Case Studies
THE CASE OF THE CASUAL KICKBACK
Ms. G.C. from Miami
Here's the problem: an interior decorator's bid is broken down into two parts-(A) the decorator's services and (B) the cost of labor and supplies. Most customers think (B) is a fixed cost-they forget it's not the decorator's fault if cabinetmakers charge an arm and a leg. So, where do customers look the closest when they're comparing costs? That's right, (A)-the decorator's fee.
Well, decorators are creative people and for years they've been doing some very creative bidding. They've been lowballing (A) and padding (B), expecting the laborers to kick back a percentage of their inflated fees to the decorator. Surprised? Everyone's doing it. Everyone, that is, except me. It's deceptive. And as a Christian, I think it's just plain wrong.
Unfortunately, this means that in comparison to my competition, my fee (A) looks too high. Of course, my laborers' fee seem low because they're not padded-but that's not necessarily a good thing. Many customers conclude that I use cheap (and therefore unreliable) labor!
The customer's final cost is about the same either way you cut it, so most decorators don't feel they're doing anything wrong. Are they right?
Needless to say, "blowing the whistle" on such a widespread and accepted practice would only damage my professional reputation.
- Ms. G.C., Miami
Christian
Solution:
Our first reply comes from Marketplace Mentor Lee Taylor, president
and senior consultant of User Computing Services, Inc., in Philadelphia.
Lee also had help from David Miller of Thomas Commercial Upholstery, Philadelphia;
and Paul Taylor, a retired contracting engineer from Florida:
First of all, it is possible to change an industry's practices. But it won't happen overnight. You'll have to be willing to invest about five to ten years in the process. You'll have to decide whether or not the Lord is laying this particular issue on your heart strongly enough to make it worth that kind of time.
If He is, you should begin to work through your professional associations, or through whatever professional relationships you may have, to find and establish alternate ways of presenting bids. Believe me, it can be done. But it's no piece of cake.
In the interim, the thing to do is to present the numbers as fairly, factually, and aboveboard as possible. Reflecting on my experience with a large consulting firm, any time we handled supplies or subcontracted labor, we put an asterisk after the amount-indicating that "this includes the industry standard margin (handling charge or carrying charge) of 15%." In other words, you could convert what is now a buried kickback into an aboveboard fee. Other terms that are frequently used for this are "subcontractor management fee," "service charge," "supplies markup," and so on.
Without knowing your business in-depth, it's difficult to know how practical these suggestions are for you. But I do think the general principle here is valid-if you feel you need to mark up the cost of labor and supplies in order to be competitive, go ahead and do it. Just make sure you keep it all out in the open.
Tell your customer exactly what's going on and chances are he or she will understand. And God will be honored.
Christian
Solution:
Here with another perspective is Mark Ritchie, a commodities investor
and partner in the Chicago Research and Trade Company:
James, chapter one, has a lot to say about your problem: "When all kind of trials and temptations crowd into your life, my brothers, don't resist them as intruders, but welcome them as friends. Realize that they come to test your faith and to produce in you the quality of endurance. And let the process continue until that endurance is fully developed and you'll find that you've become men of mature character, men of integrity, with no weak spots. And if in the process any of you does not know how to meet any problem, he has only to ask God, who gives generously to all men without making them feel foolish or guilty. And he may be sure that the necessary wisdom will be given him." (Phillips)
I believe God is telling us here that if we look to Him for a wise and creative response to your problem, we'll come up with one. So perhaps the first thing you should do is go to bed tonight and think, "God, I'm going to sleep on this, and I want you to give me creative alternatives to a system perverted by sin."
Specific advice is hard to give here, because no one knows your business like you do. But let's face it-business today is no that much different than it was two millennia ago, in that people still must have personal confidence in the person they're dealing with.
When I go to a bank for a loan, they may scrutinize my financial statement, but they still need to know on a more personal level that they're dealing with somebody credible-because there are not enough courts in the land to make sure I behave.
So when I hire someone to decorate my home, I want to be able to place confidence in that person. Well, your job here is to instill that confidence based on real substance. That means having a good list of satisfied customers I can contact who will make some statements about the kind of work you've done. Perhaps even a past customer who will say, "I thought this person's (A) price was too high, I thought her (B) price was too low, but I later discovered that...."-and let them spell it out.
That kind of communication is invaluable, because it allows you to open the whole issue of your unusual bidding structure without making a direct attack on your competition.
Along the same line, you may also want to develop testimonials in praise of your suppliers. If people can be made to understand that your suppliers are established professionals with a long track record, they'll have little reason to worry about the low price.
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