Tuesday, April 22, 2008

When to fire your clients

In many services businesses and certainly in the Recruitment and Staffing business, the customers you choose determine the level of success you achieve. In the search business we are always looking to add clients who are responsive to our efforts (we only get paid if we are successful) and in the temporary staffing business we are always looking to add clients who pay their bills on time and treat our temporary employees well.

A post on the HBS blog titled "The New Math of Customer Relationships" by Harvard Business School professor emeritus Jim Heskett articulates this better than I can:

When we observed a number of organizations ... we found a common behavior among the most successful ones. In various ways, they "fired" customers who either were abusive in their relationships with employees or were just difficult to serve, perhaps because they fell outside the core constituency (target market) identified in the organizations' strategies. In some organizations, this is a way of expressing support for employees. In others, it is a way of preserving the organization's strategic focus. This is typically not something that an organization advertises. But it is standard practice in a number of organizations today.

For example, at ING DIRECT, the fastest-growing financial services organization in the United States over the past seven years, the company, in as personal and amiable a way as possible, asks 10,000 customers to close their accounts every month. It's important to point out that this is out of a current base of about 6.5 million customers who give ING DIRECT the highest marks for satisfaction out of all U.S. banking organizations. The company fires customers who are especially "high maintenance" because they are unusually high users of the time of its support center personnel. This both preserves a low-cost base for its targeted customer base and, by the way, reduces a source of frustration for employees.

Do you agree with this concept? I do... The assumption being that your business does not depend on a small number of clients. If it does, you probably don't agree and/or regardless if you do, you can't consider this strategy until you land some more clients. So sell more so you can fire your clients too.

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