Thursday, February 28, 2008

A Look at the Dark Side of Customer Service

A brief note on the net showed that the dark side of customer loyalty and customer satisfaction is perhaps larger than we think. A survey by Taylor-Hill, a british firm that specializes in customer satisfaction research, polled 2,000 respondents across the UK. Their findings are astonishing and present a frightening picture of what companies appear to be providing to customers.

Here are some of the examples:
1. 70% of those polled accused UK firms of failing to reward customer loyalty.
2. Almost half of the respondents said UK companies had the worst approach to customer service among major world economies.
3. 49% of the respondents thought they were treated more poorly by UK firms than customers in Japan, USA and France.
4. More than 75% thought senior managers in UK companies were more interested in the latest management fads than what customers think.
5. 53% thought the public transport operators were bad at understanding customer needs.
6. 47% thought that the transport operators were the worst at rewarding customer loyalty.
7. Last but of significant importance - 91% of the respondents believe that "making money" was the most important consideration for large firms.

Some thoughts
First, let me speak to the last statistic that 91% of the respondents believe that large companies think first about making money. My first reaction is that is their job - to see that the company makes money. Too often, I think people forget that companies that do not make money either go out of business or become government subsidized. However, I can say that companies with higher levels of customer satisfaction than their competition tend to make more money than their competitors. I documented this with a colleague in an article in the Business Renaissance Quarterly Journal. Of course, the challenge for company executives is to find the balance between superior customer service and profitability.

Now, lets consider the first six statistics. There appears to be a crying need for UK companies to improve their level of customer service. There is no doubt that customer service can always be improved, but these statistics suggest (rather strongly) that many are definitely not happy with the service they are receiving.

I am currently analyzing about 350,000 customer satisfaction surveys from around the world and will be publishing the results by country. I am only looking at high technology companies that provide field service, depot service and help desks. I can say that the first cut that groups companies by area of the world suggests that European countries have lower levels of customer satisfaction than either the Americas or the Asia-Pacific countries.

The Bottom line is that dissatisfaction is real and may be much larger than we think - even though we, and most companies, believe we/they are providing good service. Maybe we are missing something! Do you think?

Monday, February 25, 2008

Customer Satisfaction is Still Important

I saw two pieces of information recently that reminded me that customer loyalty is not sustainable without customer satisfaction. There were two very important pieces of information that need to be considered when planning your budget for the year.

The first is the most recent finding from the American Customer Satisfaction Index that is compiled quarterly by the University of Michigan. Their index rates more than 200 companies on a 100-point scale. In the most recent quarter the index fell 0.4 percentage points to 74.9 and, MORE IMPORTANTLY, it marked the second straight decline after more than two years of consecutive improvements.

The second concern is that Bain & Co., a large consulting company located in Chicago, found that 80% of the companies they surveyed believe they deliver a "superior experience" to their customers. When Bain asked the customers of those same companies about their perceptions, ONLY 8% REPORTED A SUPERIOR EXPERIENCE.

The Bottom Line: Gimmicks and giveaways are not enough to create customer loyalty. Customer satisfaction is always an important component.

Thursday, February 21, 2008

Are We Finally Getting Some Analytics?

I just saw a story by Kate Maddox that is titled "Marketers pursuing new customer-focused metrics." There was a brief review of her article in the B-to-B online that is aimed at marketing strategists. She points out that it appears that customer centric metrics are taking center stage this year. Finally!!!

Maybe this will mobilize the industry to focus on the metrics issue so that we can finally settle on a few metrics on which every one can agree. It is really a shame that we have not been able to settle on a few base metrics for customer loyalty. There are many different metrics used in the market and, unfortunately for the uninformed business, the selection process of which metric to use usually comes down to who is the best salesperson.

Ms Maddox mentions several alternatives in her article; namely, she mentions the NPS metric which seems to have mixed reviews. She also mentions the Customer Affinity Index recently published by the Chief Marketing Officer Council. We already know that IBM has a new metric that they are using in their consulting business. In her article she goes into some detail on the work being done by HP where the customer metrics seem to occur at different levels and are aimed at seeing the customer from many different angles, rather than using a simple metric. Finally, there are a number of research firms that seem to have their own version of what it takes to measure customer loyalty.

Bottom line: Can we PLEASE agree on the basic metrics of customer loyalty for the sake of the companies who are paying BIG BUCKS to people who are selling everything from the magic bullet to snake oil? I will wait and see.

Monday, February 18, 2008

Employee Satisfaction and Loyalty

This is a brief blog and is based on an article that appeared on the web the day after I published my blog on "Can You Demand Employee Loyalty." The article was published on the net by and is titled "Top Eleven Ways to Increase Employee Satisfaction and Loyalty from Allegiance, Inc."

Here is my take-away from this article (it is a condensed version of a longer article).

The positives:
1. Provides very actionable steps to take.
2. Appears to cover all aspects of employee connection with the company.
3. Includes measurement of employee engagement (rarely done).

The negatives:
1. Still treats employees as employees (does not appear to seek building a partnership between the employee and the company)
2. Not clear if there are more than 11 ways to increase employee satisfaction and loyalty - article only mentions top 11.
3. What is be missing in this condensed version on the web is any discussion of how these 11 were identified as the TOP 11 ways. (This is probably in the white paper that gives the full story).

In order to determine if this was really a condensed version I went to the website noted in the article to read the white paper. I found no website either for Allegiance, Inc. or for the white paper. So much for providing "the rest of the story."

I am always concerned when I see a headline that says "Top (anything)." I always wonder how they know these really represent the top and if so, on what basis. I think sometimes the marketing department and/or the PR department go a little over the top.

Friday, February 15, 2008

Can a Company Demand Employee Loyalty?

We know it is not enough to ask customers, "What's important?" The company must isolate the relative importance of different performance areas by determining the relationship between specific problems and customer loyalty. The key here is employees deal with customers successfully or not, and solve their problems effectively or not. So, a company must pro-actively pursue the achievement of positive, loyal trusting relationships with its internal customers. End of story!

Employees are advocates, ambassadors, champions and representatitves in delivering service and expertise to customers. A company must not leave this process to chance and hope good chemistry and good business happen. It must design operating structures and incentives to empower front-line staff to take the initiative to delight customers. Management also must take care to integrate and enervate employees in delivering value to customers, since they are most vulnerable to feeling dis-enfranchised and having low morale.

Employee Motivation

Congruent accountable organizations take seriously a number of unspoken questions. Why would employees be willing and wanting to delight the customer? Would each employee be willing to serve the customer, solve their problems and act in their best interests? The fact is, employees ask and answer the basic question, "what's in it for me personally," just as customers do. If you believe money is the only, or primary, motivator for employees to do good work, you are mistaken.

So, how can a company align its corporate goals with enlightened employee self-interest? What do employees want and how can a company earn their loyalty? Or, can a company just demand employee loyalty?

I like what Professor Robert Ewin, an associate professor of philosophy at the University of Western Autralia, noted in an article that loyalty is, among other things, an important motivation to duty. It brings into play virtues such as courage, gratitude, and justice, and involves the exercise of good judgement. Loyalty is, fundamentally, an emotional attachment. The loyal person is one who sticks through hard times, not one who cuts and runs as soon as it becomes clear times will remain hard and there may be no overall end payoff. Loyalty lies at the heart of all morality and also forms the basis of much immorality. It can make possible our trust in each other, and can be an integral part of what makes life worthwhile. However, exceesive loyalty, or loyalty to a wrong source, can lead to trouble.

Basis of Loyalty

Corporations and their managers seek loyalty from customers and employees for many good reasons. We have already discussed aspects of customer loyalty; what about employee loyalty? Companies normally expect a loyal employee to subordinate their own interests, at least sometimes and to some extent, to the corporation and/or manager. On the cynical side, if employees are loyal, they might do more for the corporation than good judgement alone would lead them to do.

The positive perspective is that loyalty to a company is based on pride in the products and quality of work produced. Such loyalty is predicated on the company's standards. It is because the company meets those standards that it receives the employee's loyalty.

A result of that loyalty and accompanying pride is the employees have a strong motivation to do their duty well. They even have a motivation to go beyond what duty requires if it properly furthers the ends of the company. Ethical management can seek loyalty furthering the interests of shareholders and customers because it opposes misdeeds and cover-ups. Personal loyalty will not be to an individual, but to the company position devoted to the corporations's proper ends which includes delivering excellent products and services.

Promoting Duty

How can companies encourage development of appropriate employee loyalty? The company can begin by ensuring every employee understands thoroughly their role in its activities and missions. Each employee must understand the overall mission of the company so they can understand the significance of their work and how it affects the excellence of the products and/or services. All tasks need to be understood in terms of personal contributions to the whole if an employee is to flourish and be willing to engage as part of the solution rather than withdraw or resist change. in that way, no one is viewed as merely a means to an end.

Because loyalty does involve subordinating one's own interests to those of the company, employees on occasion must be given credit for this and protected from exploitation. Companies expecting employees to delight customers must nurture those employees. It is inappropriate and unrealistic to expect employees will produce excellent products and/or deliver superior service because they have a job. What people seem to want most from their work is challenge, accomplishment, recognition, financial security and fun.

Companies can engender employee loyalty and trust in three essential ways:
1. Through congruent, on-going demonstration of commitment to employees as valued business partners. Loyalty develops when management commincates (speaking AND listening) with all employees forthrightly and frequently aabout the big picture.

People need to feel a sense of shared values, personal involvement, sense of purpose and appreciation for their contributions. They need to believe the company knows where it is going, then understand their role in that journey.

Behaviours and actions of senior expecutives speak much louder than words. Genuine shared decision making and plan implementation bujild confidence and credibility among employees. Front-line employees must be empowered to exercise good judgement within predetermined guidelines, and make independent decisions in solving customer problems and building loyalty and trust.

2. Through meaningful financial-, work- and family-related benefits supporting a collaborative work environment, such as profit-sharing, incentive plans rewarding indiviual effort, pay plans with similar formats, flexible benefit options and a quality work environment. Encourage employee involvement with ideas, then share monetary gains or savings achieved on a monthly or quarterly basis. Consider doing lifestyle surveys to determine what's really important to employees.

3. Through work by providing professional and personal challenge and development. Employees need a sense of being treated fairly and respectfully and a belief their careers are being supported. It's a pleasure to work where the customers smile, where they're excited about the good service and appreciate the employees.

Pleased and pleasant customers motivate employees to superior performance and high productivity. People want to be where the action is, where good things are happening, where there are resources and opportunities for the future. They want to participate in a thriving enviornment.

Professional challenge and develpment includes job enrichment, job rotation opportunities, lateral movement or an option to grow beyond a current level of competence.

Earning Loyalty

Loyalty is tied directly to the health and quality of the corporate culture. Organizations managing and treating people well, placing emphasis on future development and providing opportunities for growth, generate allegiance and respect. Building a loyal customer base must be integral to a company's business strategy. Customers are loyal to a company that continues to identify their needs, expectations and problems and then responds with the right products and services.

The same is true for employees. Involvement and commitment are hallmarks of loyal cusomers. Happy loyal employees, with excellent service attitudes will interact effectively with customers to build loyal relationshps, trust and synergy. The company must understand the inextricable link between customer retention and other aspects of the business. A company striving to earn customer loyalty and maximize profits cannot afford to base its decisions on intuition.

The company must be dedicated to continous improvement and accurate quantification of the relationships between loyalty and profits, such as critical incidents affecting loyalty; identification of customer needs; measurement, analysis and prioritization of specific corrective actions; implementation of corrective measures; and remeasurment to ensure actions were effective and meaningful.

Customer-driven empirical data quantifying the bottom-line impact of poor quality and customer problems and then identifying corporate priorities based on market and reveneue impact provides a solid basis for making strategic decisions. Firms sustaining economic success consistently seem to have corporate cultures equally valueing and balancing customer and employee needs.


A corporation that neglects its internal customers will surely falter and fail to thrive because employees ARE the corporation in the eyes of the customer.

Saturday, February 9, 2008

Curbing the "Cycle of Failure"

During the last few blogs, I have discussed a number of aspects of customer loyalty. I have shown customer satisfaction does not guarantee loyalty, described both the internal and external processes of developing customer loaylty, discussed the crucial role played by employees, and articulated the importance of have effective tracking systems. Finally, I have described some ways to build long-term relationships and trust with customers.

In the next few blogs I will explore the challenge of keeping employee loyalty high in the face of corporate downsizing and restructuring. This can be expecially critical for service-oriented companies and divisions because low morale and employee indifference can place their loyal customer bases and their business at risk.

Morale and Downsizing
In the wake of the recent rash of downsizing, employee morale has seldom been worse. The conference Board surveys continue to show that a large number of U.S. companies have taken signicant downsizing action in the last five years and indications show no sign of a let-up.

It is significant to note within a year after making downsizing cuts more than half of the companies surveyed had refilled the positions. Degration of employee morale and loyalty tend to be the first unintended consquences of a downsizing strategy. Although these consequnces do not register directly on the balance sheet, high employee morale and loyalty are often a critical corporate asset. Competitors can replicate most aspects of a company's physical assets, but what about the willingness of employees to go the extra mile and invest time and energy discovering creative ways to solve customer problems, meeting customer needs and maintaining on-going trusting realtionships?

The old implicit contract which encouraged employees to link their own futures with the future of the company is gone. Now, the company cannot count on its employees because employees cannot count on the company. Another consequence, equally difficult to quantify, is the forfeited knowledge and experience of employees whose jobs have been eliminated.

It is true that many orgaizations are significantly overstaffed. Too many people drain costs, inhibit speed and curtail innovation. A smaller number of well-trained employees, supplied with state-of-the-art technology and organized in self-managed, cross-disciplined work teams, can operate smarter, more quickly and more collaboratively when they have the authority to get a job done without constraints.

Sadly, many companies have no coherent stragic rationale for layoffs. Employees are regarded as expendable costs of production to be arbitrarily discarded. While this is not always the case, there is some truth to this in almost every downsizing effort.

The worst problem with indiscriminate layoffs is they often reflect a knee-jerk, crisis mentality reaction. More than 75 percent of all downsizing efforts in the U.S. and Europe resulted in little, if any, long-term improvement in profitability or productivity. Instead of invigorating the organization, downsizing created a phenomenon identified by Harvard Business School professors Leonard Schlesinger and James Heskett as the "cycle of failure."

The "cycle of failure"
The cycle involves a chain of consequences beginning with employee dissatisfaction and culminating in organizational inefficieny, poor service quality, high customer turnover and decreased profitability. Employee morale plummets when those surviving cutbacks grow mistrustful of management and fearful of future cuts. Normal attrition slows, cuts fail to remedy the previously existing inefficiencies within the company, and departments already having a bare-bones operation are severely penalized. As morale deteriorates, so does service quality which almost immediately translates into lost revenue.

The most powerful remedy for quickly conteracting the effects of downsizing is to devise, articulate and execute a clear, credible plan for renewed growth. Duncan Davidson and James Trice of Gemini Consulting Inc., in New Jersey, suggest three principles to guide companies successfully through the issues of downsizing.

Principle #1 First, seek a 20 to 50 percent share of narrowly defined, profitable market niches. Mastery of each segment and unrivaled insights into customers' needs and expectations leads to smarter, more effective product design, marketing and service and provides barriers to competitive threats. Employee morale will improve as satisfied customers appreciate the company's dedication to meeting their needs.

Principle #2 Second, know exactly where company money is made (by customer group, by channel, by product, by market). Do not try to achieve profitability by saving and cutting costs; focus on a strong return-on-equity strategy.

Principle #3 Finally, rightsize! Successful rightsizing is a continuous, proactive, collaborative process to synchronize constantly changing customer needs with strategic objects, work processes and organization structures.

The Bottom Line
The key take-away from this discussion is the lack of understanding of the REAL losses (knowledge, commitment and trust between employees and management) that occur during a downsizing.

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