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June 1, 2000
Carry a High Price
By Jim Marsh
The problems started innocently. Sales personnel asked what was happening to their commissions. Like most salespeople, they had calculated to the penny the amount due them, but the anticipated amounts didn’t appear on their checks.
Then, the customer service department experienced an increased level of calls regarding service delays, overbilling or missed billing. However, according to the billing director, there were no problems in billing.
The line counts used to measure sales were in line with the line counts entered into the billing application, he said. The problem must be with commissions.
He added, since billing can’t occur until an order is provisioned, customers didn’t really have a billing issue, they had a provisioning issue.
Besides, the new billing system would eliminate many of the problems the current system had, such as excessive downtime and excessive runtimes causing delayed billing, the billing director said.
When upper management looked into the billing director’s explanation and organization, they found:
* Customer orders consisted of paper folders containing all the information necessary to bill. These folders were everywhere–on cabinets, on desks, on chairs, on the floor–with no consistency of handling or filing other than colored stickers indicating the order had been reviewed for correctness;
* No records were found indicating when orders were delivered from provisioning or when the billing department completed the order entry;
* The order-entry group reported a metric of 100 percent quality assurance review with all errors corrected. The order-entry group reviewed all orders entered. It then corrected any errors it found, which resulted in the 100 percent review and correction. However, a billing review group reported a metric that new customer invoices had a 45 percent error rate, which had existed for at least five months and did not count changes to customer accounts; and
* Millions of calls existed in error suspense, a processing bucket for call records that do not meet billable criteria, and it was growing at a rate of 2 million calls per month. That kind of growth would mean that in four months, more than 8 million call records would be unbillable, resulting in a loss of revenue. Yet, no activity had been undertaken to address this situation.
When the billing director was asked if the discrepancy between the order-entry 100 percent quality assurance metric and the 45 percent new-customer error rate raised any questions, he issued a statement saying that the billing tables must be incorrect. He also passed responsibility to another department without researching the issue.
In addition, management found:
* New people were trained by whomever sat next to them. At month’s end, anything that could be put into the system was right or wrong. If a new person started during the end-of-month crunch, that person crunched too, despite a lack of training;
* Quality assurance was performed on a second shift that had no supervision. A review of the quality assurance procedures found most personnel who performed during the review were not able to enter an order, much less verify billing component correctness;
* The excess downtime of the current system was due to internal LAN problems;
* Long processing delays in producing billing were due to the manner in which the company segregated intercompany processing. As the company expanded into
new markets, processing time increased. The new system would have experienced the same delays as the segregation of accounts continued and more new markets were targeted;
* The new billing system was moving forward without any billing personnel input;
* The billing errors backlog grew;
* The limited line supervision stood at a 25-1 ratio. Even then, line supervisors performed the complex order entry because newer personnel were untrained. Therefore, supervisors who already were stretched thin were pressed into the order-entry role to complete customer orders instead of training their staffs to do the work;
* Second-line supervisors, those just below department managers on the chain of command, were allowed to work from home. They seldom were seen in the office and handled most meetings and issues via e-mail and telephone–if at all; and
* The director considered himself to
be above the issues, and his focus was on managing upward instead of managing his organization.
Initial estimates found that more than $750,000 per month was lost because of improper controls. However, the real loss was much greater as customers grew tired of calling the customer service department for help or found themselves victims of the billing department, and thus, canceled their service and often left their bills behind.
Sales personnel turnover increased as account executives left the company out of frustration, taking many of their customers with them.
The billing director previously was a senior manager of billing at an established long-distance company. His prior staff had many years of service in the same billing organization. It knew its role well, had layer upon layer of standard operating
procedures and seldom had to deal with new applications.
In the scenario above, the billing director heads a CLEC billing organization–a situation for which he was not prepared. He did not know how to address problems with staff, did not like confrontation and would postpone decisions.
He neither required performance measurements of his group nor provided measurements to immediate management. The resulting confusion took months to correct and cost the company millions in lost revenue and lost productivity.
Unfortunately, poor hiring practices are not uncommon for startups. In fact, one of the primary problems in growing a new company is finding the people to manage operational and planning groups.
Common theory dictates that new companies require generalists who know a little about everything and can initiate the operational groups.
However, a problem with this hiring practice is that many potential employees come from established companies where they have been focused on one area and, therefore, are not generalists.
Although they may feel their skills provide them with the knowledge and the ability to handle a new startup, in many cases, they are in over their heads.
What many of these potential hires fail to realize is that creating a department and its interrelationships is more difficult than they imagined. Unless they have participated previously in a startup, their backgrounds often do not afford them with the abilities to lay the foundations from which to build.
It is not as simple as creating an organizational chart that looks good. A potential hire for a startup must be a doer–a person who enjoys getting his hands dirty.
How does one find this type of person? One way is to ask questions that force the candidate and those people doing the hiring to fill the box. Too often new department heads take their new responsibilities too literally.
If he is a vice president, a director or even a manager, he may relate the title with his former company’s methodologies.
The hiring manager should be prepared to confront the candidates with several scenarios that have little to do with their present function or the proposed position. Qualified candidates gladly will offer several solutions for the scenarios. Those who appear intimidated by the exercise are not appropriate choices.
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