Is this a harsh thing to say, or is there a semblance of truth in it? Or even worse, is this the norm?
Many businesses claim in their mission statements or marketing materials that their customers are at the heart of their ethos and operations. However in today’s world with business founders often seeking to ‘cash in’ on the businesses they have built, frequently selling to investors whose sole aim is to ‘add value’ but with their focus on the quickest possible ‘earn out’ when they themselves can sell the business on for a far greater sum, what is the real impact on Customer Service and where does this actually leave the Customer?
Recently, I spent some time working with clients in the health industry. This particular chain of health clubs were concerned because new competition was threatening their market share in the industry and they wanted to know how they could keep members from jumping ship. To gather relevant intelligence I interviewed many members and discovered a clear consensus.
Members considered that customer service had gone downhill since the business changed hands when acquired by venture capital investors. The members could almost pinpoint this as the moment when they began to feel the clubs no longer cared about members or indeed the staff. Morale had reached an all time low.
For instance, from the members’ point of view a cardinal sin was that experienced exercise teachers who ran the popular studio classes were steadily replaced by gym assistants normally deployed to give out programs for using the gym equipment. Members reported that the two jobs require distinctly different attributes and expertise. Exercise teachers have bubbly, energetic personalities with an excellent sense of rhythm. Whereas gym staff don’t necessarily have these traits, so when they try to teach a class it can be a disaster and the members often walk out.
Of course, this is a generalization and I am sure there are health professionals who can do both very well but the live example revealed a major problem.
When investors play an active part in the running of the businesses they have invested in, their primary interest is often in asset values, cost cutting and spreadsheets. In this instance, the excercise teachers are paid per class and are self-employed thus are paid more than the gym instructors who are employed by the club on an hourly rate. It is in the interest of the investors to go with the cheaper labor, but to the detriment of that Holy Grail, customer service
VCs are superb with numbers and profit margins, but they do not necessarily understand the nuances of each type of business they invest in and may inhibit those in the business who do.
Sadly, for the founders, members and staff of this particular group of health clubs it looks as if many of their members will fly out of the door as soon as the new competitor is up and running. This date is approaching fast and I’m not sure if they can recover quickly enough even if the management team can persuade the VCs to allow them the breathing space to get back to what they know best – how to run a successful health club and keep the members and staff happy.
When new investors walk through the door does customer service have to fly out of the window?
