Archive for April, 2008
Why consider which way you’re stuck? Stuck is stuck, right?
The way you’re stuck matters.
Take a wrong step and you fall off a cliff. Or you wander in wilderness for 40 years. Both unpleasant, but one kind of stuck is felt faster than the other.
Here are 3 types I’ve seen:
- Rimrocked
- Plateaued
- Picassoed
Rimrocked
This is where you’re stuck going up AND can easily go down. Quickly.
Being rimrocked is a precarious and tenuous place.
For contractors, rimrocked sales means nothing significant is coming in. And there’s a strong likelihood several large, anchor contracts may go away. Think rebids.
For contractors, rimrocked profits mean margins are eroding to dangerously thin levels. Your knuckles are getting white holding on.
For customers, rimrocked means not getting improved results when you need them. Could be cost savings, service quality, or customer satisfaction. Insignificant progress towards departmental or company goals means someone’s head will roll.
Plateaued
This is where you can go left or right, forward or backward. But never, never up. Never to the next level.
Being plateaued is not nightmarishly scary. Death comes from atrophy. Your potential, enthusiasm, or career path withers up and dies.
Contractors are plateaued when desired growth is painfully steeper than actual. Or profit is barely acceptable.
Customers are plateaued when not monitoring contractors’ results and actively leading them to the next level. Results are just OK.
Another plateaued sign is when your response to change is “been there, done that” and no action is taken. Start looking overhead for vultures.
Picassoed
This is where you’re trying radically different approaches, quickly one after another. You look busy, feel overwhelmed, but you’re not getting anywhere. You’re stuck.
You know you’re Picassoed when your desk, corkboard, or to-do list look cubist. Like a Picasso painting, seeing everything from many different sides, all at the same time.
Picassoed is more than not knowing where you’re going. It means you don’t know where you are. You’re lost, from too much, too fast.
Getting Unstuck
There probably isn’t one answer to getting unstuck. You’ll need to figure out how to unstick yourself.
But here are some thoughts about these 3 types.
RIMROCKED
- Time is critical
- Quickly scan results (KPIs, revenue, margins)
- Consider something different, unusual
- Look laterally
- Ask employees, contractors, customers for ideas
- Take a small step quickly
PLATEAUED
- Step back – get the bigger picture
- Get an outside perspective
- Assess situation; where you are, have been & want to go
- Focus on strategic direction
- Map out actions from strategy to first step
- Plan success measurements
- Initiate first step
- GPS progress
PICASSOED
- Take time out – slow you’re breathing
- Set time aside for formal planning
- Revisit who you are (core organizational message)
- Road map straight & narrow course towards your aspirational vision
- Restart actions but with one eye on road map
- Course correct only when off the road, minor wabbles OK
What do you do to get unstuck?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: contract sales, contract performance, service improvement, KPIs
April 29th, 2008
In the last month I’ve heard 2 buying trends from a half dozen service contractors around the country.
These trends aren’t from a statistical survey, but from anecdotal evidence (which means people told me). I love that term: anecdotal evidence. First heard it in grad school. I toss it in to make business gossip seem academic and important. You ought to try it next time you get the chance.
Here are the trends, and they’re probably no surprise.
#1 – Procurement is Playing a Bigger Role
In the past procurement acted more as a gatekeeper. Now procurement is the primary decision maker selecting service contractors. Facility or departmental managers used to have that position. Not as much now.
This changes the way contractors must communicate value, position against competitors and sell their services.
BEEN THERE, USED THEM
When facility or departmental managers had decision clout they brought expert knowledge to that contract service. Hopefully, anyway.
This was important because experienced customers could distinguish between high quality and low cost service providers. And they’re opinions counted when important services where being contracted.
That’s changed. To some degree.
BATTEN DOWN THE HATCHES
Procurement’s increased power may come from a recession-frightened economy. Companies are squeezing more profit from existing business because they’re not sure how fast new business will come on.
That puts the emphasis on procurement to wrestle lower costs from suppliers. Contract services included.
CONTRACTORS’ CONCERNS
From the contractor’s perspective procurements’ bigger role comes with a number of concerns, such as:
- Price sensitive – focus on purchase only, misses the total cost over contract’s life
- Qualitative service not valued equally against low costs in bid evaluations
- Less understanding of service – doesn’t live with daily repercussions from selections
- Commodity mind set – reverse auction friendly, if it’s a commodity, why not?
- Want to believe low cost providers equal to high quality services – easily fits procurement’s immediate goals
- Less chance to sell to procurement – relationships are less important
#2 – Procurement Staff Churn Rate
Procurement suffers turnover like any other management position. Contractors are seeing more churn here than in recent years.
This means less experienced, new comers are in positions of increasing decision-making authority. And many without the business experience the position demands.
CONTRACTORS’ CONCERNS
Contractor concerns regarding these less experienced procurement managers include:
- Don’t understand the service they’re contracting out
- Unable to differentiate purchasing subtleties between services & products
- Hesitant to use contractors as learning resources – fear perceptions of favoritism
- Low job security means decisions fall heavily on low price – hard to get fired for spending less
- Low place on organizational totem pole tends to avoid choosing innovative contractors or services
What trends are you seeing in the buying of contract services?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: procurement, contractor selection, purchasing service contracts
April 22nd, 2008
I have a friend/client from Kansas.
At least once every time we’re putting together numbers for one of his customers he’ll say “Figures lie and liars figure”.
That Midwest wisdom points out figures (numbers, facts) can tell many different stories.
You choose what you want them to say – then find a figure, or calculation, that gives you that story.
The “Kansas” factor in marketing Turnover Rates
First, the “Kansas” factor refers to honest communication – not comparing the state to how contractors market.
With that out of the way – don’t all service contractors’ brag about their turnover rate?
I don’t know of one that says their turnover is HIGHER than the industry average. That poor industry average is held up for ridicule at 100% to 300%.
If everyone is lower than the average, how come the industry average is so high? Who’s raising it?
Customers would love to have one turnover rate that all service contractors use. They could then compare turnover across contractors and services (i.e. among janitorial, security, engineering, etc.).
But if you’ve bought or sold services for more than 20 minutes you’ll recognize there are a few critical questions surrounding “turnover rates”. Here are mine.
#1 – Is there a universally accepted turnover rate?
There doesn’t appear to be one for the facility service industry.
The one that may have the best chance for being universally accepted is from the U.S. Department of Labor’s Bureau of Labor Statistics (BLS).
It defines Turnover Rate as:
“…the number of total separations for the year divided by average monthly employment for the year (annual turnover).”
You’ll need to multiply this number by 100 to get a percentage. And note that “separations” contains voluntary quits and involuntary separations (contractor terminations), but not layoffs. That makes sense.
#2 – Does that turnover calculation smell funny?
There’s a problem with the BLS formula above.
It doesn’t take into account the stability of other positions.
EXAMPLE:
- Hypothetical XYZ company has only 3 full-time positions
- 2 of those positions are staffed with 10-year employees, no problem here
- The 3rd position has gone through 10 different people in a year
- At year end, the 11th employee has managed to hang on to the job
What’s the turnover rate?
Is it 333%, using the BLS formula listed above?
Or, is it 33%, because only 1 of the 3 positions turned over?
#3 – Is all turnover bad?
Think about the bad egg who has got to go. Or an employee isn’t the right fit for the industry -or has work expectations that don’t match the contractor or customer.
These are involuntary separations. And they count towards contractors’ turnover rate.
Should high turnover rates because of involuntary separation reflect poorly on contractors?
Also, consider this. For customers in economically-challenged markets, high contractor turnover may be necessary, though not desirable. It’s done by losing the higher paid employees.
It keeps costs flat year-on-year. But it also brings service issues related. New contractor employees must learn the facility and can bring more headaches for customers and end-users.
How do you market turnover?
~~~~~~
Chris Arlen
President, Service Performance
Technorati: employee turnover, labor turnover, turnover
April 18th, 2008
A declaration of customer-contractor interdependence.
In the course of history, it becomes necessary to state the separate and equal principles that bind customer and contractor together in commerce.
As business practices evolve, both customer and contractor recognize the need for better results. Both sides want more.
However, adversarial beliefs prevent greater benefits. It’s easier to contract out of habit, or ignorance.
This manifesto is an attempt to improve service contract engagements. By declaring these principles, it’s hoped customers and contractors together will realize more value from their relationships.
PREAMBLE
We hold these truths to be self-evident, that all service contracts are created with certain unalienable principles, that among these are the following:
1. All contracts are relationships.
2. Successful relationships are based on trust. Counter intuitively, trust is earned by first giving it.
3. Contract relationships are made for the exchange of value.
4. Value is mutually beneficial – though not equal. Customers and contractors decide for themselves what’s valuable.
5. Contracts are between companies, but performed by individuals.
6. Individuals respect one another’s challenges and contributions.
7. Contracts document initial expectations, understandings and requirements. But service relationships are elastic. They’re flexibility enables delivery and contributing to goals, while meeting contractual requirements.
8. Because customers select contractors, they have the burden to do so in a fair and transparent manner.
9. Because contractors have been selected, they act as stewards in the best interests of their customers – mitigating risk, lowering costs and improving performance.
10. Customers respect the value of the service contracted. Services are NOT commodities.
11. Contractors respect the uniqueness of each customer’s needs. Customers are NOT the same.
12. Communication is proactive. Strategies, deficiencies and challenges are communicated before they surprise or hurt.
13. Communication is customized to the needs of frequency and situational understanding – hourly, daily, weekly, monthly, quarterly, or annually.
14. Contractors pro-actively and routinely recommend initiatives that lower customers’ costs, improve service and/or quality.
15. Customers incent and reward contractors’ innovation, for continual incremental innovations and/or major changes. Rewards can include longer contracts, more locations, additional services, cash awards, etc.
16. Communication is open – customers share budget, contractors share pricing formulas.
17. Communication is honest and straightforward – both sides sharing the good, the bad, the ugly.
18. Communication is fluid – info that may impact service or results is never withheld or delayed.
19. Success is praised inside organizations, up and down stream – giving equal praise to those who contributed (customer and contractor).
20. Responsibility for problems are publicly and quickly acknowledged – no excuses, but always includes corrective actions, lessons learned and improvements.
21. Customers act as facilitators within their company – removing barriers to contractors’ success.
22. Contractors act as customer advocates within their company – securing resources and commitments.
23. Customers and contractors do what they say they’re going to do when they say they’re going to do it.
24. Customers pre-qualify contractors before contracting services.
25. Customers’ service specifications are current and accurate – incumbent contractors do this in their own best interests to strengthen customer relationships.
26. Customers respect contractors’ investments to pre-qualify and bid contracts by avoiding unrealistic time lines, excessive travel and voluminous, non-contributory informational requests.
27. With a successful contractor track record, customers avoid bidding contracts only to satisfy internal price-checking needs. Alternatives such as market pricing surveys are used, see “Dear Customer…about your RFP“.
28. Cost (contractors’ price) without value is meaningless. When selecting contractors in bid processes, customers rate total cost equal to contractor delivery and service quality. Evidence is verifiable.
29. Customers do not use online reverse auctions for service contracts as they damage customer-contractor relationships, see “Reversing into Darkness“.
30. After contract award, customers verify winning contractors performance and delivery of services as promised in bid selection process.
31. Contractors document service delivery and provide timely reporting to customers.
32. Customers and contractors formally review contract performance reports religiously and regularly (quarterly, twice annually, or annually). Commitment to joint reviews is included in contract.
33. Customers acknowledge contractors right to make a profit above cost and effort expended.
34. Customers work within their company to help contractors receive payment per contract terms.
35. If customers’ employees receive increases for cost of living and benefits, then customers incorporate increases for contractors’ employees into multi-year agreements.
SUMMARY
The Service Contract Manifesto is a vision of what might be. It’s value comes from using as many principles as practical in daily practice.
YOUR TURN
This manifesto is a work in progress. It’s a first draft that will improve with your comments – customer and contractor alike.
Now’s the time to begin entering your comments. Add new principles or offer revisions to those listed. Print out the 8 Easy Steps to Start Posting Comments and get started. No time like the present.
Use the RSS feature to be notified when comments are posted, or bookmark this page and revisit it.
Also, if you’re receiving the monthly article by email, you can also subscribe to the weekly blog. Their different but equally good. Subscribe to the Revenue-IQ weekly blog here.
April 9th, 2008
Last week’s post, The 5 Service Dimensions All Customers Care About , referred to research showing how customers assess the quality of a service.
That post prompted a contractor to point out a leading question.
How does Service Quality figure in Buying Decisions?
My contractor friend pointed out when customers buy a service, pricing far outweighs service quality and other factors.
“…SERVQUAL has not yet matured into RFP evaluation matrices – they are there, but are dwarfed by pricing evaluations in weighting. So…SERVQUAL is important, but customers need a definitive RFP process and evaluation technique built…that joins SERVQUAL and governance (mandatory bids) into a true test of contractor service delivery.”
Pricing in Bid Evaluations
Pricing’s importance in bid evaluations varies by customer, service and RFP. There are no absolutes.
I’ve seen survey results where customers were asked to rank factors used selecting security contractors. Pricing came in 4th, after management, supervision and training.
I’ve also seen public airport evaluations for janitorial services. Pricing was weighted 1st by a large margin over the next factor.
But Where’s Value in Bid Evaluations?
Value is what customers receive after services have been delivered. The net impact at the end of the contract.
It seems the most difficult task in buying services is to identify the value offered. And then determine the likelihood that value will be delivered during the contract’s life.
And that’s rarely done in RFPs.
It’s more common to choose a contractor on its qualifications listed in the proposal. Which is like the investment disclaimer “Past performance is no guarantee of future results”. But it seems that’s what most customers work from when selecting contractors.
Wow. Customers must identify value before services are delivered. Then calculate the odds it’ll actually be delivered. And they have to do this all in the bid process. It’s like asking customers to be fortune tellers.
And What About…?
The “where’s the value” question leads to other questions, such as:
- Is contract compliance the same as value delivered? (Contractors going through the motions?)
- After contract award, how diligent are customers in determining they’ve received what they’ve been promised?
- How likely are customers to admit selection errors & change contractors when they’ve published new budgets based on lower costs?
If Customers Only Knew This About Buying Services…
I’ve consulted with service contractors for the last 12 years.
During that time almost every contractor has voiced a desire for customers to better understand what they’re buying. Translated that means if customers really knew better they’d buy that particular contractor.
And having participated in 100s of bids as a consultant and former contractor salesperson I see the truth in that. Some RFP processes are so balled up they’re an embarrassment to RFPs in general.
But there it is.
There will always be an educational need to help customers make better contract decisions.
The Service Contractors’ Manifesto
What if contractors could publish a document telling customers everything they need to know about contracting services?
That might help fill the gulf between what contractors want and customers do.
Next week I’m starting work on a Service Contractors’ Manifesto.
When finished it’ll be a public declaration of service contractor thoughts on better contract relationships. From buying services in the RFP process to ongoing management to inevitable rebids.
The manifesto isn’t about one contractor. But general principles all service contractors would want customers to believe and buy in to.
I’ll ask contractors for their ideas by posting additions or comments online to the blog.
Who knows, maybe the Service Contractors’ Manifesto will be sent to those customers who want to learn more. Those who want to create more valuable contractor relationships. We can only hope and try.
What are you doing to help your customers make better contract decisions?
April 4th, 2008
