms of direct expense and a broad variance in service level and capability.
The task of building a true “factory” service organization is arduous and expensive but well worth the investment in view of the benefits. It is not possible to calculate how much product is actually sold based on excellent service. But building the structure of an organization is only the beginning; building brand loyalty and depth are a constant challenge.
These are some of the basic principles, which have served me well over the past 30 years.
Hire the best people available. A prime source for me over the years was the military. These folks were highly trained, motivated, and disciplined.
Compensate people well. Complex work rules, overtime policies, incentive plans etc., give the impression the organization has many ways to reduce pay.
Train, train, train. The old model of learning the hard way has no place in our present mission.
Empower people to make decisions. This promotes a sense of ownership.
Weigh on the side of the customer. While you may forgive a charge now, you’ll gain it back later plus interest.
Be liberal with warranty administration, in pursuance of customer loyalty and long-term gain.
Make sure that service vans are well stocked with the necessary parts to provide a high level of service. One call, one fix.
Do what you’re paid to do and then some.
- Respond quickly.
The ‘90s witnessed the emergence of the building management company. This third-party’s value proposition was simple; assume contractual responsibility for operating and maintaining the building as a way to save money based upon their leverage with manufacturers and suppliers. Typically, the building management company hires all the former building service staff and takes on the responsibility for pay and benefits. Some of these companies are better than others, but isolating the service provider from the customer is a common outcome.
The building management company also benefits monetarily on their performance. On one hand, they operate as a cost center, managing to a budget for the client. However, they are for-profit companies. In some cases, this contradiction may affect the quality of service. For example, is the service provider contracted by the building management company the best choice or the lowest bidder? Caveat emptor, let the buyer beware.
Over the past decade, the revenue from field service has continued to increase, as did senior management’s focus on the service revenue and margins. With increased revenue and the new world order of government regulations and taxation, service management required the talents of the MBA. Finding the MBA who understands the business can be a pretty hard mission. Sometimes they just don’t understand how data apply to the business.
I recall a time when senior management told me that some of our technicians were spending too liberally on meals while on the road. As a young new service manager, I was anxious to impress my superiors, so I issued a policy immediately that limited expenditures for meals on the road to $30 a day. What happened next was the dreaded “unintended consequence.” Only a few were over-spending; the majority stayed well within the guidelines. Suddenly those who might have averaged $15 per day were now spending $29.99.
Another time, a very large OEM service company decided to promote “just in time” supply of parts for service as a best practice of managing inventory, reducing the number of parts stocked and the inventory tax burden. Specifically their service trucks carried a relatively small and low-cost parts inventory. More expensive parts would be stocked in depots adjacent to airports and other shipping points. The theory being that when was not on the truck, it could be quickly shipped from one of the service locations. The customer with the down mission-critical unit might not always see the benefit of this approach.
The world of service has changed in the past 30 years, for the good and the bad. I’ve witnessed these transformations personally. As the owner/operator of a mission-critical facility, you have to understand the capabilities of your service provider. Just because the organization is large and well known does not automatically make it the best. Ask questions, get references, and look underneath the hood. Service organizations that place the business process above the service mission will not flourish in the long run.
So, for those of us who are moving on to other endeavors or perhaps retirement, thank you for your loyalty, we hope we served you well. For the next generation of service management, think carefully about the decisions you make for your organization. What makes you a hero to senior management may not be the best for your organization or your customer.