Question

Paper Details

Critical Thinking

Objective: Complete and submit Critical Thinking exercises as defined in the 
course Syllabus.

Requirements: Successful Strategic thinking Exercises will be three (3) to five (5) pages in length and incorporate the information and knowledge gained in the course. Use the sections shown in the Evaluation Criteria to guide your analysis. 

Success Criteria: Think of yourself as a newly hired executive or consultant to the firm. The owner(s) is/are frustrated by the current situation and want to make changes that will correct the issues affecting business operations. They need an analysis of the situation and recommendations and a plan to improve which insures the viability and profitability of the organization. 

Timing: Papers are due and should be submitted via e-mail as defined in the class schedule. 

Evaluation: Assignments will be evaluated based on:

Assignments must include a cover sheet with your name, class, and title of the Critical Thinking assignment.

Every Customer Counts

LOSING CUSTOMERS IS ALWAYS HARD

Maintaining good relationships with customers can be stressful for a small business. Fred is a lawyer I know who’s had a successful practice for more than 25 years. When I ran into him recently, he told me he was making some changes. “I’m at a new stage of my life,†he said. “From now on, I’m working only with people whom I respect and who respect me.†“That’s a pretty bold statement,†I said. “I mean it,†he said. “I just fired three clients. I sent them their files with a note saying, ‘My firm will no longer represent you.’ I’d had it with them. They were a constant aggravation. They didn’t treat me right. They abused my office people. They took forever to pay their bills.†

“How did they respond?†I asked. “One of them called me up,†Fred said. “He thought it was a joke. When I told him I was serious, he asked me why. I said, ‘You really don’t want to know.’ He insisted that he did. ‘OK,’ I said, ‘you’re a miserable person. You make everyone’s life miserable, but you’re not going to ruin my life anymore.’ He hung up on me. It felt so good. I wished I’d done it sooner.†

There was a time when I would have thought Fred was crazy. I would have said, “So what if your customers are difficult? They pay your salary. They cover your bills. They make it possible for you to remain in business. It’s too darn bad if you find them aggravating. Life is full of aggravations. Get over it. Besides, keeping an old account is a lot easier than finding a new one. When you fire a difficult customer, you’re just trading one set of aggravations for another.†

Not that I believed in the old saying about customers’ always being right. That’s baloney. But I’d long felt it was important to accommodate customers even when they were wrong—for the good of the business. Lately, however, I’ve had a change of heart. The turning point came a few months ago, when I received a notice announcing that a fairly substantial customer was leaving my records-storage company.

Now, we don’t lose many accounts, so I was curious to find out what had happened with this one. My people told me that the customer, a big law firm, had hired a new records manager, and she was impossible to deal with. Whenever she called, she would yell and scream and threaten our customer-service representatives. They’d be shaking by the time they got off the phone.

When customers abuse your employees, refuse to pay their bills, and generally take advantage of your business, you should let them go. I wanted to see for myself what was going on, so I told my accounting people to send out the standard box-removal letter, detailing the charges for permanently taking boxes out of our warehouse. I then made sure that when the records manager responded, as she undoubtedly would, her call would come to me. Sure enough, she telephoned a couple of days later, and she was furious. “How dare you send us a letter like this?†she demanded. I explained that we were simply following the terms of the contract. “I don’t care what’s in the contract,†she said. “This is outrageous, and you can’t get away with it. Who do you think we are?†

I told her we’d be glad to sit down and discuss the situation. She responded by showering me with insults. There was nothing to discuss, she said. “You’ll be hearing from one of the senior partners,†she fumed. “Fine,†I said, “but I don’t want you to call me again. I won’t take your abuse on the phone, and— starting today—neither will my people.†Afterward, I told my employees that they could hang up on the records manager if she called back and started to get nasty.

A senior partner did eventually contact me, and we had a pleasant-enough conversation. I asked him if he knew why his firm was dropping us. He said no but he’d investigate. When he got back to me, he indicated that the firm was reconsidering its decision. Would I be willing to meet with the office manager—that is, the boss of the records manager—who was in charge of such matters? I said, “Of course.†

My sales manager, Brad, accompanied me to the meeting. The office manager turned out to be a lovely woman who said she’d like to work things out but there were a few issues we had to discuss. “Do they involve price and service?†I asked. She said yes. “We can definitely work those out,†I said, “but I also have an issue.†I pointed to the records manager, who was sitting next to her. “That woman has been abusive to my people,†I said. At that, the records manager exploded. “Abusive!†she said. “Your people are incompetent. I’ve never seen such poor service.†

“I’m not speaking to you,†I said and turned back to the office manager. “I value all my customers very highly, but I really don’t want your business unless you can assure me that this person will be civil on the telephone. If we’ve done something wrong, she doesn’t have to be happy about it, but she can’t scream and curse at my people.†

The records manager started to rant again. I turned to the office manager and threw my hands up. The office manager seemed flustered. “Are you saying that you’re going to fire us?†she asked. “I’m saying that the abuse has to stop immediately,†I said. “You can see for yourself what we’re dealing with.†“Obviously, the two of you don’t get along,†the office manager said.

“I’ve spoken to this person once before today, and I can get along with almost anyone,†I said. “Her behavior is simply unacceptable. If it was up to me, I’d have you pay the removal fee and call it quits right now. But I don’t have to deal with you on a regular basis. Brad and our operations people do. If you can persuade him that our people are going to be treated respectfully in the future, I’ll let him keep the account.†

I excused myself, went downstairs, and waited. Twenty minutes later Brad came down. “I tried,†he said. “It was hopeless. I can’t believe they’re keeping that woman in that job.†Dropping the customer cost us about $200,000 a year in sales, but I didn’t regret the decision. On the contrary, I wondered if I should have acted sooner. What if the customer hadn’t sent us the withdrawal notice? How long might the abuse have continued? And how many other customers had abused my people without my knowledge? What price had we paid in terms of bad morale, low productivity, and turnover?

The experience changed the way I viewed the business. Recently, for example, I was looking into a receivables problem and discovered that part of it was due to habitual nonpaying customers. I don’t mean customers who had fallen on hard times; we work with those people. I mean customers who were following a deliberate strategy of ignoring our bills and payment requests for as long as they could get away with it.

As it turned out, they were all marginal accounts (which is typical), and they were driving our accounting people up the wall. We had one collections guy who was spending hours and hours going after eight accounts that owed us $50 a month, our minimum fee, and refused to pay until we sent a warning letter. Even when we collected, the revenues from the eight accounts amounted to a paltry $400 a month, or $4,800 a year. So I announced a new policy. In the future, we’d send out no more than one warning letter to an account. The second letter would be a box-removal notice. My accounting people cheered.

Don’t get me wrong. I haven’t changed my principles. I still believe fervently in the importance of providing great customer service. For the vast majority of our customers, moreover, I feel

nothing but warmth and gratitude, and I’d do almost anything to keep them. Nor do I have any problem with those who complain, even when their complaints are unjustified. Our goal is to have happy, satisfied customers. If one of them is unhappy or dissatisfied for any reason, we want to hear about it.

But I’ve learned there’s a line that can’t be crossed, although it took me more than 20 years to see it. When customers abuse your employees, refuse to pay their bills, and generally take advantage of you and your business, you should let them go. Life is too short, and good people are too hard to find. If you can’t afford to lose the account right now, come up with a plan for replacing the business in the future.

The following ‘areas of concern’ are provided to help stimulate your thinking for this case. They are not intended to provide a list of questions to answer:

How would you evaluate the customer service health of the firm? What factors have lead to the current situation?

What are the strengths and weaknesses of customer service of the firm?

Do you agree or disagree that some customers should be let go? 

What are the underlying issues that are being manifested?

What suggestions would you make to improve the handling of situations now and in the future?

6. What changes would you recommend to increase the likelihood of success? Include the 
 areas of concern and your recommended plan of action and controls to monitor the plans 
 success.
7. Hint: the decision to drop the customer has already been made and does not need to be 
 discussed unless it relates to your analysis of the problem or alternatives for what should be 
 done in the future.
8. Chapters 6, 7 and 12 may provide insight into the issues.

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