Do you see your service organization as a cost center or a profit center? Your answer has a big impact.
In many organizations, field service is shifting from a cost center to a profit center. But because service organization goals are different by industry, the shift is based on your industry.
For example, in industries where there’s less competition, but more regulation (e.g., utilities), the service organization is still seen as a cost center. For utilities, delivering service efficiently is the most significant business goal.
In some industries, customer satisfaction has become more and more important (e.g., telecommunications). These organizations can see the connection between customer satisfaction and the financial benefits received as a result. So they’re starting to think about their service organization in a different way.
For these industries, service isn’t just about efficiency, but the effectiveness of service delivery. If customers are happier, these industries can connect customer satisfaction to retention and service to the acquisition of new customers which increases revenue.
There are specific metrics that can increase customer satisfaction (and financial benefits), including:
- time to initiation of service
- time to wait for service
- time to resolution
- first-time resolution
Communication – as part of the customer experience – also has a big impact. For example, if you can’t meet your commitment, but you communicate that in the right way, you can improve the customer experience.
A Faster Shift
In other industries, the shift is happening even faster. Because service is a key business model for the organization as a whole.
For example, manufacturers that service their equipment think about service as their biggest opportunity. And as a business model, service is as important, if not more important, than the manufacturing process itself. When service is part of a new business model, then, of course, service is related to revenues.
Manufacturers can utilize ideas from the Internet of Things and create a connection between the sophistication of the equipment and the delivery of service. If you constantly collect information from the equipment that you manufacture, then you can be much smarter about how to service the equipment. You’ll know when equipment needs to be maintained, moving from preventive maintenance to predictive maintenance.
An example is the smart trash bin which tells you when it’s full. It completely changes the planning for emptying trash bins. You don’t waste time traveling to half-empty bins. It’s one example of how service is changing.
Also, you can use the information you collect to give technicians more knowledge before they arrive on-site. Sometimes, this information can be used to fix things remotely. Then, if necessary, doing a truck roll. But now your technicians know much more before they get to the site.
Let’s Make Some Money
Because technicians spend more time with customers than anyone else in the organization, you can take advantage of this quality time for follow-up sales. But, in service, there’s an inherent tension between customer satisfaction and effectiveness. It could be that those technicians – that you’re encouraging to sell on-site – might spend too much time with customers. Technicians trying to close a deal might be late to the next job. Whenever you have an initiative, it’s important to understand the potential impact on other things. So you must communicate the balance that you expect.
One of our customers decided that technicians should engage in follow-up sales when they’re on-site as a way to increase revenue. However, the internal compensation plan wasn’t clear. The internal processes weren’t structured properly. The measurement points weren’t clear.
The field technicians contributed to closing the sale, but only the sales staff enjoyed the outcomes of these transactions. When technicians realized they wouldn’t receive any benefits from selling, they stopped participating. So this program failed to reach its potential.
Creating the Connections
In shifting to field service as a profit center, there are some challenges. Sometimes, it’s hard to create a clear connection between quality of service and revenues. Because it’s difficult to justify the business model around this connection. There are similar challenges for ideas related to the Internet of Things. Overall, it may make business sense. But there’s a lot of information needed to justify investing in more sophisticated and more expensive equipment. The fragmentation of information makes it hard to justify the business model.
To pull together the different fragments of information, you need a strong performance management practice. You need to understand that you’re going through an iterative process in which collecting and analyzing information and measurements is the key to making progress and taking the next steps. And this performance management practice is what drives the process.
Sometimes, when you focus on an initiative, you may forget that this initiative by itself isn’t the end-all, be-all for the organization. You need to understand how this goal might impact other metrics that are important to your organization. There needs to be a clear translation from overarching goals to more specific targets, using communication and process to more easily translate your objectives to targets.
You need to connect the tools you’re using to the objectives that drive revenue growth. If you’re talking about customer satisfaction, there are planning tools that can be aligned with your business objectives (e.g., shortening the time window; doing priority jobs first). These planning tools can better align the execution of the work with your business goals.
Any benefits gained from the tools you have in place are closely tied to your business objectives. When shifting field service to a profit center, you must close the loop on the business model.
A good example is from one of our customers who wanted to reduce the downtime of critical equipment in their retail stores. Reducing equipment downtime is closely connected with the customer experience at the store and profits.
So this customer conducted an analysis that closed the loop:
- What is the customer experience at the store?
- What needs to be done in order to improve the customer experience?
- How can our service organization be organized differently in order to improve that metric?
This customer decided that there are cases when it makes sense for in-house technicians to fix critical equipment at the store. The in-house technicians were deemed “better” because the company had more direct control which meant these technicians could arrive more quickly to fix critical equipment.
Organizations that can focus on the right metrics are the ones that can implement change and improve. Unfortunately, more often than not, organizations don’t focus on the right metrics. They reach some plateau of success. But they’re stuck there. Their workforce is the same size. They achieved a certain level of efficiency. They attained a certain number for customer satisfaction. But they have no idea how to make it to the next level.
It’s not likely that these organizations set goals to reach that first plateau of success. It’s more likely they invested in better tools. And those tools helped them get to a certain point. That’s not the same as setting goals and conducting a deeper analysis of what’s preventing your service organization from achieving its goals.
Improvement processes are all about closing the loop and doing things better and better. As with any improvement processes, what needs to be clear is:
- What are we measuring?
- And how are we measuring it?
With performance management, you can see what’s working and what’s not. Moreover, you can identify the root cause of problems to determine what could be executed better. Conducting a root cause analysis, putting improvement processes in place, and measuring again is what takes your service organization to the next level.
Think about the shift to a profit center as a change process. To be successful in a change process, you need to have the right mindset for iteration. You set a goal. You start small. You measure. You adjust. And once you achieve success, you leverage and build on your success.
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