Damage Control at Sterling Courier Sterling Couries Systems based in Hendon, Virginia is a provider of same-day-delivery services. Although Sterling may do everything right to meet its delivery commitments, it relies on commercial airlines to transport its parcels, and occasionally fails to meet its deadlines. Delays are usually a result of packages being misplaced in airlines' tracking systems. Such incidents are beyond Sterling's control. But from the customer's vantage point, the failure is Sterling's problem.
To control the damage created by such delays, Sterling had to take some corrective measures. For example, for several months in late 1990 and early 1991 several Sterling deliveries disappeared in transit. The packages turned up later, but the customers had already suffered financial losses. Yet because the packages were eventually recovered, neither insurance nor the airlines was liable. The decision for president Glenn Smoak was whether to compensate the customers for their losses or simply not to change them for the shipment. Smoak concluded that customers for their losses or simply not to charge them for the shipment. Smoak concluded that not charging for the shipment was an inadequate response, given the suffered downtime. By paying the $30,000 in losses would push the then-five-year-old $5 million company into a loss for the quarter. Smoak's decision was to pay out the $30,000 in gratis service, the customer stayed, and Sterling continues to grow.
Source Stoner, A.F. James, R.Edward Freeman and Daniel R. Culbert, Jr., Management, Prentice-Hall of India Pvt. Ltd, 1998
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