This is the second article in a three-part series on organizational obstacles that prevent companies from becoming truly customer-focused. The first article addressed factors relating to employee management. This article identifies key outcomes that lead to business success. The third piece in the series will address how best to align your company to create customer engagement.
Once a company has identified and removed all employee-related roadblocks to creating customer engagement, here's the next task: Focus the organization on the right performance outcomes.
Bluntly put, if your company isn't totally committed to delivering specific value to customers, nothing else matters. This is true no matter how strong your human capital is, how well-intentioned your initiatives are, or how many resources you dedicate to customer engagement.
Here are some of the common roadblocks to establishing customer focus and the right performance outcomes.
Roadblock one: Rewarding the wrong behavior
It's pretty simple: People do what they're rewarded to do. But choosing the right behaviors to reward isn't always straightforward. For example, how much emphasis should companies place on keeping existing business versus adding new volume? Should managers or workgroups be rewarded if cutting costs yields short-term savings but hurts long-term relationships? Should a service rep always try to sell additional products even if a customer clearly isn't interested, and perhaps jeopardize future business?
These are complicated questions; there are no easy answers. Usually, the solution is found in establishing a healthy balance. Companies focus their strategies and decisions on optimizing costs, growth, and retention -- and performance measurement and compensation systems should mirror that equilibrium.
Finding the right measurements is a crucial first step. For example, if a company's key business outcomes are retention, sales, and cost savings, then performance measurements for individual service reps should accurately factor in those three service dimensions. These measurements should align with the company's overall performance measurements, too. Managers and employees should be evaluated on a balanced set of performance outcomes, and the same outcomes should drive their compensation.
Unfortunately, most companies don't do a good job of balancing the ways they measure, evaluate, and reward their managers and employees. Most sales reps, for example, cash in when they meet financial goals, not when they generate customer loyalty or engagement.
A "balanced scorecard" is a popular approach to ensuring that the right set of metrics are used to measure and reward performance; if designed and executed well, it's one of the most effective ways to focus employees' performance. But the devil is in the details, and few companies really get this right.
Recently, a quick-service restaurant chain implemented a set of balanced-scorecard metrics. On the surface, this represented a significant improvement from their previous focus on financial performance. But three problems quickly developed.
First, some managers and employees were "gaming" the system. Supervisors, instead of their new employees, were completing training and certification tests. And once employees became experts at spotting the mystery shopper's car in the parking lot, the dining experience suddenly became much more customer-focused.
Second, some of the new metrics rewarded the wrong behaviors. Quick-service restaurants typically face high levels of employee turnover, so it's common practice to hold store-level and district managers accountable for it. That measurement works well, except when managers have the wrong employees in the store to begin with. Managers with miscast employees have no incentive to fire their worst performers and replace them with better ones because in doing so, they lose part of their bonus.
Third, the range in performance didn't translate into much of a range in pay. Compensating top performers significantly more than those at the bottom is key to creating a performance-oriented culture. It requires the right set of metrics, effectively tied to pay and accountability.
Identifying the right outcomes and measurements for employees, managers, and the company is tough, but it is crucial to its success. A well-balanced performance scorecard often contains metrics of employee engagement, customer engagement, and financial and operational performance. Your company's outcomes should align with its long-term vision. This means the performance scorecard should start with the customers -- and how your company creates value for them.
Roadblock two: When short-term becomes short-sighted
Balancing long-term performance and short-term gains is crucial to finding the right mix of performance metrics. For publicly traded companies, meeting analysts' quarterly earnings expectations is of paramount importance. As economic times get tougher, it's tempting to improve earnings with short-term solutions. However, "quick fixes" can create long-term problems. For instance, a company that installs an automated phone-answering system to handle customer calls may reduce headcount -- but it gains nothing if the loss of human contact drives away customers.
A large retailer recently installed self-service checkouts in several of its stores. To make sure customers are using the system correctly -- and not stealing merchandise -- the system "freezes" if anything is placed back in the shopping cart or removed from the bagging area before checkout is complete. An employee moves from customer to customer to monitor transactions and enforce this rule. Some shoppers like the added convenience. But several complain that they're made to feel like criminals and insist they'll shop elsewhere in the future.
Automated phone message or Interactive Voice Response (IVR) systems are also good examples of systems that can benefit or alienate customers. Some IVR systems make it easy for customers to get quick answers to frequently asked questions. Or callers can connect to a service rep if that's the easiest way to get their questions answered. But other systems make locating a live service rep about as simple as solving a Rubik's Cube®. It's as if some companies actively avoid talking with customers.
Finding the right balance between cost efficiencies and ongoing customer engagement is difficult. That said, all too often, companies don't even consider projecting a potential loss in long-term business as an offsetting factor against cost savings. Including the customer viewpoint and behavior in these types of decisions can help companies avoid being penny-wise and pound-foolish.
Roadblock three: Forgetting that customers are real people
When is a customer not a customer? When a company considers him or her a "usage occasion" rather than a person. Too many companies assume that a heavy user will always be a heavy user. That's like saying that someone who eats healthy foods will never eat a hot fudge sundae. Too many segmentation schemes and "best customer" models assume that segments are fixed and permanent, rather than fluid. One large manufacturing company, for example, revamped its segmentation scheme three times in three years because the defined segments were not "stable" or "actionable."
In reality, customer needs change over time, and many customers move freely among segments. Some categories, such as automobiles, have customer needs that change more slowly as consumers' lifestyles evolve. Other customer segments change from occasion to occasion; examples are choosing a restaurant or deciding which movie to see.
Too often, however, companies structure their entire marketing programs around the assumption that a customer who buys product X will always buy product X and will never change that behavior. As a result, they pigeonhole their customers into segments, reducing relationships to mere transactions. It would be far better to engage customers based on their individual needs.
For example, many companies develop rigid scripts for service reps based on past buyer behavior. This approach will backfire, of course, if the customers' present needs aren't quite the same as they've been in the past. A more effective approach is to examine customer behavior for general patterns. Then, help service reps understand what approaches have worked with customers before -- while giving them the flexibility to listen to, and meet, a customer's current needs. Meeting the customer's need is the outcome.
If these roadblocks exist within an organization, then engagement initiatives will likely fail -- and it won't matter if those initiatives have top management support, quality metrics, or relentless training.