Over half of field service organizations say they now operate as independent profit centers within their company, according to the preliminary findings of a new survey.
The Service Council‘s 2012 “The Role of Service Culture in Driving Service Revenues” benchmark survey, which is open until the end of the month (click here to participate), shows that just over half of respondents say their service departments manage their own profits and overhead costs, as opposed to simply operating as a cost center. This marks the first time that the majority of service departments have been managed in such a manner, according to The Service Council’s president and chief research officer, Bill Pollock.
“I’ve been conducting surveys for a number of years, and we used to get 15, 20, maybe 25 percent of companies [that viewed service as a profit center],” Pollock told The SmartVan. “But we’re seeing it getting larger every year, and it’s finally passed that hurdle where the marketplace has acknowledged that the only effective way to run service is as a profit center.”
Turning Cost into Revenue
The findings, while not yet final, do underscore a dramatic shift within the service market. In the past, service divisions were commonly viewed as a necessary burden — a cost associated with customer satisfaction and given away in conjunction with a product. It now appears that more companies than not are finding ways for their service arm to drive its own revenues, whether through preventative maintenance agreements, premium long-term contracts, or other cross- or upsetting opportunities.
“Companies can’t cut [service] costs any more,” Pollock said. “There’s nothing more to cut. So the only way to improve the bottom line — the denominator — is to increase the numerator — to drive up revenues.”
About a quarter of the survey’s respondents indicated that service is still a cost center to support sales operations. The last group of respondents represented service organizations unaffiliated with a larger sales organization, and thus must be run as their own business units.
Pollock pointed out that the shift toward service-as-a-revenue-driver has coincided with a larger and more fundamental change in how service departments do their job: “The big buzzwords 25 years ago were ‘call avoidance,'” Pollock said. “Now, it’s ‘remote services.’ “
“Service 25 years ago was: something broke, and you came and fixed it,” he said. “Today it’s making sure the box won’t break. You try to fix it remotely. Or you let the customer go through an online portal to fix it themselves.”
Service as a Business Priority
Other preliminary findings indicated that upward of 55 percent of respondents said that service is both a top priority and is well-managed within their organization. Just over a quarter said service was a top priority but lacking in resources to be managed effectively; and one in six said service was used to help sell products, but was not, in and of itself, a top business priority.
Pollock called those numbers encouraging, but added that there’s still room for improvement.
“From my perspective as a research analyst, that’s not good enough. If more than a quarter of the market says service is a top priority but that they’re lacking the resources, I can see how that breeds frustration internally,” he said. “So the trends are definitely good, but we’re not where we need to be yet as a services industry.”
To take part in the survey, click here.
More: Four Ways to Improve Service—Without Raising Costs.
Click here to download a free whitepaper, “Five Steps to Make Field Service Profitable.”