HUMAN RESOURCES

A Guarantee with Teeth

Placing monetary guarantees on service.
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In any service business, it's the little things that count. And small errors were plaguing Fringe Benefits Management, a $9-million Tallahassee, Fla., business that administers benefits plans. Faced with the loss of a major customer in 1990 because of bad service, CEO Michael Sheridan took drastic steps to save the contract and, in the process, penned an effective marketing tool: a guarantee that puts his company's money where its mouth is.

"We were doing a lousy job," says Sheridan. "That customer should have terminated us." Instead, Sheridan and his client drew up a detailed list of performance standards, backed by cash guarantees. For instance, Sheridan promised to maintain an average hold time of less than 40 seconds for customer-service calls or pay a $1,000 monthly penalty.

The biggest improvement has come in the number of days it takes the company to pay out claims and reimbursements. "Before, we were all over the place. Some took 5 to 10 days, some up to 20." Now Fringe Benefits guarantees payment in 10 days and lately has averaged just 3. Plus, phone hold time, which used to run a minute, now averages 15 to 30 seconds.

Sheridan has set up similar guarantees with three of his biggest clients, and he plans to include guarantees in every contract in 1992. In the first six months of 1991 the company paid out $1,200 in penalties on $4.3 million in revenues. To keep mistakes to a minimum, Sheridan is tying a greater part of employee compensation to the guarantees. His 200 employees help set the 40-plus standards outlined in the contracts, and cash penalties come out of their bonus pool.

Fringe Benefits reviews its performance for the client quarterly and mails a check for any penalties incurred. The client can call Fringe Benefits on any mistake.

Sheridan's guarantees make him stand out from his much larger competitors. "We rarely are the low bidder," he says. "But clients tell us our service and these guarantees more than make up for the difference in cost."

-- Michael P. Cronin

Last updated: Mar 1, 1992




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