Human Performance in the Customer-Driven Enterprise
Liberating human performance so that employees can perform at their highest capacity is one of the most compelling issues on CEO agendas today. Corporate leaders are asking such questions as:
- How do I move my organization to become customer-driven and achieve a new level of performance?
- How do I combine my organization effectively with another (through mergers, alliances or acquisitions) to offer the products and services my best customers need?
- How do I change the culture, competencies and behavior of my organization to align better with the customer experience and better reflect my customers' values?
- How do I effectively share customer knowledge across the organization to have a significant impact on each customer interaction?
- How do I measure or benchmark our organizational performance in a networked world?
The future of business enterprises rests on their ability to transform their organizations to compete in a global, networked world — a world that is complex, fast-changing, and unpredictable. Increasingly, senior executives realize they need to see and relate to their organizations in the same manner as their customers. They need to take an "outside-in" view, focusing on customer needs rather than on the products or services they want to sell the customer.
In such an environment, a company's best strategy rests on empowering and trusting its people so they can be as flexible as customers require. The good judgment and flexibility of customer-facing employees determine the quality of the customer experience and grow the customer relationship. It is no longer enough to employ transactional workers who follow policies by rote. Knowledge workers, able to understand integrated processes and handle more complex interactions, are now essential. Their individual judgment is critical. Their competencies and behaviors are what create a high performing organization. With the technology and tools largely in place to allow employees to become more customer driven, the effectiveness of the employees now matters more than their efficiency. It is no longer enough to increase the number of at-bats; the new focus is on the batting average.
Levers for Effective Human Performance
Executives surveyed in an Economist Intelligence Unit study predict their organizations
will reorganize to focus more on customers by 2002. Human performance levers
such as culture, organization structure, skilled workforce, performance measures,
and performance support will be critical to enable this shift. Another study,
focusing on quantifying the value of investments in Customer Relationship Management
(CRM), found that 11 key CRM capabilities differentiated the strongest performers
in the communications industry. The study determined that these 11 capabilities
had the greatest impact on return on sales and could each add $30 million or
more to a $2 billion business unit. Of the 11, five are directly related to
human performance:
- Attracting and retaining the best service talent.
- Measuring customer service effectiveness.
- Effectively developing the skills of sales personnel.
- Attracting and retaining the best sales talent.
- Fairly compensating and rewarding sales personnel.
In other research, Insight Technology Group analyzed 255 companies implementing CRM technologies and discovered that three of the top four challenges are related to human performance:
- Getting users productive.
- Managing resistance to change.
- Getting executive commitment.
As companies embrace CRM, they are also finding that their employees need to be introduced to new processes and technologies and need to adopt the new mindsets and skills necessary for relationship building. "Time to competency" is becoming a critical indicator of an organization's ability to learn and adapt to changing customer needs. In call center operations, for example, it can take 6 to 10 months before individuals progress from "novice" to "proficient" and even longer to reach "expert." In environments of 40 to 50 percent attrition, companies are not realizing a strong return on their training investment.
Effectively supporting the needs of front-line workers means providing learning experiences that offer relevant context and require the learner to use critical thinking and personal judgment. For example, your employees who interact with customers work in an environment where it is difficult to follow a set script. Customers are increasingly unpredictable, complex and demanding. In this scenario, the best workers are those who are confident and competent in applying their judgment where it is required rather than blindly following a prescribed system. Developing that confidence and competence is impossible to do in a classroom training environment. It requires simulating the interactions with customers and letting people practice and develop confidence through these simulations.
According to the National Training Laboratory, the best classroom training programs deliver only 20 percent of the skills needed to be successful in a job; the remaining 80 percent comes from on-the-job experiences. This means that front-line employees are practicing and learning with real customers — a significant risk to customer relationships and retention.
On the other hand, training delivered through business simulations typically results in 75 to 80 percent retention. "Learning by doing" forces people to defend, justify, evaluate and predict. This process results in a highly competent workforce that is motivated and confident because their skills have been tested in a "live" environment.
Learning from the Leaders
When it comes to improving customer relationships through human performance,
the biggest challenge is how to do it predictably, measurably and at scale.
Pilot groups in isolated locations are one thing. Ensuring that the customer
experience is consistently the same in India or Indiana is quite another.
We have found that solutions emerge when looking at four different areas that have a significant impact on the quality of a high performing organization:
- Organizational structure and roles.
- Culture.
- Talent management.
- Learning.
These areas offer lessons that can be applied to a wide variety of organizations and industries:
Organize
around the customer experience, from the "outside-in"
The predominant trait of a customer-driven enterprise is its pervasive outward
focus — on customer needs and concerns, not corporate politics, organizational
issues or internal processes. This value is the unifying force that drives the
desired cultural behaviors and unites employees in a common purpose. An "outside-in"
company has a clearly defined value proposition that drives all employees' business
decisions — and is clearly understood by the customer. The value proposition
of Southwest Airlines is centered on the lowest price in combination with "positively
outrageous service." Outside-in companies also have an obsession with the customer
and a passion for the business from the CEO on down. Not surprisingly, there
is a strong marketing orientation.
No silver-bullet organizational structure best brings this outward focus to the surface. What works best for each company is a structure based on the needs and outcomes desired by the customer. For its part, the company must identify and define what it wants to happen at the point where the company touches the customer. Is it to creatively solve problems? Provide uniform and consistent interactions? Listen to customers and generate learning for the organization? Changing organizational structures can become an all-consuming task, so it is an important point not to lose sight of what the customer wants. As Lars Kolind, CEO of Denmark-based Oticon, points out: "We are not in the business of creating innovative organizations. Our work is about developing the world's best hearing care."
A variety of organizational structures are conducive to building a customer-driven enterprise, as long as each is driven from the "outside in" — this is, by the primary needs of the customer. In fact, among the five described below, none is mutually exclusive.
High
Tech - High Touch Customization and Personalization
The customer segment-based structure is appropriate when the company has a smaller
number of larger customers or well-defined customer groups. This is the most
visible structure of a customer-driven enterprise. It forces a single point
of contact globally as well as customer accountability, a focus on providing
solutions and a consolidation of authority. Cisco Systems illustrates this model.
Its global customers seek a single source for network equipment and services,
a supplier that knows their needs intimately and can be held accountable wherever
in the world they operate.
The process-based structure aims to overcome internal functional barriers and deliver the customer experience consistently. British Airways integrated a variety of functions (reservations, in-flight services, food services and the like) into a single, horizontal, process-based organization so that it could realize its mission of becoming "The World's Favourite Airline."
The industry-based structure is appropriate where the customer values specific industry knowledge and expects a single point of contact to provide access to skills within the company. Many consulting firms are good examples of this model. Their clients want consultants to have in-depth industry knowledge and also be able to access firmwide resources as necessary, so that clients do not have to navigate the firm's organizational structure themselves.
The product/service-based structure is used when customers want strong R&D knowledge, innovative skills for a specific product solution and a high degree of problem solving to customize the product for the customer. Monsanto reflects this model. Customers of this food and health care conglomerate need highly complex products. They rely on Monsanto scientists to have detailed knowledge that can be used to tailor products for customers' particular requirements.
The geography-based structure serves a large number of small markets or even individual customers where local knowledge is important to customers and partnerships are used to build regional solutions. AAA illustrates this model. The automobile association developed local relationships and created regional solutions and knowledge to benefit individual customers.
If none of these structures seems totally on target for serving customer needs, an organization can invent its own structure, as travel services provider Rosenbluth International did. Founder Hal Rosenbluth decided that the family farm was the most efficient working unit because everyone on a farm has to communicate and know other functions. Moreover, farms and businesses have many points in common: they have to survive on narrow profit margins, react instantly to unpredictable changes and manage resources effectively and efficiently. Accordingly, Rosenbluth broke his company into more than 100 business units, each functioning as a farm that served specific regions and clients. Corporate headquarters became the equivalent of a "farm town," where "stores," like human resources and accounting, were organized vertically to provide resources for the unit farmers. Hierarchy and bureaucracy were eliminated so each farm could make immediate decisions based on achieving the best outcome. Decision-making and learning were localized on each farm, which empowered individuals and teams to make the right decision for the farm and the customer at the right moment.
Create
a customer-driven culture
An organization's culture is the shared beliefs, assumptions and behaviors that
employees acquire over time. Culture forms the common bond among an organization's
people. It is formed as its members observe, copy and repeat behaviors that
colleagues feel help themselves and others to be successful. If a behavior works,
it will become part of the culture, whether or not it serves the customer.
The dimensions of a customer-driven culture include, but are not necessarily limited to:
An Obsession
with the Customer
This obsession starts with the CEO and extending to every employee. The customer
is mentioned early and often in every meeting. Employees are natural advocates
for customer interests. The impact on customers is considered in every decision,
and customers are invited to participate in decision-making. The CEO and senior
management in particular live the value that customers come first; they model
the behaviors that keep them connected to their customers. They spend a good
deal of time visiting customers. Richard Branson, the CEO of Virgin Airlines,
has been known to call customers in their limos after they have just completed
a flight to understand their experience and level of satisfaction.
Creatively
researching and illuminating customer needs and expectations
Reverse focus groups, for example, integrate customer interaction and insight
capabilities so that information can be used effectively at the "moment of truth."
These sessions convene several customers with many company employees so the
company can "spend a day in the life of the customer." The process helps companies
understand the linkages in their capabilities and what causes delays and frustrations
in the customer's business. A large automotive tire manufacturer gained valuable
insight from this practice. The company had made a major investment to upgrade
the look of its field sales force to present a more professional image. Salespeople
were outfitted in khakis and corporate polo shirts. However, when executives
spent a day in the life of the customer, they discovered that a part of the
sales visit required inspecting old tires so that adjustments and credits could
be processed. Since the tire business is a dirty one, salespeople in "fancy"
clothes inadvertently sent the message that they were not ready to work with
the customer. Further, the customer hesitated to ask the salesperson to climb
on old tires and soil clothing, so the customer ended up doing all the heavy
work. The situation was discovered only through a deliberate attempt to spend
a good deal of time listening to the customer.
Listening
closely to their employees
Customer-driven companies ensure that their own people have a channel to make
suggestions and that the suggestions are heard and implemented as appropriate.
USAA created a formal electronic suggestion system that lets workers ask questions
and provide feedback to management on how they feel things are being run. Suggestions
go to action agents who investigate the issues, determine what can be done with
the ideas and involve management as appropriate.
Making
heroes out of employees who deliver great customer service
At FedEx, the employee who chartered a plane to make sure a parcel arrived on
time has become a legend. At Ritz Carlton, employees are authorized to spend
up to $2,000 on guests, no questions asked. As a result, a housekeeper can replace
a guest's $200 piece of luggage if it is damaged by the hotel. The decisions
and actions of these individuals are driven by culture, not by policies, procedures
or organizational structure. They are driven by behaviors they see on the job,
behaviors that produce a great customer experience.
It is intuitively obvious that a customer-driven
culture is the linchpin to creating a customer-driven enterprise. As Jack Welch,
CEO of General Electric, put it: "The winners will be those who can develop a
culture that allows them to move faster, communicate more clearly and involve
everyone in a focused effort to serve ever more demanding customers."
The implication is that these organizations
are intentionally working to refine, practice and reinforce behaviors that keep
them connected to their customers' needs. They are reviewing: The classic example of a customer-driven
culture is Southwest Airlines. The company is reporting its 26th consecutive
year of profitability in the airline industry and its seventh consecutive year
of record profits. Such results are particularly impressive in a cyclical, capital-intensive
industry prey to oil shortages and labor strife. As Herb Kelleher, its CEO,
explained: "You can get the same airplane. You can get the same ticket counters.
You can get the same computers. But the hardest thing for a competitor to match
is our culture and the spirit of our people and their focus on customer service.
That isn't something that can be done without a great deal of attention paid
every day in a thousand different ways. This is why I can say that our employees
are our competitive protection." If a customer-driven culture is not
"bred in the bones" from the start, it is possible to use organizational structures
to turn it around. A restructuring at Xerox eliminated centralized corporate
operations and created divisional and business teams tied to specific markets.
The new team structure enabled employees to work more closely with customers.
Cross-functional teams developed their own strategy, which included defining
the market, understanding and determining revenue needs, and monitoring and
responding to competitors. After the reorganization, Xerox experienced a 15
percent increase in customer satisfaction, an 11 percent rise in employee satisfaction
and a 10 percent hike in sales. Attract
and retain the best employees to get the right customer experience
Finding and hiring the right people
who fit into a customer-driven culture is essential. These workers are as passionate
about the product as their customers are. They deliver a superior customer experience
because they want the product and the company to succeed. The culture at Nordstrom's
cultivates the pleasing of customers, regardless of their needs for specific
Nordstrom products. The culture at Disney cultivates delighting customers, focusing
on the customer experience and how doing so links to the Disney brand. To ensure a tight fit between employees
and culture, customer-driven enterprises clearly define five or six critical
behaviors for each customer touch point. Then, during the hiring process, they:
In their recruiting processes, customer-driven
companies flex a variety of creative muscles. Cisco, for example, advertises
to specific job openings on Web sites that their kind of people visit, like
dilbert.com. In addition to advertising aimed at specific target audiences,
Cisco uses software that reads the URLs of Web surfers, matches them to competitors
it likes to recruit from and paints a banner with a link to the company's job
page. Once hired, Cisco employees are evaluated on customer satisfaction measures,
and the bonuses of top executives are tied to customer satisfaction ratings.
Culture is so important at Southwest
Airlines that employees are screened specifically to ensure a likely fit. The
airline looks for people with a sense of humor, who are fun and have a passion
for customer service, as opposed to the traditional criteria of education, skills
or experience. Interviews include oddball tests and storytelling to assess attitude
and sense of humor. Front-line employees also hire their peers, and model employees
are part of the hiring process. Even frequent flyers are included in selecting
applicants. In addition to screening for complements
to their culture, customer-driven organizations manage their talent effectively
by measuring and rewarding performance according to measures tied directly to
customer and employee satisfaction. Schwab pays brokers and customer service
teams straight salaries, not commissions, in addition to bonuses based on customer
satisfaction measures. It wants to reinforce behaviors that build customer loyalty
and trust rather than account churning so that customers feel comfortable
bringing more of their assets to Schwab. Recognition and rewards should be decisive
and bold enough to create corporate myths, like the FedEx employee, whose decision
to charter a plane was publicized company wide. Such highly visible recognition
addresses the new heroes as well as the dissenters. It also encourages employees
who try and fail to demonstrate the new attitudes and behaviors rather than
fear of being punished. Finally, high-performance organizations
make sure to satisfy their employees, recognizing that employee satisfaction
leads to customer satisfaction, which in turn leads to higher profits. The Economist
Intelligence Unit study showed that twice as many companies plan to use employee
satisfaction measures by 2002 as a critical ingredient in their customer-related
performance measures. Sears has proven that every five-point improvement in
employee satisfaction leads to a two-point improvement in customer satisfaction
the next quarter, which in turn results in a 1.6 percent revenue growth. Norwest's
CEO believes that customers cannot resist doing business with a company whose
employees enjoy working there. Marriott has set up a call center to provide
assistance for its immigrant workers, which comprise 85 percent of its workforce.
The telephone-based counseling service is staffed with multilingual professional
social workers trained to deal with work- and family-related problems. This
resource has resulted in lower turnover and less absenteeism and tardiness.
It also saves Marriott $1 for every $4 spent on the training and recruiting
program. Find
innovative ways to drive new skills and confidence throughout the workforce
Business simulations provide such a
solution. Long favored by the airline industry for pilot training, simulations
for business enable companies to improve their human — and thus, business
— performance on a far bigger scale than by using traditional training
techniques. Participants can experience new roles at their own pace and make
the mistakes they need to make to become truly effective, all in a risk-free
but realistic environment. In addition to these benefits for individuals, business
simulations provide organizational advantages as well. Companies can more effectively
align their employee learning objectives with their business strategy, measure
the results and establish measurements that ensure sustained impact and value.
Simulations also help change the culture rapidly in large organizations. Organizations that use business simulations
are those that want to increase their "internal clock speed" — their ability
to learn faster, exploit opportunities more quickly and apply knowledge more
widely. The result is a more competitive and flexible workforce, one that not
only knows more but can actually move faster and accomplish more than their
competitors vital criteria for managing customer relationships today. In addition
to learning corporate culture and valued behaviors, employees emerge with a
better understanding of how their roles relate to customers' needs, how organizational
structures link together and what the job requires. Ultimately, business simulations
are about more than managing the customer relationship; they create a sustainable
capability of continuous transformation. When USAA used business simulations
for its customer service professionals, it was able to project a reduction in
time to competency from 12 to six months, resulting in a savings of $9.8 million
over three years. Further savings of $3.3 million over three years could be
projected based on a two percent reduction in turnover. The use of simulation
itself was projected to cut training time by 25 percent, saving $14.2 million
over three years. Astra Merck used theater-based learning
— another form of business simulation — to bring 500 new sales employees
up to speed quickly in a complex environment. A live simulation was created
in which sales reps interacted over four days with eight actors portraying a
range of realistic customer types. Each day simulated one month of the salesperson's
environment. The experience included all the resources used in a real sales
call, allowed feedback and sharing of best practices and accommodated a variety
of skill levels. Sales representatives were forced to adapt their delivery style
to the personality of the customer and to adjust their strategies based upon
the type of relationship they had developed. In addition to theater-based simulation,
enabling technologies like the Internet can integrate learning content and performance
frameworks to deliver consistent, strategically aligned learning to large audiences.
A telecommunications company used multimedia
business simulation for sales and service reps who handle inbound calls from
residential customers. The training program simulates taking calls using a call
center metaphor. It includes audio feedback from customers, video and written
feedback from coaches, intermittent video feedback from executives and meters
for customer satisfaction and revenue impact. Twenty-five calls, each with an
average of 1500 unique paths, are included to teach customer negotiation, professionalism
and product and services knowledge. A second interaction simulates coaching
other reps at various points in calls and receiving feedback from the call center
manager. The knowledge system used in the simulation includes "war stories"
of actual experiences. The telecommunications company received
tangible benefits from this simulation including increased Day One proficiency,
decreased training time and cost, and fewer repeat calls. There are also intangible
benefits, particularly increased employee satisfaction as the reps are given
a high-end, multimedia simulation to build skills. Conclusion They create nothing less than a sustainable,
high performing organization in a customer-driven enterprise. Such an organization
displays: Sound like nirvana? Hardly. The resource
to execute these goals is the most easily accessible of all corporate assets
human capital. And the power to leverage that asset is equally accessible
human performance. It's just waiting to be tapped.
Customer-driven enterprises invest considerable resources to:
In a highly competitive and quickly changing environment driven by customer
needs, skills and competencies must be developed rapidly and consistently. Savvy
organizations know that employees cannot learn at the expense of their customers.
The price of tuition in the school of experience is very high. Classroom training
subsequently practiced on the job does build confidence through repetition and
provides a challenging experience with realistic consequences too realistic,
however, because on-the-job training also leads to on-the-job failures. Such
failures, brought about by inconsistent coaching and unpredictable experiences,
can have devastating effects on customer retention and financial results. What
is needed is a solution that incorporates the benefits of on-the-job training
but eliminates the associated risk.
What happens when organizations:
