Growing a business in today’s environment is as challenging as ever — especially with relatively stagnant overall economic growth. That’s why it’s more important than ever to hold onto existing customers.
According to Christopher F. Meshginpoosh, a director in the Audit & Accounting practice at Kreischer Miller, companies frequently spend too much time trying to win new customers and not enough trying to hang onto existing customers.
Smart Business spoke with Meshginpoosh about techniques that companies can use to create an organization where every employee is driven to meet the needs of its customers.
Why do some companies struggle with customer service?
It’s often a function of a lack of processes that ingrain and reinforce the importance of customer service. When an entrepreneur starts a new business, he or she understands the value of customer relationships because he or she worked hard for those relationships and can’t afford to lose them.
However, as the company grows, employees are added who lack that same perspective. Without formal processes — training, documented expectations, reward systems, etc. — the focus on customer service can gradually erode.
Additionally, all too often, companies treat customer service like a department. For the record, I didn’t come up with that — it’s on the website of Zappos, a company with an almost legendary commitment to customer service. Every employee has the ability to strengthen or damage a customer relationship, so it’s important for companies to make sure they hire people who have demonstrated an ability to put customers first.
What steps can management take to improve customer service?
That’s an easy one: Look in the mirror. If management wants every person in the organization to demonstrate the importance of customer service, then the first step is to make sure that they demonstrate it. And that doesn’t just mean managers of the sales or customer service functions. If you want happy employees who thrive on meeting or exceeding the needs of customers, then managers in charge of production, human resources, administration and other functions also must walk the walk.
How can companies reinforce the importance of customer service?
One easy way is to publicly recognize those who demonstrate an outstanding commitment to customer service. Do you have an employee who went out of his or her way to solve a problem for a customer? Don’t just tell that person, tell everyone.
Additionally, make sure reward systems and incentive programs include explicit customer service goals. While some people seem to have an innate ability to want to make customers happy, others may need a little additional motivation. As a result, it’s important to ensure that annual reviews and compensation programs include explicit customer service objectives. If your reward systems simply focus on metrics like profitability or efficiency, then you run the risk of driving short-term profits at the risk of long-term customer losses.
How do you know if your efforts are moving the needle?
While there are many formal methods such as customer service surveys or monitoring customer service metrics, one easy way is to routinely have your employees ask a simple question: What did I do to add value to the customer relationship?
Everyone gets bogged down in the details once in a while, but they should still be able to step back and determine whether their actions strengthened or damaged a customer relationship. If they can’t routinely point to actions that strengthened a relationship, then there’s room for improvement. If they can, then they’re well on their way to creating strong, lasting customer relationships.
Christopher F. Meshginpoosh is a director, Audit & Accounting, at Kreischer Miller. Reach him at (215) 441-4600 or firstname.lastname@example.org.
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Business owners understand the need to go to dentists to get their teeth cleaned and to mechanics for car repairs, but yet they attempt to manage their employees internally instead of getting help.
“Managing the business of employment requires a completely different discipline and skill set from what is needed for the core business activity,” says William F. Hutter, CEO of Sequent. “Just because you are in the business of making widgets doesn’t mean you understand what it takes to be an employer in today’s environment. Rules and regulations relative to being an employer have changed a lot during the past 10 years.”
Smart Business spoke to Hutter about government regulations, employee retaliation and other issues involved with the business of managing people.
Why should companies pay more attention to employee management?
So many companies spend time on their communications budget for things like high-speed Internet and phones; that’s an insignificant portion of the total budget. For service companies, people represent 40 to 70 percent of the total cost of operations. It’s such a big segment, but no one seems to approach it appropriately because it requires a separate discipline. Issues relating to employees have a risk tail — it’s a contingent liability that can last three to five years after an event occurs. How many companies really know how to manage that liability? Small to midsize businesses don’t have the resources or expertise to do that and protect their biggest asset, which is their company.
What is involved in employee management?
There are common responsibilities that come with being an employer — compliance, wage and hour, health care reform, retirement plan fiduciary liability, workers’ compensation management, proper forms, reporting, employee file maintenance, etc. In professional practices, there are also issues regarding licenses, accreditations and certification; those are business drivers that contribute to your business success.
The hiring process, however, has nothing to do with what you’re passionate about and the business you opened; the business drivers for your specific discipline. Each new piece of legislation, each government-required form, each legal precedent set because of a lawsuit filed by a employee begins to change how you need to think about managing the business of employment.
In 2010 and 2011, retaliation charges became the most frequent complaints filed with the Equal Employment Opportunity Commission, surpassing race discrimination. An employee filed a complaint of some sort — harassment, hostile work environment — and then was terminated and filed a claim of retaliation. That retaliation claim is pursued by the government at no cost to the former employee. And 41 percent of all federal discrimination claims are charged against companies with 15 to 100 employees.
One of the newest areas for claims is in absenteeism and attendance. The Department of Labor has developed a free app employees can download to their smartphones and keep track of hours worked to see if they’re due overtime pay, which in essence is wage and hour enforcement at the employee level.
What can companies do to prevent claims?
Make sure employees are properly classified as exempt or nonexempt under wage and hour law. For example, to be exempt you must have hire or fire authority, supervise two or more people and be able to affect company policy. Not all professionals are exempt; it depends on the actual job task. For computer programmers, they have to be paid 6.5 times minimum wage per hour to be considered exempt. But fruit and produce delivery truck drivers are exempt because they are involved in interstate commerce.
Most companies don’t want to keep track of time because it requires monitoring by managers. But it’s a major liability and all it takes is one complaint to create problems.
Think about how to keep track of hours and reporting requirements of health care reform and look-back periods, or just one required form, the I-9 — there are 40 different fines that can be levied for that form alone. This shift in focus toward compliance and away from innovation has great cost to the business. That’s a cost of doing business and you need to move those tasks elsewhere because you never get that opportunity back.
William F. Hutter is the CEO of Sequent. Reach him at (888) 456-3627 or email@example.com.
Know what to ask a professional employer organization before hiring one with these 20 important questions.
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Data centers, software providers and information technology firms can expect that clients will be asking to see their service organization control (SOC) reports.
SOC reports have replaced the Statement on Auditing Standards 70 (SAS 70) as a means of assuring companies they do business with that proper controls are in place.
“Years ago, it was mostly payroll companies having SAS 70 audits done because they were affected more than everybody else. They managed their clients’ money, and their clients needed to make sure that they had controls in place,” says Robert B. Brenis, CGEIT, CISA, CRISC, PMP, a principal with Skoda Minotti Technology Partners. “A lot of companies are now seeing the need for these because, with the advent of technology, many have access to their clients’ information.”
Smart Business spoke with Brenis about the differences between SOC reports and SAS 70 audits and the types of companies that should have them prepared.
What is a SOC report and how does it differ from the SAS 70?
SAS 70 was one report, now the SOC 1, and it covered service organization controls related to financial statement assertions. SOC reports break SAS 70 reports into three different reports: SOC 1, SOC 2 and SOC 3. SOC 2, also known as AT 101, audits any or all of five trust service principles: security, availability, processing integrity, confidentiality and privacy. It also contains descriptions of tests performed and the results. The intended audience for a SOC 2 report is management of the user entities. While SOC 3 reports look at the same data as a SOC 2, it is more of a general use report, providing only the auditor’s report on whether the system achieved the test criteria. A SOC 3 report is intended for any user who wants assurance on the five trust service principles and wants this report freely distributed.
Why was a switch made from SAS 70 to SOC reports?
The biggest reason is that the SAS 70 was not being used the way the American Institute of Certified Public Accountants intended it to be used. Accountants were opining on more technical things like firewalls they have in place and secured socket layer encryption. Accountants, however, weren’t entirely sure what any of that meant.
There were way too many IT things creeping their way into the SAS 70 report, so they broke them into two different standards — the financial assertion standard, which is now the SOC 1, and the SOC 2/SOC 3 which focus on the five trust principles.
How do you know if you need a SOC 1 or SOC 2 report?
It gets back to the type of business that’s being provided. If a service is being provided that can affect a client’s financial statements, a SOC 1 is absolutely needed. Say you’re housing servers. That’s more in the realm of security and availability, which talks to the trust services principles found in SOC 2. You should talk to the client to understand the service they’re providing and make sure they get the right one done.
What is meant by Type 1 and Type 2 reports?
As was the case with the SAS 70 audit, there are also two types of SOC reports. With a Type 1, the policies you have are reviewed to determine if they cover the controls you have described in the ‘Management’s Description’ section of the report. In a Type 2 report though, it’s not just the policies that are audited but also the procedures. If you have a policy that says you are reviewing employee network access monthly, for a Type 1 this policy is enough. For a Type 2, you need to show proof that these reviews are happening on a monthly basis.
What value does a company get from a SOC report?
- You will have a description of your business in your words.
- Your clients’ concerns about certain controls are addressed before these concerns become issues.
- You will have an SOC report completed before you are required to have one for an RFP.
- You will demonstrate to your clients that your business uses due care in managing information.
- You can use this process to review and improve internal controls, eliminating unnecessary risk from your business.
One example is a medical billing company that thought it had all the policies and procedures in place to ensure it was tracking receivables on a consistent basis. When we went through the process of the controls that were in place, it was discovered that any receivable that got beyond 180 days dropped off their radar. So they weren’t chasing after money when they should have been. It helped them realize where they had holes and led to a change in their processes. The next year they didn’t have anything in their receivables that came up to 180 days. So the receivables were watched on a much tighter basis.
Other examples would be if your SOC 1 business description says that you have service level agreements with your clients. An audit can be performed against those service level agreements to determine if they’re being met. If not, it could mean that you’re going to owe some clients money, so you need to maintain your service levels that have been agreed upon by your clients. You are liable because you’re supposed to be
ROBERT B. BRENIS, CGEIT, CISA, CRISC, PMP, is principal with Skoda Minotti Technology Partners. Reach him at (440) 449-6800 or firstname.lastname@example.org.
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If you are a business owner, key manager or employee of a company going through an organizational transition, such as a merger or leadership change, it is likely you will experience performance disruption caused by confusing messages, speculation or lack of information. And you are not alone.
Often the planning for these important events happens behind closed doors with only the owners and advisers, leaving everyone else to speculate about the future.
Ricci M. Victorio, CSP, CPCC, managing partner for Mosaic Family Business Center, says business owners can avoid these challenges by being more transparent about upcoming changes and engaging everyone in the process.
“The key is communication, communication, communication. It’s important to identify what you can control and learn how to be flexible with all the rest. When you’re getting ready for a transition or succession, you might feel like you’re surfing a tidal wave. There’s an art to keeping your balance in an ever-changing world,” she says.
Smart Business spoke with Victorio about how to prepare yourself and your company for major business transitions.
What are the most common stumbling blocks that occur when a company is heading for change?
The most common stumbling blocks typically center on communication. Today’s older generation grew up learning to keep financial affairs close to the vest. So sometimes even a spouse doesn’t get involved in the planning until asked to sign papers.
Other times, people don’t feel comfortable sharing their ideas and concerns during shareholder meetings because they’re afraid of disrupting the artificial harmony that’s been established. They may have private conversations outside of the boardroom, but during meetings there’s often a fear of disrupting the delicate balance.
Further, business owners involved in a transition can be so overwhelmed by either the fear of confrontation or the lack of planning, the project begins to loom large and they’re stopped in their tracks. They feel as if there’s no way they can get through it; it becomes so daunting they often just hope it goes away.
How can these stumbling blocks be avoided?
Instead of keeping all conversations behind closed doors, when appropriate include key players such as family members, managers and those who will be most involved in the strategic design of the transition plan before you start actually planning. In these conversations, ask the group, ‘If we could do anything without worry of failure or confrontation, what would be best for our family and company?’ At this stage, there should be no pressure of commitment; it’s just brainstorming and idea building.
Engaging a succession coach can help facilitate dialogues that are creative, innovative and energizing, and potentially serve as the foundation of solutions to what might seem like an impossible endeavor.
Once you have a vision, you can develop an implementation plan. Break it down into a timetable and get key players involved to determine who spearheads specific initiatives and what the outcomes should be. Document the vision and itemize each step to be executed on a schedule for all involved.
Owners and other decision makers in a business likely won’t find it easy to facilitate these discussions, so consider using an experienced adviser to guide and focus the conversations and break the task into manageable segments. It can be difficult and even intimidating for groups to internally identify and discuss their own problems, but it’s helpful to have someone from the outside keep discussions open, comfortable and inclusive.
It’s also important to reach out to the overall organization, including employees, clients, customers, franchisers and vendors to communicate the vision of the plan — not the intricacies, but the expectation of the fulfillment of the plan and how it affects each party. This will help clarify what each can expect and what their roles will be.
What are the red flags that tell you a transition is going badly or not as planned?
Confusion or dysfunction within the management team is one of a few signs of difficulty that typically arise during a transition. Often it’s revealed that management is unsure where the company is going or what the plan is. Additionally, departments that are not cooperating well with each other — also called ‘silos’ — can typify dysfunction.
If management isn’t confident that the transition will include them, their productivity will slow and they’ll likely start looking around for something more stable and secure as a backup plan. A high level of turnover in management might prompt others to start abandoning ship.
When is a good time to seek outside counsel?
The best time is when you know or others are imploring you to consider that it’s time to begin succession planning. For any business owner between the ages of 45 and 75, if you have a business that is worth perpetuating, you need a long-term strategic succession plan and a short-term contingency plan to protect it. It’s worth bringing in an adviser who can help you with both kinds of plans. You’ve got to think beyond your own needs because your business has so many people tied to it who count on its success.
All of the planning responsibility doesn’t have to be on you. You can pull people into the transition process and get them enrolled so you’re no longer alone in the endeavor. If or when you do step aside, you can do so knowing you have people there to maintain and even grow the business. The hearts of those involved in the company might be broken when a founder passes or moves on, but that creation, built lovingly, does not have to crumble.
Ricci M. Victorio, CSP, CPCC, is managing partner for Mosaic Family Business Center. Reach her at (415) 788-1952 or email@example.com.
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Joe Takash is the president of Victory Consulting, a Chicago-based executive and organizational development firm. He advises clients on leadership strategies and has helped executives prepare for $3 billion worth of sales presentations. He is a keynote speaker for executive retreats, sales meetings and management conferences and has appeared in numerous media outlets. Learn more at www.victoryconsulting.com.