I've had the same woman cutting my hair for the last 15 years. As a product of the 80s, I'm forever scarred by memories of bad haircuts (spikes were NOT a good decision!) so I'm nervous at the prospect of having a stranger cut my hair. Anna is my hair-cutter (not sure if that's a word, but she's not a 'barber' and certainly not a 'stylist') and I've followed her around to the various shops she's worked at over these 15 years, always choosing her over the shop. I know she has a number of other customers that have also been following her around during this time.
Anna does a great job, she's very personable, and I can trust what I'm going to get. Including the tip, it costs me 25 bucks and I'm good for about 6 weeks. I was in there this past week and I got thinking about the business relationship we have. It occurred to me that Anna is leaving money on the table every time I walk out of there.
Why?
Because if she doubled her prices I'd still keep coming back to her every 6 weeks. I don't go to her because of the price, I go because I trust her service. Even if she doubled her prices, I don't use the service often enough to really notice. I have no doubt that a large segment of her customer base feels the same way.
In fact, she's doing both of us a disservice by NOT charging more.
With a little quick math, I can see that Anna needs to stay really busy in order to make any decent money in this business. There's certainly nothing wrong with working hard, but if people are working hard all the time and not getting anywhere, eventually they get fed up. The worst thing that could happen, for me, is for Anna to get fed up and decide to get out of the business. By keeping her prices low, Anna isn't making as much off of me as she could, and that introduces the risk that she might get fed up and quit the industry. I would much rather pay her more now and have less risk of her leaving, than pay less now and have more risk later on.
Now, I'm sure there's a segment of her client base that wouldn't pay more than the going rate. I'm sure those people would be aghast if she raised her rates and would go elsewhere. But is that really a problem? I don't think so. The bulk of her business is repeat customers that come for her specific service. That revenue is supplemented with the walk-ins, but those are unpredictable. Many of them would still pay above average rates because once they're standing in the shop, they're less inclined to go hunting for a cheaper price.
Of course, Anna can't double her rates overnight. But even if she increased them by 40 or 50% annually, she'd be making a whole lot more without losing many customers. The pricing game always requires a fair bit of trial and error to find the sweet spot, so bumping the rates over time would allow for some testing of the market. As well, there's always the brand advantage that comes from pricing your service higher - "we're the best and our rates reflect it".
Okay, so what does any of that have to do with trucking or driver development?
Well, Anna is making assumptions about what's important to her customer base, but those assumptions are based on incorrect information. She's assuming that her customers are motivated by price, but they're not. Her customers have demonstrated through their loyalty that there are other things that are more important to them. In fact, the best customers are the ones who are least motivated by price. Anna is giving away money unnecessarily.
This is a trap that's easy to fall into. It's temptingly easy to assume that money is the most important factor in business decisions, even though it rarely is. Whether we're talking about pricing our products and services, or pay packages for drivers, money is almost never the most important element. The total package is what influences the decision, and quite often people would rather take a short term hit if it means long term payoff.
I suppose I should be a good customer and tell Anna that, eh?
Let me know your thoughts.
Wednesday, January 23, 2008
Monday, January 21, 2008
Got HR Challenges? These Guys Have The Answers
Next week, the Human Resources Professionals Association of Ontario (HRPAO) is holding their annual conference in Toronto. HRPAO is an outstanding organization, providing excellent educational opportunities for HR practitioners at all levels. Their annual conference is packed full of amazing opportunities to learn from peers across various different industries.
This year's conference has 115! different sessions over the 3 day conference schedule, so there's lots for everyone. It runs January 30 - February 1, at the Metro Convention Centre in downtown Toronto.
I know downtown Toronto isn't the most convenient place to get to, but it's worth the effort. With all the HR issues we face in the trucking industry today, I think everyone can benefit from attending this conference and/or joining the HRPAO.
More information on the conference - Innovate '08 - is available on the HRPAO website. Enjoy!
This year's conference has 115! different sessions over the 3 day conference schedule, so there's lots for everyone. It runs January 30 - February 1, at the Metro Convention Centre in downtown Toronto.
I know downtown Toronto isn't the most convenient place to get to, but it's worth the effort. With all the HR issues we face in the trucking industry today, I think everyone can benefit from attending this conference and/or joining the HRPAO.
More information on the conference - Innovate '08 - is available on the HRPAO website. Enjoy!
Tuesday, January 8, 2008
Retention Tactics - What Works For Different Groups?
A few weeks ago I was talking about the bell curve of driver quality and how any given fleet will have a bunch of "pretty good" drivers in the middle, a smaller group of star performers at the top and a matching small group of duds at the bottom. We talked about those different groups present different challenges, particularly relating to turnover issues, and how we need to do different things for each group to get the most out of them. I was speaking at a conference before Christmas and we got talking about different tactics that work well for the different groups. Here's a summary of that discussion.
Star Performers - Top 20% of the fleet
This group is responsible for about 80% of your profit (80/20 rule) so we want to keep them around as long as possible. The tricky thing here, though, is that money is almost never the answer. Why? Because if these are the top performers, chances are you're already paying them as much as you can afford to pay them, and they're probably not hurting in that department. Of course, everyone wants to make more money, but at this level no one quits because of money. They quit because of opportunity.
What these drivers crave, in the majority of cases, are opportunities to grow as individuals, business people, and leaders within the organization. These are the people for whom 'perks' work well. Coaching/mentoring programs, equipment spec'ing, collision review, etc. Educational opportunities are also good carrots for them. Setup an Education Assistance Program and pay for them to take distance learning college courses in whatever area interests them.
Duds - Bottom 20% of the fleet
This group is very much the opposite of the star performers. With poor performance, they're not making anywhere near as much money as the other group, so the best programs here are the ones that help them improve their performance and make more money. Note that we're not talking about a pay raise (which would have a negative effect in most of these cases) but rather giving them the tools to improve their job performance. Things like putting them into a coaching program, giving them more job-related training and skills development programs, and helping them figure out why they're struggling and how to fix the problems. If you can do that, you win double - you get a better performer that makes you money instead of costing you, and you get someone who's more loyal and less likely to quit.
Breakevens - Middle 60% of the fleet
This group is interesting because they include elements from both of the other groups. In general, if you cover the extreme ends of the spectrum, the middle 60% gets covered as well. That doesn't mean you don't have to do anything for them, just that the things you do for the top and bottom 20% combine to produce an effective set of solutions for the middle group. Some people in the middle 60% will benefit from job-related training, some will benefit from non-driving opportunities.
Training for everyone?
For all groups, training shows up as a solid retention tactic (big surprise that someone selling online training would find a way to mention it in a blog posting!). However, the training looks very different for both of those groups. For the bottom 20%, it's the job-specific stuff that gives the most return - regulatory, safety, best practices, that kind of thing. The top 20% is already demonstrating that they have a solid grasp of these issues so that kind of training is less critical. For top performers, taking the training up a level brings the real benefit - business management, customer service, leadership - those kinds of topics. This group responds well to that kind of training because it helps them to continue growing in their careers.
Okay, now what?
All that makes sense, but how do you implement it? Who's already doing it and how are they making it work? Good questions. Over the next little while we'll look at some companies that are doing this stuff really well and see if we can't "borrow" some of their ideas.
In the meantime, Happy New Year!
Star Performers - Top 20% of the fleet
This group is responsible for about 80% of your profit (80/20 rule) so we want to keep them around as long as possible. The tricky thing here, though, is that money is almost never the answer. Why? Because if these are the top performers, chances are you're already paying them as much as you can afford to pay them, and they're probably not hurting in that department. Of course, everyone wants to make more money, but at this level no one quits because of money. They quit because of opportunity.
What these drivers crave, in the majority of cases, are opportunities to grow as individuals, business people, and leaders within the organization. These are the people for whom 'perks' work well. Coaching/mentoring programs, equipment spec'ing, collision review, etc. Educational opportunities are also good carrots for them. Setup an Education Assistance Program and pay for them to take distance learning college courses in whatever area interests them.
Duds - Bottom 20% of the fleet
This group is very much the opposite of the star performers. With poor performance, they're not making anywhere near as much money as the other group, so the best programs here are the ones that help them improve their performance and make more money. Note that we're not talking about a pay raise (which would have a negative effect in most of these cases) but rather giving them the tools to improve their job performance. Things like putting them into a coaching program, giving them more job-related training and skills development programs, and helping them figure out why they're struggling and how to fix the problems. If you can do that, you win double - you get a better performer that makes you money instead of costing you, and you get someone who's more loyal and less likely to quit.
Breakevens - Middle 60% of the fleet
This group is interesting because they include elements from both of the other groups. In general, if you cover the extreme ends of the spectrum, the middle 60% gets covered as well. That doesn't mean you don't have to do anything for them, just that the things you do for the top and bottom 20% combine to produce an effective set of solutions for the middle group. Some people in the middle 60% will benefit from job-related training, some will benefit from non-driving opportunities.
Training for everyone?
For all groups, training shows up as a solid retention tactic (big surprise that someone selling online training would find a way to mention it in a blog posting!). However, the training looks very different for both of those groups. For the bottom 20%, it's the job-specific stuff that gives the most return - regulatory, safety, best practices, that kind of thing. The top 20% is already demonstrating that they have a solid grasp of these issues so that kind of training is less critical. For top performers, taking the training up a level brings the real benefit - business management, customer service, leadership - those kinds of topics. This group responds well to that kind of training because it helps them to continue growing in their careers.
Okay, now what?
All that makes sense, but how do you implement it? Who's already doing it and how are they making it work? Good questions. Over the next little while we'll look at some companies that are doing this stuff really well and see if we can't "borrow" some of their ideas.
In the meantime, Happy New Year!
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