Every advisor has dealt with mistakes on client accounts, such as incorrect tax slips or changes of address that fell through the cracks. Those mistakes can be incredibly disruptive, and potentially undermine client confidence – for investors it’s one thing when Dominos doesn’t get their pizza toppings right, something else entirely when there is a screw-up by the advisor or firm managing their money.
When it comes to mistakes, there’s good news and bad news. The bad news is that no matter how hard you try, if you run a large practice a certain number of mistakes is inevitable. The good news: Provided that problems are relatively minor and are one-off in nature, the right process to handle mistakes will actually strengthen client loyalty and improve satisfaction.
The profitable art of service recovery
How to win multi-million dollar clients
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Among the first to study the area of service recovery were three professors at Harvard Business School who in 1990 published the Harvard Business Review article The Profitable Art of Service Recovery. This article talked about how applying the “zero defect” philosophy from manufacturing to service interactions can dramatically reduce the number of problems. It also made the case that applying this philosophy can only go so far when it comes to service experiences.
In services, no matter how rigorous the procedures and employee training or how advanced the technology, zero defects is an unattainable goal.
As an example of service failure, the article talked about a wealthy customer who used a different bank branch than his normal one to cash a check. Because this was not a “qualifying transaction,” his parking slip wasn’t validated and he was charged for parking in the bank’s lot. He was so steamed that he drove 40 blocks to his home branch and described what had happened to his normal banker, telling him that he would like an apology by the end of the day. When he got no response, he withdrew $1 million, an event that made national headlines.
Sometimes a poor response to a problem is almost as bad as no response. The article pointed to research that more than half of the efforts to respond to customer complaints actually reinforced the initial negative reactions to a problem. That’s actually good news for advisors. Consumers’ expectations for the response to an issue have been driven down to the point that you stand out just by dealing promptly and effectively in resolving problems.
How to turn around problems
Turning around service problems starts by creating a corporate culture where frontline employees who interact with customers are empowered to act. The article pointed to how Club Med, FedEx and Marriott have built service recovery into their corporate culture. And organizations like Four Seasons use stories of how employees have helped turn unhappy customers around as part of their training for new staff, to set expectations that front-line staff have the authority to deal with issues.
Once you’ve done that, the next step is to identify a clear set of steps to take when a problem arises. Recently, I delivered a workshop to a large branch of a leading wirehouse. As part of my day in the branch, I was asked if I would spend 45 minutes with sales coordinators, who are typically neglected when it comes to training. In that session, we focused on how to respond when a client calls with a problem. Here’s what we created:
- Listen: Put everything aside to give the customer’s complaint 100% attention, taking notes along the way.
- Apologize: Right off the top, make an unqualified apology using simple words such as “I’m terribly sorry about this.”
- Clarify: Ensure you have all the details by asking the client to elaborate and by asking “Is there anything else I should know?”
- Confirm: Check that you have a full understanding of the situation, restating the problem that the client ran into with the words “Just to be sure I have this right.”
- Empathize: Apologize a second time and empathize with words like “I can imagine how frustrating this is.”
- Propose a solution: Lay out what will be done to deal with this, starting with “Here’s what I suggest,” and include a specific timeframe when the client can expect to get a response to their problem. Then get the client’s agreement by asking “Would that be acceptable?” Depending on the client and the nature of the problem, a short email laying out next steps might be appropriate, starting once again by apologizing for the fact that the client was inconvenienced.
- Implement a solution: Even if clients are satisfied when they hang up the phone, that won’t last long if the problem isn’t resolved. The person dealing with the problem needs to follow up to ensure that the issue is rectified quickly and accurately.
- Follow up: The final step is to follow up with the client after the issue has been addressed, either by phone or email to ensure that they are 100% satisfied with the way the problem was handled.
- Be vigilant: One of the sales assistants talked about how sometimes the same clients run into problems and what was a trivial matter the first time becomes incredibly annoying when repeated. That’s why when clients encounter problems, she takes special care in all the interactions with them in the following period, to minimize the chances of issues recurring.
This level of attention to detail in resolving problems may seem excessive. But the hard fact is that when a client runs into a problem and calls to complain, the relationship is at risk. How you and your team respond can reinforce the client’s perception that administrative issues aside, you are 100% committed to meeting their needs.
Implementing service recovery in your practice
There are a few key steps to implement a culture of service recovery in your practice.
First, sit down with everyone on your team to talk about this. Discuss how you deal with problems currently and talk about whether you need to build in a clear written process similar to what is outlined above. In your weekly meetings, discuss any problems in the previous week and how they were dealt with. Talk about lessons from that experience that might be able to improve the process in future.
To make this happen, give everyone on your team the authority to act. The Harvard Business Review article described how one Marriott hotel gave every employee authority to spend up to $10 to deal with an issue when a guest complained. Consider whether you should give everyone on your team the authority to send a client a small token of apology when they run into a problem.
Everything in this article talks about relatively minor issues. Serious complaints are a different matter – for serious complaints, the expectation should be that they are immediately escalated to the advisor responsible for the client and if that advisor is unavailable to another advisor on the team.
There’s one last step that needs to happen –diagnose of how the problem happened. While an effective process to rectify problems is important, even better is avoiding that problem in the first place. Once the immediate issue has been dealt with, the next step is to sit down with your team to understand why the problem occurred and how to avoid this issue in future. As part of that, it’s critical to avoid pointing fingers; my recent article Google’s Advice on Making Your Team Excel outlined research pointing to the importance of “psychological safety” on teams, where everyone feels that they can be open and honest without fear of being shut down or punished.
Finally, I’ve talked about the cases where clients complain. What about the silent majority of clients who are not vocal and put up with minor annoyances without saying anything? For those clients, consider adopting the advice in my article, The Best Question to Engage Clients and finishing your reviews by saying: “What one thing could I do in the next 12 months to improve your experience working with us?”
The conclusion from the research on service recovery is very clear. While mistakes are never a good thing, by putting in place the right culture and process, you can manage the downside from minor mistakes and turn them into opportunities to solidify your relationships.
Dan Richards conducts programs to help advisors gain and retain clients and is an award winning faculty member in the MBA program at the University of Toronto. To see more of his written commentaries, go to www.danrichards.com or here for his videos.
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