The Case of the IT Service Firm

To understand how feelings drive people to change from one state to another, consider the example of a medium-size information technology (IT) service firm that found itself in trouble. It was losing its best clients, who complained of poor service and was also having trouble winning new business. To make matters worse, vital, skilled staff were leaving. Yet just a couple of years earlier, the firm had exhibited none of these problems and had been enjoying modest growth.

The trouble seemed to lead back to the arrival of a new head of sales and marketing, who had surveyed the firm’s market and found plenty of potential clients who wanted the kind of service support the firm offered. Until then, growth had largely come from occasional referrals by satisfied clients. The new guy convinced his colleagues they were missing a great opportunity and set about launching a sales campaign. Sure enough, he brought in new clients at a good rate (Figure 8.2 “A Service Firm’s Problem With Winning and Keeping Clients”).

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This new person had recently left, frustrated by the difficulty he was now having in winning new business and irritated by the growing distrust of the rest of the team. They were worried about what was happening and how to fix it. In particular, client losses had jumped to unacceptable rates and service quality had suffered—calls for help went unanswered and fixes that were done failed to solve customers’ problems. Moreover, the decrease in client acquisition did not seem to have been caused by market conditions; there was still plenty of potential business to be had. Calls to potential clients revealed that the firm had not won this business because of rumors about its poor quality.

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Examining the quality problem first, the team confirmed what they already suspected, that the service staff had been under mounting pressure from the extra work required to serve all the new clients. They could cope with this pressure at first because they were not especially stretched, but a year or so later it got to be too much for them and they started making mistakes. The team did not know what the exact pressure of work had been, but by checking their records on customer service demand and staff levels, they could make a pretty good estimate.

Turning to the issue of client acquisition, the team surmised that word had gotten around about their quality problems, and so their reputation had been tarnished. From the quality estimates and the contacts that people in their market might have had with each other, they estimated what might have happened to their firm’s reputation. By putting this together with estimates of client losses, they obtained a picture of the dynamics of their client base (Figure 8.3 “Pressure of Work Creates Problems With Quality and Reputation”).

The company’s management was left with one puzzle. If client losses had risen so that workloads were falling, why had pressure on staff stayed so high? The decrease in workload should have brought things back into balance, and the problem should have fixed itself.

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The company had maintained a strong hiring rate, but all the same, its staff numbers had gradually declined. Previously this had not been much of a problem because increasing experience kept productivity moving upward, but the benefit was not powerful enough to keep work pressure under control when all the new client business came in. Staff records showed that turnover had risen particularly sharply in the past year.

Strangely, the staff turnover problem appeared to be only a recent phenomenon. Conversations with some of the people leaving revealed that they were initially excited at the new opportunities coming in. It had taken time for the constant pressure of impossible demands to hit morale. The effect on motivation had been exacerbated by the now escalating need to refix the same client problems that should have been fixed before.

Sketching these phenomena on the board gave the team a clear picture of how the staff had been affected by recent events (Figure 8.4 “Work Pressure Hits Morale, So Staff Losses Escalate”). They realized that their original hiring rate had never been high enough to build resilience in their group of professionals. Consequently, when pressure built up, the lid had blown off, which is why staff were now leaving at such a rapid rate.

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