Cost of Delays to Customers

When we fail to deliver, who pays the most?  Here’s an example with which I suspect we can all relate, via the Associated Press

Airline flight delays cost passengers more than inconvenience — $16.7 billion more — according to a study delivered to the Federal Aviation Administration on Monday.

The FAA-funded study looks at the cost to passengers for flight delays in 2007, the latest year for which complete data was available when researchers began working on the study.

Unlike past studies of the impact of flight delays, researchers looked more broadly at the costs associated with flight delays, including passengers’ lost time waiting for flights and then scrambling to make other arrangements when flights are canceled.

The cost to airlines for delays was $8.3 billion, mostly for crew, fuel and maintenance. Overall, the cost was $33 billion, including to other parts of the economy. But one finding of the study is that more than half the cost associated with flight delays is borne by passengers.

Over half of the cost passed directly to the customers.  These are people who have already paid a good deal of money for their ticket, not to mention their bag.  Extra fees are invented seemingly daily to boost the revenue of the airlines, and now we see the passengers are the ones who really suffer from poor performance.

It’s no surprise, of course, and it happens in your business, too.  When HR creates a bad process, or rolls out a broken tool, or tries to enforce an ill-conceived policy, who pays for it?  Usually the other departments, mangers, employees and leaders.  HR loses some creditability (assuming they have any to give), but the cost is borne elsewhere.  This is why it is so important for young HR professionals to spend time outside of HR.  Go an experience the impact of those bad decisions, the vague policies, the misleading or misaligned metrics.  Have it done to you, not with you, and see what happens.

If airline CEOs flew coach for a few years, you can be sure it would impact their perspective.  HR needs to take the same approach, and learn how costly poor HR operations can be to our internal customers.

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