What is emotional discounting? It is when we start abandoning business models and pricing structures and allow emotions to drive or impact our revenue, prices, decisions, etc. In this salon industry blog, 2 Reasons Why It’s (Too) Easy to Emotionally Discount, the author explains the dynamic of what happened to cause a stylist to discount hair coloring, then offers some insight and tips. As you read this little story, begin considering the dynamic we face and the need for balance.

In Restoring Success, Nothing is Scarier than Scope Creep, emotional discounting is presented as a root cause of scope creep. Emotional discounting can result in problems during the execution of a job and have a direct impact on job profitability and ultimately the company’s bottom line.

It all began when a friend mentioned the concept to me in a casual conversation, having nothing to do with the restoration industry. I almost immediately started recalling countless scenarios, jobs, and conversations, and realized they were all related to issues resulting from emotional discounting. As the great Zig Ziglar points out, “The first step in solving a problem is to recognize that it does exist.” I developed a weird excitement because in an instant I had a better understanding and a new context to some of the most basic things we encounter in our industry.

As an industry we value empathy, the ability to understand and share feelings with others. Many of the services in our industry revolve around serving others who experienced a disaster, devastation, and interruption. There may be added financial strains and a variety of other factors impacting those we serve. Consider the fact that we encourage and develop emotional skills, the ability to connect and empathize with our customers. Review this quality in meetings and demand it in interviewing new candidates; we even use our emotional abilities to engage people and develop relationships when describing the values and people in our companies. When you combine these dynamics, it could be a recipe for emotional discounting disaster.

Consider this dramatization: A family experiences a water loss; the husband was just laid off work and the wife is working two jobs to help make ends meet. There is a $2000 deductible, the kid’s toys are all destroyed. The team is empathetic, and the family is comforted by the support and performance in mitigating the loss. There are minor repairs to be done after the water loss. While doing the repairs, the wife says, “Our front door needs to be replaced, a draft comes in, and the lock does not work.” Feeling the pain of the misfortune of the very nice family who has fell on hard times, team member replies, “I will take care of that for you. I don’t want you to be cold or have a security problem; you have been through enough”. The manager who handles collections, calls to follow up on payment of the deductible 30 days later, hears of the family’s sorrows, feels bad, and credits the account $1500 because they only had $500. Three years later, a call comes in, it is the same nice family filing a warranty request on the front door that is now leaking. The total job cost for the company is $4000 and the company was paid $2000.

This family’s scenario is truly heart-wrenching and we may be called as human beings to help them in some way. It is also a dramatization of the force of emotional discounting and the potential outcome.

The reality is that after reviewing job outcomes for many years, many that had issues and/or missed targets were impacted by emotional discounting. Our infrastructures likely have a variety of policies and procedures from change orders to collection policies that may have been breached or compromised, not with a disregard for company policy but rather out of an emotional reaction derived from being empathetic.

Now that we can recognize emotional discounting, we can consider how to proactively manage it and the impact on the company’s operation and results.

1. Be aware and become a student of those who seem to have mastered the balance of service, empathy, and emotional discounting. To some extent, I have been studying this balance without having known exactly what I was watching. Over 15 years ago, my young child required a dental surgery and we had to pay out of pocket. During this stressful and emotional experience, I had left the office and pondered what I experienced. They were very kind and supportive, but I was perfectly clear on what and when I was going to pay and the consequences if I did not. I had still felt that our family was in caring and loving hands. I ran back and detailed out the experience to the team in our restoration company.
2. Training and Accountability: There are many skill development and training courses, like project management courses to help manage these scenarios. Currently, I am working on a project with an outside organization; my point person has mastered the balance. He is service-oriented and intent on the perfect execution of our project, but he also professionally handles changes, additions, and telling me that I will pay for them. I complimented him on this ability and asked him about it. He relayed to me that he was trained, and he is held accountable.
3. Coach the Team:
   1. Back to identifying the issue: Make everyone aware that there is in fact a balance of caring about the customers while showing empathy and the value of the goods and services you are delivering.
   2. Scripts: Help the team get comfortable and confident in handling a situation where emotional discounting could take over. Use Your Words has some additional tips to help develop the teams’ scripts.
   3. Organizational awareness: Give the entire team some basic understanding of the business model and basic economics. This gives confidence and allows everyone to engage and better handle situations. Quite simply a business will not function and survive if the cost of executing the work is more than they are paid to do it. Businesses may not thrive when we allow emotions to make the decisions instead of price lists, procedures, etc.
4. Redirect the Emotional Response: We want to funnel our desire to help others in a deliberate fashion and not in a way that is contrary to company policies or the objectives.
   1. Have options to get those served additional help or support:
      1. Local Support Organizations
      2. Banks and Financing Options
   2. Company initiatives: Your company and team may be involved in charitable activities, give time, talent, and resources. As a company, you can even develop your own programs and initiatives to help customers.

So, the next time someone did something, without a change order, and without charging, consider that it may have been a form of emotional discounting and not a simple disregard of a policy or an oversight. Find the right balance for the company and the team.

Enjoy much Restoring Success.