Are Your Employees Serving You or Your Customers?

February 15, 2010

I had an unfortunate service experience recently involving Boston Coach, or more specifically, a Boston Coach affiliate.  Boston Coach is a car service known for its national network of premium taxi services.  I get tremendous value out of the service when I travel for work, as I often end up in unfamiliar cities at unfortunate hours.  Knowing that there’s someone responsible for me on the other end, someone who’s accountable for my safety and knows exactly where I’m going, reduces my anxiety (and my family’s) in dramatic ways.

But things can go wrong, as they can in any service, and as they did for me with a recent Boston Coach airport pick-up.  As I stood waiting for my driver, watching the clock tick by and watching every other traveler trickle out of the building, I had plenty of time to reflect on the service failure.  The question I asked myself was whether this was bad design or bad execution, was the employee delivering ineffectively on a good service model or was the model itself broken? By the end of the encounter, more than an hour later, I concluded that it was service failure by design.  This is usually the answer.

Boston Coach has trained me to expect a driver holding a sign with my name on it when I arrive at the location they designate (typically baggage claim or a specified waiting area for car services).  When I arrived exhausted in the Corpus Christi airport, there was no sign of a driver.  I called the company, who put me on hold for ten minutes as they tried to track down the affiliate.  Another thirty minutes later someone pulled up, unconcerned about my experience and defensive about my frustration, which made the subsequent ride painful.  It turns out the driver had followed her company’s instructions to the letter, and the fact that those policies delayed, agitated and disoriented me was not her problem.  I don’t blame the driver for the poor service.  She was clearly motivated by doing her job right, but somehow her managers had made it clear that she serves the company before its customers.

This is a choice that all service organizations must make.  Who is first on your employees’ list of priorities?  You or you customers?  In the absence of a clear choice, most employees will put the company first.  It’s just human nature.  The company signs their checks every month and doles out status and other rewards most directly. An exception is models such as high-end restaurant or concierge services where customers pay a large percentage of employees’ compensation.

If you’re not running a five-star restaurant and you really want your team to put customers first (not every company does or should), then it requires very deliberate operational choice-making and alignment.  This includes creating a culture of service that puts customers at the center of organizational life.  If service excellence is part of your strategy, then your employees must observe no meaningful difference between doing their job right and serving customers well.  And they must have the tools to deliver on that observation.  Your average employee must have the training, support, flexibility and incentives to deliver an outstanding service experience.

If you’ve designed a model like that and are still delivering bad service, then go ahead, blame your people.  But they’re typically the last place I look when diagnosing service failures.  Most employees are like my driver in Corpus Christi, earnestly doing the right thing and making your customers miserable along the way.

POSTSCRIPT:

Below is the correspondence I received after the incident from Boston Coach headquarters.  In another post I’ll discuss what we’ve learned about responding to customer complaints.  For now, here is an illustration of what not to do:

I apologize for this inconvenience. I would like to offer you a voucher which would be good for $50 off of your next trip with BostonCoach. Please let me know if this is acceptable and I will email you the voucher as soon as possible.

2 Comments | Business, Customers, Employees, Leadership, Service | Tagged: , , , , , | Permalink
Posted by Frances Frei

IBM’s Turnaround: Taking Service Seriously

January 28, 2010

I recently discussed Google’s response to the service demands on its new Android phone.  Google has prided itself on excellence, but has come up short with the Android offering, where hands-on service is a critical part of getting it right.  As I wrote in that post, the phone needs a different kind of customer interaction than Google is used to delivering.  If Google continues to rely on its standard service model, it will continue to struggle.

There was an interesting parallel in the NYT’s recent description of IBM’s turnaround, which has been fueled by its pivot to high-end services.  Why has IBM succeeded where others have stumbled?  In part, it’s because IBM didn’t underestimate the challenge.  IBM managers realized how much change was required to play and win the services game.  That may sound simple, but the emotional barriers to service excellence can be enormous.  Said differently, acknowledging that you can’t deliver great service without some serious soul-searching can be as important as whatever happens next.

What did IBM do differently?  The short answer is everything.  The longer answer is that it took service seriously.  And then changed its products, pricing, processes, human resources, and customer interaction.  For example, instead of designing a product that it then sold into organizations, it learned how to uncover a client’s problem and develop solutions to that problem.  Fortunately for IBM, many of its clients had similar problems, which has permitted standardization across solutions.

IBM gets 80% of its revenues from services. Just a few years ago it was 50%, and not too long before that, services were essentially a hobby for the company.  IBM has demonstrated that it’s possible for a product company to play the service game, but pulling it off requires new attitudes about customer needs — and a deep humility about the road ahead.   When that kind of humility meets those kinds of attitudes, the outcome is happy customers. And when you throw standardization into the mix, now you have a service business.

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Posted by Frances Frei

Will Amazon Kill the Zappos Magic?

January 22, 2010

In a recent NYT interview Tony Hsieh (pronounced “shay”), CEO of Zappos, described his management priorities in this order:  culture first, service second.  This may come as a surprise to anyone who has first-hand experience with the Zappos service model, which consistently produces excellence at virtually every customer touch point.  I myself was surprised.  I’ve heard many executives talk about the need to align culture with service, but I’ve rarely heard someone describe culture as their organization’s primary purpose.

When pushed to explain what got him there, Hsieh reflected poignantly on a prior company he built and sold (for a great deal of money) that had a culture he and others hated.  He vowed never to let it happen again:

When it was starting out, when it was just 5 or 10 of us, it was like your typical dot-com. We were all really excited, working around the clock, sleeping under our desks, had no idea what day of the week it was. But we didn’t know any better and didn’t pay attention to company culture.

By the time we got to 100 people, even though we hired people with the right skill sets and experiences, I just dreaded getting out of bed in the morning…when I joined Zappos about a year later, I wanted to make sure that I didn’t make the same mistake…in terms of the company culture going downhill. So for us, at Zappos, we really view culture as our No. 1 priority. We decided that if we get the culture right, most of the stuff, like building a brand around delivering the very best customer service, will just take care of itself.

How do you “get the culture right?”  In Hsieh’s case, he and his team decided to live and die by a series of core values:

…we formalized the definition of our culture into 10 core values. We wanted to come up with committable core values, meaning that we would actually be willing to hire and fire people based on those values, regardless of their individual job performance. Given that criteria, it’s actually pretty tough to come up with core values.

I was particularly moved by his take on his own role in designing and protecting the Zappos culture, which involved a central responsibility to create an environment where other people will thrive:

Maybe an analogy is, if you think of the employees and culture as plants growing, I’m not trying to be the biggest plant for them to aspire to. I’m more trying to architect the greenhouse where they can all flourish and grow.

So what happens to the greenhouse once Amazon buys it? I wrestled with this question when I wrote about Zappos culture in a post last year, as I was getting ready to go on a case visit.  We wrote the case just as the Amazon purchase was going through (for just under a billion dollars).

Amazon has clearly indicated its respect for Zappos culture and its desire to leave the company alone to continue to deliver wold-class service.  My hope is that Amazon can resist the temptation that has tripped up so many other acquirers, the temptation to provide a bit too much help the moment the acquired misses its numbers, a tweak here, a tweak there, to improve its performance.  That kind of help can be a lethal blow to the true drivers of a company’s value.  In the case of Zappos, I’m not convinced its culture could survive this well-intentioned support.

1 Comment | Business, Culture, Employees, Leadership, Service | Tagged: , , , , , | Permalink
Posted by Frances Frei

Google’s Service Problem

January 15, 2010

The NYT recently described Google’s customer service supporting its new Android phone.  The article described how customers can’t call Google for help and that it may take up to 48 hours for the company to respond to email messages.  The article referenced one customer who has been trying for a week to talk to a live person. Still no luck getting through.

This article made the front page of the NYT business section because it’s a story about Google, not because it’s a particularly rare or surprising service phenomenon.  When a service model designed for one type of customer needs (e.g., using web-based adwords) is then used to serve an entirely different set of needs (e.g., after-sales service for a new type of phone), there is predictable turmoil.

The interesting part will be to watch how Google responds to the realization that it’s trying to meet wildly divergent service needs — what I call distinct operating segments — with a single operating model.  In my experience, the company has some choices to make if it wants to deliver excellent or even adequate service.  Option A is to serve one operating segment well and essentially ignore the other.  That’s not as bad as it sounds.  Southwest Airlines optimizes its service model for low-maintenance travelers. When high-maintenance travelers come along, it doesn’t turn them away, but it also doesn’t work very hard to accommodate them.  Southwest serves one segment with excellence and asks everyone else to adjust.  This is the definition of focused service.

Option B is to create a distinct service model for each operating segment.  If Southwest is an example of focused service, I call this approach multi-focused service.  To execute well on a multi-focused structure, Google must convince itself that multiple service models are better off under the same corporate roof.  I’ll talk about that more in later posts, but the key is shared services.  While shared services are often appealing at first glance, the model can be very difficult to pull off.  (Here’s a link to an HBR article where I touched on the concept of shared services briefly at the end.)

There are many examples of excellent organizations operating with either focused or multi-focused service models. But there are far more examples of organizations doing neither.  Instead, these organizations work hard not to disappoint either operating segment too much, which ensures a limit to the anger and outrage, but also ensures mediocrity.  It’s the path of least resistance because customers complain more about bad service than they do about the absence of excellence.  A hard truth about service is that you often have to disappoint some people in order to delight others.

The responses by two of Google’s employees seem to foreshadow the direction it’s taking:

Katie Watson, a Google spokeswoman, said no one was available to speak about the service problems. But in an e-mail statement, she said, “Solving customer support issues is extremely important to us.”

Andy Rubin, Google vice president for engineering in charge of Android technology, gave a similar response, indicating that its challenge was to reduce its email response time from days to a couple of hours.  These statements suggest that Google’s still committed to using its existing service model to serve an entirely new operating segment.  I’m hopeful that abandoning this fantasy is an outcome of these initial service difficulties.

Leave a Comment » | Business, Customers, Leadership, Performance Management, Service | Tagged: , , , , , , , , | Permalink
Posted by Frances Frei

The DARPA Challenge: Motivating a Network to Act

December 3, 2009

DARPA, the government agency, is sponsoring a challenge on Saturday to test the ability of social networks to mobilize and complete a common task. The group is placing ten giant red weather balloons around the country (tied down near the ground in random locations) on Saturday. They are offering $40,000 to the individual or team that can correctly submit the locations of all ten balloons. The balloons will only be visible during daylight hours on Saturday and they will be visible from publicly accessible locations, such as roads.

Some of my students have formed a team to participate in this contest.  If they win, they will donate the proceeds to charity.  The  team is looking for help in tracking down the balloons on Saturday.  If you see a balloon and are interested in being helpful to them, you can find all of the details on their website.

3 Comments | Education | Tagged: , , | Permalink
Posted by Frances Frei

The Patient Has a Soul

November 25, 2009

The title is from the opening pages of the Cleveland Clinic’s Annual Report, which quotes Dr. Rene Favaloro:  ”the patient is not only an illness, he has a soul.”  I came across the quote as I watched my colleague, Ananth Raman, teach a class in our Achieving Breakthrough Service executive education program at HBS.  Ananth took the class through an incredible discussion of why a healthcare provider would need to remind employees that a patient has a soul.  His larger point was that we can get so lost in the quest for operational excellence that we lose sight of the humanity of the people we’re serving.

Ananth titled his talk “Empathy and Execution.”  One of the reasons it resonated so deeply with me is that it intersects with what I’ve been stressing in my work with executives, which is the need to set high standards for their people, but to do so with high empathy.  Getting one right with out the other is much easier than getting both right, as I explored in a previous post.

Ananth convinced me that this frame is important for customers, too.  In fact, I’m increasingly persuaded that one of the secrets to healthy organizations is a culture of compassion and excellence around all human interactions.  These values benefit everyone in the system — managers, staff, suppliers, investors and, yes, customers. I’m finding they work for my toddler, too.

1 Comment | Business, Employees, Leadership, Service | Tagged: , , , , , | Permalink
Posted by Frances Frei

Culture Change at GM: Declaring it Doesn’t Make it So

October 9, 2009

The NYT reported that the board of GM wanted the culture of the organization to change:

In the interim, Mr. Henderson stressed that G.M.’s new board was pushing management to speed up decisions on new products and install a culture devoted to pleasing customers.

I’m not optimistic. The first red flag is the title of the article, G.M. Is Adapting to a New Culture, Chief Says.  In my experience, culture doesn’t change upon decree from the top.  Culture exists because of years of reinforcing norms and behaviors.  It exists because smart people constantly pick up on how status is gained and which behaviors are valued in practice (not in the introduction to the annual report). Changing culture requires unraveling and replacing that normative system in a comprehensive way.  The analogy that always comes to mind is clearing a patch of land to be farmed. You can’t just cut down the trees and declare victory. You have to get your hands dirty beneath the surface, digging up roots and turning over the soil.

In other words, you have to address the underlying conditions that allowed certain behaviors to thrive in the organization. Where to begin?  I suggest starting with my favorite question, now familiar to our readers:  why would reasonable, well-intentioned people do what they’re doing?  Once you can answer this question with an open heart, once you can identify the organizational drivers of the actions and choices you want to change, then you can begin to influence them.

Maybe the article got it wrong, but if it’s even close to correct, the 90 days allocated to this activity at GM will be wildly insufficient.

1 Comment | Business, Culture, Leadership | Tagged: , , , , , , | Permalink
Posted by Frances Frei

Illusions of Customer Loyalty

October 3, 2009

As I read a WSJ article on the European grocer Asda’s new customer loyalty program, I was impressed to be learning about an actual loyalty program.   Most organizations create customer retention programs and then mistakenly call them loyalty programs.  This wouldn’t be a big deal, except that a mislabeled loyalty program can prevent a company from creating a real one.

Let me explain.  When companies pay customers to try out their products and services, it’s part of a customer acquisition program.  When companies pay customers to remain customers, it’s part of a customer retention program.  When companies invest in activities that increase customers’ willingness to pay, they have a customer loyalty program.  When a loyalty program works, it increases the chance that your customers will choose you over a lower-priced competitor.

European grocers have been touting their “loyalty” cards for years, with Tesco claiming the largest one.  These are effectively retention programs, where customers earn future discounts based on their current purchase behavior.  Companies like Tesco are bribing their customers to remain customers.  This is a classic retention tactic.

I was struck by the following quote in the article, which revealed that Asda might really be going after a loyalty and not retention program:

Making a dig at rivals’ customer-loyalty programs, Asda Chief Executive and President Andy Bond said he thought customer loyalty couldn’t be bought with plastic points or discount vouchers.

Asda is experimenting with a very different set of activities then its competitors.  Instead of offering discounts, it’s involving its loyal customers in strategic decisions such as which products to offer and how they should be arranged in the store.  Some customers will be given early access to products so that their opinions will have more influence.  Good customers will effectively earn the right to be a part of the company’s choice-making process. They will earn the right to co-create the value they eventually consume.

I’m intrigued by this idea because of the shared benefits of greater customer involvement — Asda’s customers make the service better, and become more devoted to the brand along the way.  Everybody wins.  And if customers turn out to be very helpful, Asda will compensate them accordingly:

…starting early next year, Asda also will reward customers who come up with the “brightest idea” that saves the business money. If the suggestion is implemented and saves Asda £2 million, a customer could be in line to receive a check for £100,000, or 5% of the first year’s saving.

Again, that line between customers and employees blurs.

3 Comments | Business, Customers, Service | Tagged: , , , , | Permalink
Posted by Frances Frei

Upside Down Operations: Self-Service Can Increase Labor Costs

September 29, 2009

A “self-service” play almost always has a strong cost component.  The model’s logic is that if your customers are doing more of the work, then your employees can do less of it — and can be paid less for it.    Of course, firms look for additional advantages to customers meeting their own needs such as increased retention, but the desire to drive down costs anchors most of these initiatives.  (For a dated look at these type of motivations, see this link.)

I want to share a recent research finding that upends this logic in surprising ways.  Dennis Campbell and I studied what happened to customers after they adopted online banking services, which are essentially designed to drive people away from retail branches that are costly to build, maintain and staff.   The web’s promise of low-cost, scalable self-service business models seemed like a reasonable direction for the banking industry, and so we studied the option to measure just how much companies could save.  We were then shocked to discover that the cost to serve these customers increased after they moved online.

As we investigated this phenomenon, we uncovered something interesting.  When customers move online, they become more engaged with their financial information.  They can suddenly spend hours examining each transaction, and no one is line behind them to hurry them along.  This new consumer behavior, on its own, is not problematic for the banks.  But the  heightened level of engagement can also drive customers to consume more full-service resources from the bank.  Customers now call more.  They have more to say and more to inquire about.  They even visit branches more often.

In other words, an unintended outcome of self-service is increased engagement, and a predictable outcome of increased engagement is the desire to engage even more.  The lesson I take from this research is that managers must anticipate the potential impact of self-service on their customers’ engagement.  If it seems likely that engagement will increase, make sure that the goals of a self-service model go beyond potentially elusive cost savings.  Make sure that improved service is a central part of your agenda.  Indeed, make sure that the project will be considered a success even if costs go up.

Who should pay attention to these findings?  New self-service options that make customer information more accessible are ripe for this dynamic.  Think online health records, not pumping your own gas.

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Posted by Frances Frei

Non-Verbal Leadership

September 22, 2009

In a recent article in the NYTimes, Linda Hudson described her first day on her job after being promoted to president at General Dynamics:

… I went out and bought my new fancy suits to wear to work and so on. And I’m at work on my very first day, and a lady at Nordstrom’s had showed me how to tie a scarf in a very unusual kind of way for my new suit. And I go to work and wear my suit, and I have my first day at work. And then I come back to work the next day, and I run into no fewer than a dozen women in the organization who have on scarves tied exactly like mine.

Hudson’s scarf is a great metaphor for the power of non-verbal leadership. Language matters in leadership, of course, but non-verbal leadership — the signals that leaders throw off in their actions and body language — can speak as loud, if not louder than those carefully-chosen words.  This phenomenon can be an enormous opportunity, as long as you understand and harness it.  Ms. Hudson got it immediately:

And that’s when I realized that life was never going to be the way it had been before, that people were watching everything I did. And it wasn’t just going to be about how I dressed. It was about my behavior, the example I set, the tone I set, the way I carried myself, how confident I was — all those kinds of things. It really was now about me and the context of setting the tone for the organization.

I try to focus my students on the non-verbal influence they have on their peers in the classroom, influence that they will eventually have on organizations. This is counter-intuitive in the beginning.  Students often think they’re only being evaluated on the two minutes they may contribute to a conversation in any given class, but I try to explain that the other 78 minutes matter just as much.  Our goal is to get as much out of the discussion as we can as a group, which means everyone needs to work hard when they’re not speaking, too.  It turns out that the body language of one student can have an incredible effect — positive or negative — on other students.

As a simple example, imagine the quality of participation when Student A speaks and Student B is leaning forward and listening carefully.  Not only is Student A much more likely to deliver on the high expectations of Student B in that moment, not only is she much more likely to step up and share something brilliant with her audience of believers, but she’s also more likely to stay focused on the collective learning of the group.  Student B’s eagerness to learn from Student A shuts down the possibility of narrow, self-promotional exchanges that can sometimes creep into the dynamics between students and teachers.  Student A can no longer just talk to me, the evaluator.  She must respond to Student B’s non-verbal invitation to help him improve.  Now consider the quality when Student B is barely listening, or appears bored or dismissive.  Why should Student A bother to do anything but think about herself?

In my experience, the classroom is a microcosm for organizational dynamics. It’s a laboratory for learning how our  choices influence others in the structure of a group.  As I’m reminded every day when I step into that laboratory, our non-verbal choices are a powerful tool for creating the conditions for others to thrive.  The next time you are in a conversation, take note of how the body language of listeners affects the speaker.  If you accept the premise that our job is to bring the best out of the speaker, then we need to learn how to lead non-verbally.  The first step is understanding that we’re accountable for it.

Leave a Comment » | Business, Culture, Employees, Leadership | Tagged: , , , | Permalink
Posted by Frances Frei

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