OK, HR fans.... Friday I posted the following scenario and asked if this Leader belongs in jail.... Here's the scenario again, notes after the jump:
The Story: Bill’s a SVP of operations in a telecommunications company that provides a triple play to their customers – voice, data and video services. He’s risen through the ranks from his humble beginnings as an installer to manage the operations arm of a region that consists of 25% of the company’s total subscriber base (no easy career feat in a company that does 1B in revenue annually). A sound operator with immense knowledge of the business, he’s lauded by the C-level for his determination to make budget every quarter and every year.
The Problem: Complaints are starting to roll into corporate HQ about a specific policy implemented by Bill in his region. Bill has directed every local operation under his command to give him status updates on Accounts Receivable and Customer Aging, which he accumulates and then sends edicts out to the field related to when customers can be disconnected, sometimes waiting until bills are 120 days past due to disconnect the service (the standard is 45 days). Complaints about the business practice run hot and generally accuse Bill of ethical issues related to the business practice, which keeps his subscriber count artificially high at quarter’s end. Bill makes the numbers but has 18 complaints against him at HQ for the practice.
Does he belong in jail? No. Some notes on the business side:
1. In a subscriber based business like telecom, the decision on when to cut off customers is a business decision that's not dictated by any law. Bill has the right to direct his operation in the way he sees fit, and he can keep the customers on for as long as he wants.
2. Assume that Bill has the autonomy from corporate to handle this the way he wants as long as he hits the numbers. Since analysts follow subscriber trends in subscription-based businesses like wireless, cable and other services that are billed monthly, subscriber count is something that Bill has to manage.
3. However, the practice is not without financial detriment. Bill has to make a choice - the longer he keeps deadbeat customers on the active list, the more bad debt those customers run up. Bad debt is billed revenue to customers that ultimately can't be collected. If a customer runs up a big bill and can't pay (much more likely the longer you wait to disconnect), it gets "charged off", and goes in to bad debt, at which time it's booked as an expense in the financials.
So legally, Bill can keep the customers on as long as he's willing to put on his big boy pants and accept the bad debt write-off, which hurts his profitability in future quarters. Odds are here that Bill is choosing to manage subscriber count this quarter, and the focus will change as the bad debt comes due on his financials. It will have to.
But, even though Bill is within his rights to do this, the 18 complaints are based on both perception and reality:
1. Perception. The people in the field think Bill is crooked because he's carrying out a business practice that goes way outside of the financial norm of cutting people off at 45-60 days. Bill likely hasn't done a good job of explaining why he's doing what he's doing. He probably can't, because saying, "I'm trying to hit the numbers for us this quarter" doesn't resonate with the little folks who have to live it every day in the field. It's an understatement to say communication is tough in this circumstance.
2. Reality. Here's the real reason the complaints are rolling in. While many of the folks feel like Bill is shady and crooked in what he's doing, the big reality is that doubling the time customers get before you turn them off kills the employees in the field. You're basically training your customers to not pay you on time. The collections agent for the company calls and says, "you either have to pay or you're running the risk of being disconnected." That message was strong when the company cut people off at 45 days. However, the customers have received the same call 3 times and they now carry a 4 month bill and nothing has ever happened related to disconnect. That's where the reality on the street meets the perception of Bill being crooked, and the pressure results in the complaints.
Like Run-DMC once said:
"It's Tricky to rock a rhyme, to rock a rhyme that's right on time
It's Tricky...it's Tricky (Tricky) Tricky (Tricky)
It's Tricky to rock a rhyme, to rock a rhyme that's right on time
It's Tricky...Tr-tr-tr-tricky (Tricky) Trrrrrrrrrrricky"