How Happiness Drives Profit

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Starting out in my first job, I worked the following 20 years in the service business, restaurants, bars, coaching, and in consulting services; working my way to co-founder, national leader, and then back to start-up mode. For some years, our hardest challenge was to find people to do all the work, for others, it was trying to find work for all our people.

During a lean period, I came across the above concept. Which in itself is somewhat ‘interesting’, what makes it quite powerful is the accompanying truth:

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Aha. Now I hope I have your attention.

That’s ‘interesting’ But my business is different...

Here is where we hope we can have a healthy discussion--

Your business certainly has some differences, but at its core, it is similar to all service businesses, we all serve people, and all people have a few things in common.

We all lived in caves.

Because we all evolved from a cave dweller, we have some tools that were really important in order to survive, and they still drive much of how we decide. The same skills that allowed us to hunt and not be hunted still drive many of our decisions today, like, do I spend money here, is now the time to spend money there. And one of our key survival instincts is to resist/avoid things that can hurt us, and usually things that hurt us come with a change in our environment. Consequently, we really, really, hate change, and we have for 100,000+ years. This is what makes the first formula so powerful.

The #1 element: Expectations Management.

When someone chooses to buy a service, they are committing to a change; as mentioned, that in itself can be stressful, so it is key that we deliver what we promise. What is important to observe, is that we set expectations in each step of the service delivery process , from qualify/quote through to collecting payment. Whatever we can do to meet expectations, we make our customers happier.

Here are some examples of expectations setting, and missed expectations we set in the course of service delivery.

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In each of these examples, the customer is forced to accept unanticipated change, this makes our inner cave dweller very, very upset. If you look at the second formula, we know that upset customers are unprofitable.

The challenge with service delivery expectation setting:

Li Jin (@ljin18) and Andrew Chen ( @andrewchen) do a very good job at identifying the friction points in delivering services in this post, they describe how services are:

1. ….are complex and diverse…

2. Success and quality in services is subjective...

3. Fragmentation — small service providers lack the tools or time...

4. Real-world interaction is at the heart of services delivery…

And they are bang on--these complications have protected service delivery from any real external threats, customers have been historically tolerant of the challenges, and have just been willing or forced to pay service companies in order to get the job done.

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The problem was this worked when service companies held all the information, this has now changed, with online communities and the speed of information, missed expectations do not just impact a single customer, they impact your future customers. Bad news & News of Bad Service travels 10X faster than good news.

Social media can be a very convenient complaint box, people complain vocally about missed expectations, and even worse, people love to join in on the ‘complain train’ hurting your business further.

So what can I do?

The good news is that you don’t actually have to change your business (too much), in many cases, you just need to reset expectations in line with what you are best at delivering. McDonalds may not be your favorite burger, but it is the same burger at every McDonalds; delivering on expectations is why McDonalds remains one of the worlds largest restaurants in revenue, profit and number of stores.

Review how you do your work, (and get ready to earn stronger and more sustainable profit).

Invest 30 minutes from your week and draw out one of the process steps in your business, make it easy, use a napkin or scratch paper for your first assessment.

1. Identity the parts of the process where you know you are vulnerable to missing expectations.

From that list, ask yourself the following 3 questions:

1. Can we meet the expectations we’ve set out?

2. If we can’t meet expectations, can we change the expectations and still be profitable?

3. If changing expectations wouldn’t be practical, how can we change the way we deliver work as economically and time effectively as possible so we can more reliably meet expectations?

Track the opportunities for change, start small making changes in a small part of your business, keep track of the impact on your customer (price, time, quality) and track the difference.

You will likely find that those customers will be the happiest, the jobs will be the most profitable, and the employees that are delivering the services will be the happiest! Why? How? Because we all love meeting expectations, there is something about delivering what you promised that helps the cave dweller in our bodies feel good about the work we do, and sleep extra hard at night.

Join the conversation & leave comments!

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Have a great week!

Guillermo