Managed Services and Pareto’s Law

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managed servicesNever was Pareto’s Law more evident than in Managed Services. You know Pareto’s Law – aka the 80/20 rule? In the business of managed services, it’s easy to get kicked around. After all, we deal (primarily) with customers who are having a problem and so naturally we’re talking with people who are stressed, people who are frustrated, short on time, need it to work, etc. Call it an occupational hazard.

So what does that have to do with Pareto’s Law? Well, a while back I did some math and true to form, we find 20% of our customers are providing 80% of the revenue. We also find that 20% of our clients create 80% of the daily “noise”. And of that 20%, we further find that 80% of them have very complex environments which accounts for the additional customer service workload. Fair enough.

But here’s where it gets interesting: the remaining 20% are just noisy – and not in a good way. I know you know what I am talking about – overly demanding with outrageous expectations that aren’t based on reality let alone any contractual obligations, out and out rudeness – just plain never satisfied and at the lowest end of the scale in terms of revenue generation (somewhere around 2% if you can believe it!).

managed servicesThe typical (and far too prevalent) response when dealing with clients like this is to “do whatever you can to keep them happy”, right? Wrong. And here’s why: If you are always willing to walk on your lips through busted glass to help the ornery and thankless tyrants, you won’t have any time left in the day to service the clients who represent your true bread and butter: the happy clients who are providing 80% of your revenue and likely near 100% of your referrals!

If you always work with the worst possible customers who give you the least gratifying projects, grind you for every nickel and then berate you for your work, that will be kind of customer you attract. If you save your best work for those who deserve and appreciate it, you will find you soon have a happy harem of profitable, gracious, and appreciative clients and you may just break Pareto’s Law.

managed servicesSo are you wondering what we did with our “noisy 20”? We fired them, of course. Now I get to focus 80% of my time on creating new ways to really blow the socks off my pet customers and the other 20% on finding new ones just like them. And that has created an unbelievable culture of “do whatever you can to keep them happy” only now, they totally deserve it.