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December 2007

November 2007

There, but for the grace…!

Her Majesty’s Revenue, Customs & Excise managing to 'lose' the records of 25 million taxpayers has to be a record for 'customer' disservice. But is it a once-off or was the government just unfortunate in being the first high-profile manifestation of the consequences of over-zealous cost-cutting?

All cost-cutting entails a risk that, if too deep, the cuts will adversely affect the organisation’s capabilities and hence its performance. The risk is greatest when it comes to reducing people numbers, when all-too-often – the danger of losing unique elements of knowledge is not fully appreciated or understood. For this reason, cost cutting should never be undertaken for its own sake, but should rather be the inevitable consequence of improved performance that results from continuous improvement initiatives. Some might argue that this is always the case, but I know from personal experience that just isn’t true.

The fact is that the increasingly competitive market has turned cost-cutting into an inverted arm’s race, where cost reduction has become a treadmill for executives keen to show their management ‘fitness’. Unfortunately, this mindset has important side-effects on the people who work in the organisation, often with unforeseen and unintended consequences. 

Invariably cost cutting initiatives entail some job losses, and, even if these are delivered through 'natural attrition' rather than enforced redundancies, the prevailing culture becomes one of fear. Steve Jobs said, “The only way to do great work is to love what you do” and it isn’t possible to love what you do if you are fearful. You cannot be happy in your work if you are afraid, and if you cannot be happy in your work, you cannot love it.

Consequently, in such an environment people either become reluctant to show initiative, or else try too hard to prove themselves. If the former, they will not move out of their comfort zone or do anything they have not been trained to do or that is not in their 'job description' – something that is increasingly likely if the people who did it previously are no longer around. If the latter, they may well attempt something that they shouldn’t. So the risks of omission and commission, which could have a serious impact on the long-term sustainability of the organisation, both increase.   

In such an environment it is highly likely, almost inevitable, that someone, at some stage, will fall into such a trap and the organisation pay the price accordingly. To date, however, the instances where this has happened appear few and far between, and the consequences have not been particularly calamitous. Whether this is due to an ability to disguise the cause, or through good fortune or effective risk management is an open question.

This cost-cutting mindset, however, has clearly, perhaps inevitably, also spread to the public sector. Unfortunately, the civil service is not a pressured environment, or, as this instance clearly shows, one in which risk management flourishes and, as a result, the risks here are even greater and the consequences more extreme.

Yet, it does not matter whether the organisation is in the private or public sector, the consequences for the people are equally devastating. There is an immediate outcry, derision for the organisation involved, the stigma of association, a climate of suspicion and a witch-hunt for the people responsible. All this makes it an even less pleasant place in which to work and compounds the problem, and increases the risk.   

Not only is cost-cutting strategy very much a relic of the 'command-and-control' management era, but clearly one any executive team should approach with extreme caution. 

Pursuing " 'Killer' Service"

“Good customer experience can insulate businesses from the effects of competition on their margins.” (John Hughes: Director of Awards Management)      

It was no credit to me that my piece on “Killer Service” last week coincided with a  complete section on Customer Experience in the Sunday Times (11th November), for I only discovered it afterwards. Thus it was with some trepidation that I started to read it. As it happened I need not have worried, for it was little more than a celebration of the various winners of the UK Customer Experience Awards 2007, renamed after 13 years as the Service Excellence Awards. The change in name is clearly a move in the right direction, recognising as it does that competition is about the total customer experience, not just the way customers are treated by sales people, and hence involves the entire organisation. Even so, without in any way disparaging the winners or their achievements, I found it actually made rather depressing reading.

While one headline claimed the awards “are a celebration of superb service,” a closer reading certainly raises questions. For starters the word superb is subjective, and lacks any quantitative or qualitative meaning, and doubts are further fuelled by a comment that, “It’s worrying that for many companies the drive to improve has levelled out in the past three or four years.” These misgivings were not helped when a few lines further on I read that the awards, “this year attracted more than 350 entries” - across 6 categories! Excuse me, 350 entries!! That’s hardly X-Factor stakes and is hardly a significant number in the total field of UK businesses. It is only 1.2% of the 30,000 businesses that adopt the Investors in People (IIP) standard, and which IIP claims employ 27% of the UK workforce. Since IIP generally tends to be adopted more by the larger employers it would therefore be extremely conservative to say that there must be more than 120,000 businesses in the UK. But, if we take that number as a given, then 350 represents only 0.3% of the total population: a paltry proportion - and, if representative of the general interest in the customer experience of UK business, a figure that is truly depressing.

So, what does an organisation have to do to win an award? Simply, according to another item, to, “deliver on all fronts to profitably win, satisfy and retain customers better than the competition.” But who are the competition – the other entrants? Not quite, for the article goes on; “All entrants receive a comprehensive benchmarking report detailing their performance, described by some as the best £195 consulting fee ever spent. The report, drawn from a database of more than 1,500 award entrants, not only sets outs the company’s strengths and weaknesses, but provides insights into improving customer service.” Aha, the competition would thus appear to be the other 350 competitors plus all the competitors from the previous 13 years, which, as we saw earlier, was when the awards were simply the Service Excellences Awards, when the benchmarking was, or ought to have been, less comprehensive. So, unless the benchmarks are being constantly updated and using measures from businesses that are truly world class, something which these reports would indicate is not being done, the criteria for these awards may be of dubious merit.

All this is extremely disappointing, for the awards are clearly well-intentioned, and, as another article pointed out, “The product or service innovations of today quickly become commodities. … The thing you can’t copy is the thing that will give you a competitive edge and that is the history and relationships you have with your client.” Yet, while the reports all identify the specific actions that winners have taken to differentiate themselves, and one report even spells out the 10 lessons needed “to keep the customer satisfied,” the fact remains that there is little in the supplement in the way of new ideas, and nothing that is going to radically change the way business improves its “customer experience.” Indeed, the very headline retains the now outdated concept of “satisfied customers,” rather than reinforcing the fact that customer experience is about considerably more than a merely satisfied customer.

Yet all is not lost, for buried in amongst the 10, lesson 3 states, “Trust in your people. It is your people that deliver great service. The service winners all give their staff as much freedom, choice and opportunity as possible.” 

The fact is, as Hal Rosenbluth proved “a company is only as good as its people” and thus if you aspire to ‘killer service’ you have to put your people first. The three most important elements of a superior customer experience are: People; People; People. 

Do You Offer "'Killer' Service"?

Of course you cannot answer that question without knowing the definition of “killer”, which in any case is one of those subjective, non-quantifiable and hence basically meaningless terms.      

In any case, this is actually a trick question, because every business offers ‘killer’ service – for the service provided either kills the competition (the desirable outcome), or it kills business (the unintended outcome.) Henry Ford said, "The only foundation of real business is service." The fact is, if you provide a poor service your customers won’t love you, but your competitors will. So to be more accurate the question should actually be, “What kind of ‘killer’ service are you offering?”

Well, are you offering ‘murderous’ service that, at least presents a challenge and, at best, offers a 'WOW!' customer experience that really poses a threat to your competitors? Or are you offering ‘suicidal’ service that, without radical change, at best makes it difficult to thrive, or, at worst, makes it impossible to survive?

Given that the choice is clearly between a right answer and a wrong one, I am sure the majority of managers will claim that they are offering ‘murderous’ service or, if they are more honest, will say that they are working hard to deliver such service.

The fact is that outstanding service today remains very much the exception rather than the norm, and many businesses survive only because the long-suffering consumer has become inured to poor service, and is too fatigued and brow-beaten to expect anything better, or to do anything about it.

Unfortunately this is a situation that doesn’t look like getting any better in the near future.  As reported in my last blog (“The Great Management Paradox”) the recently published Towers-Perrin 2007 Global Workforce Study, reveals that only 21% of the world’s workforce are ‘engaged’ in their work. How can any organisation expect to offer exemplary customer service if 79% of its employees are not sufficiently engaged to commit their time, energy, creativity and knowledge to make the effort? 

Given these statistics it could even be argued that by far the largest majority of businesses actually fit into the ‘suicidal’ category. Or they would if service wasn’t universally so poor. This lack of employee engagement is so pervasive that it is actually protecting business from its consequences.

It was Warren Harding who said, “Service is the supreme commitment of life.” While he was most likely referring to public service, there is an underlying truth to the statement which gives it a wider application and makes it relevant to all service. This means it is impossible to expect service standards to improve unless a way can be found to secure employee engagement: to make people more involved and committed.

While the sheer pervasiveness of the lack of employee engagement is levelling the playing field and preventing individual businesses going to the wall as a result, the economic costs are astronomic. Recent research by Proudfoot Consulting estimates that the cost to the UK economy is £80 billion or 7% of the GDP. While it is clear that this is not just a UK problem, in a global economy this kind of drain is one that no country can afford. Nor, at the individual company level, is it one that any self-respecting management team can tolerate.

So to return to the original, revised question, you need to be more aware of the intrinsic nature of your service offering and which category of ‘killer’ service you are truly promoting. And, if you are serious about trying to deliver ‘murderous’ service, you will need to recognise it is only possible with committed people, and consequently make people management your number one priority. It is clear that any business able to solve this problem and engage its employees is going to gain a massive competitive advantage, with enormous economic and commercial benefit. Alternatively, one that does not will risk being slaughtered by the competitor who does. Can you really afford not to explore how the Zealise approach could help in this regard? 

The Great Management Paradox - Solved

One of the greatest ironies of current, early 21st Century management seems to be that, at the very time management are recognising the value of their people and their contribution to organisational success – and so are increasingly focused on introducing policies and procedures to win “hearts and minds” and engender greater employee loyalty – the more disengaged people appear to be becoming.   

The recently published Towers-Perrin 2007 Global Workforce Study, based on a survey of 90,000 workers in 18 countries and input from a database of more than 2 million people in 40 countries throughout the world, reveals that only 21% of the world’s workforce are ‘engaged’ in their work, when engagement means “freely giving their time, energy, creativity and knowledge to their work.” The survey also reveals that of the balance 41% are ‘enrolled’, (something colleagues and I used to refer to jokingly as “on the payroll but not at work”) 30% are ‘disenchanted’ and 8% ‘disengaged.’ Turn this around and it tells you that 79% (86% in the UK) of the organisation’s greatest asset and primary source of competitive advantage is not pulling its weight.

Yet this is at a time where management is more employee friendly and ‘liberal’ than at any time in history, increasingly focussed on the ‘soft skills’; aware of the need for ‘employer branding’ and endeavouring to create it by implementing policies that encourage ‘work-life balance’, offer flexible ‘cafeteria’ benefits, ‘home-working’ and ‘job-sharing’ etc.

This change is in fact the result of two very distinct, but mutually reinforcing forces. Firstly, the social advances of the past seventy years have resulted in a more democratised workforce that is more self-centred, less subordinate and so disinclined to tolerate being told what to do. Secondly the technological advances have increased the pace of operations to such an extent that the old ‘command and control’ style of management is no longer appropriate anyway.  Thus there would appear to be a natural convergence drawing the two together. So why is it not happening?

Ultimately, it boils down to a matter of trust. Although management is recognising this and doing its best to change, there is no instant mechanism for doing so, and thus – despite the best intentions – the greater inter-dependency of management and worker has still not been openly acknowledged: centuries-old mindsets continue to shape ingrained behaviours and attitudes and so perpetuate the historical conflicts and mistrust that exist between manager and worker. The workers still see manager’s role as to maximise efficiency and/or profits and that largely at their expense, and ultimately so too do managers. 

There is need for a whole new language to be developed to bring the two closer together to bridge this great divide. Let's see how this could be done.

In a recently published book, “Mobilizing Minds,” McKinsey executives Lowell Bryan and Claudia Joyce argue that “profit-per-employee should now be the key business metric.” Yet, while undoubtedly making the case that people are a business’ most important asset, this metric remains rooted in traditional management thinking and will perpetuate the very confrontation that we are talking about. For example, if a business is making a profit of £1 million with a workforce of 100, the profit-per employee would be £10,000. So, if management, were to reduce the workforce by 10% the profit-per-employee would now be £11,111. Consequently, this would perpetuate the worker perception that they are expendable, further reduce employee loyalty  and continue the traditional worker/manager conflict, which would be further reinforced and exacerbated if this was a KPI and management incentives were dependent on it.

On the other hand if workers were valued as assets, the KPI would be ‘Return on Human Assets.’ While ultimately no less meaningful or useful, this would engender greater co-operation between worker and manager, with both endeavouring to maximise the individual contribution.  Not only would this eradicate the centuries-old conflict but it would provide the catalyst needed to change the forces shaping behaviour. It would eliminate the paradox and build a basis for a more efficient organisation with happier, more engaged employees.