Giving Up – Reframed

On your blog of Thursday, September 01, 2005 “Giving up to get ahead” you talk about moving insurance agents. I’ve just been through the process of ‘firing’ my accountant of near 10 years.

She hasn’t served me well for a number of years and done some things that have severely impacted me – instead of a $7,500 tax refund, I got a $3,000 bill (because they got a $15,000 donation wrong) and I was given a bill for $2,000 with a single line itemisation “professional services”…

Not entirely dissimilar to your insurance agent.

What’s the pattern/anti-pattern here??

Loyalty + Outsourcing. (I reckon :-) )

As a small sole-practitioner, I need to outsource many things – normally you’d think of large organisations outsourcing, but I suspect that small business are the major outsourcers. There are a bunch of things that I have to hire ‘professionals’ to do – down to having a mechanic for my car, an accountant, insurance agent, employment agency, lawyer, bank, ….

I need to focus on my business, what I do well, and hand off to others things that are peripheral and I don’t have the time, inclination, training and possibly aptitude to do well enough, or maybe be sufficiently expert in… I can afford to pay a premium for those services (in terms of hourly rate) because (apart from the recruiters) I only use them occasionally and the total impact on my budget is small. It’s like building a pipeline – the straight bits of plain pipe are commodity items and priced accordingly, the tricky bits – bends, joins, valves – are a very small but important part of the pipeline. There aren’t too many people that can do this stuff and they can charge a premium. It has to be right, it has to be on-time and it’s under 1% of the total contract (a guess).

So back to my accountant. I selected her by asking friends for references. We got on well enough and the price/service was acceptable. Then it was a ‘handled’ problem – I’d outsourced the work and it just kept ticking over – no decisions required. It’s not laziness, but prioritisation, like cleaning that attic, basement or garage out. Things will keep running just fine unless there is an emergency like a fire, flood or a relative moving in. When people die, others get to look at the things they’ve ‘deferred’ dealing with – and it looks like a complete mess and a hopeless tangle of junk… But they lived just fine that way. (In Australia, farmers build another shed to store stuff. These are amazing places to find old & sometimes valuable things. “Clearance Sales”, when the *entire* contents of a farm are sold by auction in one day are quite some fun.)

And I’m pretty loyal as well. That’s a pattern that usually works well for me personally and professionally.

Finally, I’d reframe your blog question from “What’s the anti-pattern”, to “When does a useful pattern become an anti-pattern?”

Having a single insurance agent you “just go to” is a very useful pattern – until they screw up or screw you around. Then you have to go through the pain of finding someone new… It’s trivially obvious that doing a through & exhaustive evaluation of *all* suppliers in the marketplace for *every* purchase/service is a waste of time – especially for micro- and small-business where you have very limited internal resources. And, if you work out the opportunity cost, the money saved each time will be much less than you could’ve earned with that time… Guess that’s why bigger organisations tender for goods & services – but only for a limited time. Take the hit on selecting someone – the pain, time and cost – and then reap the benefits of a single supplier. At least with a contract, you schedule when you’re going to reconsider a relationship.

Remember in PSL the lesson of “success leading to failure”?? Early success leads to a ‘lock-in’ of the solution method. Mostly the method doesn’t scale, but it’s always worked for you, so you have to stick with it until it fails catastrophically. Hopefully, you’re still around to be able to rechoose.

Stephen Jenkin, Australia

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