Internal networks for internal marketing

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Internal networks for internal marketingDavid Ballantyne aa Department of Marketing , Monash University , Melbourne, AustraliaPublished online: 06 May 2010.

To cite this article: David Ballantyne (1997) Internal networks for internal marketing, Journal of Marketing Management, 13:5,343-366, DOI: 10.1080/0267257X.1997.9964479

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Journal of Marketing Management, 1997, 13, 343-366

Internal Networks forInternal Marketing

David Ballantyne

Department of Marketing,Monash University,Melbourne, Australia This paper is a report on a longitudinal case study of internal

marketing as a relationship development process. The activity isobserved and interpreted as a relationship development process in alarge retail bank. Dominant modes emerge which are described asenergising, code breaking and border crossing. These activitiesare seen to be facilitated by the sharing of knowledge through anetwork of voluntary internal staff relationships. The characteristics ofinternal networks for internal marketing are then examined. Thisshows both the strength and the vulnerability of internal networkorganisation to other legitimate agendas within the hostorganisation.

Introduction

This paper is a report on a single longitudinal case study of internal marketing, anorganisational activity which is said to improve external market performance.

The research which is the basis for this report covered a business time frame from1986 to 1991. This was the developmental period for internal marketing and theinternal marketing networks that emerged in the Australian branch banking sectorat ANZ Bank. The stated goal was to put the "Customer First", and this orientationwas pursued through a major commitment by top management to a customerservice improvement program. ANZ is one of Australia's largest and oldest banks,one of the so-called "big four".

In 1986,1 was a career banker at ANZ Bank when the new Customer First strategicinitiative was approved at Board level. I was appointed to a new customer servicedepartment, set up to handle the internal change process. I was promoted to head ofthe department in 1987, and held the position of "customer service executive" untiltaking leave of absence in 1989 to take up a position at Cranfield School ofManagement, UK. In 1992,1 returned to Australia and obtained a Monash Universityappointment in the Department of Marketing.

Academic researchers seldom have opportunities for getting close to the detailedcomplexities of implementing marketing strategies and plans as internal agents ofchange, much less a major realignment of direction, such as the ANZ Customer Firstprogram. Likewise, staff working in companies undergoing realignment ofdirection, where organisational behaviour is challenged to match customerrequirements, seldom have opportunity to reflect and interpret their workingexperience within the discipline of formal scientific research methods.

My roles as internal change agent and, later, as academic researcher, present aunique opportunity in relation to this case to open up an under-explored topic whichis of growing importance to both business management and marketing academics.Given that customer orientation is the presumed starting point for effectivemarketing action, it is a matter of concern mat the marketing management literature

0267-257X/97/050343 + 24 $12.00/0 ©1997 The Dryden Press

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344 David Ballantyne

is short of empirically grounded explanations as to how this orientation might beachieved.

This research is intended to be a contribution to the deeper understanding ofinternal marketing, its relevance and its limits. The questions I will raise ininterpreting the case are these: How can the dynamics of internal marketing beunderstood? What is the role of internal networks in relation to internal marketingactivity?

The literature on customer service improvement and internal marketing is nowbriefly reviewed to establish the context for the case research.

Concepts for Customer Service Improvement

The quality of customer service, and the potential for improvement, is under reviewin the 1990s as a strategy for sustainable competitive advantage.

The naivety of the rush to customer care programmes in the 1980s has becomereadily apparent. There is more to improving service than improving the quality offront-line staff. Many service managers, through experiment and experience, nowrealise that reliable service at the customer interface depends on the quality of thesupport systems in place as well. What constitutes customer service performance isthe sum of the value creating processes for which staff are the coordinating agents andcustomers are the co-participants (Ballantyne et al. 1995).

There is also a current reappraisal of the total quality concept which has relevanceto this study. In the 1980s, internally based quality standards like "conformance torequirements" and "zero defects" were being offered to service businesses as apathway to reliability and cost saving (see, for example, Crosby 1979), even whenmore complex but clearly customer oriented approaches were also available(Deming 1982; Juran 1989). There have, of course, been many notable successes(Reichheld and Sasser 1990). However, when separated from a deeper assessment ofcustomer requirements, the total quality concept suffered. In achieving the status ofunexamined doctrine in many companies, it became a prescription for failure(Ballantyne et al. 1991).

Concern for customer service improvement came to the fore in logisticsmanagement in the 1990s. Logistics customer service is sensitive to availability ofsupply at short notice, with customers often operating within a just-in-time (JIT)philosophy as a manufacturing business, a retailer, or end user (Christopher 1994).A distinguishing feature of logistics organisation is that it cuts across the traditionalfunctions of a business. It is not surprising therefore to find that many logisticsmanagers have recently concentrated on reducing process cycle time, end to end, byeliminating "non-valued add" activities in what they see as an era of time-basedcompetition (Stalk and Hout 1990). This is a powerful point of review but insufficientfor fully understanding service delivery from the customer perspective.

An academic service quality research programme for service industries hasdeveloped over approximately the same period. This agenda is based on an externalview of quality, that is, customer perceived quality (Gronroos 1982; Parasuraman et al.1985). It has made many gains in knowledge but recently has become bogged downin methodological wrangles concerning the validity and generalisability of instru-

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Internal Networks for Internal Marketing 345

ments for monitoring external service quality and in attempting to make aconceptual distinction between service quality and customer satisfaction (fordiscussion on these issues, see Carman 1990; Cronin and Taylor 1992, 1994; Oliver1993; Liljander and Strandvik 1995).

These four agendas for customer service improvement are important. Thestrategic intent is quality in each case. Yet each, with hindsight, has tended to giveundue emphasis to its own essential group of activities to the exclusion of others,namely:

(1) the quality of staff (competency) in interaction with customers;(2) the quality of internal processes (reliability) in iterative work activities;(3) the quality of cycle time (responsiveness) in service delivery; and(4) the quality of customer information (market research) in dynamic

relationships.

Thus, it is not surprising that Gronroos (1993) calls for a new "third phase" ofservice quality research, which embraces both goods and services and recognises thedynamic or time-based interactive nature of what is being studied. It seems likely thatthe complex coordinative challenge that service and quality improvement poses forfirms may be better understood by such an approach. Also of relevance here is theconcept of relatiotiship marketing, which can provide a useful focus for bringingquality, customer service and marketing closer together (Christopher et ah 1991).

One additional problem has surfaced in practice. This is the generally poordiffusion of marketing ideas across the functional divisions of the firms, which inturn impacts negatively on market performance (Witcher 1990).

The interesting issue is whether this calls for more marketing department directauthority over the operational activities of the firm, acting across traditional internalborders. This would seem to present more problems than it would solve. To re-interpret McKenna's call to marketing action (1991), marketing is not everything (noteverything is or could be a functional marketing activity), but everything ismarketing (in the sense that organisational outputs are designed for and deliveredto the markets). Nevertheless, internal coordination of customer oriented actionremains problematic. If there is an internal marketing solution, how might it beunderstood?

Concepts for Internal Marketing

There is renewed interest in the marketing literature in the potential impact ofinternal marketing on external market place performance (Gronroos 1994; Ballantyneet al. 1995; Rafiq and Ahmed 1995).

In this field, there are the seminal papers by Gronroos (1981) and Berry (1981,1983). The first author emphasises internal communications and the need formotivated and customer conscious employees. The second author advocates treatingemployees as internal customers (an idea first tried in the 1950s by Japanese qualitymanagers) and adds a twist to the concept by treating employees' jobs as internalproducts. What underlies Berry's formulation is the principle of exchange, butexpressed with concern that a firm needs employees to be satisfied with their job

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products in order to have a well motivated work force and satisfied customers. Thisis a theme also emphasised by George (1977,1990) and many others.

These behavioural and managerial themes are also emphasised by Piercy andMorgan (1991). They recommend formulating marketing plans which apply external(4Ps) marketing techniques to internal (employee) markets. However, this wouldseem to give rise to some difficulty in practice, as the legitimate roles of otherfunctions overlap and may come into conflict if collaboration with other depart-ments is ignored.

Collins and Payne (1991) recognise the probability of managerial overlap in thepursuit of employee motivation and satisfaction. They make a case for the transferof marketing thinking to the HRM domain. The utility of deploying some HRMthinking in the marketing domain is not examined, yet this would also seem a usefulline of enquiry, especially those aspects of organisational behaviour relating tochange management.

The main lines of thought therefore emerging from the literature are that, first,internal marketing is an activity directed towards improving internal communica-tions and customer consciousness, and secondly, finding the internal motives toachieve this means emphasising the satisfaction of the internal customer. However,this leads to some reasonable doubts about the causal links between staff satisfactionand customer satisfaction, the adequacy of marketing's "tool box" methods, and thelegitimacy of the marketer acting unilaterally as an agent for change within internalmarkets.

In broadening the boundaries for internal marketing, Christopher et al. (1991)applied the term to any form of marketing within an organisation which focusesattention on the internal activities that need to be changed in order that marketingplans may be implemented. Ballantyne et al. (1995) have since re-focused this viewof the domain of enquiry with the following definition:

"Internal marketing is any form of marketing within anorganisation which focuses staff attention on the internalactivities that need to be changed in order to enhanceexternal market place performance."

Whether broadly or narrowly denned, there is little empirically based evidence inthe literature to suggest how internal marketing develops or motivates customerconscious employees, or contributes to external market performance. One notableexception is Gummesson (1987), who reports a case study of the preliminary stagesof a program of culture change which focused on improving the effectiveness ofexchanges between internal suppliers and internal customers. There are also anumber of thoughtful practitioner accounts, perhaps the most outstanding being atSAS (Carlzon 1987), Paul Revere Insurance (Townsend 1990), and British Airways(Walker 1990). Whether these eminent practitioners saw their customer oriented andstaff involving programs as "internal marketing" is a moot point.

Overall, there has been much descriptive and somewhat varied conceptualising ofinternal marketing and its potential for organisational change, and little guidancehas emerged as to how the concepts might be operationalised. The ANZ case studyis a contribution in this area.

First, I will describe the internal marketing activity that emerged, which onreflection and re-interpretation, I now understand to be a relationship development

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process with three complementary activity modes. Together, these made possible thetranslation of external customer requirements into operational forms.

Second, I will describe the internal network of staff relationships that emerged forthe sharing of "know-how". On reflection and re-interpretation, I now understandthe network to be an open organisational system which facilitated knowledge transfersof value to the host organisation.

Third, I will explore the characteristics of internal network organisation that seemnecessary for internal marketing to have a continuous adaptive-change role withina host organisation.

Research Method

Overall, my case study strategy reflects an interpretive intent. My major concern isto understand the processes involved in the work-place activities reported as a basefor theory development. In this endeavour I have been guided by the action scienceprogram method recommended by Gummesson (1991). This approach bringstogether the role of the management consultant (in my case, an internal changeagent) and the role of the researcher in a series of time-based action (program)phases and research (reflective) phases.

To do this, I first separated out four action phases that seemed to occur naturallyin the ANZ Customer First program. This created a phase by phase context for myreflections. In this way, an understanding of the empirically grounded content of thestudy was developed and refined phase by phase. Thus I am making a distinctionbetween the reflective learning that occurred within ANZ's Customer First program,and my post-event reflections, understandings and interpretations as an academicresearcher. This distinction is necessary because the objectives of the consultant andthe academic researcher in relation to the research "problem" are not the same.

There are advantages in combining the case study/action science approach. Theacademic researcher/employee consultant is able by virtue of access to penetratebelow the surface of business events to a level not possible by outsiders. Also, theinternal conditions, policies, corporate modes of language and hierarchical protocolsare already known to the academic researcher/employee consultant. This worksagainst overlooking the blindingly obvious and the not so obvious. These specialadvantages are part of a pre-understanding not available to the independent academicresearcher (Gummeson 1991). There is always a risk of bias. On the other hand, myrole as an academic researcher is separated by the passage of time from my role asinternal change agent (the years 1986-89). This time separation has helped me guardagainst any bias arising from too intimate an involvement. It is difficult to see howthe data could be formally accessed by any other means.

The underlying empirical work is based on personal records as a participant-observer, or more correctly, as an observant participant. This is supported by historicalrecords from the period. My participant account has been summarised elsewhere(Ballantyne 1990, 1991). Also, I have used the general systems theory model of Kastand Rosensweig (1970, 1985) as an interpretive lens for looking into some difficultaspects of my participant account. This will be discussed within the context of thecase study which now follows.

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Customerservice

improvement

Bettercustomer

relationships

Moreretained

customersLong-term

profitability

Figure 1. ANZ's "Customer First Logic"

ANZ Bank Case Study

In the case of ANZ Bank under study, a customer orientation goal was clearlyexpressed from the start in their internal communications logo, Customer First.What followed was an attempt at its operationalisation. The strategy was thatcustomer service improvement would lead to better customer relationships, moreretained customers and thereby complement the organisation's marketing activities.Overall, this would contribute to better long term profitability (see Figure 1). This.strategy was adopted by the branch banking division early in 1986, and approved bythe Board.

The marketing department was involved in designing the market research to findout the critical customer service issues, but the direction of the program was in thehands of a small customer service department set up in 1986 to facilitate the changein orientation, reporting directly to the general manager, branch banking. However,many of the core group of 8-12 employees involved at the outset were eitherexperienced marketers or personnel trainers, having been transferred to the newdepartment. The first head of department had been recruited, "from outside", andshe too had a background in marketing as well as organisational changemanagement.

On reflection, the department composition had a strong marketing bias with asensitivity to the role of people in service organisations, although at the time itseemed that people had been recruited from everywhere. Although the departmentmight be viewed with hindsight as modelling the new behaviours required in theBank, at first it seemed more like a strange group of bedfellows.

Officially titled at first a "customer service improvement program", the activitycontinued for five years without a break from 1986 to 1991. From the outset, the ideawas not to try to change staff attitudes by formal communications alone, but toinvolve staff in making the kinds of internal changes to policies and procedures thatcould be linked to market place performance that external customers wouldvalue.

The "False Start" Phase (1986)

As the members of the new customer service department were coming to terms withtheir task, the senior executive of the bank decided to offer some outside consultingsupport. This seemed to be a good idea at the time, but it proved to be a false start.The consultants chosen were influenced by the success that British Airways in theUK were having in their own Customer First program. As they had a supportinginvolvement in this through their UK subsidiary, they began with what theyunderstood to be the successful elements of the British Airways approach. This

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involved "cascading down" to staff the commitment of top management, through aseries of explanatory communications programs, in quick succession, from upperlevels of the organisation to the lower.

Staff at the lower levels, branches and regions, were invited to make suggestionsas to service improvements, and some co-ordinating committees were set up at alllevels to handle the upward flow of ideas. This seemed reasonable at first but verysoon it became quite clear to staff in the new Head Office customer servicedepartment that what was about to arrive in bags and parcels on their desks was anad hoc deluge of ideas without the logic of a focus on customers' real needs. Thecascading up of ideas recommending change was to be as quick as the cascadingdown of commitment had been. The real job of sifting and sorting, and negotiationwith Head Office departmental chiefs was to be a customer service departmentresponsibility by default.

Ideas not quite thought through such as "Why don't we get rid of the queues inbranches by putting on more tellers?" were quite common, and while the co-ordinating committees dealt with many suggestions at their levels, every staffsuggestion warranted a reply, the staff were waiting for one, and so too were the co-ordination committees. While some excellent ideas were put forward and imple-mented, overall the outcome of the cascade was to raise expectations for changewhich could not be fulfilled.

In terms of know-how, this approach indicated a lack of it. The learning from theexperience at the time was that valid customer information was needed, urgently,firstly to begin again, and secondly, to meet the heightened expectations of staff forchange. The cascade had made promises that could not be fulfilled. A new directionwas needed urgently.

The consultants were thanked, and they left.

Reflections on the "False Start" Phase

Commitments to change of this kind must be accompanied by enabling strategies.When employees have experienced what seem to be changes of direction withoutany explanation they are likely to be less trustful in future about involvement in anynew departures from routine. Messages become ineffective if interpreted as "Theyare saying this, but...". Sadly, the process of eliminating meaning may go one stepfurther and become an organisational defensive routine, where what could once be saidopenly is perceived to be unsafe and so it becomes effectively undiscussable (Argyris1986).

Failures of commitment tend to restrict future choices of action. So if one path ofaction cannot fulfil a commitment, it becomes critical to choose another and provideand communicate a logic for the change of path while re-affirming the goal asunchanged.

The "New Start" Phase (1986-7)

In recovery mode now, the critical service issues were identified by means of anextensive qualitative/quantitative Australia-wide sample survey of customer

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service needs called the Customer Service Study. This enabled customers to tell theBank what was critical to their banking requirements and in what areas they soughtimprovement. It was also a benchmarking study in the sense that survey responseswere obtained from other banks' customers too. The survey revealed ten criticalissues and their priority for attention. This data gathering phase of the new startplan had been put to field before the external consultants had left the Bank, so as tobe able to demonstrate to staff a change of path with continuity of purpose withoutembarrassing time gaps.

Next, the new plan involved setting up diagnostic review groups (see Table 1 fordefinitions) within a critical change workshop to solve the ten critical service issues.There were ten groups, one for each problem. Each group had 3-5 members, butgroups of four later proved to be optimal. With the full support of the generalmanager, branch banking, a project team of 40 employees from all parts of Australiaassembled in Melbourne, in May 1987. All were volunteers, or more correctly, all hadbeen asked and had accepted. The idea was to create the maximum impact on theANZ organisation as a whole, rather than spread the effect over time with a numberof new starts. The 40 people represented a diversity of experience, skills, ages, andstatus levels. A few branch managers were represented but most people wereyounger and less experienced, within an age range of 20-30 years.

The critical change workshop ran for three weeks, with one weekend off after thesecond week. The first week was structured around bringing to light individuals'own values and motives and the recognition of the commonality of their hopes andfears for performing well in the task ahead. This was followed by exercises in groupwork and understanding group dynamics, as an aid to working with others onunstructured tasks such as the one they had been set. Next followed an introductionto the needs of customers as expressed in the Customer Service Study.

Staff involved in this program were given plenty of opportunity to test their

Table 1. Customer service improvement terms and definitions used at ANZ bank

Agent for ChangeA member of staff who facilitates critical changes within the organisation, by bringing together people,pathways and processes in new combinations to achieve a "problem-solving" outcome.

Critical Change WorkshopA preparatory course about "change within organisations" designed especially for ANZ's DiagnosticReview Groups.

Critical Service IssuesThe customer service issues critical to ANZ branch banking performance.Customer Service StudyThe external market research study commissioned in 1986 and the 1987 report revealing the CriticalService Issues.

Diagnostic ProcessThe process of breaking down any one Critical Service Issue into its parts to find operational solutionsor to explore alternative opportunities.

Diagnostic Review GroupsTeams of 3-5 people assigned to "solve" any one Critical Service Issue. Every member of a DiagnosticReview Group is an Agent for Change.

"Groupies''A term of self respect and solidarity used by Diagnostic Review Group members to identify themselvesto each other.

Source: ANZ "Groupie News" (1987-89).

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personal limits as agents for change (this is the term actually used). The idea was thatvolunteers would find their own motivation for involvement and in so doing, theywould contribute to their own self development and to customer serviceimprovement. Specialist consultants were carefully selected to support this aspect ofthe program, working within the new Customer First agenda and this time notdominating it.

An immense amount of positive energy was created by this preparatory process.Two direct participant reports illustrate mis (Video tape record, May 1987):

Male speaker: .

"Oh, lots of things, I mean I guess my biggest fear is thatwe won't be able to do anything effective, that nothingwill come out of it and it will be just a waste of time. AndI guess also that I would be frightened that even if we dosomething that is really worthwhile, that the Bank, "theBank", [here he gestures to indicate the remoteness of thenormal decision process] won't think it's worthwhile orsomehow it will get diverted and nothing will come of it.My biggest hope is that we can actually do somethingincredibly worthwhile to change things because I wouldnever ever have thought that I would get an opportunitycertainly at this stage in my career to get involved insomething like this."

Female Speaker:

"We are not here to be willy-nilly and work 9 to 5, weactually have to have this particular issue on our minds24 hours a day and really become obsessed with fixingthat particular problem or "opportunity" as we've beentrained to think about them. Once again from myself andeveryone else, thank you for realising that the youngerpeople and the older people and there are various peoplein this organisation who maybe aren't a branch manageror accountant or something, actually do have some verygood points to put forward, and [thank you for] actuallygiving them an opportunity of helping ANZ to become amuch better customer-oriented place."

The actual work task of problem solving began in the second week and continueduntil the end of week three. The setting for this activity was important: one vastroom, big enough to house the ten groups averaging four per group, all in theirclusters around separate square tables, with white boards, pens, papers, flip charts,and coffee mugs.

People were free to come and go as they liked, start and finish when they cared to,wear what was comfortable. What was interesting was that this autonomy was notexploited and the groups worked at least 6O-80-hour weeks, thinking, discussing,visiting branches, and interviewing senior executives of the bank who were onstand-by for such visits. Also, there was interaction between the groups, at first outof curiosity about what others were doing. All groups were considering a great

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range of possible operational solutions. It then became clear that although the tengroups were working on quite different customer perceived problems, among all thepossibilities coming up, there were some solutions shared by many of the groups!

Comments from participants at the time illustrate this (Video tape record, May1987):

Male speaker:

It started as I said, because we didn't know much aboutit, and then in an explosion over a day we got this bigidea which we thought might become [the] most impor-tant and we have been working on that for a while, andnow we have been seeing other people and all of asudden that explosion has exploded again. And I am justwondering how many more times that is going tohappen.

Male speaker:

There seems to be a lot of interaction between the groups,they seem to have [service solutions which have] beeninterrelated one way or another.

This puzzling interaction/explosion/discovery cycle warrants further comment.In common banking practice, rules prescribe almost all the work people do on a day-to-day basis. These have little to do with good service performance from thecustomers' viewpoint. Customers' experience banking policies and procedures as asystem of constraints. However, in discovering many internal policies andprocedures that were potentially a barrier to improved service, the diagnostic groupsalso discovered which end-to-end processes were critical above all others. Forexample, the transaction processing time on credit card cash advances (as anoperations process) impacted on a range of reported critical service issues, not juston the waiting in queues at the counter. Customers are never in a position to knowhow are internal activities are connected. Thus it turned out that some customer-perceived problems could be reduced with quite an impact by careful attention tothe dynamics of a few key internal processes.

At first, the diagnostic review was no more than ad hoc sifting and sorting, then theinteraction/explosion/discovery cycle began for most groups, and finally, thesegroups, as a by-product of the interactions, began to develop an innovative workingstructure for sorting out their solutions. This was a radical departure from the"expert appraisal" methods conventionally employed by the Bank. Some furthercomments from participants made during these group interactions now follow(Video tape record, May 1987):

Male speaker:

But it is starting to make some sense and especially afterthat chat this morning, the things you were talking aboutwere on our board: environment, procedures, design,personnel — they are our main headings.

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Female speaker:

In discussing it with other groups there are a lot of thingsthat we have thrown up as weird ideas that they havealready discussed as well. To get the cross section, to getthings that we've talked about and then to hear them[repeated in the other groups] ...to think that they havetalked about the same thing! ... there have been four,five, maybe six things that will come out in every groupthe same. If those four, five or six things are followedthrough [by senior management], then, that's the start ofturning the wheel. - .

Profound understandings like these happened to individuals throughout theprogram. When they did, it was as much a shock to the participants as a delight tothe Head Office customer service department. This was something more than theconformity that day-to-day banking life allowed. Participants were sharing ideasand information, not to minimise their personal risk but (as it turned out) to discoverwhich key internal processes were ripe for critical change.

Throughout the three weeks of the critical change workshop, the role of thecustomer service department was to facilitate the review activity in any waypossible, to provide any resources needed, and to gain access for participants to theBank's hierarchy on a needs basis. By the third week, with increasingly hecticactivity caused by an unshiftable time deadline, the groups were determined tomake a big impact with their recommendations. Their commitment to the task hadnot overwhelmed them like many had feared. Their reports were logically arguedand well researched. Everyone had gone beyond what they thought was theirpotential, as though giving birth to babies.

These task issues apart, the most outstanding feature of the groups was how openthey were with one another. They were cohesive as small working teams and as agroup as a whole. Yet, they used their individual differences as a source of creativestimulation. These differences turned out to be a hidden resource. At this point, theygave themselves an enigmatic name, one that would stay with the program till theend, and constantly challenge bureaucratic sensibilities. They called themselves"groupies", meaning that they were prepared to follow the customer anywhere.

Formal reports containing preliminary cost-benefit estimates and recommenda-tions were presented to Head Office chiefs on time. Top management supported andwere involved in an oral presentation of findings, and they gave their commitmentto work through the reports. A party night was held and everyone went homepleased with themselves.

Over the next six months, about 40% of recommendations were implemented, themost profound being the functional separation of routine customer transactions atbranch tellers' counters from service information and other complex time consumingcustomer requirements. This reduced service waiting time and costs. It also meantthat a new policy for the introduction of part-time tellers could proceed on firmer jobdesign grounds. Also, planning for what was called the New Look branch designs,already under way, would now be re-considered in the light of the new jobdesigns.

However, 60% of the recommendations could not be actioned and this was quite

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a problem. In spite of support expressed for the program at all Head Office levels,many departments outside the branch banking unit found that, in respect ofparticular recommendations, they

—were unable to accept the validity of the recommendations, or—had no funds budgeted for the changes at that time, or—had similar agendas and would "Definitely try to get to these particular issues,

but it will take time".

Interventions by the general manager branch banking were politely dealt with,but the changes which were stalled were largely outside his business unit, thereforenot directly within his authority to control. The issue of unresolved expectations hadraised its head again (as it had at the end of the "False Start" Phase).

Strategy was again reviewed in the customer service department. The goal wasstill to put the Customer First but the key strategic issue was now about getting thechanges through the wider internal system. Circumstances provided a new path tothe goal. Two of the original groupies had asked whether the customer servicedepartment would support them in setting up diagnostic review groups in their ownregions (branches were clustered into regions of about 30 branches). Why not takethe problem-solving concept to the branches, solve local problems, gain recognitionfor the program in the regions, and most of all, bring influence to bear from theregional chiefs onto Head Office departments, through the back door? This becamethe next phase of the evolution of the program.

Reflections on the "New Start" Phase

I am now in a position to define the nature of internal marketing as it emerged atANZ and hypothesise a more general application to any organisation, as follows:

Internal Marketing is a relationship development processin which staff autonomy and know-how combine tocreate and circulate new organisational knowledge thatwill challenge internal activities which need to bechanged to enhance quality in marketplace relation-ships.

If internal marketing is to be understood and defined as a process, I need todemonstrate a coherent set of activities which are process-like. Activities in this sensemay embrace both behavioural and technical aspects. To do this I examined thesequential narrative of the events, and isolated those activities that moved from startto completion as a chain of events. Three empirically grounded activities of aprocess-like nature were found, and I have called these internal marketing activitymodes. The modes are energising, code breaking, and border crossing (see Figure 2 fordescriptions of these activities).

In the ANZ case, each internal marketing activity mode is clearly identifiable fromthe apparent chaos of day-to-day experience and yet no one activity mode couldsustain its momentum without the others. It is in this sense that they are process-like.This observation is critical. On the other hand, each activity is complementary and

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contributes to the cyclical "spin" of the others. In this sense they combine as aprocess.

Understanding internal marketing as a relationship development process, with itsown inputs, throughputs and outputs, and recognising that process feedback wouldcontribute to renewing the cycle, I have identified the general characteristics of theseinputs and outputs where, each mode of activity contributes something of value tothe whole (see Figure 3).

This conceptualisation, with its three inter-dependent modes, is seen as a newdirection for the internal marketing literature, for these reasons:

First, energising, and the staff commitment to the customer that it represents,challenges the assumption of causal linearity whereby staff satisfaction is said tostimulate customer satisfaction (see for example, Berry and Parasuraman 1991;Schlesinger and Heskett 1991). This seems too tight a link.

In the ANZ case, the satisfaction of the staff (including the groupie participants)was not an a priori organisational goal. Putting the Customer First was the goal. It

'ENERGISING"Seeking and receiving the

willing commitment of staffto work towards a given goal

within or outside theboundaries of their job* • descriptions.

"CODE BREAKING" ,Translating known customerrequirements into an agenda

for detailed changes in •" .i production or delivery ,

systems with new . - • .. "Enow-how". . . ' * •

VISIONMISSIONINTENT

Service-QualiManagementFUNCTION

(Quality Control andcontinuous improvement)

"BORDER CROSSING"Dealing with dysfuntional

* processes which crossdepartmental borders by

circulatingnew knowledge

across thoseborders

Figure 2. Internal marketing activity modes

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Input - -•"Through-put -

1 People1 Information

BORDERCROSSING

-•Output

1 Approvals to act• New knowledge' Legitimacy confirm.

1 People' Information

' People' Information

ENERGISING

CODEBREAKING

'Trust' Commitment• Climate for change

• Strategic insight' New "know-how"' New solutions

Figure 3. ANZ's internal marketing as a knowledge discovery process

turned out that this required the discovery of internal activities that needed to bechallenged and changed. Yet participant satisfaction with this work was high. Putanother way, energy renewal comes directly from the organisational activity itself(Katz and Kahn 1966). Why? In this case, it was because the groupies werevoluntarily part of the knowledge discovery process, the work activity increasedtheir sense of self worth and purpose, and it stretched their capabilities. Andsubsequently, changes to policies and procedures did have some positive effect ineasing the pressure on front line staff in their service encounters with customers.This suggests that staff satisfaction with their work will be positively related tocustomer satisfaction when that work is customer oriented. There is no evidence inthis study of a broader causality between the two.

Second, code breaking, in the sense of customer problem solving, does not appearto be a matter of major concern in the internal marketing literature. Yet in the ANZcase, seeking operational solutions to customer problems is seen to be the veryexpression of customer consciousness in action. Developing the know-how is anecessary part of challenging internal policies and procedures. In the context of thebank and its external markets, it would be difficult for competitors to comprehend,let alone to copy.

For example, problem-solving insights were codified into a diagnostic tool calleda code breaker, which was used extensively in ANZ branches for many years. Theessence of the code-breaking technique is to look at any customer problem from anumber of diagnostic perspectives (not just one) and then to choose the best of thepossible solutions on a maximum benefit/least cost basis. Four diagnostic levels forservice (re)design were defined as a result of know-how development and these laterbecame environmental setting, processes, job design and people (see Ballantyne et ah1995).

Third, border crossing recognises that internal communications are important butwith a caveat. Any organisation has legitimate hierarchical divisions which tend toconstrain interaction across internal borders and to distort communications. The

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case for internal changes, especially those which seem to impact negatively on staffor powerful sections of management, may need to be put again and again, involvingquestions of legitimacy access to non routine channels of communication andinfluence, at all levels of the organisation.

For example, the apparently simple matter of getting approvals to begindiagnostic review groups required resolute approaches. Initially, the CustomerService Study was communicated in a conventional market research report format.The highlights of this report were presented to the board of directors, for theirinformation, but also to increase the credibility of the findings in the eyes of seniormanagers. Also, an audio-visual version was commissioned to overcome the"paralysis by analysis" attitude that many managers then had to statistical analysisof market information. Other border crossing complexities constantly occurred, andsome of these are discussed in the next section.

The "Evolutionary" Phase (1987-89)

Over the next two years, the regional/branch based strategy for diagnostic reviewgroups was implemented, based on the pioneering experience of the first group inMelbourne and the two pilot groups in the regions. The original program formatswere improved over time to provide essentially the same effects over a shorter timeframe. This usually involved a three day start-up workshop for volunteer stafffollowed by a return to their branch to work on customer service improvement, intheir own time. There was a debriefing in the regional office to report findings andrecommendations six weeks later. These debriefings were celebratory events whichallowed recognition to be given where due.

The programs grew gradually at first and later at a pace stretching the capacity ofthe customer service department to sponsor and support them with their know-how.Experienced groupies in the branches and regions volunteered support and easedthe burden in setting up new groups.

At the time of the first two regional pilots, the border crossing activity to getapproval to start up, and to get changes approved through the system, was moresensitive and difficult than energising or code breaking issues. However, the valueof past participants as information carriers and the persuasive influence ofsupporters in senior managerial positions soon became abundantly apparent. That isto say, the value of an internal network of committed "true believers" in contributingto this border crossing activity became abundantly clear. The customer servicedepartment set out to sponsor and to encourage the internal network on a nationalbasis and extend the links in the chain. This strategy was not part of the design at theoutset but it emerged as a likely way to go.

The experience of one of the original groupies in border crossing to get approvalto begin diagnostic review groups in her region reveals the hierarchical problemsand network solutions (Video tape record, November 1987):

Female speaker:

All I had to say to my regional manager, who by the wayhates reports so I couldn't go and hand him our reportbecause he wouldn't have read it, hates paperwork and

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never has time to read it. So I had to sneak in there andgive him a cup of coffee nicely, remembered all my(communication) skills because I didn't know myregional manager. I was still working at xxx branch, hehad been in our area for about a year, but you know youdon't really get to know the regional manager if you arejust in a branch.

So I went down there one day, phoned and said could Icome down in my lunch hour to see him and he was veryimpressed with that. I went down, took him in a cup ofcoffee and got myself one and I thought now he has gotthis huge desk filled with paperwork which he hates andnever reads, it's been there for years I am sure, justcovered in dust, and I went in to him and sort of knockedon the door and I had these cups and I thought if I putmine down first and take the other one to him then I canstand next to him like A had shown yesterday. So Iwalked in, put the cup down and I went over to the sideand put my hand on his shoulder, well he nearly shithimself! He couldn't believe what was happening,thought I was totally crazy and he was half right! Andthen I proceeded to just — I said I have got a report hereof AA's but I know you hate reports so I won't leave thatwith you and he sort of said oh good, because he hatespeople going "Here's a report to read", and I said to him"Look I think it's the easiest thing to do, I have got a fewideas of what I would like to start in our region and usingyyy branch as a guide" ... he knew the regional managerof yyy, so I said "He's got a terrific thing going and Ithink we could do even better down here and I wouldlike to show you a few things".

So I arranged a meeting with him, the ops, manager, thepersonnel manager, and all those other managers whowanted to come in and listen to it all [gesturesresignedly] and I did the presentation ... and I told thema lot about what diagnostic review groups are capable ofespecially the original groupies, and I said that I knowthat it can work in our region. And that was fine, they allsort of accepted that, but I still didn't have the approval,I still went away and I sort of thought they all seemed tolike that and understood it but no one sort of said to meright go ahead. I was lost for direction.

I really didn't have a clue what to do and my regionalmanager had walked out of the room and I was lost. SoI phoned DA and we spoke for about three hours on thephone, so get used to that! And then I phoned RI and toldher my problem, she then told our assistant GM and he

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phoned my regional manager, and said "Gee, congratula-tions, I am really glad to see that you've started thisinitiative and you're going to have diagnostic reviewgroups in the region. Well my [regional manager]thought, God I'm good!"

The emerging internal network was supported by an information exchange to andfrom the customer service department. A magazine called Groupie News, simplyproduced, and somewhat irreverent in tone, was published as a vehicle to encouragethis exchange. Every past participant in the programs received a copy. When thisproved popular, another was produced called Facilitator Groupie News, and this wentto regional and branch-based staff who had run local programmes in their region.Other magazines were added to the stable as the opportunity arose. The networkwas not managed in any usual sense of the word, as it was felt that it could not bewithout limiting the spirit of free association around the common customer-orientedgoal. On the other hand, the magazines tended to focus issues and this was editorialcontrol of sorts.

The regional programmes were immensely popular. With their "bottom up", non-hierarchal approach, they attracted at first the suspicion of branch managers,followed by their support when it became clear that the activity was successful, notat all a threat to their authority but an enhancement of it. The programme allowedmany managers to make the distinction for the first time between their authority tomake decisions and authority to control information. They found they were able tolet go of the second without threat to the first. Some regions demanded similarcourses for managers and these were arranged. One general manager said it was like"Outbreaks of excellence" in the regions, and phrases like this were seized upon andrelayed through the network magazines.

Over 80 programmes were run in over 30 regions in the two years from1987-89.

Reflections on the "Evolutionary" Phase

After each of these regional workshops, groupies returned to their branches to go italone, individually. To return to your branch, when you are around the age of 22,with your task yet ahead of you and to be completed in six weeks is not a positionof strength. Great courage was required. The commitment generating aspect of theworkshops was a essentially a preparatory stage. After that, you had only the HeadOffice customer service department and the groupie network to actively supportyou.

The nature of the network which emerged in support of the internal marketingprocess at ANZ can be understood by reference to the core concepts of generalsystems theory.

Systems theory is basically concerned with problems of relationships, of structure,and of interdependence, and is applied to the understanding of any total entity (Katzand Kahn 1966). Systems thinking has recently been popularly re-discovered (Senge1990). However, its roots may be found in pre-Platonic philosophical discourse. Inthe modern sense, systems thinking has provided a framework for empirical enquiryin quite diverse disciplines like Gestalt psychology (Koffka 1935) and biology (von

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Bertalanffy 1950) and from there to organisational theory (Emery and Trist 1960) andorganisational learning (Argyris and Schon 1978). It has also been applied tomarketing (Fisk 1967) but this seems to have been largely overlooked. Also, thereappear to be close parallels, seldom explicit, between general systems concepts andthe basic frames of reference applied in network/interaction marketing, the on-goingacademic research agenda of the Industrial Marketing and Purchasing Group(Hakansson 1982; Ford 1990; Hakansson and Snehota 1995).

The key relevant concept in the systems approach at this point of interpretativereview of the ANZ case is boundaries, which are said to prescribe the domain forinternal organisational activity. Organisational systems may also be thought of asbeing relatively open, according to tire permeability of the boundaries. Such systemsare said to function dynamically in relation to their environment. Clearly, an internalnetwork operating within a host organisation is an open system on these criteria.

Open systems allow inward and outward energy flows beyond their boundariesand tend to a greater differentiation of outputs, which in turn requires greatercomplexity of organisation within. Again, the internal networks at ANZ qualify onthis criteria. Closed systems, on the other hand, have impenetrable boundaries. Suchsystems direct their energies inward and move to disorder and eventually fail(entropy).

Another key concept in systems thinking is hierarchy, by which it is meant that anyorganisational system may be understood in terms of sub-systems which logicallydifferentiate internal activities. The whole system, however, is said to be somethingother than the sum of its parts, in the sense that the properties and relations of theparts are determined by the whole. Yet to some degree, parts function independentlyof the organisation which they comprise, and this contributes to the flexibility of thewhole organisation.

To meet these criteria, I needed to find clear links between the ANZ internalmarketing activity modes, the internal marketing process as a whole, and theinternal network as an organisational form.

To this end, I superimposed the three internal activity modes on to a five partgeneral systems organisational model formulated by Kast and Rosensweig (1970). Inso doing, a partial fit was achieved (see Figure 4). However, this left two "missing"activity domains, not revealed in my earlier empirically based reckoning. The first isrelated to goals and values, which I have termed path finding, and the second is astructural domain which I have called routinising.

Were these activities present in the case itself or is this merely a convenience? Ireviewed the case material and found solid grounds for these activities. I now seethat pathnnding as an activity mode was present from the beginning of the ANZprogram but its chain of process-like sequences extended over a longer time frame,represented by each complete phase of the program, and so was not so apparent inmy early analysis. Each attempt to get the program back on track was a path findingprocess.

Routinising, as a necessary activity, came into prominence only in the "Evolution-ary" Phase of the program, and then as a strategy in design rather more than inimplementation. Routinising activity, as I now see it, was an attempt to give theknowledge discovery process sustainability by embedding some suitable guidingstructure in the day to day routine rounds of the host organisation, as securityagainst rival claims on management's resources and time.

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What was planned and partially put in place was a structure for cyclical actionand periodic review (Ballantyne 1990). This allowed for a complete cycle of action,a spin of the wheel, from market research inputs to diagnostic work and thescheduling of recommendations for change, rewards and/or recognition for staffinvolved, and review of the training needs of participants. There was also a connectpoint in the structure for training of staff in general as and when new operationalsolutions and know-how were diffused to the host organisation. Also, with everyroutinising spin of the wheel, review points for reflecting on the suitability of eachpart of the cycle itself were included (see Figure 5).

I am now in a position to define the nature of internal networks as they emerged atANZ and hypothesise a more general application to any organisation, as follows:

Internal networks are open organisational systemswithin host organisations whose members are connectedto each other by choice, and through complementarypatterns of cyclical activity, for the legitimate purpose ofcreating and circulating knowledge to the hostorganisation.

The first part of this definition is the connection between internal networks andopen organisational systems. This has been discussed above with reference togeneral systems theory.

Figure 4. Network organisation for internal marketing. Network members connect with eachother by choice, through complementary patterns of cyclical activity. Source: The activity modesdescribed for internal marketing have been overlaid with a general systems framework adaptedfrom Kast and Rosensweig (1970, 1985)

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Next, network members were connected to each other by choice. Relationshipbonds were based on shared customer-oriented goals, commitment to the taskwithin given deadlines, team-based interactions, strong social support for each otherand high levels of trust in the sharing of information within the network. Theyreceived much satisfaction from the work activity itself (as discussed earlier underthe Reflections on the "New Start" Phase). These are important issues to be exploredin more detail in another article.

Also seen to be critical in holding internal networks together are the complementarypatterns of cyclical internal marketing activity. The internal activity modes at ANZhave already been demonstrated to be process-like, independent of each other andyet complementary. To have unity and stability, following Katz and Kahn (1966), thedominant activities should move from point of origin to closure, with the probabilitythat the chain of events will then be repeated. This closure was achieved at ANZ,with the notable exception of the routinising structure described earlier. This can be

Review feedbackand measurement

systems

Reviewtraining

schedules

Scheduleimprovements for

approval

"Energising" anddevelopment ofdiagnostic skills

Improvementsto systemsintroduced

Diagnostic"Code

breaking"phase

Rewardcontributors to

systemsimprovements '

Figure S. Turning the wheel of improvement — continuously. Adapted from Ballantyne(1990)

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interpreted as a potentially serious defect in the long term sustainability of anyinternal network organisation.

Above all else, what may prove to be the Achilles' heel for the sustainability of anyinternal network is the issue of legitimacy of purpose, which is given, and may betaken away, by the host organisation.

Finally, internal networks may be further defined by fheir goals, as a special kind,in this case for creating and circulating knowledge to the host organisation.

The "Routinisation" Phase 1989-1991

Customer-focused operational improvements became routinised at participatingbranches and regions through the knowledge discovery and transfer process of theinternal network and the on-going diagnostic review programmes.

Also, new know-how had started to spread from the network to the widerbanking sphere. What was experimental in earlier phases was now routinised ifsuccessful. Know-how, although a personal quality, was codified into methods and,like the code breaking system mentioned earlier, became part of a kit of knowledge,professionally produced and accompanied by training notes and quality videos. Thiswas the phase of tangibilising what was of value. Non-groupies were now moreaware of how to put the Customer First, without the programme as prelude. At thesame time, new programmes for specialist groups were trialed.

The resource costs of these programmes was insignificant in relation toquantifiable gains. However, immediate benefits were often (not always) quitemodest and of the "good housekeeping" kind. This was because key operationalprocesses were the same at all branches and changes were controlled at higher thanregional levels of the organisation. At the same time, the programmes gainednotoriety in Head Office departments as recommendations from the regions (outsidetheir discretion to approve) maintained a persistent pressure for change. Officiallyand positively it was said that "You've been working for years on customer serviceimprovement".

Yet other internal agendas had been gaining importance and attention in HeadOffice thinking well before 1989, and these were more and more taking the attentionof Head Office chiefs. Plans had been drawn up for new technology-based branches,requiring fewer staff. Also, the lending functions of branches were to beprogressively removed and centralised, like much of the back-office functions. Thiswould require fewer staff at branches and a reduction in the status of managers. Onthe other hand, these changes would create positive openings for a new breed ofyoung female managers.

Missing spokes from the routinising wheel (see Figure 5) were replaced,sometimes to fall off again, to be replaced again, to fall off again.

Then external factors began to impinge on the strength of the programme. Theglobal economic recession began early for Australians and by 1990, interest ratespeaked at 22%, businesses were faltering, and bank bad debts were out of hand.Banks everywhere had many new concerns and customers became part of theproblem, not part of the solution.

Strong evidence for the resilience and sustainability of the internal network wasthat it was two years after the onset of the recession before the customer service

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department was wound up. Without a hub for the spokes the network became silent.What could once be said openly became effectively undiscussable.

It was a time for change.

Conclusion

In essence, this paper has reported on my understanding of the Customer Firststrategy and programme activities that I participated in as a change agent. Iinterpreted these activities to find how dominant internal marketing modes connectin a complementary way as a relationship development process, and how internal(staff) networks enable the discovery of new knowledge and transfer this knowledgeto the host organisation. Finally, forces that work for and against internal networkorganisation are revealed.

One final interpretive contribution arising from the systems based thinking I haveemployed would suggest that the goals desired by an organisation could be reachedflexibly and by a variety of paths. This is the principle of equifinality. Choices can bemade. However, the dynamic structuring that supports an open system, like ANZ'sinternal networks, needs committed supporters to withstand internal tensions.Finally, without continuing legitimacy of purpose, the internal boundaries cannothold, and the hierarchical relationship of the whole activity to its parts implodesupon itself.

This is the challenge of change.

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Internal networks for internal marketing