Will Uber Kill Time-Based Billing?

Why would Uber’s business model impact the standard billing method of established professional firms?

An interesting observation was made on a radio program I was listening to last night.  Apparently a number of taxi operators in larger cities in the US are now doing all their pricing up-front for the passenger before they start the trip.  This means that the old  method of turning on the meter and charging what the end result was is becoming redundant as the taxi operators have worked out that the customer wants pricing certainty.  If the cabdriver doesn’t provide it, the customer will go to Uber…

The disruption Uber has caused within the taxi industry globally has been well documented, however, it did get me thinking.

With increased penetration of up-front pricing for work that used to be based on an set (arbitrary?) rate by time, customers from all segments of the economy are going to start to question the logic of entering a transaction with no known end price.  Where very other industry is going down the path of providing pricing certainty on commencement of a piece of work, why do the professions still believe they are immune from the impacts of the change?

In many respects, the taxi industry is similar to the professions – time by rate and it doesn’t matter to the provider how many hours (or miles) are spent on a job as they will know they are getting paid “for what they do”.  The sad thing is this has been ripe for exploitation (who hasn’t been in a taxi which “took the long way” to get somewhere?)  Unfortunately, it doesn’t create a great experience for the user of the services as they just have to grimace and wear it.

Disruption in pricing and business models is going to increase and roll through many other industries and professions that used to work on the time by rate model.  Customers are experiencing more of it and are going to demand more of it.

Those firms that start on the path to pricing on purpose will see themselves gain a competitive advantage – those that don’t will wonder what the hell happened.

Have a look around the Verasage site – there’s lots of rich material in here (esp recommend a solid listen to Ron and Ed on their “The Soul of Enterprise” podcasts).

The professions are going to become “Ubered”.  I hope they are ready for it.

Could not say it better myself!

Only just received the 2015 copy of the “Good, Bad Ugly” report on the Australian Accounting profession prepared by Business Fitness.  Makes for interesting reading.

head in the sand

There are a couple of points that are worth repeating:

  • revenue per partner has decreased by 8.9%;
  • average client fees have reduced by over 18% in the past two years;
  • for firms using timesheets, productivity is falling;
  • lower marketing spend over the past three years; and
  • 6% increase in firms using outsourcing (reasonable number, but not very many firms are doing it).

There is one very telling comment made in the introduction to the statistics in the report (my highlights):

When analysing the 14 years’ worth
of data relating to high-performing
firms, we can conclusively say that
productivity based on chargeable
hours has no correlation to
profitability.

Having just returned from the Verasage get-together in Boston, it has become even more apparent that the old models of firm management are not only redundant, they are dangerous.  Much of the discussion at the symposium related to the way successful firms focus on relationships – both internal and external.  This has to do with building, maintaining and honoring decent relationships.  Not relationships where everything is about flogging the crap out of your people and billing the hell out of your clients.  Relationships which are based on trust, accountability and common goals.

Having seen the damage done by the Almighty Billable Hour and looking at the impact this approach has on the cultures of firms, it amazes me that so many firms still use this model.

There is change already here in our industry and, as the GBU report reveals, this change is having an all-pervasive impact on our profession.  Either adapt or die.

Does this Really Work?

Ohhhh, the frustration!

I recently posted about a seminar I attended last week.  The feedback I have received from that post has been significant.  The responses have ranged from “Oh my Lord – that’s us” to “so, there is a way forward”.  Great, but I want to concentrate on the first type of replies received.

So many firms understand that the way they operate and their business model isn’t great, but it’s all that they know.  To try and move them to a new, more effective model takes a great leap in mental construct on behalf of the owners and managers in those firms.

One of the responses I received was from a bloke I know well who has just taken over as CEO of a professional knowledge firm.  Well established, reasonable size and “good, traditional” brand.  And he is frustrated up the wazoo!

It would appear from his email that the following issues pervade the organisation:

  • staff are rewarded with bonuses for hitting “productivity” targets;
  • The transfer from WIP into debtors (you know – actually billing the customer) is fraught in that, once the bills are raised, the customers get pissed off;
  • Consequence of this is that a lot of work remains in WIP as the senior people responsible for billing the WIP are too scared to raise the bill as they don’t want to have to deal with an angry customer;
  • Debtors ledger is out of control as there are a large amount of accounts “in dispute” which means that the whole thing is taking a massive amount of time and effort to clean up.

Now, from my view, this appears to be the antithesis of everything a professional knowledge firm should be.  Let me posit my view of the warped thinking that enables such an environment to exist, let alone continue:

Productivity

We want our people to be working – agree on that.  But, do we want them to be working on things that make a difference to the customer and are valued by the customer or do we want them doing things that waste a heap of time on customer accounts?  The behaviour you reward is the behaviour that continues.  By tying rewards (bonuses) to productivity targets, we are encouraging our people to bill as much time to the Holy WIP Ledger as possible.  The argument goes that, when we record everything, it gives us a basis for billing everything to the customer (more on this below).

But what is the real message that we are sending to our people when we bonus (often ridiculous) productivity?  Is it a message about effectiveness?  And is it really a message about efficiency?  Too many times, firm leaders sprout on about efficiency but the bonusing system actually penalises people from working more efficiently as their productivity targets won’t be met (the thinking goes: if I do this job more quickly, I won’t spend as much time and therefore, I stand less chance of getting the bonus).  Where is the incentive for them to be more “efficient”?

As part of this system, you get the inevitable build up of your Holy WIP Ledger.  Many firms see this as a “lead indicator” (as per last week’s post) when, in fact, it is a wish list that often bears very little resemblance to collection.

The other message you send to your people with the focus on hitting production targets as far as time spent is that they will only see a customer as something to be billed, not valued.  The training that occurs as a consequence is that the “up and comers” get taught that to get ahead, you need to focus on pleasing the partner/manager with high productivity rather than pleasing the customer by delivering great outcomes.

As an aside, it is often the case that the less senior people very rarely (if ever) get to meet with the customers.  How is this going to play out in their career development?  How is this going to assist them with understanding the file and the customer needs?  All information is “filtered” through the senior people before it gets to the actual “doers” of the work.  The outcome – they flog their guts out to get promoted and then have no experience in dealing with customers face to face.  I know of one firm in town here where the only people who see customers are the partners.  Talk about rate limiting factors!  An obvious outcome of this is that there is more rework required and heavier partner involvement in getting a file “customer ready” as the instructions are, more often than not, “lost in translation”.  This though, in the warped world of timesheet based billing, is good – more chargeable hours to bill, higher “productivity” and a bigger Holy WIP Ledger.

Holy WIP Ledger (HWL)

So, we have a whole heap of people billing the Holy WIP ledger as hard as they can as this is the basis on which they get rewarded.  The HWL is seen as a current asset in the books of the business and the financiers and owners of the business see it as “money in the bank”.  All that needs to happen is for it to be billed.

Herein lies a bit of a problem.  I have yet to meet with a firm where they state, honestly, that the HWL is fully recoverable.  I know of one firm I have been dealing with who ran a HWL that was a pure estimate.  They had timesheets to (sort of) back it up, but they knew that they were all rubbish so they just did an estimate.  It was probably as approximately right as the timesheet based one anyway.

I recently did some work for a customer in a professional knowledge firm regarding the exit of a Partner.  The HWL was obviously an issue to be addressed as the approach they were considering was one based on a mixture of profit and net assets.  To get a true picture of net assets, there needed to be a full review of the HWL as everyone recognised that it was not valid and certainly not all collectible.  In this circumstance, I suggested that we not go through this process.  Instead, we developed an approach which looked at what the exiting Partner was happy to receive for his equity and what the continuing equity holders were prepared to pay for the share.  As I said to the Managing Partner – “We can go through the whole process and get a result.  The real risk here is, whilst it might be very right as far as the number goes, someone is likely to be pissed off”.  The approach we used meant that my business didn’t get a whole heap of extra money for going through the valuation process, but, we did ensure that the Partners (exited and remaining) have kept very very good relationships and our customer very much values the creative approach we have adopted to solve their problem.  In short, we provided value rather than a number.  And we have further strengthened our relationship which will lead to more referrals and customer longevity.

The HWL is never right.  The term in most professional firms is “lock-up” – how many days the firm has “locked up” in WIP and debtors.  Often time, this number is horrendous – I know of some firms who have nearly one year’s worth of revenue “locked up”.  For what purpose?  You can’t spend it as it’s not real.  Why bother measuring something that is so subjective as to be useless?

Debtors

To get a bill done from your HWL, it needs to go through a process.  Often, it will be a senior person or Partner who goes through this process.  More often than not, they will sit down and agonise over the process “If I bill them what’s on the HWL, they will have a melt-down”.  So, what happens is that a bill will be raised against the customer for some portion of the HWL balance outstanding – in effect, what the person doing the billing believes they can get away with.  Conversely, if you do bill them for everything that’s on the HWL, you are almost guaranteed to get a pissed off customer on the phone three days later (or, worse, never – as they quietly leave and have no intention of using you again – or paying your bill).  There is no positive outcome that arises from this.  For anyone.

Now, the current thinking with regard to this is that firms should budget for “write-offs”.  In other words, they are saying (in words and deeds) that they know the HWL is crap.  But they then hold that the basis of their charging of the client is on time spent.  So, if the client has agreed to appoint them on time spent and they don’t bill the full time, are they really engaging them on that basis or on a “best estimate” at the end of the job?  This is where “estimated ranges” of accounts come in to it.  The client is told the cost of doing the work will be in the “range” of (say) $5,000 and $10,000.  The client hears “$5,000”, the Partner hears “$10,000”.  When the bill ends up being $8,000, both parties are pissed off.

What happens more often than people care to recognise is that there is a lot of “stuff” on the HWL that the senior guys are just too scared to bill.  I have seen some aged HWLs which record work done up to two years prior that is yet to be billed.  Seriously?  Is it ever going to be billed?  Or is it just there as a tacit admission that the system ultimately doesn’t work?  This then leads to other KPIs in firms about the ageing of HWL.  Most of these are there but not adhered to.  If the WIP isn’t billable, write it off – with all the “appropriate” consequences.

But, back to the staff posting time to the HWL.  How do they feel when the time they put in to a client is then written off?  Where is the feelgood out of this?  For anyone?  What is their thinking at the end of a job when, they are encouraged and incentivised to record all the time only to have it written off?  How will they think about the Manager/Partner who has “done this to them”?  What message does it send about the “system”?

So, after much navel gazing and internal brinkmanship, the bill is sent out to the unsuspecting customer.  The customer gets angry.  Now, one of two things happens.  The customer ring the Partner to have a whinge about the bill – the firms sends out a detailed HWL report to the customer detailing everything they have done (including the 15 minute phone call – billed as 18 minutes – where the customer recalls at least half of it was spent discussing the football results) for the period the bill covers.  Guess what, they get more angry “They’re charging me for what?”  Then they start to do the maths.  “If he is $500 per hour and he spent 8 minutes talking about the football, he wants me to pay him $100 for that?”  Not a great outcome.

Source:  geektoauthor.blogspot.com.au

Source: geektoauthor.blogspot.com.au

The other thing that can happen is that the customer simply doesn’t pay the bill.  So, they start to get harassed by the ever-vigilant accounts department in the firm.  The “friendly reminders” come out, then the “is there a problem” letters and so on until the letters get more threatening.  Really good, positive stuff about customer engagement through this whole process.

At the end of the day, it gets nasty and people start defending positions.  The firm will (usually) relent and write-off a part or the whole bill or, sadly, take the customer to arbitration.  On this note, I remember a number of years ago when Ron Baker did his “Firm of the Future” tour around Australia.  During this tour, I met with a number of the Legal Services Commissioners from various states around Australia.  Their major source of work?  Fee disputes.  Their fervent wish was that all firms priced up front as the firms that did this hardly ever had a fee dispute.

So, we have a debtors ledger that is somewhat suspect as to the real collectability of the balance.  Which means, when coupled with the HWL, the “lock up”metric used by a number of firms is inherently questionable.

After all of the above, is it any wonder why my firm dumped timesheets in 2007?  It has saved innumerable hours, it has reduced customer complaints and has meant that the team in here are far more focused on delivering positive customer results rather than inputs.  As stated above, the behaviours you get in your firm are the ones that you reward.  Is your reward program incentivising the right behaviours?  Is your firm business model one which is team and customer focused?

There is a better way of running a professional knowledge firm.  Far less stressful, more enjoyable and one where you actually want to come to work.  if you look after your people and customers, the profits will (generally) look after themselves.

The frustration of firm management can be reduced and/or removed.  There are a band of highly experienced guys and girls at the Verasage Institute who can help you make the move.  But you have to make the first step.  I strongly encourage you to do so.

The Medical Approach – The 3 “Abilitys” (and Cheese)

Friday night last week was not a bad night – a bit cold and wet, but with a roaring fire and some lovely wine and cheese, the evening progressed very comfortably ( I can highly recommend the Tarago River “Shadows of Blue“).  One of my best mates came around to watch his football team get flogged – it was such an enjoyable spectacle that we ended up watching soccer and the Tour de France.

Over the course of the evening, we discussed many things and one of the topics we covered was the “ideal” approach that Doctors should have with their patients.  To provide some context, my mate is a specialist Surgeon and has built a wonderful reputation in his field.  He also teaches trainee surgeons and is on the examination panel for the Royal Australian College of Surgeons.  All this is very surprising considering he supports Carlton Football Club.

As our conversation opened up, he shared with me the three factors that make for better doctor/patient relationships.  His view was that where these three factors are in place and in order, the patient is happier, the health outcomes are generally better and there are fewer claims for adverse outcomes against the specialist.

The factors and the order?  They are:

  1. Availability;
  2. Affability; and
  3. Ability.

In precisely that order.

patient satisfaction

Expanding this approach through to other professions, it appears to me as though this might just be the most simple and easily understood “guide” for all of us.

Think about the customers whom you love dealing with.  They will be the ones you make yourself readily available to.  They are also the ones where you have a great personal relationship.  And, generally, they won’t be overly focused on your technical ability as the relationship is the thing that resonates most with and for them.  They respect your technical ability, but they value the relationship.

Over the weekend, I have reflected deeply on this approach and I believe it is something that we all should be aware of in our dealings with customers (in fact, everyone).

If you have a customer who is a pain and who you avoid contacting, nothing good is going to happen from the relationship.  This situation is one where you need to consider the real value that you are bringing to the relationship and determine whether it really is one that you should maintain.  Where you recognise that you don’t currently have the desire to be as available for a customer as you should be, is the relationship able to be recovered or should it be terminated?  I know that over my career, I have had numerous situations of this type.  They are really hard work and, even though you might get great results for them, there is very little satisfaction derived from the outcome.

Secondly, if you have a customer around whom you cannot be yourself and where you find your communication stifled and difficult, does this allow you to bring your “full game” to the relationship?  If you aren’t being yourself (or worse, if they aren’t being themselves), can this be rectified or should it be discontinued?  Again, there have been numerous occasions where I have had customers around whom I had to adapt my style and deliver with a very “serious” (so-called “professional”) demeanor.  This is hard work – for them and me and my experience tells me that the absence of this factor in a relationship makes the whole process less satisfying for all concerned.

The ability thing I am leaving out here as, if the first two factors aren’t present, it doesn’t matter how good your ability is, the relationship will be difficult to nurture and develop.

This is only a short post to introduce the approach to this forum.  I would love to get your feedback on this – it appears to be so simple, concise and to-the-point that you may wish to consider using it in your customer selection and retention process.  I will be.

Now, where has that cheese gone?

 

 

Regrets? They’ll have a few

OK, so we’ve all got them.  You know, those things that we look back on and think “what the hell – why did I do that?” or, (even worse) “why didn’t I do that?”

I’ve had plenty – more of the former type than latter, but it all forms part of the rich tapestry of life that we humans form part of.  And, much as we may regret things, it helps us develop into the people we are and forms the foundations of who we will be.  Great.

apple

BUT, what would happen if you knew that something was going to happen and, despite every nerve in your body screaming at you to do something, you didn’t “do it” (whatever “it” might be) – is that really a regret?  If you adopted a stance of denial, does that turn into a form of regret?

How is it that, even when confronted with massive amounts of evidence supporting a reality that is going to occur (and I’m not talking “consensus” here) – I am talking incontrovertible facts – you still don’t make the moves that are required?

I’m not going to launch into semantics here (I will leave that to my far more learned colleagues in Verasage), I am just trying to posit the argument that often times, people do not do what they should and don’t take action when they should or find a million reasons not to do something they know they need to because, well, they have lost something.

What is the loss they have made?

Consider if you will the current state of the accounting profession.  We are seeing massive changes set upon us – mainly from technology/cloud solutions, but also from offshoring operations.  Did you know, for example, that most of the Big Four have established offices throughout Asia to which they “in-source” their compliance work at (about) AUD10 per hour?  I know of an Australian example where a large corporate has moved a significant volume of their processing/admin work to a Pacific nation as the effective wage rate there is AUD1.20 per hour – a bit better than the award rate over here!

This is all happening now.  Today.  To our beloved accounting profession.  And what are the vast majority of our colleagues around the world doing about?  Nothing.

I posted some time ago about the changes that were occurring to our profession.  The changes that were coming then are rolling out even more quickly than I anticipated.

So, what is the profession doing to adapt to this change?  Not much.  Some of us a screaming to all who can be bothered to listen that there needs to be a change in business model.  Hardly anyone seems to be listening.  Or caring.  And we are not, by the way, being “chooky looky” – the sky is falling in!

What are most accounting firms doing to try and combat the inevitable?  They are trying to be more efficient.  Making better time recording platforms and putting greater emphasis on staff productivity.  Anyone recall Danny DeVito in “Other People’s Money”?  Buggy whips.

To make the process more precise isn’t what’s required in the accounting profession today (or tomorrow).  As Ron Baker is fond of saying – “I’d rather be approximately right than precisely wrong”.  Bravo Ron!  But tell that to the Luddites who persist with a 1950’s business model 65 years after it was made common place and 64 years after it became redundant.

The time-sheet is an anachronistic tool that does not fit with today’s requirements.  Staff hate them, admin hates them, managers hate them and Partners/Directors hate them.  The people who hate them most however, are the second most important people in your business – your customers.

In some respects, I am advocating a “back to the future” scenario – get rid of time-sheets – but with some important changes.  Changes like agreeing the scope of work and price up front with your customer.  The change which includes and involves your people in determining scope – and price!  The one where you truly empower your people to shine rather than record their misery in 6 minute increments.

Ed Chan of Chan & Naylor last week posted on Linked In.  Chan’s argument is that accountants sell time.  No.  We don’t.  We sell solutions to our customers’ problems.  His argument is that the “solutions” (I am expanding his argument a little here, but I believe it is in the same vein as what he has written) are all compliance-based whereby all we are doing is the “same thing” for each client.  As I have illustrated above, the basis of a lot of the compliance work is going to be automated or off-shored.  So scalability only applies if you’re doing basic, processing and bookkeeping work.  Not exactly what we’re trained for is it?

Similarly, setting an arbitrary hourly rate to charge them for your time isn’t reflective of their need or the value that they place on the work to be done.  Using the same rate for everything you do makes you pretty “average”.  And remember – average is where the best of the worst meets the worst of the best.

My belief is that every customer is unique and have their own set of fears, needs and the like.  To try and put them all in one basket is to demean both them and the people who work on their files.

Chan’s argument is also based on the premise that all you have to do is to hire more people and more customers will come to you.  Oh, to live in such a wonderful world!

From my experience (such as it is), the only way you can achieve this is to discount your offering to a level that drives people to you.  And then, what happens to “the margin” that Ed believes is the Holy Grail?  That and the fact that you’ll generally get the bottom-feeding clients who don’t value what you do anyway and will bring a whole heap of their “friends” along with them – High School Chemistry – like attracts like.  You will also not exactly engage your people as they merely become cogs in a never-ending grind out of tax returns.  Inspiring isn’t it!

So, in Ed’s world, where “you build a business to prepare a tax return”, I believe there will be regrets.  Lots of them.

Customers don’t want tax returns.  They want advice.  Support,  Counsel.  Encouragement.  SOLUTIONS.  The tax return work is only there because the government stipulates it.  Nobody really “values” it in the true sense of the word.  And the ultimate disruption?  I know of at least one of the Big Four that will be offering their clients compliance work for $0 in the coming years.  How’s “the margin” on that?

Getting the business model right for accounting firms is critical given the disruptive times we are in.  Making a bigger or cheaper version of what exists won’t answer the challenge – it merely cements in a race to the bottom for those firms that don’t adapt.

Regrets?  Yep, I have them.  A number of them.  One I do not have however is getting rid of time-sheets and moving to a business model that will sustain our business, our people and our customers for a long time.

Oh – the loss they have made that I referred to above?  It’s a loss of self esteem and belief in why they do what they do.  And that, my friends, can be scaled!

Really, It Is That Simple

Yesterday, Kai Kasad from Moores in Victoria, Australia posted this on a VeraSage internal page. We thought it was too good not to share to a larger audience. He writes:

Earlier this week, I was at a pricing workshop hosted by a biglaw firm.

At one stage attendees were asked how the pricing function worked at their firms. I informed the audience that with Moores Agreed Pricing or MAP, we agree the price before we start work for a customer.

I was asked by the host, director of pricing of the big law firm, what we do if the “client does not come to the table with respect to scope.”

My answer: “We simply don’t start work until we’ve scoped and agreed the price in conjunction with the customer.”

After a pause he said: “Well, that’s very disciplined of you.”

I think I got his attention given he suggested he wanted to chat with me in detail about how MAP works!

It is amazing how the answer is so simple, yet so beyond the comprehension of otherwise very smart people.

Why You Should Fire Your Low Value Clients

By Tim Williams, Ignition Consulting Group
www.ignitiongroup.com

My colleague Ron Baker has coined what has come to be known in professional service circles as “Baker’s Law”: Bad clients drive out good clients.

What is a “bad client?”  A bad client is a low-value client; they don’t add any value to the agency’s bottom line, professional satisfaction, or reputation.

  • For starters, low value clients are unprofitable.  There is simply no rational argument for keeping an unprofitable client.  Look at most agency financials and you’ll see Pareto’s law in effect: 20% of your clients generate 80% of your income and profit.  Generally speaking, about one-third of an agency’s clients actually cost the agency money.
  • Low value clients usually run your team ragged because they’re poorly organized, have unreasonable approval processes, and make constant changes and revisions because they’re not focused enough to give the agency good input and clear direction.
  • Low value clients often treat your team with lack of respect; thereby creating a relationship characterized by lack of collaboration, mediocre work, and strained nerves.

Not every dollar is a good dollar

dollar-ripped(1)

So why are so many agencies filled with clients that fit this description?  The excuse offered up by most agency principals is “they at least help cover our overhead.”  They have the attitude that every dollar is a good dollar.  But some dollars actually have negative value when the result is demoralized people who leave for other jobs and a damaged agency reputation that hurts prospecting efforts for both people and clients.

When less is more

Our firm once worked with a 50-person agency that had a roster of 45 clients.  Their profit margins were razor thin, their work was only average, and their staff was literally overwhelmed by the demands on their time.  The principals of the firm made the courageous decision to part ways with the bottom third of their client list – about 15 of their smallest, most unprofitable clients.

They agreed that they would resist cutting any of their key staff positions until they could judge the results of their actions.  The result was a rejuvenatedorganization that suddenly had the time and ability to grow the business of their best clients, resulting in greatly improved profitability, s

taff morale, and work quality.

Bigger versus better

To quote another of Ron’s sayings, “Growth for the sake of growth is the ideology of a cancer cell.”  The only kind of growth you should want is smart growth.  Income is vanity, but profit is sanity.

P.S.  One brilliant way to get rid of your low value clients is to charge them the highest price.  Ironically, most low value clients end up getting our lowest price, because they complain the most.  Do just the opposite and your low value clients will disappear.

Yup, It’s the Client’s Fault (Again)

In this month’s Accounting Today, Roger Russell’s article Don t Let Clients Drag You Down furthers the belief system that accountants need to be cautious of “client’s” and their undocumented expectations.

The article opens, “Being sued for something you’ve done wrong is bad enough, but getting sued when you have performed your work diligently and correctly can be devastating. Yet that’s what oftentimes happens when accountants fail to communicate with their clients exactly what to expect.”

The article then prescribe the usual remedies: better engagement letters, better spelling out of the firm’s responsibilities, and, of course, “Be aware of what is a reasonable fee.”

Nowhere is it suggested that a conversation about the value to the customer be had. Nowhere is it suggested that the professional and the customer should agree to a fixed price upfront before the work is performed. Nowhere is it suggested that the customer be given some choices with regard to the work performed. Nowhere is it suggested that the professional is responsible for managing the scope creep and scope seep.

Once again the advice is to treat the symptoms, not the cause, which is never even mentioned in the article – The ABH (Almighty Billable Hour).

William Cobb on the Cobb Value Curve

At the Sage Firm of the Future Symposium in March 2013, William Cobb, devisor of the oft cited Value Curve, was on hand to explain his concept to the attendees.

Value Curve ClntPwr

The Cobb Value Curve

He was kind enough to let us record it. Enjoy!

Book Review: Heads in Beds: a Reckless Memoir of Hotels, Hustles, and So-Called Hospitality

I must admit I have been derelict in my responsibilities of sharing with our Community the wonderful learning I encounter when reading books that I find by merely browsing virtual and real bookstores. Although the recommended reads from our entire Book Club have nearly always lead to pleasant page turns – once in a great while I stumble upon an outlier and Heads in Beds: A Reckless Memoir of Hotels, Hustles, and So-Called Hospitality, by Jacob Tomsky is a 5-Star – belly busting – journey through the eyes of a front desk agent of 4 and 5 star properties. Tomsky writes about lodging like Greg Kyte writes about accounting. For the insiders and experienced travelers you’ll find the humor both funny and sick and you’ll never leave your toothbrush unlocked again nor will you ever turn down the opportunity to have a bellman schlep your bags to your room while you hand over your 1s, 5s, and 10s for the privilege.

Tomsky is a pseudonym as he is writing about real life and real people. He attempts to opaque the hotels where he has worked (albeit not overly opaque – just enough to keep the predator lawyers from preventing its publication). This is simply a joy to read. As a frequent guest, and one with my own set of horror stories and comic relief realities, I appreciated the frankness of Tomsky’s writing.

Tomsky begins in New Orleans after concluding that his recent Philosophy degree doesn’t provide easy career entry and figuring that any job was better than starvation, he begins working as a valet at a restaurant where he begins learning the hustles and ropes of true customer service. He also learns how detrimental negative leadership is (besides being a fun and enjoyable read about hotels, guests, and life and times a professional front desk agent – this book has some great lessons about the value of excellent leadership (aka the Ritz Carlton way) and the cancers created by toxic turds that focus on abuse of power and profits above customers and people).

After a short yet honest effort as the restaurant valet, Tomsky learns of a new 5 star hotel being renovated and about to be opened (pre-Katrina) in the heart of New Orleans and is hired as a valet. Here he learns about the value of Total Quality Service (TQS). At the new hotel, the entire pre-opening team is paid for two weeks, just for training in the hotel’s way of service. They have a pre-opening party and clearly the opening management team is dedicated to serving their customers beyond their expectations. When one of the valet’s inquires how that might happen, the instructor quips back and suggests he thinks about something that would be desired, appreciated, and yet unexpressed by the guest. The valet retorts, maybe a guest that arrives with a dirty car he would like his car washed and detailed and the instructor replies that is exactly the kind of service said was desirable. When the valet asked a follow-up by asking if he was “to drive the car over to his home in the 9th Ward, and wash/detail it there and drive it back”? the manager said, not only “Yes, but I’ll pay you extra for the service realizing you will have lost some tips while you were away”. Think about that – how are your team members thinking of providing service and would you back it up with your wallet?

Soon, our author is recognized as better than valet material and is offered a spot at the front desk as part of the “front of house”. Here he learns about systems and processes. Realizes why a bellman never retires (can’t handle the pay cut) – how to summon a bellman by yelling “front” and handing the keys to the bellman making the guest have to negotiate them back or be obliged to be served. He learns to remember names, preferences, and handle any sort of challenge. He works for caring leaders and management that actually support their entire team.

Tomsky reminds us that once a hotel opens it never closes and reminds the reader that you will generally never find a lock on the front doors of a luxury hotel. They can fail to be in business, but while in business they do not close. Tomsky notes that “hotels are methadone clinics for the travel addicted” – safe refuges from the insanity of being away from home.

Early on in his career as he was studying the hotel management program he noted that “….{it is} (A) strange thing to see a hotel translated into a program, every room and floor represented, every guest assigned a profile, rate, and requests. A portion of the work involved learning the room codes: NT = no tub. NC = no closet. SB = small bathroom. And here is a great one: Ne = near elevator. Or another guest favorite: NV = no view.” This level of understanding of the hotel’s capacity lead me to think about PKFs and how could we create such codes for our services, our team, and our customers. One I thought of was NF = No Future.

While learning how to balance 10 requests for 8 rooms with a view, Tomsky notes that “services is not about being up-front and honest. Service is about minimizing negatives and creating the illusion of perfection.” I must admit part of this perspective scares me but it certainly contains some wisdom.

My first indication this was a book Greg Kyte would appreciate is when learning that it is perfectly acceptable by the front desk to wipe out that in-room movie off your bill (along with mini-bar charges {I must admit that this doesn’t sit well with me but I appreciate the authority the front desk has for taking care of business and seeing that happy customers return}). As he is describing that he doesn’t really need the full story of the accidental movie click – he begins mid-sentence with a guest calling the front desk “Yeah , I’m in room 1205. I accidentally ordered a movie. Can you take it off my bill? “Certainly, sir”. Over to the movie console to cancel Asian Secretaries Rike it Rough (italics in original), two minutes and seven seconds into playback. I guess the opening credits were sufficient” (that last phrase is just so GK)

After a significant stint at the font desk and clearly demonstrating that his philosophy degree has provided a leg up on the others, Tomsky is offered his first opportunity into management where he is offered the assistant housekeeping manager position. This is clearly not for the faint of heart. He writes about the humorous and sad of housekeeping. The amount of work and coordination it takes to provide turn-down servicing while the guests are away, maintaining a clear hallway, and providing extra-ordinary service like it is just an everyday occurrence.

One thing the author is adamant about is that housekeepers do not steal. They are the first blamed when careless guests (frequently too drunk to remember being to frisky when they swept that diamond earring out of their ears playing some form of cat and mouse game awake the next morning and begin looking for their missing items. And you know what. I believe him. From his time in housekeeping it is clear that there is way more to what he refers to as the “heart of the house” then meets the eye of the common guest.

While standing hip deep in dirty sheet and towels in the bowels of the hotel, it hits him that it is time to leave and start a new journey. He leaves New Orleans for Europe where he spends his savings drinking and staring at the stars before he returns to the States and lands in New York City. Initially he applies for any job but one in the only industry he knows. And ultimately he applies at a 4 star NYC hotel as he is about to be evicted from his boarding house and again enters the life and times of a professional front desk agent. Here he is tested by the doorman for honesty, hustled by bellman, and begins again providing extraordinary service to commoners and celebrities alike. He learns the hustle of New York where he frequently explains that a $20 or $50 bill cleanly wrapped around your credit card as you check in will get you that ultimate upgrade if possible and will certainly provide ample dividends as a guest who understands the process.

When the venerable historic hotel is sold to a group of private equity trolls, life begins to unravel as the new owners short-change themselves as they chase a current dollar while the front desk is protecting the valuable thousands generated from loyal customers. Management is switched out. Massive controls from clamping down on complimentary items, goody bags, and common sense solutions all the way to switching out the knowledgeable security team, lead by retired NYC police officers that could direct any guest to their destination to an outsourced service that worked for $8/hour less but had no institutional knowledge. They just were currently cheaper. But at what cost.

There are too many great lines for this posting – however here is the ultimate recommendation. I thoroughly enjoyed this read. It took me three days to read and I haven’t laughed so deeply while reading a business book since the Clinton Administration. This is simply enjoyable. Pick it up. Learn some lessons in service and leadership. And whenever possible swap your firm or leadership for the hotel team or management and leverage the lessons that are so wonderfully illuminated throughout.