Monday, May 17, 2010

See the Forest

I was recently talking with a friend that works at a fairly large company, over 5,000 people, about an issue with their clients. They have a few large clients who spend upwards of US$10M a year on services that my friend’s company provides.

(names withheld to protect the guilty)

In any case, my friend is a salesperson and had a deal closed last year that would bring in about US$15million in revenue each of the next few years. This deal included a lot of services, and was based on certain usage targets of the services his company provides.

The deal consists of smaller projects, and each of those is scoped out, and has it’s own allocation of costs and revenue. In one of those situations, one of the people working on that project questioned the way in which this project was being charged. Since each of these projects contributes to revenue from some departments, but not all, they have some P&L associated with them. In this case, the department was essentially losing money and it would look bad for that department.

But not for the company.

Overall, this deal gains some goodwill, it’s a minor deal, and the people at the customer don’t want to renegotiate this smaller deal, in the $10k range, when they have larger, multi-million dollar deals they have in place.

There’s a disconnect somehow in how parts of deals work. The chargebacks and costing internally at my friend’s company doesn’t handle things like this. And it should.

In my mind, while a part of your business might be involved in just a piece of a larger deal, they ought to get some credit for the larger deal. It’s a case of worrying about the trees without looking at the forest. Don’t be short sighted, looking at each deal on it’s own. Companies started to do this with customer service in the 80s and 90s and it burned some of them. They got bad reputations because MBAs came in and worried about each piece of the business being profitable and forgetting that they are parts of the whole.