Bill Pollock, President and Principal Consulting Analyst at Strategies for Growth, weighs in on how he feels organizations need to evolve how they measure progress and success in today’s service landscape.
Sarah Nicastro: Welcome to the Future of Field Service podcast. I’m your host, Sarah Nicastro. Today, we’re going to be talking about new metrics for a new world of service delivery. We’ve talked a lot lately about how many things are changing for service organizations. And another thing that needs to change is the way that you’re measuring your progress and success. I’m excited to welcome back to the podcast today Bill Pollock, president and principal consulting analyst at Strategies For Growth. Bill, welcome back to the podcast.
Bill Pollock: Thanks for having me back. I appreciate it.
Sarah Nicastro: Absolutely, absolutely. Glad to have you. So you are doing a lot of research in this space, and you and I have known each other a long time and we’ve both seen this evolution that’s taking place in service and witnessed some of the trends that are occurring. Before we dig into to how KPIs and metrics and measurement need to change based on those trends and the evolution, let’s first talk a little bit about the history of how service success or failure has been measured. And then we’ll talk about why we need to evolve from there.
Bill Pollock: Sure. That’s a really great way to start off this session. The way that success has been measured over the years depends really on how sophisticated or knowledgeable or how vulnerable a services organization is. For example, there’ve been many cases over the years where I’ve seen companies that have been doing fairly well and they figure, “Well, we really don’t need to measure our success because we’re successful all the time.” And the problem with that is that whether it’s self-inflicted or an existential like COVID-19 or an economic meltdown, even those that are doing well year after year after year ultimately hit a point where they’re not doing well. And if they haven’t been measuring things on a regular basis, then they don’t know at the outset, “Why did we just tank? What happened that made us not satisfy our customers anymore?”
Bill Pollock: So the thing is that what I believe is that if you’re not doing well or you’re always on the cusp and you always are striving to do better, then you really do need to measure things and see how your performance is trending over the years. The paradox though, is that if you’re doing well and you’re making some money and you have a high profit margin, you may not be tempted to measure as much, but that’s the time when you really should measure, because you’ve got the resources, you’ve got the cash in hand to do some measurement. I don’t believe there’s a single organization out there that can say, “Regardless of how we’re doing right now, there’s absolutely no improvement that we can make. We’re doing the best that anyone can. No improvements are possible.” That’s not possible. Traditionally, what we’ve seen is things all over the place.
Bill Pollock: For example, one of the first field service management surveys that we did at Strategies For Growth over a decade ago, we asked questions, “What do you measure?” We had a laundry list. “Do you mentioned this and the other thing?” And one of the questions was, of course, “Do you measure customer satisfaction?” And at that time, and again, this is like 15 years ago, the response was something only like 47%, less than half. And then another question was, “Do you measure customer retention?” And 65% said, “Yes, we measure customer retention.” And my question is, how can you measure customer retention if you’re not measuring satisfaction? And it leads me to believe… I did a workshop for one of the trade associations once years ago and I said, “What is the quickest way to improve your customer satisfaction performance?” And everyone started raising their hand. “Pay more attention to customers, listen to the voice of the customer, do some market research.”
Bill Pollock: And I said, “Well, this is tongue in cheek, but the best way to improve your customer satisfaction overnight is notify all your customers who are not giving you a perfect score that you’re no longer customers.” All you have left are customers that are giving you a perfect score. Well, of course that’s nonsensical, but there are many organizations, one organization, for example, said to me, “We’re doing about 85% customer satisfaction now. How much money can we save if we did only 82% customer satisfaction?” I was an economics major in college, I understand the elasticity and sensitivity of numbers crossmatched against each other, but that’s not the way to manage a business. So, really, and as far as customer retention is concerned, at the end of the career of the business, just before the business closes, if you still have every customer you ever had and they’re still buying things from you and they’re still relatively satisfied, then you had a nice career and that business and had a good reputation.
Bill Pollock: But you can’t wait until the very end to measure something. You have to measure it all along. So really, the history of service success measurement is, some people will say, if you’re measuring more than six KPIs, that’s too many. Others will say, if you’re not measuring 20 or 24, that’s not enough. The rule of thumb is wherever you’re not doing well and you know it, or you may not be doing as well as you could, but you’re not sure can, any areas where you believe you’re vulnerable because of what you’re doing and about to do or what one of your competitors is about to do, or there’s a merger or acquisition in the competitive landscape, they’re the things that you have to measure.
Bill Pollock: Some people make the mistake of measuring only things that will ultimately impact their merit reviews and their bonuses. And that’s good for you, but it’s not good for the company, it’s not good for the customers. So it’s been all over the place. It long enough has passed that it’s time to rethink and reengineer the way you measure things, and COVID-19 has made it even more critical to do it now instead of tomorrow or next year.
Sarah Nicastro: Right. So a couple of themes that you just brought up are obviously the variability, which makes sense. Every company is going to be a bit different in how they view this, how they approach it, what KPIs they use, et cetera. So certainly understand that there’s no uniform approach or advice. The other theme is you’re saying that companies have a tendency to want to measure more when they are struggling. I would argue that a third thing that’s important to talk about though is that customers today are demanding more visibility than they ever have before. So that is, I think, another reason that organizations need to expand and evolve the metrics that they’re using and how they’re tracking their progress and success.
Sarah Nicastro: Because I’ve heard a lot of feedback from folks that customers used to be happy if it was just, “Hey, you showed up, you got the job done. Great.” And now they want to know all of the details on what that looks like. And so having that data becomes important from that perspective as well. So knowing, Bill, that there’s no singular answer to this question, can you give me a couple of examples of metrics that have maybe been historically used that are becoming a little bit ineffective or obsolete in today’s environment?
Bill Pollock: And getting back to a point I just made before, everything needed to change anyway and COVID-19 said, “You got to do it now.” But even before the COVID pandemic, the transformation of the industry from an analog world to a digital world and from an onsite fix to a remote fix or prevention made it such that in trending your performance data from year over year over year, it’s not only not apples and oranges, it’s apples and vegetables to try and make those comparisons. Like in department stores, they always measure one week’s sales this year compared to the same week’s sales last year. Well, it doesn’t make sense for them to do that now, just as it doesn’t make sense for us to, as an industry, look at our performance this year compared to last yeah. It’s almost like there’s a need to have two sets of books.
Bill Pollock: As we move from analog to digital and onsite to remote, things just don’t mean the same anymore. Like for example, and forgive me for looking down at some of the notes I have here, in our 2020 field service management survey that we conduct every year at Strategies For Growth, the top five or six KPIs that are being used by a service organization, number one has always been number one in every one of the surveys we’ve done, customer satisfaction. And it’s always in the 70 to 77, 78% say, “This is one metric that we use.”
Bill Pollock: The second one has always been total service revenue. And you’re running a service organization, you want to generate revenue. What we did is we compared our notes from 2020 to 2011, which is basically 10 years earlier, to see what kind of differences there were. We did not differentiate between service revenue and service profitability 10 years ago, but we do it now. So the number three factor, if we standardized the two surveys and those two years would be looking at total service profitability. But it’s almost pointless to say which is second, which is third, or third or fourth because they’re pretty much the same. You’re looking at revenue and you’re looking at profitability.
Bill Pollock: But then we see some differences. 10 years ago, the next three factors were field technician utilization, which is basically the time that a field tech spends performing a repair divided by the total time that he or she is working that day for the company. And then total service cost, onsite response time, and the percent of total service revenue under contract. So 10 years ago, they were the top five or six factors that we were seeing. Fast forward to this year, first time fixed rate pops way up from seventh or eighth place into third place.
Bill Pollock: So what customers are looking forward to is they don’t want to jerk around with having to make repeat calls on their half to the service company or to the service company say, “Hey, it didn’t work. We got a signal from your system. We have to come back and do something else.” They wanted to fix the first time. The beauty of it is that many customers don’t really realize that something’s broken or about to break because it’s fixed remotely before it breaks. So the first time fix rate I believe is going to diminish in its important because you’re really looking for a first time prevention/ fix rate where a failure is prevented rather than fixed right the first time. But there’s a whole series of other things like meantime between failures. That used to be along with meantime to repair, two of the biggest metrics 10 years ago, 15, 20, 30 years ago.
Bill Pollock: But equipment and systems don’t fail as often anymore. And even when they’re about to fail, they can be prevented from failing remotely. So when I said two sets of books, maybe you used to measure meantime between failures. Maybe now is the time to start measuring meantime between prevented failures. There are some cases where the equipment is just as likely to break down after 18 months today as it was after 18 months last year or 10 years ago. The thing is last year and 10 years ago, it would break down every 18 months. This year, it doesn’t break down here every 18 months because it’s being fixed before it breaks remotely. So the whole concept of break-fix, I believe is transforming into break-prevention. So what happens is the old metrics and the new metrics might coincide in terms of when the equipment is likely to fail, but it’s not going to fail because you’re doing something remotely.
Bill Pollock: And this is the whole concept between the old break-fix model and the, newer, it’s not so new anymore, servitization model or the outcomes-based model. So we’re seeing the transformation based on going digital, adapting to a civilization model and employing the use of remote diagnostics and remote fixes more and more over time.
Sarah Nicastro: So that all makes sense. So this new world of service, and if we look at the root cause of why measurement of progress and success needs to evolve, it’s really related to the evolution toward predictive service, outcomes-based service servitization and looking for ways to measure and reflect success in those new terms. So, as you said, some of the metrics that would be more related to the traditional break-fix models are things that over time maybe become obsolete. So the other thing that comes up a lot when I talk with folks about this topic is it’s not only that the KPIs a company may need to use are changing, but it’s also the speed at which that data is being reviewed and communicated needs to become faster as well as. Is that correct? What are your thoughts on that?
Bill Pollock: That is correct. I’ve written a couple or a few pieces over the years, and many other writers have about the problems with data collection. And [inaudible 00:16:42] data lakes are out there and you’re catching titles in some of these articles, you don’t want to drown into data lake, but you need water to survive. And the thing is that many organizations now have the tools they never had before to collect as much data as possible, whether they’re collecting it proactively or unilaterally by leading leaders or it doesn’t make sense to me much, but some organizations still are manually transcribing numbers into a spreadsheet. But there’s so much information that now has been collected and transmitted and shared by the equipment and the systems themselves. And companies are finding themselves in a situation where they’re collecting too much data and they either don’t have the bandwidth to process it and analyze it and assess it.
Bill Pollock: And then once it’s analyzed say, “Hey, this is good stuff. This is not so good stuff. Let’s take the good stuff, who should get it? Who do we share that with?” So that’s where the data lakes can become data oceans and you can drown in that data. But there are other organizations that collect information and never do anything at all with it. I know for example, that one of the critiques that we’ve received over the years is that our customer surveys, the field service management and others are long. There are many questions. And what we find is that we process the same data every year and do some trend analysis, but there’s some data from some questions that we ask that we’ve never really done anything with. So in the past couple of iterations of our surveys, we started cutting back on some of the data we were collecting because we knew we would never use it and it would not be that important in the overall scheme of things anyway.
Bill Pollock: But then the converse of that is if we’re collecting it and we think that it may provide some information, that it may be of interest, then we sit down and we analyze it and then we write about it and we share it with our clients or our clients share it with their customers. And it’s the same thing with the data that’s being collected. I do not believe that you can move from a break-fix environment where you’re scheduling your PMs four times a year and your performance is measured on the basis of, “We have to arrive on site within four hours or eight hours the next day.” You can’t move from that model to servitization where everything’s measured in terms of outcomes, without breaking away from collecting the right data and not collecting the wrong data.
Bill Pollock: I think that Brian Wilson said it so succinctly in the song Wouldn’t It Be Nice. “Wouldn’t it be nice to have this data” is not a mandate for collecting that data. I need to know is your mandate for collecting the data. So there’s need to know and there’s nice to know. And you might want to take a step in every once in a while because you might find something that you wouldn’t have found otherwise, but you really need to focus on the need to know and your KPIs, and metrics that you use to measure your performance have to focus on those sets of data so that the data you’re collecting is actually used in a proficient way to allow you to enact change management, make things better.
Sarah Nicastro: Sure. Yeah, I think that’s a good point. I also think this is a really clear example of where today’s digital tools come into play in the sense of having strong business intelligence and business analytics tools and being able to leverage the data you have to look at different scenarios and plan accordingly. I mean, you mentioned a couple of times the impact that COVID has had related to this topic and it comes up in almost every conversation I’m having that these organizations have moved from reviewing data and making business decisions weekly or monthly or quarterly to day to day and even hour to hour, right? Because the circumstances are just evolving so rapidly. So it’s just a really important area for these businesses to consider. I agree with you that as you move toward outcomes-based service, you need to focus in on the data that’s most important, but you also need to be very, very proficient at processing data and deriving valuable insights from it.
Sarah Nicastro: So I was hoping, Bill, if you could share with our listeners all of the things we’ve considered. So we talked a bit about the historical perspective, we’ve talked a bit about what is changing and what has changed and some of the pitfalls to avoid, I guess. But if you, based on your research, based on your expertise were to suggest five key KPIs for the new world of service, what would they be and why? And I understand, just to put the disclaimer out there, that there is no prescriptive approach for every service organization. But if you had to look at what, in your opinion are five of the most important, what would those be and why?
Bill Pollock: Well, obviously I’m a prime advocate for always measuring customer satisfaction. If you’re a services organization, you’ve got to measure your service revenue trends, your profitability trends and your cost trends. But there are other things, like for example, I wrote a report once on contract and warranty management, and I thought, “This is going to be not the most exciting report I’m ever gone to write.” I didn’t really appreciate the value of things like contract attach rates and contract renewal rates and things of that nature. But what I saw is the difference between those organizations that are using a solution that helps them to basically annuitize their contracts that takes the work off of their table from having to say, “Oh yeah, it’s two months before this client renews. I better send them an email.”
Bill Pollock: What they found is that they were able to annuitize their revenue stream and bolster it. You still have to work at it, but much of the heavy lifting is already done. So what I would advise any services organization is to look at the solutions and the modules that are available to them from IFS or whomever they’re using, and to say, “What difference is it going to make if I improve our activities in this area?” Whether it’s a service contract compliance or contract renewals, or just things like, “Why don’t we look at total revenue per field technician as a ratio and see can we still generate the same revenue gifts because of COVID-19? We’re losing some workers that we had to furlough them or they’ve gone elsewhere.” Look at the opportunities. And then you need to establish a baseline first. “Where are we before we execute this change?”
Bill Pollock: And then six months, or most likely one year later, “Let’s revisit this again. Let’s ask the same question. Where do we stand today?” And in most cases, a year later, you’ll stand in better shape because you’re using a solution that helps you to generate more revenues or cut costs or increase the contribution of individual employees or field technicians. Very rarely have I seen organizations use new solutions and one year later it just costs a lot of money and they didn’t see any improvement. So the rule of thumb would be where you’re most vulnerable, measure that. Start measuring that now if you’re not, and take steps to remove your vulnerability. And it could be something as simple as your Salesforce is not as good as your competitors’ Salesforce is. It could be something as simple as you might have the best product around but you’re not promoting it well enough, so your marketing needs to be stepped up.
Bill Pollock: So in that latter case, it’s a matter of, “Well, let’s start measuring marketing dollars spent toward increases in our market awareness or increases in our sales.” So the thing is, it’s almost like you’re building an exoskeleton for yourself, and it’s going to make you stand up straighter, walk faster in the right direction and improve everything. But each element of that skeleton really has to address areas that you’re looking to improve in, areas that you’re looking to avoid, some of the pitfalls that you had in the past few years. If you know you’re going to be merging or acquiring another company, what do you need to know before that happens to ensure that the metrics you’re measuring now, you can separate and measure a year from now under a new scenario? So it’s a matter of what fits you the best.
Bill Pollock: But I think what we’re seeing in servitization and outcomes-based, if all you’ve been measuring in the past is your ability to be in compliance with your contracts, to arrive on site at the right time, to fix things on the first visit, and you’re not looking at new metrics for measuring throughput rather than system uptime, you can’t have throughput, you can’t be processing something on an assembly line if your systems aren’t working. But the question is, “What do we have to do as a company, as an organization to make sure that our volume, our capacity, our throughput is maximum for what we have as tools and resources and staffing? And if there are any breaks in the fence, what do we need to measure in terms of ensuring that those breaks don’t become catastrophic breaks and cut our throughput?”
Bill Pollock: So it’s a mindset from the overbearing manager who looks at individual metrics and says, “They were five minutes late to arrive on time. Our system uptime was one tenth of a point short of the 90% they guaranteed us.” Instead of nitpicking like that, you’ve got to change your focus to, “What do we need to measure to make sure that our throughput goes through cleanly, regardless of how many times there were prevented failures and how many times, God forbid, there were real failures that had to be fixed?” So it’s a change of mindset. Some companies get it, some companies don’t get it. And in fact, I just wrote something for the Future of Field Service about, are you getting a servitization? And if not, why not? When are you going to get it? So those organizations that get it are already making the migration or transformation from the old way of measuring things to the new way of measuring things. And those that aren’t doing it yet really need to [inaudible 00:29:49] so they don’t fall further behind.
Sarah Nicastro: Right. I agree. So I understand, like I said, the variability from organization to organization. So you started off with customer satisfaction and service revenue and profitability. Are there others specifically that companies need to be thinking about or considering?
Bill Pollock: Well, sure. If you’ve got a field force that’s still going to the field, some of them, many of them are shrinking from what they used to be because remote diagnostics and remote repairs are taking over in those areas, you really need to focus on field service utilization. Again, and that’s how much time you’re spending actually doing repairs divided by the total amount of time you’re spending that day working for the company. There’s a few field technician productivity, and historically that’s been based on the average number of calls per day. But in many cases, that metric is changing substantially because you may have fewer field texts and fewer needs for onsite calls. So the metrics are changing, but there’s so many organizations that need to measure that. What I like is a third in that hat trick, if you will, field technician efficiency, which is the average daily calls completed by the total calls assigned.
Bill Pollock: So what are the total calls are dwindling on a daily basis from 10 to eight to six? How many are they completing efficiently divided by how many they had to do that day? And then all the other KPIs that we’ve been talking about, fixing right on the first time and those kinds of things start to fall into place. There is one thing, it’s tough to measure, but I’m a strong proponent of this, and that’s fixing the customer while you’re fixing the equipment. You can imagine that if you’re walking into a manufacturing plant, the assembly line is down. The plant manager say, “When is this going to get fixed? We’re processing milk. We’re going to have to throw out thousands of gallons of unprocessed milk. It’s going to cost a fortune then we’re going to have to add a third shift tonight.”
Bill Pollock: And what you need to do as a field technician, or if the technician doesn’t go on site, what you need to be able to communicate, whether it’s through chat or chat bot or whether it’s by telephone or however you communicate with your client to let them know from the outset that, “This is a minor thing, we’ll take care of it in about 20 minutes.” Or, “This is a major thing. It could take an hour or more to fix. We’ll keep you apprised along the way.” So it’s really tough to measure that. That’s more customer relationship management, but I would venture to say that any of these quantitative KPIs that we’ve been talking about are important. So is the more qualitative KPI of fixing your customer while you’re fixing the equipment.
Bill Pollock: And there are surrogates that you can quantify the percentage of time that you communicate with a customer before an anticipating failure, during the failure, following up after the failure, what they could do to prevent a similar failure later on. So there are ways to communicate that. So if you’re running an organization where you do not believe that your field technicians or your dispatchers or any of the employees are really treating the customer while they’re treating the equipment, you might want to look at those kinds of quantifiable metrics to see what percentage of customers that have had problems with you or complained with you, what percentage of them had actually been communicated with in terms of, “Here’s what you’re likely to face. Here’s what we’re going to do about it. Here’s the estimated time for completion.”
Bill Pollock: And if you find that you’re not talking to them enough, that may be enough of the reason for why they’re unhappy with your service tech or your company as a whole. Nobody wants to hear bad news, but if it’s bad news, then they need to hear it. And once they hear it, then they’re not as likely to complain to you about your performance afterwards if they know why it was caused and what you’ve done to prevent it from happening again.
Sarah Nicastro: Right. Yep, that makes sense. And that is along the lines of how we see the field technician role evolving, right? So as you said, as we look at organizations utilizing technology to enable more remote systems, remote assistance, remote service, remote repairs, what is required of those onsite visits is changing to be more of a face of the brand, a personal touch, a consultative relationship, those sorts of things. So, yeah, I think there’s probably a lot of areas that companies are looking at in terms of how metrics and how measurement needs to evolve to reflect the way that the field technician role is changing, along with the way service delivery itself is changing. So, that makes sense. Any final thoughts or comments, Bill?
Bill Pollock: Yeah. I’m as guilty as any other research analyst or consultants of using the phrase new normal. Nobody wants to hear new normal anymore. I thought that I was a little different by originally talking about there’s not going to be a new normal, there’s going to be a series of new normals. And then others started saying the same kinds of things. When you get right down to it, nobody a year ago could have foreseen exactly what shape we would be in a year later today. And we don’t even know what our fall, winter and spring are going to look like right now. So the thing is that whether you call them new normals, old normals, a new way of doing things, whatever, just be prepared to change. And there’s one phrase that one of the major computer manufacturers used the year I started my business and it was the use of the expression “agile adaptability.”
Bill Pollock: And I loved that because agile to me doesn’t convey even half the image. Agile means, well, I can move this way. I can move that way. But what way are you moving? Adaptability means that you’re adapting to your new situation, your new scenario. So you’ve got to be both agile and adaptable to be able to sustain your business through COVID-19, and quite frankly, through any normal circumstances. But we’ve got turmoil in the streets, we’ve got economic crises, we’ve got medical and healthcare pandemic, and they’re saying we’re going to have locusts later this year, too. So yeah, it’s really a mess out there. And whether you can predict what’s about to happen or not, and I don’t think you can very well, you need to have that agile adaptability to make sure that your service organization can turn virtually on a dime and deliver to the marketplace, to your clients and customers, and especially to your prospects what it is that you can do for them tomorrow, regardless of what tomorrow is. So I think that that’s a parting phrase.
Sarah Nicastro: All right, Bill, well thank you so much. I appreciate you being here and sharing your perspective with our listeners. You can find more on service transformation and how companies are grappling with COVID-19 challenges and working towards servitization by checking us out at www.futureoffieldservice.com. You can also find us on LinkedIn as well as Twitter @TheFutureOfFS. The Future of Field Service podcast is published in partnership with IFS. You can learn more about IFS Service Management by visiting www.ifs.com. As always, thank you for listening.