Peter Drucker is probably the greatest management guru of all time, so when he pronounces on an issue, it`s right to pay attention. He notes: "Of all the decisions an executive makes, none is as important as the decisions about people, because they determine the performance capacity of the organisation."
This is particularly true in the domain of customer management. If it is true that executive involvement and championing are key in ensuring successful delivery of customer management, it is equally so that there will be no sustained success without the complete buy-in and empowerment of customer-facing and support personnel.
It should come as no surprise that the responsibility for effective, on-the-ground customer management begins with the executive team.
Doug Leather is CEO of Knowledge Factory, the customer insight services company in the Primedia group.
People deal with people: this is the basic underpinning of business worldwide. We may introduce layers of technology to reduce the cost of doing business, and we may disintermediate through the creation of extra channels for interaction, but when all is said and done, business is about people selling goods and services to other people.
Remarkable, then, that businesses spend one-tenth on people development relative to their advertising expenditure (as reported by UK-based QCi in its third annual State of the Nation Report, released in February).
While no element of customer management can be ignored, the people element is the most important, and the one that impacts most clearly on business performance.
(This is, of course, quite logical: People, after all, form one of the three legs of the platform of people, process and technology on which well structured companies today base consistent performance.)
There is plenty of empirical evidence to support the correlation between happy/unhappy staff and customers` satisfaction and retention. For instance, Sears Roebuck implemented a set of total performance indicators using the measures of employee satisfaction and customer loyalty. This enabled the retail giant to estimate the impact on financial performance and set targets for employee and customer satisfaction. For every five-point increase in employee satisfaction, it found a 1.7% increase in customer loyalty and a 3.4% increase in earnings.
Key to the Sears case was the company`s success in understanding that:
* Employee attitudes about their job and the company are the two factors that predict their behaviour with customers.
* Employee behaviour with customers and the delivery of a particular customer experience - "Sears as a fun place to shop" - directly influence customer attitudes, satisfaction and retention.
* Customer satisfaction and retention directly influence financial results.
The Sears study has been well documented, and it remains a classic of its type. It follows the value chain:
* A compelling place to work, becomes
* A compelling place to shop, which leads to
* A compelling place to invest
In effect, Sears had seamlessly linked employee satisfaction to shareholder satisfaction.
The corollary is, unfortunately, also true. Poor employee management can prove very costly, with many hidden, opportunity and consequential costs:
* Poor health and safety records
* Reduced productivity
* Many lost days
* Low employee retention - especially retention of good people
* High recruitment costs
* Equally high training and coaching costs
* High disciplinary and legal costs
* Reduced sales (it takes time before new people perform well)
* Reduced customer satisfaction
* High internal theft rates
Of all the factors that impact on customer service and satisfaction, the most profound one is continuity, which is disrupted by people leaving. In a study of a sample of lost customers in the oil industry in Germany, the major reason cited by customers for moving to a competitor was: "You constantly changed the people dealing with me and I got fed up training them."
To put this into internal perspective, a 150-employee call centre with 40% staff turnover could incur costs of R2.6 million a year just to re-recruit to replace departing employees. (Not re-training, note, just replacing them.)
The simplest dipstick test of the market will show that most organisations are unaware of these costs, and view them as inevitable, and part of the cost of doing business. This is unfortunate, as there are dramatic savings to be enjoyed from reducing staff churn.
It should come as no surprise that the responsibility for effective, on-the-ground customer management begins with the executive team. A key role of these managers is to create the conditions that engage and motivate employees. (I say managers, but we are looking rather at managers as leaders.)
A Gallup Poll produced the memorable insight: "Great managers create great teams with loyal customers, through creating a great workplace. Research also demonstrates that first-line managers have a significant impact on employee loyalty and that 70% of employees do not leave their company, they leave their manager."
Leadership then needs to be driven down to line staff, who are in effect living out the brand promise of the organisation. (The Scandinavian airline, SAS, understood this best when it articulated it into a living programme of magic touch points whenever a customer interacted with a SAS employee.)
While it is beyond the scale and scope of such an Industry Insight to delve into the points in depth, herewith a brief overview of management`s roles and responsibilities in ensuring the organisation is able to deliver on the requirements of customer management from a people perspective:
* Understand the brand experience required and the behaviours necessary to deliver it.
* Create an operating framework for your people.
* Don`t forget the hygiene factors.
* Begin change management: Make the brand proposition deliverable, across the business.
* Use cultural inputs to understand behaviours.
* Raise competencies throughout the organisation.
* Align objectives and engage employees.
* Measure post-change employee attitude and behaviour.
* Recognise and reward people retention as you would customer retention.
If managing people is analogous to herding cats, then managing people AND customers and aligning their priorities must be on par with herding cats while pushing a piece of string uphill!
Yet, without this effort, the promise of customer management may remain unfulfilled. The topic is so huge that it merits further investigation. If you would like to discuss it, feel free to contact me on dougl@knowledgefactory.co.za or (011) 445-8100.
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