Role Change Of The Funeral Director

By Wilson H. Beebe, Jr.

Not since your great-greatgrandfather converted his furniture and livery business to a mortuary and added a funeral service charge to the cost of the casket has the funeral profession been poised for so much change. The alignment of an aging population, industry economics, consumer preference changes, and labor demands have formed a crucible out of which the business and practice of funeral directing is expected to emerge in a fundamentally altered form. Current funeral home roles and consumer needs suggest that what funeral directors “know” about the business of life when a death occurs can complement the traditional body-centered activities of what they “do.” For example, the death of a senior family member often marks a crossroads for a family as it makes important decisions about how “Mom” will maintain her independence, health and finances now that “Dad” is gone. By integrating eldercare and senior support capacities into current funeral home offerings, the funeral director can position himself to provide valuable guidance for surviving family members long after the funeral. Because of their vast experience and community knowledge, funeral directors have much more to offer families than just a “good funeral.” They have knowledge about the “business of life” that can be turned into a valuable service for families. The development of a new business model — the “Knowledge Based” model of funeral service — can create new value for licensees while diversifying the workforce with new skills and alliances. The “Knowledge Based” model provides a road map for a new generation of services that will help reposition the role of funeral directors in the social and economic fabric of their communities.

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Setting the Stage for an Evolving Model Changes in consumer needs have given rise to subtle shifts in disposition and ceremony preferences, creating a climate that is highly conducive to the evolution of the profession. These preference changes are driven by the need for convenience stemming from more dispersed families, twoincome households, and ever weakening formal religious affiliations. Price competition and lifestyle changes are resulting in diminished merchandise margins and fragmented, unpredictable and oftentimes reduced service requirements. The continued expansion in cremation rates is the most apparent barometer of this phenomenon. While the majority of families continue to adhere to the basic model of body-centered activities, they are not averse to challenging the traditional, expected rules upon which those activities are based, whether that means different or shorter calling hours, non-religious celebrations, or a diminished perception of merchandise value. The introduction of new types of merchandise such as creative keepsakes, casket inscriptions and a plethora of other “add-ons” is not going to make up for steadily deteriorating margins on caskets and facilities usage. On average, funeral home gross profit as a percentage of sales is about half of what it was 20 years ago. There is also a distinct and discernable movement away from body-centered activities altogether by what may be referred to as the “opt out” consumers — those who are tethered to what a funeral home provides only by the reality of the body. These trends pose significant challenges to the industry’s standards of labor and facility utilization, pricing and fulfillment; in short, the existing business model may be on the verge of crisis. Efforts to articulate these changes and promote alternative models have been championed by the National Funeral Director’s Association (NFDA). The NFDA is promoting a

American Funeral Director • April 2005

model that relies on the funeral director’s traditional role being supplemented by and extended into an “event planning” model. Its value is that it assumes a more people intense, less traditional “cookie cutter” approach, challenging practitioners to integrate their traditional services with related services such as catering, flowers, monuments, video tributes and the like, so as to create a “celebrationist” message to the public. These are all positive directions. The “celebrationist” model does have its limitations, however; it does not intrinsically distinguish the funeral director from other providers of hospitality services. While some personalization directions may add marginal revenue, increased training and emphasis on personalization is not really a breakthrough opportunity. Additionally, the risks of commoditization, national branding and affinity marketing may lead to low-margin, price-driven business models. While this may adequately serve some segment of the market (and a large one at that), the greater and longer-term risk lies in the

absence of alternatives that are capable of breaking through consumer perceptions of the funeral business as little more than a conduit for the disposition of the remains. There is a need for a cohesive business and social model that is perceived as offering something that is not only different, but also necessary and valuable in ways that even the consumer himself or herself may not have considered. Think about it — “What services can the funeral director provide that are of large, perhaps hidden economic and social value, not easily duplicated, and not body-centered?”

Introducing the “Knowledge Based” Model Funeral directors are uniquely positioned at a point of crisis that typically generates a cascade of needs for the survivors. However, what funeral directors currently cater to are those immediate needs as they relate to the care and disposition of the dead body, which is their heritage function. But in a world where the “business of life” for survivors has become

Universe of Offerings The current model of funeral service range of products, services and influence. encompasses the opportunity to offer a range of The recent focus on expansion as it relates to goods and services and/or referrals traditionally the event planning and celebrationist model associated with the care and custody of human is a positive development and does create a new remains, and the ritual associated with sphere of influence. disposition. But relative to the size, longer-term relevance The key to long-term funeral service viability and unmet needs of today s survivors, and opportunity is to expand that the potential of the

Industry Economics

Labor

Demographics

Consumer Preferences

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increasingly complex, funeral directors are often information traffic controllers, guiding families about what to do, whom to see and where to go on any number of issues related to the care, comfort and maintenance of the elderly and bereaved. When formalized, extended and professionalized, such services, for survivors working on a long distance basis, for those lacking sufficient social knowledge to adequately navigate the systemic requirements of social service programs, for two-income households with insufficient time, for widows/widowers with inadequate resolve, may well possess intrinsic utility and value in the contemporary marketplace. This concept proposes to make funeral homes a recognized, community-based resource of critical information, advisory and consulting services for families either anticipating or confronting a death, and those who might continue using such services after the initial crisis intervention. The “Knowledge Based” model of funeral service is focused on helping survivors navigate the business of life when a loved one has died, following on the unique ceremonial acknowledgement of a life lived. From a competitive standpoint, this is a model that would be difficult to replicate for groups outside of funeral service, and that is consistent with the non-commodity, personal and

• Prepare required paperwork, permits • Retain and care for remains • Facility, staff and equipment overhead

customized service approach that is the direct heritage and franchise of funeral directing. Being an information gateway to elder care and senior support information and other information-based services is a potentially viable, profitable and credible model that does not abandon the commitment to perfecting existing services and developing other non-body centered activities.

Labor and Professionalization How does the “Knowledge Based” model provide solutions to the industry’s labor dilemmas? Currently there is a quantifiable shortage of funeral directors, and the rate of new entrants into the market is insufficient. Additionally, there is a need for significant change in labor resources, training and education as the marketplace moves from a merchandise-valued environment to a more service-valued environment. The increased customization of individual ritual and service needs requires more versatility in the labor force, not less. The the lack of post-licensure curriculum and training has done as much to diminish labor versatility in the profession as any other one thing. The cost of inadequately trained personnel is probably greater than is appreciated and bears directly on the negative price/value relationships experienced by consumers and the ability of funeral firms to deliver in an environment where

Variable Non-Declinable Service Fee Pricing Structure

• Obtain expanded biographical data • Coordinate with required third parties • Prepare and place notices • Orchestrate memorial and religious services

• Prepare required paperwork, permits • Retain and care for remains • Facility, staff and equipment overhead

• Conduct life transition assessment to identify independent living challenges for survivors, eligibility for assistance, and potential solutions to ensure continuity of care

• Obtain expanded biographical data • Coordinate with required third parties • Prepare and place notices • Orchestrate memorial and religious services

• Prepare required paperwork, permits • Retain and care for remains • Facility, staff and equipment overhead

Expanded Non-Declinable

Standard Non-Declinable

Minimum Non-Declinable

A variable non-declinable service fee system would allow funeral homes to have multiple offerings with different a about what is provided for in the charge for Basic Services of Funeral Director and Staff. For example, a funeral have three offerings: a stripped down Minimum that it associates with its direct dispositions, a Standard that it with a more typical funeral, and an Expanded offering that, in this case, is used to present gateway elder care

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American Funeral Director • April 2005

families increasingly demand differentiation. In the absence of staff that is sufficiently flexible and resourceful, it is difficult to meet the varied and diverse demands of consumers and to then justify the large, single-unit price nondeclinable professional service fees that funeral directors are accustomed to charging. The “Knowledge Based” approach will create the environment and training structures necessary to expand upon the skills of licensees and divorce the funeral director’s license from its exclusive reliance for value on making funeral arrangements and embalming. This provides an opportunity to professionalize the license so it includes supervisory responsibility for new entrants from other professions, such as social workers, who would bring skills critical to the integration of a “Knowledge Based” set of services. Such a scenario could create the opportunity for licensee capacity to be “tiered up” to include competencies involving advanced educational requirements in the social services, rather than being “tiered down” as would be the case with strategies such as a split embalmer/funeral director license.

Price Flexibility and the “Knowledge Based” Model In addition to expanding educational and career development opportunities, the “Knowledge Based” model provides further support for an oft-discussed new pricing model — the variable non-declinable service fee. This new pricing structure has received industry-wide attention of late. NFDA has petitioned the Federal Trade Commission to convert the current non-declinable fee of “Basic Services of Funeral Director and Staff” from a single-fee approach to one that varies depending on the type of arrangements being made. The reason for the proposed change is that the inflexibility of the single-fee structure threatens the long-term interests of funeral directors everywhere. As funeral directors continue to rely on a single, non-declinable service fee as the core of the industry’s pricing system, they run up against barriers that induce them to avoid meeting emerging consumer needs and expectations of value-added service. Rather than finding different ways to communicate price and value, it is sometimes easier to say: “The government makes us do it.”

Research & Development

As part of a joint venture between the New Jersey State Funeral Directors Association and the Metropolitan (New York City) Funeral Directors Association, a multi-year research and development project was undertaken in 2004 to explore the viability of the Knowledge Based Model. The overarching goal is to redefine and expand the role of funeral directors in the 21st century and develop new professional opportunities for association members. Several phases of consumer research explore different models and assumptions in an attempt to identify the best of the existing bodycentered practices and how they can be optimally supplemented with new services. The project will validate and develop the Knowledge Based model, relying upon consumer, labor and internal industry attitudes, capacities and guidance. Initial findings indicate that the Knowledge Based model has merit. While the majority of consumers are satisfied with current funeral home offerings and desire the use of personalization techniques, when given the opportunity to purchase value-added services such as those described in the Knowledge Based model, two-thirds expressed a desire to Consumers Who Like/Dislike The Prospect of Funeral Homes Offering Value-Added Services Such as Having Fully-Trained/Experienced Staff Assist Families with Services Ranging From Legal, Financial, Business Matters and Offering Emotional Support

Under the variable service fee concept, a fee would still be “non-declinable” and a part of every arrangement, however it would enable funeral homes to scale this fee according to the services they actually provide rather than basing it on some increasingly mythical, high-margin, traditional funeral. For example, the arrangement service fee for a graveside service could be less than the arrangement service fee for a funeral that includes public visitation, a church service and cemetery committal. The arrangement service fee would more clearly reflect the complexity — or simplicity — of the funeral and

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disposition service the family selects. A variable service fee would continue to provide a mechanism for overhead recovery and would allow a firm to begin the process of unbundling the levels of service that we take for granted as either being necessary or expected in all cases. The current rigid method of overhead assessment interferes with transmitting the values of uniqueness that we purport to cherish. It negates the consumer’s desire for choice and selection and impedes the development and distribution of new, high-value products and services, i.e. “Knowledge Based” services, which could become part of an expanded, variable nondeclinable fee. While the variable non-declinable service fee pricing structure has merit without the “Knowledge Based” business model, it becomes even more useful and relevant to both consumers and funeral directors with the inclusion of “Knowledge Based” services. They complement one another — each making the other stronger.

Consider the Impact of Success The success of the “Knowledge Based” model and introduction of the variable non-declinable service fee will support the continuous evolution of funeral service. Labor will depend upon “tiering up” licensee value rather than regressing to some older model like the split funeral director/embalmer license. The new model allows for the integration of other labor competencies and provides a natural path for secondcareer individuals. The new model can provide career “headroom” for existing licensees to manage both body-centered and knowledge based functions. At the same time, it will stimulate the demand for, and help support the economics of, substantive continuing education programming that will reinforce and elevate the basic skill sets already required of individuals seeking to succeed in the industry. For a majority of consumers, resources within the “complicated

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society” appear to be segmented and difficult to identify. The “Knowledge Based” model of funeral service provides consumers with a “one-stop shopping” scenario. They can use their trusted funeral director as a continuing source of guidance, information and hands-on assistance in navigating the confusing road ahead, including attending to financial details, finding qualified professional referrals and expert elder care services, which also helps to address the socially driven dilemma of an aging population. Finally, industry economics will be significantly improved with higher margins stemming from viable revenue replacement sources that smooth out earnings and labor utilization better than preneed ever could. The “Knowledge Based” model and variable non-declinable service fee will help to establish a system that provides the flexibility we need to adequately engage in real price communication and product differentiation that contributes to families choosing to “opt into” funeral service for reasons other than the obvious. The end result will be significantly improved public perceptions, longer customer relationships, and greater economic participation in an industry that maintains its core function while evolving to be something better.

AFD Wilson H. Beebe Jr. has served as the executive director of the New Jersey State Funeral Directors Association for the past 19 years, and concurrently as the executive director for the Metropolitan (NYC) Funeral Directors Association for the last 11 years. Prior to that Beebe served as the assistant executive director with the New York State Funeral Directors Association from 1980 to 1985. Beebe also serves as president of Thanexus Inc., the only funeral practice management cooperative in the United States, providing human resource, financial and marketing services. Beebe is a director of the National Cooperative Business Association (NCBA), and a trustee of the Association Master Trust (a health insurance benefits provider for over 12,000 participants).

American Funeral Director • April 2005