Can levy of penalty prevent defaults?

Can levy of penalty prevent defaults?

Principal of a school was quite irritated with the parents coming late to pick up their children after the school was over. This was forcing some teachers to wait for hours till the last child was Picked up.

Principal had a brilliant idea . The school started charging the parents Rs. 10 for each hour of delay.

Did it work?

The new policy was a disaster.

Now, the grumbling teachers found that the number of parents coming late increasing day by day and the duration of delay also increased.

The reason, the parents considered Rs. 10 as a price to be paid for the baby sitting service and they paid it merrily without interrupting their favorite TV show or drinks with the friends.


The lesson to be learnt from this is, that one can invite disaster from wrong pricing decisions. Had the Principal fixed the price (penalty ) at Rs. 500, the defaults could have been arrested.

Right price needs to be discovered.

Whether pricing decisions are for default or service, they have to ensure desired outcome.

How many professionals take their pricing decisions seriously?

EFF Factor suggests an approach “Management by billing rates “, which starts with fixing appropriate prices for their Human Resources {check previous article} The prices so decided could be used to measure the work done as well as work to be done. ( whether for WFH or WFO)

EFF Factor is designed to ensure that you fully exploit the theory of “Management by billing rates” for reaching your profit target effortlessly.

Of course you may continue with your traditional approach of focusing on the cost. But not too long. You will soon realize the merit of the EFF Factor approach.

Evolve with EFF Factor.



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