Corporate Culture and Customer Loyalty

I’d like to take a break and discuss a topic that had never occurred to me. The concept had crossed my mind but never really “grabbed me.” The concept? Customer organization and corporate culture can and does play a real role in customer satisfaction and loyalty.

Since its news to me, I am taking some time to write it to be sure I understand it. I recently visited a company in the southeastern United States and met its president. We chatted about the company’s strategic direction and its mission of building long-term customer relationships. I was encouraged to hear this, and when he said they have re- engineered their company, I became even more interested.

In essence, this company has chosen to work with customers on a team basis. Each customer (at least the larger customers) has a project team assigned to them. The team works with the customer and finds comparable members in the customer’s company.
Each team has a project leader responsible for coordinating all its activities and assuring customer requirements are met. This means every aspect of the business, including the accounting end of the relationship. Here’s where it gets interesting.
The keen insight now dawning on me came from a statement by the president that not all customers worked well with the team concept. He explained some customer organizations come with a team to work on the project. These customers have taken on a corporate culture of a flatter organization with fewer levels of hierarchy and greater responsibility and authority given to individuals at the working level.
These individuals make decisions and fix problems without the need of “corporate approvals for minor changes and corrections always present during the start-up and operation of business relationships between two corporate entities. Thus, the operation moves quickly and efficiently, usually at minimum cost.

The other extreme of customers has the corporate hierarchical structure of the ‘50s, where there are few in authority to make decisions and many to do the work directed by the organizational structure. The corporate bureaucracy acts as an inhibitor to the team process by imposing the hierarchical decision-making process on the team.
Because each decision requires approval from the few executives at the top of the hierarchical structure, decisions take more time. Hence, the project (or customer operation) is impeded.

But what is the impact of working with the flat team approach as opposed to the rigid hierarchical style resembling a pyramid? In both extremes of corporate culture, there is a customer impact when an outside company attempts to do business with them. Customer satisfaction measurement can be made for both types of companies. How about when the two extremes interact with an external service company?
For a rigid hierarchical company, the external service organization will be selected by the management decision makers. The level of satisfaction provided to the customer company will probably be perceived differently at the operations level than at the management decision-making level.

The primary reason for the difference in perceived satisfaction is the likelihood of communications discrepancies between the levels of management. When problems arise at the operation level, they will be communicated to the management level. When the problems are resolved, the resolution also will be communicated in some manner to management.

Unfortunately, communication between levels of management is troublesome at its best. Personalities play an important role and communications are sometimes distorted for reasons other than the good of the company. In this case, customer satisfaction may have dramatically different measures depending on who is asked. In fact, the operations personnel may be satisfied at the same time management is dissatisfied with the same service company. The most likely reason is management was informed of problems, but has not yet been made aware of the solutions.

When it is apparent the company structure is rigidly hierarchical, the service organization must communicate at both the operations level and the management level.
For this type of company, customer satisfaction at the operations level does not constitute loyalty, and measurements taken at the operations level may be misleading in terms of vulnerability to competitive actions.

In a distributed management company, the service company will be selected by the decision makers at the operations level. The higher levels of company management may not even be aware of the company providing service. Those involved with the decision to select the service provider will use the service as well. They also are the people who will become loyal to the service provider and, hence, the ones on which to focus. Unlike the rigid hierarchical structure where communication can be a critical factor in satisfaction with the service provider, the communication links are short because decision and operation are within the same organizational level.
The customer satisfaction measurement can be misleading with this organization as well as with the rigid hierarchical structured organization. Higher levels of management may have no clue to the satisfaction level provided by the service provider, and any attempt to measure their understanding will probably be misleading at best.

When a company is seen to have distributed management, the major effort for building loyalty and customer satisfaction should be aimed at the operations level. Although higher levels of management should not be ignored, their influence in the decision-making process will be limited.

Customer satisfaction is generally thought of as the result of the delivery of products and services meeting or exceeding the customer requirements. This concept must be modified to accept the new understanding (new for me) of what a significant role the corporate culture and management structure of the customer can play.
Although this concept of corporate culture having an effect on customer satisfaction has been known to many, few of us have taken the time to understand the implications of the different types of companies we deal with daily.

Corporate cultures are changing more today than ever in the recent past. Some companies call the changes re-engineering, others call the changes rightsizing.
Whatever the name, the way companies do business today and tomorrow will be different than the past. In order to be successful, and have satisfied customers who become loyal, corporate culture must be a strong consideration when deciding the customer strategy to use.

The bottom line is that measures of customer satisfaction and loyalty can be dramatically distorted by the customer organization.