The True Cost of a Callback
August 3, 2009
Nothing seems to eat up a contractor’s profits quicker than callbacks. That’s why contractor Brian Leech of Service Legends, Des Moines, Iowa, wanted to understand the complete and full cost of a callback. Perhaps more significantly, he also wanted his staff to understand it. “I asked myself this question one Sunday morning and did not know the answer,” he explained. “After deep analysis, I have concluded this is the most significant change we can make for 2009 to continue our path towards success.”
Reducing the cost and occurrence of callbacks, he concluded, “will ensure a heightened level of success for the client, for our team, and for the company.” So what’s not to like?
The company started an intensive course to get to the heart of the company’s understanding of callbacks from the most basic to its eventual cost. It started with identifying a callback. According to the company’s definition, a callback occurs “when we return to a client’s home due to any challenge the client is having, and we are unable to charge for that service due to communication or technical error by the team member.”
From that point, the lesson rapidly progresses to figuring out the true cost of a callback. All team members had 10 minutes to estimate the true cost of a callback. The team member with the closest estimate won a prize.
The goal was to instill training that team members could carry with them always on the job, something that transcended rote memorization, Leech said. As he explained during the training, “I would like you to own them inside and out.”
According to Leech, 30 employees were trained from management, administrative, field, and sales staff. “We shut the entire company down for a day to teach this.” When it was all over, “Wow” was the main response, he said. “It was very positive, and it put control in the team’s hands. They now had a deep understanding of the why behind the what.”
GETTING TO THE ROOTSIn order for the lessons to be deeply effective, Leech decided to tie it into the values that the company was founded on by reviewing its vision statement: “to be the nation’s leader in providing legendary customer service excellence by listening to our clients’ needs and responding with passion for the benefit of our clients, community, and ourselves.” It’s a solid foundation for the rest of the discussion.
Then they review the core principles:
1. Client focus - “Our single most valuable asset is our clients, therefore we promise to deliver what they desire by listening to their needs and responding with passion.”
2. Service excellence - “Each of our clients will receive value from Service Legends that far exceeds their expectations. Our goal is to do whatever it takes to have each client say, ‘I love those guys,’ by delivering Personalized Legendary Service daily.”
3. Leadership at all levels - “Attracting top talent by being the attractive place to be. This will be accomplished by providing top pay, top benefits, and the opportunity to become successful by becoming strong leaders and developing future leaders, for our company and our community.”
4. Ethics - “Our integrity, honesty, morality, and honorability will not be compromised by anyone; we are a role model for each other and those who look upon us.” It all adds up to:
5. The promise - “To exercise and apply our core principles to our decisions on a daily basis, ensuring that we achieve our win-win, win-core philosophy.”
That core is like a three-legged stool. “First, the client must win,” said Leech. “They must be our first consideration in everything that we do. Without clients, we wouldn’t be able to support a team.”
Second, the team members (that is, the employees) must win. “If you are happy with your team environment, and are providing for your family, then you will be able to make our clients happy.” Third, the team as a whole (the company) must win. “If the team doesn’t make its goals, then it will be in danger of letting both the client and the team member down.”
In fact, if any one of those legs fails, the structure cannot be supported. Callbacks affect all three legs.
CALLBACK REPERCUSSIONSThe primary causes for callbacks are lack of ability, lack of knowledge, and lack of caring.
“If a client does not get the level of service that they expect,” Leech asked, “how many times does it take before they switch to a competitor?” This information falls into the category of “scary thing most employees don’t know.”
You can’t control what you don’t measure. With this in mind, the contractor rates its customer service on a scale of 1 to 5:
1. Upset client - Client is very upset and they will tell many people about the poor service that they have received. They will go out of their way to do this. “This client will never use that company again.”
2. Not satisfied client - Client feels that they did not receive the level of service they expected. One out of five will tell the company that they did not value the service. “You may have the opportunity to increase their level of satisfaction if they share their dissatisfaction with you.”
3. Satisfied client - The client feels they got what they paid for. They are impartial to the company. This client will not share or refer you to another person, and may switch to another provider.
4. Happy client - Client will readily share your company as one they do business with, will not switch to a competitor if solicited, and may share their experience with close friends and family.
5. Raving fan - Clients will share their experiences with friends, family, coworkers, even strangers. “They will sell that company better than the company could sell itself.”
According to research from Google, no client ever expects to have a callback. When they do, the service quality is rated quite low, no matter whose fault the callback was.
CALLBACK COSTS“There are many factors that will go into determining the true cost of a callback,” Leech said. “First, we must determine what the overhead costs are to have a van on the road per van per hour.”
The company’s formula takes into account overhead, the number of vans, number of hours per month, advertising costs, employee-related expenses (administration/office wages, vacation/holiday pay, training wage, payroll taxes, workers’ comp insurance, group health insurance, 401(k) matching, uniforms, recruiting/hiring, employee relations, training and travel, call center commissions), facility costs, vehicle costs, and day-to-day expenses. It all helps the team members realize how much it costs to have a van on the road. “Our next step is to determine the unrealized potential of each van,” said Leech.
To do this, the company needs to determine the Average length of a proper service call; the company minimum expectation for average ticket; the average ticket service, divided by hours on service call, equals the dollars per hour income.
Then the team members need to figure its lead conversion ration, how many hours it takes to generate one sales lead, what the average ticket is for service-generated sales leads, and what the average closing ratio is on service-generated leads. Multiplying the average ticket by the closing percentage, reveals the dollars per lead generated. This was divided by the hours to generate a lead = $X per hour.
Using that information, the contractor was able to determine the cost of a callback for a service van, and the true total cost of a callback for the company if a service tech runs the call, or if a senior sales technician, or a star-performing senior sales technician runs a callback.
The costs in missed calls, or unrealized potential, can be staggering. In short, time can be spent much more profitably not running callbacks. And it was all backed up by hard numbers.
UNREALIZED POTENTIALAccording to the Webster’s definition “unrealized potential” of persons is “marked by failure to realize full potentialities.” The contractor calculated the cost of unrealized potential, caused by callbacks, for a maintenance technician, installation technician, IAQ selling maintenance technician, and senior sales technician.
The training got personal, asking each team member how many callbacks they had the last month, total cost for the month, and an awareness of “what you could buy with the increased income from callback-free service (list three things).”
Then Leech asked, “For each knowledge related callback that you have, how much time will you invest studying that area to ensure that callback never happens again?”
This contractor did figure out its true cost of a callback - and it made its staff figure it out too, longhand. It personalized the cost by equating it to what the team members could spend the money on in their own lives. Then they took a few minutes to brainstorm more ideas to reduce callbacks.
Leech said 16 different ideas came out. They included increased training, increased accountability for callbacks, and more significant repercussions.
“Any callback now is a platform for training that is done on a weekly basis,” he said. “If it is a callback due to lack of caring, that tech is put on probation for two months or until the situation improves.” There also is a reward system for excellence in reduced callbacks, and heightened client communication.
They brought it home by reiterating the company’s core statement, vision statement, getting the team members to sign a pledge dedicating them to the best customer service possible, and announcing two contests related to reduced callbacks.
In the two months after the class was taught, the company cut callbacks by 25 percent, Leech said. “We are now in our sixth month and we have cut callbacks by 77 percent since we trained in the class.”
Sidebar: Callback ContestService Legends’ “2009 Callback Improvement Contest,” exclusively for the service and replacement department, will have one winner. This person will receive an all-expense-paid vacation on a four-day cruise in the Caribbean with a guest. The winner will have the lowest callback percentage of the team. The minimum expectation to qualify will be a one-percent callback ratio.
A “2009 Raving Fan Happy Check Contest/Testimonial Contest,” also for the service and replacement department, will have two winners, an installation lead and a service technician, named each month. The team member with the highest amount of points derived from Raving Fans will receive a paid day off.
Publication date: 08/03/2009