Bad Customer Service? Blame the Bosses' Bad Policies

customer serviceEver wonder why good customer service seems to be the exception rather than the rule? Are good employees really in such short supply?

Not necessarily.

In many cases, bad customer service isn't caused by negligent or incompetent employees. Instead, the blame for poor service lies with their bosses -- or, more specifically, the policies put in place by the higher-ups that undermine the employee-customer relationship.

It's the pursuit of short-term growth that often drives businesses to engage in practices that end up alienating the very people they should be treating like royalty -- customers. Consider the following business practices that often lead to shoddy customer service.

1. Hyper-Focus on Selling to, Not Serving, the Customer

Greg Smith, a former executive director at Goldman Sachs (GS), raised a ruckus when he publicly aired accusations against his former employer. He said that the company's focus was no longer on serving their clients; it became, instead, about "how we can make the most possible money off of them."

Problems like these are partially caused by difficulties in balancing long-term success goals with quarterly revenue growth goals. While long-term success depends on quality products and good service, short-term growth is sometimes best achieved by cheating customers.

2. Short-Changing Employees

For years, Costco (COST) has been pressured to pay its employees less. After all, the company is pretty generous with its compensation package compared to its peers -- with average per-hour pay about $6 to $7 higher than what is offered at Walmart's (WMT) Sam's Club. In addition, Costco offers better worker benefit packages than most of its competitors.

So how does lower pay translate to worse customer service? Consider employee turnover. Higher-paid employees are more likely to be satisfied in their jobs and less likely to quit. Costco's employee turnover ranges from 6% to 20% each year, compared to 20% to 50% of Sam's Club employees who quit each year.

Customers benefit from employee loyalty. Costco customers are more likely to be served by experienced customer service representatives who can assist them quickly and competently, for example. Also, Costco can afford to keep prices low if it doesn't have to shell out a lot for expenses associated with recruiting, hiring, and training new employees.

3. Policies That Penalize

Ever been confronted with a team of employees who are eager to help, but all lack the authorization to solve your problem? Perhaps the item you wish to return needs to be processed by a manager. And that manager just happens to be unavailable at the moment because she is too busy carrying out other small tasks. Or perhaps the employee you're talking to is near the end of his shift, and can't go into overtime to solve your problem without management's approval.

Businesses We Complain About The Most
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Bad Customer Service? Blame the Bosses' Bad Policies

24/7 Wall St contacted the Better Business Bureau in order to determine which industries received the most complaints in 2010. For each of the nine industries that stood out, we also narrowed down the most common complaints. The list is a good reference for both consumers and companies that want to be known for customer satisfaction and draw clients that way.

> Number of Complaints Received: 9,545
> Most Common Complaint: Contract issues (not honoring rate/terms)

Last year, nearly 10,000 people complained to the BBB about receiving poor treatment from their mortgage broker. Many of these complaints are part of the fallout from the sub-prime mortgage crisis, as many of the poorly handled homeowner-loans are still coming to the fore. The biggest complaints from customers were that they were overcharged; that the company used overly aggressive tactics to collect on loans; and that the company simply did not honor the conditions of the mortgage.

> Number of Complaints Received: 12,950
> Most Common Complaint: Failure to refund when product doesn't arrive/arrives damaged

There are benefits to online shopping, mostly the convenience of having everything at your fingertips. The clearest drawback, however, is that you don't receive the product until well after you pay, and all kinds of things can, and do, go wrong. This is especially the case if you are dealing with other individuals, as is the case with eBay, which has the lowest customer satisfaction rate in the industry, according to the ACSI. The U.S. BBB received nearly 13,000 complaints last year alone from online retail customers. The biggest complaints were, as might be expected, not receiving the product, receiving a damaged product, and not receiving a refund even after not getting what was ordered.

> Number of Complaints Received: 13,018
> Most Common Complaint: Failure to refund after furniture doesn't arrive/arrives damaged

As is the case with online shopping, much of the problems consumers have with furniture retailers don't occur until after they've bought the product and moved on to waiting patiently until it arrives. More than 13,000 complaints were filed against furnishing companies last year. The most common complaint was that the furniture simply never arrived, or that it had arrived with serious damage. In either case, retailers often blame the postal service, or even the customer for falsifying reports. Another common complaint, unsurprisingly, is that the retailers deliberately misrepresented the quality of the product they were selling.

> Number of Complaints Received: 13,178
> Most Common Complaint: Failure to fix problem

Anyone who has ever had his car repaired can likely relate, especially when the problem is unidentified. Mechanics have garnered a reputation as being among the most untrustworthy personal service people in American business. Because consumers generally know close to nothing about their cars when they bring them in, a mechanic can blame a more expensive part as the source of a problem. Overcharging was not the biggest source of complaints, however, likely because few people are ever aware they were hoodwinked. The most common complaint to the BBB was simply the failure of the mechanic to fix the problem.

> Number of Complaints Received: 15,896
> Most Common Complaint: Harassing tactics

While auto mechanics may be considered untrustworthy, they don't come close to earning the kind of fear and hatred collection agencies do. Much of this dislike is probably the nature of the business, but there are nearly 16,000 complaints each year against agencies that allegedly have engaged in some truly despicable acts. Harassing tactics and adding fees to old debt are the most common complaints. A quick search of customer-rights site reveals too many horror stories, including a collector's threat to murder one woman's dog, or another suddenly demanding payment for a 13-year-old Internet bill.

> Number of Complaints Received: 22,648
> Most Common Complaint: Billing Issues (unnecessary fees, inaccurate information)

Nearly 23,000 complaints were filed with the BBB against America's banks last year. By far, the most frequent complaint had to do with billing, and the types of complaints related to this varied wildly. Some argued that their bank had charged them fees after an account had been closed. Others accused their company of inaccurate or incomplete information on their statements. Worst of all, people complained of being charged with unannounced and unexplained fees. The banks that received the worst customer satisfaction scores in the ACSI include JP Morgan Chase and Bank of America.

> Number of Complaints Received: 27,973
> Most Common Complaint: Contract issues (not getting price promised, unnecessary fees)

According to the ACSI, cellular phone service companies received one of the worst overall scores among the 50-odd industries covered. The few industries that scored worse include the U.S. Postal Service and airlines. Nearly 28,000 complaints were filed against cell phone services and equipment companies last year. Common complaints include poor customer service, bad technical support, and issues of salespeople actually lying about the total price of the plans.

> Number of Complaints Received: 30,985
> Most Common Complaint: Misleading cancellation options.

In 2010, subscription television providers had the third worst score in the ASCI. Companies like Dish, DirecTV and Charter Communications were the source of some 31,000 complaints. According to the BBB, common issues include problems with billing, bad connections, the inability of workers to repair the bad connections, or simply cable workers not showing up at all. The most frequent complaint cable companies are charged with are misleading cancellation options.

> Number of Complaints Received: 38,948
> Most Common Complaint: sales practices (misrepresentation of automobile)

We combined the new and used auto dealers into one category as we believe the two groups have enough in common. Between new and used dealers in 2010, nearly 40,000 people complained to the BBB about the quality of their service. For both factory-new and pre-owned vehicle dealers, the problems were the same. The most common complaint was that salespersons pressured customers into buying add-ons, like extended warranties and additional insurance, in some cases making it seem like these were standard options. Reportedly, some dealers even convinced customers they were approved for financing for a vehicle, when they actually were not. The customers found out the truth only after taking the vehicle home, and then they were charged for the miles they drove.

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Policies like these are often developed after some employees abuse their power by taking unnecessary overtime, or by helping their friends make a few extra bucks by refunding discounted items at their full price. In other words, some businesses create these policies in an attempt to minimize the opportunities employees have to rip off the business.

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However, such policies cost businesses money in other ways. They create a situation in which customer needs are only met after long delays, or not at all. The result: Consumers take their business elsewhere.

And the only thing worse for a business than bad customer service is having no customers to serve at all.

Motley Fool contributor M. Joy Hayes, Ph.D., is the principal at ethics consulting firm Courageous Ethics. She doesn't own shares of any of the companies mentioned. Follow @JoyofEthics on Twitter. The Motley Fool owns shares of Costco. Motley Fool newsletter services have recommended buying shares of Costco and Goldman Sachs, as well as creating a diagonal call position in Walmart.

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