Editor’s Note: Scott Molinari, general manager of Adduco Digital e.K. in Zweibrücken, Germany, took issue with OnForce CEO Peter Cannone‘s analysis about contract-hiring trends in the field service sector. Molinari believes strongly that training and investing in full-time technicians, not contractors, is far more important to long-term success. Here is Scott’s guest column on Field Service Digital.
I used to be a service technician and I’m now the General Manager and Owner of my own company and what Peter Cannone says is actually a mistake many companies make. I feel you should not “swap out” technicians for the sake of cost savings, especially when their work is on very technical products. Training technicians or service reps to be very good ones takes time and a decent amount of money and both are much better spent on your own “in house” technicians.
You Can’t Buy Loyalty
A “rent-a-tech” approach means when you first start with those “contractors,” time is often lost, professionalism is often lost and if you finally get them up to speed on your products or services, your invested capital in their knowledge could disappear overnight and even worse, to your competition — and this is a much greater risk than if you have your own good, well-paid and dedicated technician workforce. Sure, this could happen with your own technicians, but if you are dedicated to them and their accomplishments for the company, they are much more likely to be loyal to you, than the “rent-a-tech” guy or gal.
The real issue is — very few companies see the return on investment in their technician workforce and only see them as “costs.” That’s a very, very bad way of viewing the one team of people who see and deal with your customers directly the most! From my experience, the service team has, on average, about 60% more customer contact than both the sales and marketing teams combined — who, by the way, too often get much more money to get their jobs done. With 60% more contact, the service team has a much greater impact on your customer relationship, than anyone else.
Yes, there is a cost to having a good service workforce. But the cost does yield a great return. It is the “Wow!” effect customers get, should your product just happen to have broken or need maintenance for the first time and they get quick and professional service from your service team. The service team is the cherry on your (hopefully) high-quality product pie and to make sure that cherry is really sweet, you must invest in your service team and stop looking at them as costs.
It’s Not About Cost Savings
I believe the “let’s just rent some techs” comes from a fallacy many managers have with setting goals. I feel that financial numbers (such as costs) are results and not goals. But, much too often they are used as goals — as in, “We need to lower costs by 10% this year.” I used to get a chill down my spine when I heard lowering costs as a “goal.” I think this kind of goal setting happens because managers may not have any other ideas about what else to concentrate on — and since most costs are hard facts on paper, they’re the easiest to try to change or improve.
But, in fact, there are other actions and factors that can be dealt with, which will lower costs and they should be the goals — like actually investing in the service team’s technical knowledge, so they have better one-time repair rates (an important service KPI by the way). Technicians traveling much less often to solve problems mean lower costs.
Oh, but wait — training technicians costs more money… right?
Well, you should always strive to achieve goals, which will mean happier customers, who will then be very satisfied with your service performance, which will lead to better customer relationships, which will inadvertently lead to more sales, which means more success for your business. That is the right direction. Unfortunately, a lot of managers have a hard time putting their finger on those customer oriented goals and that is why the main goal — a happy customer — usually gets lost in the “results.”
Think About Your True Goals
Ask yourselves these questions the next time you set a business goal around your service workforce. Ask yourself, “Will this impact my customer base positively, if we achieve the goal?” Then ask yourself the next question, “Will this impact my workforce positively, if we achieve this goal?” If the answer is “no” to both of the questions, the goal you’ve just come up with won’t be a useful to anyone who really matters and thus, you end up making unsound decisions, like renting technicians in the name of “cost savings.”
The undeniable fact of the matter is that both sides have a valid argument and there are rather clear benefits to both models (just a few of which I have included below). However, the deciding factor of which model is better suited to a given company needs to remain within the culture and core competencies of the organization itself. Neither the rent (which I like to call distributed) nor the buy (which I like to call internal) model works well for EVERYONE, but some companies fall into one or the other category, and the points made by Mr. Peter Cannone resonate strongly with those who prefer to rent this labor and the points made by Mr. Scott Molinari resonate strongly with those who prefer to take on the work in-house. Furthermore, as strongly as I disagree with this thought process, the current paradigm for IT in business is that it is a non-revenue generating department, which affects decision-making for service and anything IT-related.
With businesses looking only at bottom line costs, which is a common mistake on a number of levels, more and more companies choose the rent methodology, primarily because it is a considerably more attractive option for utilizing personnel and is less costly than the capital expenditure required with regards to wages and payroll taxes, VACA, sick days, network access, tools, vehicle fleet, healthcare costs, retirement costs, and all of the management layers that go into such internal workforces. Simply put, you only hire when you need the work completed, so this is very efficient with regards to utilization and cost control. This model also scales well to fluctuating needs. You can rent and train the same technicians for your environment using this model and doing so can yield very similar results as indicated by Mr. Molinari in the buy model.
Internal workforce models can allow for more physical control, dedication, and a specific, pinpointed skillset to the needs of the company. With strong leadership internally, the resources can be strategically placed, ensuring enough coverage in all areas at all times without under or over utilization, and then manage the work orders, track SLAs and completion times, etcetera. There can be elements of SLAs and tracking with the rent model as well, but this is an absolute necessity in the internal workforce model.
Whichever model you elect, you must be able to show that the chosen model is worth the investment to your specific organization, since in the end, the success of a company is determined by profitability and how a company chooses to handle this aspect of their environment plays a vital role in determining this metric.
There is no doubt that there are advantages to both the independent contractor (rent) model and to the traditional W2 model. It is a strategic decision whether a company is going to choose one over the other or use both. While cost is a significant factor, it’s not the only one. After all, no sound company would argue that it’s better to save a buck at the expense of customer satisfaction. This is why it’s critical – with whichever labor model you choose – that positive customer experiences are preserved. While the W2 model can support dedicated and loyal employees, the independent contractor model can also provide strong assurance for quality service delivery. Reputable online tech talent sources will vet all independent contractors; verify certifications, licenses, background checks, and drug tests; and provide performance histories of every contractor. In addition, companies can choose to use the same contractor(s) for multiple on-site jobs for an indefinite period of time, allowing for consistency and positive customer outcomes.
The fact is that we’re in a new business reality today that is fundamentally changing for companies and workers. The economy continues to stagnate and the employee value proposition continues to crumble (e.g., job security is a myth, healthcare coverage is in jeopardy, 15-20% get laid off annually…etc…). Given these conditions, more and more people are choosing to be independent contractors where they can be their own boss and choose the work they want to do. In turn, companies benefit from independent contractors in multiple ways: get quality tech talent where they need it, pay only for completed work – not idle time or training, and get on demand access to experts with specific IT knowledge and skills (e.g., VoIP, Microsoft Exchange, Mac/Windows environments, BYOD, networks…etc…).
Competition is fierce. Companies of all sizes need to be agile and cost-efficient to meet ever-demanding customer needs. Companies need to be able to meet short-term peaks in demand, quickly cover skills and geographic gaps, efficiently manage multiple product lines at various lifecycle stages, and be able to rapidly respond to labor needs when launching a new product rollout, among other things. The traditional W2 model simply cannot efficiently, or cost effectively, accommodate all of these requests all of the time which is driving companies to adopt innovative workforce solutions that can.
Neither the independent contractor labor model nor the traditional W2 model is superior to the other. Equally as important, neither model is exclusive of the other. In fact, many companies today are increasingly choosing to augment their W2 staff with skilled independent contractors for the benefits already stated. To determine what will work best, companies need to evaluate their strategic goals, understand how they are going to reach them, and then determine how to configure their labor network for optimal results. Companies that don’t will simply get left behind.
John – thanks much for the thoughtful response. Important issue for many organizations to consider when it comes to recruitment and training.
Interesting comments. Thanks gentlemen.