Should Service Providers Guarantee Success?

Monday, 12 December 2016 18:23
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Greetings! In any transaction involving service to be provided, risk (or risk avoidance) is almost always the primary factor that decides the choice of provider and the terms of engagement. So, should service providers be willing to guarantee their work? Should customers make payment contingent upon success?

Curious to learn more? Read on dear friends...

Should Service Providers Guarantee Success?

There's an excellent television commercial that investment advisor Charles Schwab has been running. It shows a father and his adult son at a restaurant speaking over dinner. The son asks his father if his broker refunds his fees if he isn't happy. To which his father laughs and replies, "That isn't how the world works." The son pays off the exchange with "Well, the world's changing". It's a great question intended to invite further inquiry by the viewer.

As it turns out, if Schwab customers are dissatisfied for any reason, it will refund the prior quarter's program fees and will work with the client to make things right. It's a terrific and powerful guarantee assurance message. This begs a broader question, should service providers guarantee their mutually agreed deliverables? My answer is yes, they should. Let's study this a bit further.

The basis for any service agreement is the desire for another party to do something that a customer either cannot do or chooses not to do for himself during the desired time frame. This means that there is a certain level of expertise or skill that a service provider is expected to bring to the relationship to which the customer attaches value when it is competently applied to his/her needs. Beyond this, the importance and urgency attached to successful service delivery and the risks (and their associated costs) associated with failure will drive the choice of service provider and the business terms.

So, should a service provider be obligated to guarantee their deliverables? While there are a vast array of services to which this question may be applied, I would argue that yes, they should. Importantly, this is not the same thing as promising that the customer will be happy with the outcomes. It is very important to understand the distinction between these two things.

When a customer takes his car to his local repair shop to diagnose and fix a mechanical problem, the mechanic may identify an exceptionally expensive repair need. He may also then be authorized to complete the repair which restores the car to perfect working condition. This should be considered "success" even if the customer is not happy about receiving the bad news or having to pay for the expensive repair.

I was recently involved in an engagement where the customer hoped that I could identify a ready-to-go, "off the shelf" solution for their need, but accepted that after I had undertaken an extensive effort in their behalf, what they desired didn't currently exist. Instead, I provided them with leads that were extremely promising, if not as fully developed. Does the fact that I couldn't identify a turnkey solution mean that I failed them? No, I would have failed only if I had promised my client at the outset of the engagement that I would deliver this outcome and then didn't. Instead, we mutually agreed at the outset of the engagement that the existence of their desired solution was uncertain and even doubtful, and that I would work to identify viable development candidates even if I could not find a turnkey solution. On this basis, I succeeded and my client was very pleased with my deliverables.

In conclusion, I assert that for any service agreement, the service provider and customer should collectively agree to a precise and unambiguous definition of the deliverables, which can and should be guaranteed by the service provider.

"Connecting You With The Right Solutions" BFS Innovations, Inc.

Since 2005, BFS Innovations has helped its Fortune 500 clients with technology scouting, new business creation and business development services. Contact Michael today at This email address is being protected from spambots. You need JavaScript enabled to view it. or at 614 937-2408 to discuss your company's needs.

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