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Business Journal

HumanSigma Rule #3

The employee-customer encounter must be measured and managed locally

by Bryant Ott

Decades of research on managing the human element of business -- including interviews with more than 10 million customers and 10 million employees -- can be boiled down to the "Five New Rules of HumanSigma Management." These five rules suggest a new approach for getting the most out of those moments when your employees encounter your customers.

So say John H. Fleming and Jim Asplund, authors of Human Sigma: Managing the Employee-Customer Encounter. Their book details some of the ways the world's best performing organizations measure, manage, and improve the points of contact between their employees and their customers to drive dynamic financial performance. In this article, the third in a series about the five rules, we explore Rule 3: You must measure and manage the employee-customer encounter at the local level.

Order the Human Sigma bookAt best, the current economy is sending out vexingly mixed signals. Subtle improvements in consumer confidence measures clash with recent Gallup indexes indicating lower levels of consumer spending and continued mixed perceptions about job creation. As Gallup Chief Economist Dennis Jacobe commented, the continued tension between consumer spending habits and confidence may reflect the "new normal."

In a time when companies and organizations in every industry are trying to keep their current customers and attract new ones, leaders can be hard pressed to know where to focus their attention. With consumers spending less and wanting more value for their purchases, organizations can be stretched thin when competing on traditional marketing standbys such as price, product, and promotion.

As branding expert William J. McEwen noted in a recent Gallup Management Journal article, companies would be well served to go beyond competing for customers based on functional attributes; they should also seek to satisfy the emotional requirements essential to developing and nurturing engaged customer relationships. "In the 'new normal,' a few things seem clear. The consumer is now in charge. And the consumer will continue to have emotional needs as well as functional requirements," writes McEwen. "The companies that recognize this and act accordingly will be the ones that will prosper."

Gallup research has shown that the employee-customer encounter is fundamentally emotional. And in Human Sigma, Fleming and Asplund describe why companies need to improve their understanding of how the emotional economy works before they can achieve substantial, sustainable improvement in their financial performance.

Once organizations know what emotional encounters look like between their employees and customers, how can they measure and manage what happens at each customer touchpoint? The answer can be found by exploring HumanSigma Rule 3: The employee-customer encounter must be measured and managed locally. Or, in the words of renowned microbiologist Rene Dubos, "Think globally, act locally."

The Five New Rules of HumanSigma Management

Eliminating variation

Just as Dubos' philosophy suggests -- and as Gallup's HumanSigma science supports -- a business can achieve consistent performance improvement and sustainable growth when it focuses its attention and energy on managing the employee-customer interactions at the local level. Most employee-customer encounters don't occur in the board room. They occur on the front line. So they should be studied and managed where customer interactions occur and where the customer experience is created.

Most employee-customer encounters don't occur in the board room. They occur on the front line.

It's surprising and unfortunate how few business leaders manage this way. Fleming and Asplund note that without a concerted effort to research and improve on the employee-customer encounter at a company's actual customer touchpoints, variation in the quality of those interactions "remains large and mostly undetected, bleeding off revenues and profits and resulting in anemic growth."

The key to solving this problem is acknowledging that your business is wrought with variation problems that cause an inconsistent customer experience. And performance -- including the ability to create an engaging customer experience -- varies vastly within organizations. "In one regional grocery store chain, for example, the best-performing store regularly engaged 38% of its customers while the worst location engaged just 2% of its shoppers," says Fleming. Interestingly, these two stores are just 10 miles apart. "This kind of engagement variability emerged even though the stores carried essentially the same products at the same prices under the same marketing campaigns," Fleming says.

Gallup's HumanSigma science identifies the measurements that matter most to providing a consistent customer experience -- employee and customer engagement levels. Once your organization understands its employees' engagement with your company and your customers' emotional attachment to your employees at the closest point of contact in the employee-customer encounter, you can develop and implement management strategies aimed at improving these encounters.

For one retail bank, the customer engagement survey data revealed that a key customer issue was "being easy to do business with." As each team within the organization wrestled with what customers meant by that, Fleming and Asplund found that the solutions to the same opportunity -- being easy to do business with -- actually differed from location to location. "One unit discovered the solution was having appropriate staff available to answer questions. Another unit defined it as simplifying the paperwork necessary to open an account. It was the same revealed opportunity, but with different local solutions," Fleming says.

In the current economic climate, consumers are being cautious when deciding where to spend their hard-earned cash -- and Gallup's polls suggest they will remain that way for the foreseeable future. The organizations that will garner most of that money will be "characterized by not only the high quality of their offerings, but also by how consistently they deliver that quality time after time from location to location," Fleming says. Creating this kind of consistency requires providing customer engagement and performance feedback to employees at the level where employees interact with customers. But, Fleming points out, achieving this consistency may also require senior executives to be held accountable not just for overall customer engagement but also for variation in engagement at the local level.

Consistency and sameness aren't the same

Don't confuse the struggle for consistency with what should be the true key effort for managing variation in the customer-employee encounter: giving managers the autonomy to implement an organization's practices in the most effective way possible for meeting customers' needs. Managers and employees need the freedom to respond to customers in ways that provide the greatest opportunity for an emotionally engaging encounter.

"The most powerful approaches to reducing local performance variability often are also the most simple and flexible, allowing each unit to identify and correct the causes for customer disengagement," Fleming says. This, however, presents a paradox: How do companies foster consistency in engaging customers while allowing local teams autonomy to develop their own solutions and strategies to improve engagement?

Fleming says the key is distinguishing between "consistency" and "sameness." "Sameness of service" emphasizes adherence to a narrow set of scripted behaviors, but "consistency of service" emphasizes the ultimate outcomes organizations want to create for their customers, Fleming says. For example, he notes that the world's five-star restaurants might serve distinct cuisines, be found in different locations, offer unique ambiance, and appeal to people at particular price points. Regardless of these differences, these top restaurants achieve an exceptional customer experience because they focus intently on serving and engaging their valued customers.

It might be too early to tell whether the "new normal" is just that, but organizations that focus on measuring and managing their customer-employee encounters at the local level can go a long way toward improving their company's financial performance, whatever troublesome and often contradictory twists and turns the economy may take.

Bryant Ott is a writer and editor at Gallup.

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