Earl Dawson, owner and manager of Earl's Taxi, operated a fleet of 148 cars, 75 owned personally. All remaining cars were leased direclty by their drivers, who paid variable stand fees based on the number of calls. Current revenues approximated $110 per week per driver.

Over a seven-year period, stand expenses had increased and exceeded the $110 charge to the drivers. Earl's accountant advised him to increase fees to $150 per week.

Earl was worried that his accountant's advice would result in drivers refusing to work. So he discussed the matter with Art Risling, a fellow member of a local investment club and small business.

Art probed for details about his operations and discovered expenses had increased by 20 percent during the past three years, while the number of fares declined.

Earl thought the problem was rising cost - but it was driver productivity.

Continued probing revealed that customer pickup delays were causing volume declines - a decrease in revenue - even though meter rates had increased; drivers met for coffee throughout the day and that meant lost fares.

Art suggested two approaches to the problem: Charge the $40 cost increase or charge $40 and apply it to an incentive pool, from which refunds of $20 would be given to drivers who increased their number of fares by 30 percent. If accomplished, volume increases would increase both stand fees and income for productive drivers, while penalizing those who failed to improve.

Earl implemented the second approached and experience increased revenue and productivity.

By assuming the role of soul mate, Art Risling led Earl to a better conclusion . On his own, Earl had concluded that rising costs (inflation) was his only problem.

Soul mate involvement also led to the choice of a reward system over penalties.

This case study can be found on page 19 of 50 Steps to Business Success: Entrepreneurial Leadership in Manageable Bites.