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.



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.

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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