Taxman Henry Bloch

 

INC.: So you've found that another key to maintaining a consistent level of quality in a far-flung service organization is promoting almost exclusively from within.

BLOCH: That's right. Our number-two man in the tax operation, who heads the operation worldwide, started out part-time in the Philadelphia office and just worked his way up. The same with all of our divisional directors. And what's most important about that is that they all have experience dealing with the client. As training, as screening, you just can't beat that.

INC.: There are undoubtedly some obvious ways to tell good tax preparers from bad ones. You can see which ones make the fewest mistakes, or prepare the most returns, that sort of thing. But are there any other measures you use?

BLOCH: We listen for the thank-yous. Our managers go around and listen at the end of an interview. Because if the client doesn't say "Thank-you," or "I appreciate what you've done," we haven't done a good job for him -- or for ourselves. And this goes to the heart of our marketing concept. You see, we have an 80% repeat rate among our clients, which is pretty good considering people die, get married, retire, and so on. And what new business we have comes, almost all of it, from recommendations. So we're out to do one thing, and that is keep customers satisfield. If you're not satisfied, we don't charge you a dime.

INC.: That's an unconditional guarantee?

BLOCH: There's often one condition: that we give you a free return for next year as well. Because otherwise a lot of people would say, "I'll take my money and go somewhere else." And we want them to come back.

INC.: In other words, you want to prove it won't happen again.

BLOCH: We do a lot of things like that. In Kansas City, for example, we've been trying to attract a big company to locate here -- 1,000 scientists to make advanced computer chips. And so we offered free tax returns to all its employees for the first year. We wanted to do it to help the city. But in fact, we'll look for most any excuse to do almost anybody's return free the first year, because we know we're going to get 80% of them back after that. That's why we also give free returns to high-school senior as Christmas presents -- we end up doing this all over the country.

INC.: For how many kids?

BLOCH: We offer it to millions of students. But remember, in all likelihood, a high-school senior will have a very simple return -- it usually involves income from a summer job. Our aim is to get them started with us early -- we don't want them to get in the habit of preparing their own tax returns. Preparing your taxes is strictly a habit: what you do one year, you just keep doing.

INC.: Now, an idea like that -- the high-school thing or the offer to an unsatisfied customer for a free return next year -- who decides whether to go with something like that?

BLOCH: We like to test things -- and I'll tell you why. One year somebody suggested that it would be a good idea to offer appointments if people didn't want to take their chances and come down to the office and sit in line. This idea went around the organization and everybody loved it. Why not give people a choice? And so we went ahead, and it was a disaster -- it cost us millions. We advertised the appointments and people signed up -- maybe half our customers took advantage of it. But you have to remember that our offices get very crowded during tax season. And so people were coming in and saying, "I have an appointment at 10 o'clock," and eight people were sitting there waiting without appointments, maybe as long as an hour, and you can imagine how angry they would get. And many of them just walked out. Never came back. So that's why I say now, no matter how good an idea sounds, test it first.

INC.: What other ideas have you tested?

BLOCH: A number of ideas about how we could expand our line of services. Filling out medical forms for people, that was one. Somebody came up with that idea and we said, "Great. Now go test it." And we gave him an office and, like most of these things, it generally didn't work out. Student-aid forms, financial planning -- the same thing.

INC.: Whereas Hyatt Legal Services was something of a proven formula when you bought it.

BLOCH: Exactly. But even with Joel, we ran into this. Shortly after we acquired him, he came to me and said he wanted to buy something similar in the dental area. And I said, "Joel, you know, the dental business might be very good, but I don't think you should buy it or that we should buy it for you because I don't think we want to dilute your management. You've got so much to do." So we passed.

We had confronted much the same things ourselves at one point. It was years ago now, and we had just heard about diversification and thought we should be doing it -- after all, everyone else was. So I went to see an investment banker in New York with one of our board members to talk about various options. Anyway, this investment banker, Felix Rohatyn at Lazard Freres & Co., asked us a few questions about how fast we were growing, which at the time was very fast. And he said, "You're not ready to diversify yet." He explained to us that there's a certain time when the growth curve starts to flatten off, when it gets near the top, when your business has matured to a certain level -- and that's when you want to branch out. And you know I think that holds true not just for companies, but for people as well. It is not just a question of what else you can take on, but when you can take it on. And I think you know when that time comes.

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