L5 MCR Manual Advance Edition

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MANAGING THE CUSTOMER RELATIONSHIP

QCF Level 5 Unit

Contents

Chapter Title Page

Introduction to the Study Manual iii

Unit Specification (Syllabus) v

Coverage of the Syllabus by the Manual ix 1 The Characteristics of Customer Service 1 Introduction 2 Who is the Customer? 2 What is Customer Service? 7 Customer Satisfaction 9 Service Quality 12 Evaluating Customer Service Levels 19 2 Using Customer Service to Create Competitive Advantage 23 Introduction 24 Customer Loyalty/Retention and Competitive Advantage 24 The Service/ Profitability Cycle 28 The Impact of the Wider Environment 32 Macro Environmental Analysis 34 Porter’s Five Forces 42 3 The Impact of Strategic Choices on Customer Satisfaction 49 Introduction 51 Organisational Structure as a Strategic Choice 52 Types of Organisational Structure 54 The Impact of Growth on Structure 62 Organising Processes Around Customers 64 Culture 70 Empowerment 79 Service Excellence in the Public Sector 82 4 Internal Influences on Customer Service 85 Introduction 87 The In-house Customer Service Function 87 Outsourcing the Customer Service Function 92 The Importance of Process in the Customer Service Function 94 The Importance of Technology in the Customer Service Function 101 Customer Relationship Management Systems 105 Personalising the Customer Experience 110

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Chapter Title Page

5 Obtaining and Dealing with Customer Feedback 115 Introduction 117 Communicating 117 Communication Methods 122 Communicating with Customers 129 Customer Feedback 131 Techniques to Support Effective Communication 135 Complaints 141 Negotiating with Customers 146 6 The Impact of HR Policies on Customer Service 151 Introduction 152 Recruitment and Selection 152 Induction and Development 166 Employee Resourcing Issues 179 7 Managing Staff to Create Customer Service Excellence 187 Introduction 188 Work-related Stress 188 Internal Marketing 194 Employee Satisfaction 197 Management Support for Boundary Spanning Roles 201

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Introduction to the Study Manual

Welcome to this study manual for Managing the Customer Relationship.

The manual has been specially written to assist you in your studies for this QCF Level 5 Unit and is designed to meet the learning outcomes listed in the unit specification. As such, it provides thorough coverage of each subject area and guides you through the various topics which you will need to understand. However, it is not intended to "stand alone" as the only source of information in studying the unit, and we set out below some guidance on additional resources which you should use to help in preparing for the examination.

The syllabus from the unit specification is set out on the following pages. This has been approved at level 4 within the UK's Qualifications and Credit Framework. You should read this syllabus carefully so that you are aware of the key elements of the unit – the learning outcomes and the assessment criteria. The indicative content provides more detail to define the scope of the unit.

Following the unit specification is a breakdown of how the manual covers each of the learning outcomes and assessment criteria.

The main study material then follows in the form of a number of chapters as shown in the contents. Each of these chapters is concerned with one topic area and takes you through all the key elements of that area, step by step. You should work carefully through each chapter in turn, tackling any questions or activities as they occur, and ensuring that you fully understand everything that has been covered before moving on to the next chapter. You will also find it very helpful to use the additional resources (see below) to develop your understanding of each topic area when you have completed the chapter.

Additional resources

ABE website – www.abeuk.com. You should ensure that you refer to the Members Area of the website from time to time for advice and guidance on studying and on preparing for the examination. We shall be publishing articles which provide general guidance to all students and, where appropriate, also give specific information about particular units, including recommended reading and updates to the chapters themselves.

Additional reading – It is important you do not rely solely on this manual to gain the information needed for the examination in this unit. You should, therefore, study some other books to help develop your understanding of the topics under consideration. The main books recommended to support this manual are listed on the ABE website and details of other additional reading may also be published there from time to time.

Newspapers – You should get into the habit of reading the business section of a good quality newspaper on a regular basis to ensure that you keep up to date with any developments which may be relevant to the subjects in this unit.

Your college tutor – If you are studying through a college, you should use your tutors to help with any areas of the syllabus with which you are having difficulty. That is what they are there for! Do not be afraid to approach your tutor for this unit to seek clarification on any issue as they will want you to succeed!

Your own personal experience – The ABE examinations are not just about learning lots of facts, concepts and ideas from the study manual and other books. They are also about how these are applied in the real world and you should always think how the topics under consideration relate to your own work and to the situation at your own workplace and others with which you are familiar. Using your own experience in this way should help to develop your understanding by appreciating the practical application and significance of what you read, and make your studies relevant to your

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personal development at work. It should also provide you with examples which can be used in your examination answers.

And finally …

We hope you enjoy your studies and find them useful not just for preparing for the examination, but also in understanding the modern world of business and in developing in your own job. We wish you every success in your studies and in the examination for this unit.

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recording or otherwise without the prior permission of the Association of Business Executives

(ABE).

© The Association of Business Executives (ABE) 2011

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Unit Specification (Syllabus)

The following syllabus – learning objectives, assessment criteria and indicative content – for this Level 5 unit has been approved by the Qualifications and Credit Framework.

Unit Title: Managing the Customer Relationship

Guided Learning Hours: 160

Level: Level 5

Number of Credits: 18

Learning Outcome 1

The learner will: Understand the contribution Customer Service makes to achieving organisational objectives.

Assessment Criteria

The learner can:

Indicative Content

1.1 Examine the key aspects of customer service.

1.1.1 Distinguish between customer, user and purchaser.

1.1.2 Understand key terms in the application of customer service, e.g. ‘customer satisfaction’, ‘service quality’ and ‘customer delight’.

1.2 Explain how customer service can be used to create competitive advantage.

1.2.1 Service/Profitability cycle (Reichheld).

1.2.2 Importance of the lifetime customer and customer loyalty.

1.2.3 Customer retention, repurchasing.

1.2.4 Customer acquisition.

1.2.5 Benefits of achieving ‘world-class’ customer service for an organisation including customers, employees and other stakeholders.

1.3 Evaluate the risks to an organisation if it delivers poor customer service.

1.3.1 The dangers and problems associated with poor customer service.

1.3.2 The focus on alternative sources of competitive advantage, especially price.

Learning Outcome 2

The learner will: Know how to improve customer service performance in an organisation.

Assessment Criteria

The learner can:

Indicative Content

2.1 Evaluate the factors that contribute to customer satisfaction.

2.1.1 Identify organisations that justify the label ‘world-class’ and analyse what they do that sets them apart.

2.1.2 Explain the factors that create customer satisfaction, dissatisfaction and customer delight.

2.1.3 Understand the role of customer expectation, the service transaction and service outcomes (as perceived by the customer).

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2.1.4 Use of role modelling, benchmarking to evaluate customer service levels.

2.2 Assess how HRM policies can be used to deliver service excellence.

2.2.1 Develop recruitment and selection policies that enable the organisation to identify people with appropriate attitudes and capabilities for the effective performance of service/support roles.

2.2.2 Create induction, learning, training and development schemes that inculcate the organisation’s central customer service values, its ‘Big Idea’ and its required service behaviours.

2.2.3 Reward and recognition systems that acknowledge and celebrate success and progress in the customer service arena, for both individuals and teams.

2.2.4 Build service priorities into all aspects of the organisation’s performance management and appraisal mechanisms.

2.2.5 Importance of career patterns.

2.3 Identify the different internal tactics that can be used to improve customer service.

2.3.1 The role of infrastructure (processes, systems and technology) in creating positive customer experiences.

2.3.2 Significance of Information Technology as an enabler of efficient service delivery, the contribution of I.T. to design, maintenance and improvement of customer service systems.

2.3.3 Co-operation between functions, especially customer facing (e.g. marketing and sales).

2.3.4 The factors for and against the establishment of a specific customer service function.

2.3.5 Benefits of personalised service organisation (tailoring customer service to each specific customer).

2.3.6 Risks and benefits associated with outsourcing and offshoring for service support roles or directly customer-interactive facilities.

2.4 Evaluate the strategic issues that affect customer service performance.

2.4.1 Service leadership, e.g. create appropriate high-level standards, champion and promote service excellence through a ‘Big Idea’, a mission, vision and core values.

2.4.2 Culture, e.g. climate of continuous improvement and restless dissatisfaction with the status quo and the development of positive approaches to learning.

2.4.3 HRM Strategies; evaluate the principles of job design in a customer service context; standardisation and scripting versus empowerment, discretionary behaviour and role autonomy.

2.4.4 Organisational structure.

2.4.5 Current and future potential of e-service and other forms of remotely administered customer service.

2.4.6 Customer Segmentation and the implications for customer service.

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Learning Outcome 3

The learner will: Know how to manage the customer interface.

Assessment Criteria

The learner can:

Indicative Content

3.1 Evaluate how macro environmental factors affect the power of the customer.

3.1.1 Economic influences e.g. increasing levels of discretionary income and the impact of the globalised economy.

3.1.2 Political influences e.g. privatisation and the deliberate creation of more competitive environments.

3.1.3 Social influences e.g. higher levels of education leading to a more sophisticated set of expectations, the impact of diversity and equal opportunities, the expansion of consumer groups.

3.1.4 Technological influences, e.g. the internet and e-commerce.

3.1.5 Legal influences, e.g. consumer protection, awareness of consumer rights and the effect of regulatory agencies.

3.1.6 Ethical and moral influences, e.g. the degree to which authentic levels of reciprocal trust can be created between organisations and customers.

3.2 Propose procedures to handle customer complaints.

3.2.1 Effective procedures for encouraging, processing, managing and responding to customer complaints.

3.2.2 Mechanisms for handling difficult customers and for resolving customer/supplier conflict.

3.3 Illustrate communication methods with customers that enhance service levels.

3.3.1 Gaining customer feedback and the benefits of measuring the organisation/customer relationship through ‘the lens of the customer’ (Johnson and Gustafsson).

3.3.2 Methods through which organisations may communicate with customers: published service commitments and promises, product/service information etc.

3.3.3 Methods through which customer feedback may be solicited and utilised by organisations: questionnaires, interviews, focus groups etc.

Learning Outcome 4

The learner will: Know how to improve customer service levels in specific contextual settings.

Assessment Criteria

The learner can:

Indicative Content

4.1 Compare the application of customer service between business-to-business (B2B) and business to consumer (B2C).

4.1.1 Compare the application of customer service between business-to-business (B2B) and business to consumer (B2C).

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4.2 Identify the unique aspects associated with implementing customer service values in the public sector.

4.2.1 Compare public sector to private enterprise.

4.3 Evaluate the practice of customer service across differing distribution channels.

4.3.1 Internet-based and virtual product/service providers.

Learning Outcome 5

The learner will: Understand the role and impact of front-line staff in the delivery of customer service.

Assessment Criteria

The learner can:

Indicative Content

5.1 Explain the crucial role of front-line staff in the delivery of quality customer service.

5.1.1 Internal Customer Service, including the role of people in creating positive customer experiences and methods for generating customer-focused attitudes and behaviours throughout the organisation.

5.1.2 The notion of boundary spanning roles in customer service organisations (Batson and Hoffman) and the challenges these present to front-line staff and their management.

5.2 Assess the impact of the customer service interface on front-line staff.

5.2.1 The impact of boundary spanning roles on service delivery staff.

5.2.2 Causes of stress in the delivery of customer service.

5.2.3 Response mechanisms of staff in handling boundary spanning role stress.

5.3 Evaluate the managerial challenges in supporting front-line staff in the delivery of customer service.

5.3.1 Recognising the pivotal position of the customer service manager and front-line staff supervisors/team leader in stimulating high levels of commitment and engagement among customer-facing/boundary-spanning staff.

5.3.2 Identify the range of techniques available to managers and supervisors in undertaking 5.3.1.

5.3.3 Understand the mediating role of managers/supervisors in handling conflict between customers and customer-facing staff.

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Coverage of the Syllabus by the Manual

Learning Outcomes Assessment Criteria Manual

The learner will: The learner can: Chapter

1. Understand the contribution Customer Service makes to achieving organisational objectives.

1.1 Examine the key aspects of customer service

Chap 1

1.2 Explain how customer service can be used to create competitive advantage

Chap 2

1.3 Evaluate the risks to an organisation if it delivers poor customer service

Chaps 1 & 2

2. Know how to improve customer service performance in an organisation.

2.1 Evaluate the factors that contribute to customer satisfaction

Chap 1

2.2 Assess how HRM policies can be used to deliver service excellence

Chap 6

2.3 Identify the different internal tactics that can be used to improve customer service

Chap 4

2.4 Evaluate the strategic issues that affect customer service performance

Chap 3

3. Know how to manage the customer interface.

3.1 Evaluate how macro environmental factors affect the power of the customer

Chap 2

3.2 Propose procedures to handle customer complaints

Chap 5

3.3 Illustrate communication methods with customers that enhance service levels

Chap 5

4. Know how to improve customer service levels in specific contextual settings.

4.1 Compare the application of customer service between business-to-business (B2B) and business to consumer (B2C)

Chap 1

4.2 Identify the unique aspects associated with implementing customer service values in the public sector

Chap 3

4.3 Evaluate the practice of customer service across differing distribution channels

Chap 3

5. Understand the role and impact of front-line staff in the delivery of customer service.

5.1 Explain the crucial role of front-line staff in the delivery of quality customer service

Chap 7

5.2 Assess the impact of the customer service interface on front-line staff

Chap 7

5.3 Evaluate the managerial challenges in supporting front-line staff in the delivery of customer service

Chap 7

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Chapter 1

The Characteristics of Customer Service

Contents Page

Introduction 2

A. Who is the Customer? 2

The Customer in the Consumer Market 3

The Customer in Commercial Markets 4

What about Intermediaries? 5

The DMU as the Customer 6

B. What is Customer Service? 7

Reactive Customer Service 8

Proactive Customer Service 8

C. Customer Satisfaction 9

D. Service Quality 12

Service Quality and the Marketing Mix 12

Delighting the Customer 13

The Loyalty Factor 15

Internal Customers and Service Quality 15

Service Excellence and Word Class 16

The Moment of Truth 18

E. Evaluating Customer Service Levels 19

Customer Service Standards 19

Role Modeling 20

Benchmarking 21

Getting Customer Opinions – SERVQUAL 21

Mystery Shopping 22

Summary 22

2 The Characteristics of Customer Service

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INTRODUCTION

Treating customers properly is fundamental to any organisation. Without a good flow of new and repeat customers any business will struggle. It is a truism that long-time customers are vastly more profitable than newcomers, yet most companies keep better track of office supplies and magazine subscriptions than they do of their customer relationships. It has been estimated that acquiring new customers costs between four and ten times as much as keeping existing ones. Therefore, it would seem that, particularly in difficult trading times, the key to maximizing business success is to encourage satisfied customers to come back again and again – to repeat purchase. That is what managing the customer relationship is all about.

We shall start our study here in this first chapter by defining the key terms used in customer service and exploring the main ideas and theories which contribute to creating a positive and profitable customer experience. In subsequent chapters, we shall build on this initial discussion by looking at how customer service may become a central pillar in the management and operations of business organisations, and the benefits it may bring.

A. WHO IS THE CUSTOMER?

Most people‟s definition of a customer is an individual who buys a product or service from an organisation. If we look for a dictionary definition, then this is pretty much what we are given. The Merriam-Webster online dictionary, for example, gives the following simple definition:

"1: one that purchases a commodity or service

2: an individual usually having some specified distinctive trait <a real tough customer>".

Ignoring the second definition as not really applying to our purpose here, in simple situations like, say, buying a sandwich for your lunch, the first definition is, to a large extent, correct. But not all transactions are so straightforward and, according to the UK‟s Institute of Customer Service, a customer is:

"anyone … who receives customer service from a service deliverer".

This is a very broad definition and needs to be examined a little closer. Let‟s start by exploring some of the basics and defining what we mean by the words we often associate with a customer.

What is the difference between a customer and a consumer?

Again, if we look at the dictionary, we find a very specific definition of a consumer:

“… a person who buys goods or services for personal needs and not for resale or to use in the production of other goods for resale” (Webster‟s New World College Dictionary).

So a consumer is a customer who buys something from you which they will be using themselves. So they are both the purchaser and the end user.

Is the customer the person who pays?

In simple retail situations, the customer buys and uses the goods or services which the seller is offering. The purchase isn‟t complicated and the sales assistant can quickly identify what the customer needs. All of us make these kind of transactions every day. However, if we take our example of the lunchtime sandwich, who is the customer if you are buying a sandwich for a colleague? This leads us on to the next question.

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Is the customer the same as the user?

The person who pays for the goods or services – the buyer – may be only one link in a chain of people all with different points of view and positions regarding the purchase. The person who actually does the buying may be a separate person who is not going to be using the goods or service at all. The person who actually uses the product or service that has been bought may also have some influence over the purchase decision. So, both sets of people can be classified as customers as they are all receiving customer service from the seller, but each will have an different perspective on the purchase – for example, the sandwich buyer has been given the task of buying something to eat, generally within a price range, which meets the needs and tastes of their colleague, and the sandwich eater wants to know that they are getting something which they can enjoy (taste, freshness, etc.) and which represents good value for money.

So, buyers and users are not necessarily one and the same, particularly in commercial markets where the buyer is not an individual acting on his/her own or on behalf of other individuals, but is part of an organisation.

Let's explore this in more detail.

The Customer in the Consumer Market

If the organisation operates in the business to consumer market (b2c) then, as we have seen, the customer is generally simple to identify.

Figure 1.1: Customer-organisation relationship in the b2c market

The customer is usually the individual person who pays over the money for goods or services from a company. The purchaser is often also the user – the consumer – of the goods or services, but despite it being called "the consumer market", we need to be careful as identifying who the organisation‟s customer is may be complicated if the purchaser has other interests to take into account.

The buyer, for instance, may be parents looking to purchase a bicycle for their child‟s birthday, but it is the child who is the user. The user may have a very different idea of what they want, or what they expect from a product or service, than the person who actually does the purchasing.

We can complicate this example easily by considering the situation where a grandparent gives money to a parent to buy a gift for their grandchild. Who is receiving the service in this case? The child? The parents? The grandparents? All three? Certainly the parents are the direct customers as they are the ones who are interacting with the organisation in the purchase. But the grandparents can also be classified as customers as they also have needs and wishes that the organisation must satisfy. The child who receives the present will be the user of the goods or service provided and therefore he/she, too, falls within the definition.

Organisation

Customer


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So you can see that, even in a simple b2c transaction, the person who makes the purchase may not necessarily be acting solely on their own thoughts, feelings or experiences and may not, therefore, be the sole customer.

The possibility that, even in apparently quite simple transactions, there are multiple "customers" is very significant. For example, most organisations these days try to identify who their customers are in order to gather large amounts of data about them. This "data mining" informs strategic business decisions such as loyalty programmes, advertising decisions and even product specifications. This is something we will return to and examine in later chapters.

The Customer in Commercial Markets

If the customer is not necessarily easy to identify in b2c markets, in business to business markets (b2b) it can be particularly complicated to identify just who the he or she is – and, therefore, exactly whose needs and expectations must be met by the organisation.

For example, if you are an IT support company, the buyer is representing the organisation which procures your services to ensure their computer systems operate correctly. However, the user is the person sitting at their computer to do their work. Both the organisation and the user are customers according to our definitions, but they all have different criteria for evaluating your product or service.

Thus, in a b2b situation, the customer is more likely to be a series of people or even a whole organisation.

Figure 1.2: Customer-organisation relationship in the b2b market

A business-to-business transaction is normally between a representative of one organisation and the representative of another organisation. Sometimes, in the case of smaller businesses where the owner and manager are the same person, it bears many similarities with a consumer transaction. However, it is more usual in the b2b market for there to be a broad range of stakeholders involved within the purchasing organisation – for example, shareholders, directors, investment banks, departmental managers, etc. – and the purchase may then have to be justified against the differing requirements of each. This justification could be in financial terms – for example, cost versus benefit; budget considerations; return on investment – but there may also other internal factors such as spending in one particular area or department against another with an equally pressing need. In commercial situations, the purchaser will also have organisational policies and processes to adhere to and will have the overriding commercial interests of the organisation in mind. All of these stakeholders may be considered to be customers who need to be satisfied.

Furthermore, in the public sector, the purchase may be influenced by external political considerations and come under public scrutiny.

Selling Organisation

Purchasing Organisation

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So, then, it can be surprisingly difficult for an organisation to identify who its customers are.

However, it remains an important question. On one level, there is the practical administrative issue of capturing customer names and other useful data from those who do the purchasing of the goods or services. But, on a more fundamental level, there is the complex issue of determining who is receiving the service from you – you may need to identify and distinguish the end user from the buyer, decision maker or even administrative and accounts staff.

What about Intermediaries?

As well as b2c and b2b, there is a third type of market which needs to be considered when identifying who the customer is – the b2b2c market. This exists in industries where intermediaries are used to get the product to the end user, such as insurance, the travel industry and pharmaceuticals.

Consider what we do if we need insurance for our house or car. We can go directly to the provider who will offer one of their own policies, but more often, we go to a broker who looks across a range of policies from different providers to find us the best deal. Similarly, when we want to travel, either on business or for holidays, we still largely go to a travel agent either on the high street or the internet to consolidate and book air travel, accommodation, car rental and other options and it is with these organisations that the customer interacts during the transaction.

Once purchased, though, the focus of customer interactions and customer service in the b2b2c market is with the company or companies providing the service. The insurance broker and the travel agency must maintain good relationships with both the consumer and the service providers – and vice versa - making managing the customer relationship quite complicated.

Figure 1.3: Customer-organisation relationships in the b2b2c market

The pharmaceutical industry provides us with a further example. Here, the changing nature of healthcare has produced entirely new business models, resulting in an even more complex set of customer definitions. New channels of distribution – both for the products themselves and for information about them – and the consequent new partner relationships

Selling Organisation

Intermediary Organisations

User

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between the organisations and individuals involved complicate the idea of who the customer actually is.

Originally, the primary customer of the pharmaceuticals company was the physician. This relationship was created and maintained when representatives called on the doctor, explained the benefits of their product and left samples. Those days are now long gone, particularly in European, Australasian and North American markets. Today, "managed care" organisations, pharmacy benefit plans, employers and even caregivers and patient advocacy groups represent new and important customer groupings with whom pharmaceutical companies must also create and maintain good relationships if they are to sell their products and services. They must also remember that, sitting outside that circle of intermediaries are the end users, the patients, who need to feel confidence in the medications that they are prescribed.

Each of these customers has its own set of potentially conflicting needs that must be understood and met. The "value proposition" – the clear identification of what key benefits the product will deliver, and the price that will be charged – may be very different for each of them.

The DMU as the Customer

If you have studied marketing, you may have already come across the concept of the Decision Making Unit (DMU) when looking at what influences people to buy or use products and services.

Basically the DMU is the group of people who have an input into the decision to buy or use something. There are six main roles within the DMU:

Initiator – the person who suggests purchasing or using a product or service.

Influencer – the person who affects the decision by defining specifications or supplying information which helps evaluate alternatives, often on the basis of particular relevant knowledge or experience.

Decider – the person with the authority to give the go-ahead on purchasing a particular product, service or using a particular supplier. This person may be the budget holder, for example.

Buyer – In b2c transactions, this is the person who pays for the item. In b2b transactions, this will be the person who is responsible for arranging the terms of the purchase, perhaps through negotiating a contract.

End user(s) – the person or persons who will use the goods or service.

Gatekeeper – the person who controls the flow of information.

The six roles do not always equate to six different people in the DMU. Often, one person may take on more than one role or, indeed, you may find that there is more than one person in each role.

The DMU is most obvious in larger corporations where roles and processes are clearly differentiated. But it can be seen at work in both the b2b and the b2c markets, and in respect of relatively small value transactions as well as larger capital purchases.

Think Point

Think about a recent purchase made for your family or household, such as a new television or car. Who suggested looking for the item? Who uses it? Who had a say in which model was eventually purchased? Who decided how much could be spent? Who interacted with the salesperson and purchased the item?

http://en.mimi.hu/marketingweb/benefit.html

http://en.mimi.hu/marketingweb/product.html

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Write down all the people involved and what their opinions were about the purchase. Can you fit their involvement into the six roles of the DMU?

So, in both b2b and consumer situations, not all of the customers are directly involved in the purchasing transaction – and indeed, may not be easy to identify. Further, the requirements and motivation of each of the participants in the purchase decision may not be the same. Successful companies understand that a decision to purchase is not always taken alone by the person who "seals the deal" and that all members of the DMU should be considered as customers with needs that should be identified and satisfied.

B. WHAT IS CUSTOMER SERVICE?

So, if a customer is anyone who receives customer service from a service deliverer, just what is customer service?

Peter Drucker in his book Management: Tasks, Responsibilities, Practices (Harper, 1993) stated that the main purpose of business is "….to attract and maintain customers". Our own experience tells us that an important part of maintaining customers (and arguably also attracting them in the first place) is how the customer is treated.

To make a sale, customers have to be attracted by at least one of the following when making a purchase:

The product

The price

The service.

It used to be that organisations sold on price or scarcity and needed only to provide the goods that customers wanted at a price they were ready to pay, and a sale was more or less assured. With ever increasing choices, today's customers want something more. Ideally, customers want a product which meets their specifications at a price which gives good value, plus the reassurance that the company they are buying from will sort out problems reliably and efficiently, should they occur. They often place more importance on the service factor – how service providers take care of them and show that they value their custom. The terms "customer care" and "customer service" may be used interchangeably in this respect.

To customers, the service they receive is the most visible aspect of any organisation‟s performance. Any internal measurement of performance is irrelevant to their perception of you as a quality organisation unless it directly affects the care they receive before, during and after buying from you. For most, the quality of customer service determines whether or not they will buy in the first place, but also whether or not they will return to buy again and encourage others to buy.

So, customer service is an essential part of doing business. Ideally, it means assisting customers, listening to and acting on their complaints, and generally using a variety of tactics to keep or retain them.

Let's put this to the test and assume you need to purchase a home computer. You decide to go to the shopping mall where you know there are several shops all selling computer equipment. When you reach the shopping complex you notice that every shop sells similar computer systems, all with the specification you want and at a very similar price. Who will you buy your system from? The chances are you will buy it from the salesperson who greets you, takes the time and interest to find out how you intend to use the machine, and explains to you the after sales service in case something should go wrong with the computer. The differentiator is the service you receive from the salesperson. Or, indeed, you may have


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bought goods or services from a particular store before and feel reassured that the service you had before will be repeated and meet your requirements for the price you are paying.

Think point

How do you behave as a customer in relation to the service you receive from sellers? Can you identify a time when you experienced poor customer service before, during and after a transaction? Have you ever had an unsatisfactory experience over the telephone with a call centre, even though you may have liked the product or service?

Think about each of the occasions and whether you bought the product or would go back and buy from the same company again.

The chances are you decided not to go ahead and buy the product or service from that company, or at least not a second time if you had a choice!

Reactive Customer Service

One important aspect of customer service is rather obvious but sometimes overlooked, and that is „to serve customers‟. Businesses assist customers in many ways by providing pre- and post-sales support over the phone, via the internet or in person. Many businesses, especially retail outlets, have a customer service desk for any questions customers may have regarding sales, returning goods or dealing with problems with a product. Most large businesses have a dedicated department or even a call centre for inquiries and other assistance for customers who need help with a problem.

On the surface this may seem to demonstrate that businesses are taking the initiative in providing service to customers. However, if we analyse these activities a little more closely it is fairly evident that rather than being proactive, these are reactive solutions to problems. The premise behind having a help or service desk is that customers come to you with a query or problem, and then you put in place processes which deal with these. It is about responding to a customer‟s articulated need and, more often than not, limited to the resolution of a complaint.

Proactive Customer Service

Proactive customer service differs from reactive service in that it uses a variety of techniques and processes to get information to customers before they initiate an interaction themselves. These techniques and processes will vary from company to company depending on variables such as the nature of the products and services being supported, the skill level of the company‟s customer base and the type of ongoing communications that already take place

between the company and its customers. But simple examples of this pro-active approach could be

Sending out questionnaires and surveys to find out customer views

Notifying customers of changes to products, price, procedures etc

Providing information allied to your product (e.g. recipes if your business is selling fish)

Having a "chat" facility to handle customer questions while they are looking at your website

Bringing drink refills to a customer‟s table before they ask.

There are some markets which are price-sensitive, and companies need to ensure that their product or service is in-line with what other companies are charging. But these markets, in


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reality, are few – even with the rise of internet shopping and the price comparison sites that have sprung up over recent years. You can only lower a price so much on a product, and then what do you do to persuade the customer to buy from you rather than any other company? Even when a product is priced slightly higher than a competing brand, customers will often choose the organisations that provide friendly and efficient service. On the flip side, rude and moody staff who act as if the customer is preventing them from doing something more important may upset and put customers off. Many customers would rather spend a little more for good service and quality than get something a little cheaper but not feel confident that any problems will get resolved satisfactorily, should something go wrong.

So, good customer care gives an organisation a differentiating factor, and helps it to stand out. A product can be copied, but the service it gives is unique to that organisation and the people it employs. If customers perceive customer service as unsatisfactory, they will not hesitate to take their business elsewhere.

C. CUSTOMER SATISFACTION

As we have seen, customer service is the critical factor for succeeding in any type of business today. Customer satisfaction is a key performance measure for all companies, and the main goal of any company is to satisfy its customers in some way. Satisfying customers – giving them what they want –keeps them coming back and builds a very strong customer-business relationship. Customers will trust your services and feel comfortable when doing business with your company.

Exactly what constitutes customer satisfaction?

Customer satisfaction = meeting expectations

Identifying your customer‟s expectations – and exceeding them – creates exceptional customer service and a successful company. Finding new strategies to accomplish this is always necessary because customers‟ expectations are forever changing. So, the question “Are our customers happy with what we are doing?” is now a fundamental part of global business practice in all markets, whether you are a multinational company or a corner shop.

In order to answer that question, first you need to identify what it is that your customers want or expect from you. Once you understand that, you can then devise strategies to meet those expectations.

Using Hertzberg’s Two Factor Theory

You may have already come across Hertzberg‟s Two Factor Theory with regard to motivating staff. Basically, Hertzberg said that there are some things which satisfy employees and some which neither satisfy nor dissatisfy them, but they expect as a normal part of work. Hertzberg came to the conclusion that aspects of the work environment that satisfy employees are very different from aspects that they take to be "the norm".. He labelled these factors as “hygiene” factors because we are only conscious of them when they are missing, just like we get sick when hygiene measures such as sewers and clean water are missing in our environment.

Hygiene factors are part of the context in which the job is performed, as opposed to being attributable to the job itself. Hygiene factors include:

company policies

supervision

working conditions

salary

safety


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security

To illustrate this, imagine that where you work, the office is too hot in the summer and too cold in the winter; you are being harassed and mistreated by your manager, and your best friend tells you she is earning much more than you for doing the same work. You would certainly be miserable in such a work environment.

However, if these problems were solved (your office temperature is just right and you are not harassed at all – perhaps you are even being paid more than the going rate for the job!), would you be motivated to work harder? Most likely you would take the situation for granted, though research has shown that a pay rise will have a short term effect on motivation. In fact, many factors in our work environment are things that we miss only when they are absent, but don‟t notice if they are present.

In contrast, "satisfiers" are factors that are intrinsic to the job, such as:

achievement

recognition

interesting work

increased responsibilities

advancement

opportunities for personal growth such as training.

According to Hertzberg‟s research, satisfiers are the conditions that truly encourage employees to try harder.

Figure 1.4: Two-Factor Theory of Motivation

We can apply these hygiene and satisfier factors to the customer experience.

Customer satisfaction is the result of a customer receiving what they expect to receive, the hygiene factors. In all transactions, customers expect to be treated fairly. They expect the product or service to be "fit for purpose" (and indeed many countries have laws covering this) and for the transaction to be carried out politely and efficiently. There is an unspoken expectation of this across all industries and types of purchase regardless of the cost or complexity of the transaction.

If we look at low cost airlines, for example. A passenger is happy to pay less for their ticket than on a full service airline knowing that there will be some services associated with airline travel that they will not receive – their flight will probably depart from a distant gate (or even

interesting/ satisfying work

personal growth

recognition

Satisfier

achievement

responsibility/ autonomy

working conditions

supervision/ relationships

security

salary

Hygiene

company policy


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an airport at some distance from their destination), they will not receive complimentary in-flight drinks or snacks/meals, their luggage allowance will be less, they may not be allocated specific seating and may have to sit apart from their travelling companions, and so on. The low cost airline passenger does not consider these "hygiene" factors – they don't expect to receive them and are therefore not put out that they are not there.

In fact, they could be classified as satisfier factors. If the customer values these services then they will pay more for them, as many charter and low-cost airlines discovered when they successfully began charging passengers extra to choose their seats in advance of check-in.

However, there are certain hygiene factors which all passengers expect from an airline, whatever the price of the ticket – well-maintained and safe aircraft, trained staff; straightforward booking systems, clear terms and conditions, etc. On their own, they are not enough to satisfy the customer, but if any of these things are missing or not up to industry standards in the eyes of the customer, then the customer will feel dissatisfied.

Customer satisfaction = expected service – received or perceived service

Case study

In 1988, J. M. Juran produced a rank-ordered inventory of elements important to air travellers, based on a study of 2,500 passengers of Quantas Airways. He grouped all of these elements into two lists under the headings of hygiene factors and satisfiers. From these, he produced a list of those elements that customers reported would lead to extremely positive satisfaction. Virtually all of the top elements in this list were found to be hygiene factors and, in general, the satisfiers were ranked lower than the hygiene factors. He went on to demonstrate that many of the hygiene factors may cause passengers extreme dissatisfaction if they are not delivered according to the customers‟ expectations.

On the surface, this seems to be a confusing and almost contradictory state of affairs. Why didn‟t the satisfiers lead to customer satisfaction?

Some of the hygiene factors noted by Juran included no lost luggage, no damaged luggage, clean toilets, clean and tidy cabin, comfortable cabin temperature and humidity, etc. On the other hand, some of the satisfiers included comfortable seats, prompt baggage delivery, ample leg room, good quality meals, assistance with connections, quick/friendly airport check-in, etc. Some of us who do not travel frequently by air may see these as more hygiene than satisfiers!

The main finding of his study was that good satisfaction levels are only achieved when the hygiene factors meet customer expectations, and only then do satisfiers play their role by exceeding customer expectations. The conclusion was that, while the hygiene elements are a must, the satisfiers are what lead to customers making the choice to repeat purchase


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D. SERVICE QUALITY

Quality can be a very subjective concept and, therefore, difficult to define.

In manufacturing or technology, it can be seen to be the state of a product conforming to a set of specifications. These specifications or requirements are set by engineers, scientists, designers and technicians, and the goal of all functions within the manufacturing process is to meet the specifications for every product, every time. Performance is monitored and measured and corrective actions taken if non-conformity is found. Indeed, this is so important that, in many companies, whole quality assurance departments are often established to ensure that the products meet the internal – and often also external – quality requirements.

Defining quality in services is, though, often more difficult because of the intangible nature of the concept of service. There are a number of different "definitions" as to what service quality means, but we can put forward the following one which fits with our previous discussions:

Service quality = the extent to which a service meets customers' needs or expectations

Once again, though, we come up against the problem of defining what customer's needs and expectations actually are. Each of us is likely to have a different idea of what constitutes an acceptable quality of service based on the context of the service itself and our previous relevant experiences. This can be seen by the expectations of different generations – for example, older customers who were used to the personalised service offered by shops in the 1950s, 60s and 70s, often complain about the lack of knowledge or attention of retail assistants who carry on a conversation with a colleague while serving them, while younger customers, with quite different expectations, may well not even notice.

In considering service quality, then, we need to take account of a broad range of factors which can encompass different customer expectations and needs.

Service Quality and the Marketing Mix

The marketing mix is one of the most widely accepted concepts in marketing. Philip Kotler has written many books on the subject and he defined the mix as the controllable variables that an organisation puts together to satisfy target markets.

Traditionally the marketing mix has included four broad categories – product, price, promotion and place. Kotler and others have, though, suggested that particular elements of the mix should vary or be expanded beyond these 4Ps depending on the context in which they are being used, but particularly in service organisations or service contexts. The services marketing mix evolved due to the recognition that the service environment – whether it is linked to a tangible product or not – offers organisations more opportunities to interact with the customer than the traditional marketing mix suggested.

Take, for example, the hotel industry. It is largely thought of as being part of a service industry, but each hotel stay requires buildings, beds and other products, a price charged for the stay which needs to reflect the perceived value for money or quality that the customer is getting, a location (place) which is convenient for the customer, and advertising or promotion used to get customers to book a room.

The expanded service mix includes all of the four traditional elements plus three additional Ps:

Physical evidence – the environment in which the service takes place

People – everyone who plays a part in the service delivery

Process – the systems and mechanisms relevant to the service


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This model implies that service quality is directly linked to customer satisfaction: the customer has an expectation of the quality of service based not just on industry standards for the product/service but also on their own perceptions of the organisation based on the tangibles of what they can see (the people and the physical evidence such as the cleanliness of the premises) and what they experience (the processes which they come into contact with such as booking procedures, returns policy).

Because the service a customer receives is to some extent made up of non-visible attributes, each one will unknowingly play detective before or during an interaction by looking for more tangible evidence or information regarding the level of service they will receive. This can include visual "clues" such as décor, design, employee appearance, and newness of equipment and systems, etc. These contextual cues directly affect customer satisfaction by influencing expectations prior to the service encounter, and then in the evaluation of perceived performance against these expectations.

Think Point

What happens when you are in an unfamiliar town or city at dinner time and you need to find a restaurant? Do you just go and eat at the first restaurant you come across or do you look in the windows of several before making up your mind where to eat? What is it that influences your choice?

Most of us will assess the possible restaurants in terms of the 4Ps – the type of food offered, its price, the location and how the menu is presented. However, it is likely that you will consider other factors, such as how the establishment looks, the appearance of restaurant staff, the numbers of other diners and even the sort of clientele the restaurant attracts. All of these will influence our perception of the service we will receive in each restaurant and contribute to the choice we make.

Of course, what a customer perceives as the service they receive is not necessarily the service they actually receive. Several published studies reveal that the mood of the customer has a significant impact on the perception of the service received. For example, if a customer has been waiting for a long time in a check-in queue, the perception of the friendliness of the person at the check-in desk deteriorates; people waiting a long time for elevators (lifts) have a better perception of the experience of waiting if there is some distraction such as a mirror in the elevator lobby; golfers who have had a bad day on the course are likely to have a worse perception of the service at the clubhouse than those who have had a good day.

Service quality, then, is about the difference between customer expectations of service and their perception of the service received. If expectations are greater than performance, then perceived quality is less than satisfactory and customer dissatisfaction occurs. If performance is greater than expectations, then the customer is delighted, will remember this and be more likely to use the same organisation again.

Delighting the Customer

Good service is an expectation held by the customer regarding the manner in which they are treated by anyone representing the company. In developed western markets, perhaps, this may be significantly more important to customers simply because over the years competition within consumer markets has driven organisations to adopt such slogans as “the customer is king”, “satisfaction guaranteed” or even “your satisfaction is guaranteed or your money back” and have put into place practices which support them.


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It is a fact of life that sometimes things go wrong and customers do not always experience the level of service that they expect – maybe the product or service being sold is faulty; the delivery could have been wrong, late or not at all; or an employee involved in the sale upset the customer in some way. All businesses experience complaints. What makes the difference is how the customer feels about the way their complaint has been handled.

So, if a product is faulty or damaged on delivery, customers expect, at the very least, a discount on the price or the offer of an immediate replacement. Customers want, and expect, to be spoken to in a respectful and professional manner in any situation regarding a problem, complaint, question or need for assistance that may arise. If they are not, they are unlikely to feel satisfied whatever the outcome of their complaint.

From a seller‟s point of view, all this makes sense and offer something which you might expect the customer to be very happy with. All organisations want satisfied customers – after all, dissatisfied customers are bad for business.

However, from a business perspective, customers who are merely satisfied are vulnerable. Competition in most markets is fierce and customers who are merely satisfied with a product or service may be easily lured away. Globally, there are very few true monopolies, so customers have a real choice when they are looking for a product or service. Whilst many organisations seem to believe that they can only compete on price, whenever customers are asked why they do business with some companies and not their competitors, the answer usually is “they have better customer service.”

What do they mean by this? Do they just mean they get what they expect to get? Or in some way has the organisation gone beyond expectations and "delighted" them? Let‟s look at an example.

I need my carpets cleaned, so I call the best known carpet cleaner in town and we make an appointment for Tuesday at 2 pm. The carpet cleaner arrives exactly as scheduled and is friendly and polite. I show him one spot in the living room that is extremely stained and he works hard to clean it. When he is done, the house looks fresh, clean and much better than before. The cleaner charges me exactly what I was quoted, thanks me for doing business with him and leaves. As a customer, I am satisfied – I got what I expected.

Most people would be happy with this level of service and would say that they would use the same company again. However, as a customer I have not been "delighted". There was no "WOW" factor which made the company stand out from all the others. So, if a competitor advertises a lower price or offers a promotion to include further services for free or at a reduced rate, it is quite possible that I will assume they will deliver the same satisfactory service as the company I used before, and choose the competitor next time because of the added value that I can get.

It is this notion of added value which can make the difference. So, what if, when the carpet cleaner was finished with my house, there was a canister of spot stain remover left on the dining room table? Or, suppose when you go to the dentist they offer to play your favourite music during the procedure? What if the car repair centre took you to work in a smart and comfortable car or left a complimentary car care pack on the driver‟s seat after a service? Or perhaps the hair salon knows your favourite brand of coffee and always has a cup waiting for you at each appointment?

These are just a few of examples of customer service which is better than expectations – there is a WOW factor. In those situations, the customer decision to use a particular organisation is no longer about price, it‟s about perceived value and being delighted with the service that they have received. The customer is then well on the way to becoming loyal or even an ambassador for the company.

Organisations who can be said to be market leaders retain and grow their customer bases by going beyond satisfaction.

http://www.actioncoach.com/press-room/coach-library/view/cat/index.php/Customer_Service


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The Loyalty Factor

If a customer receives service which is better than expected, they will be delighted and will go on to become not only loyal customers, but will often act as advocates for the product or service by telling their friends, colleagues and acquaintances.

Customer loyalty is created by strong relationships where the customer feels special and important – the "customer experience". People often buy their products and services on such an emotional feeling as much as the features and benefits. If a product or service gives them a good feeling in some way, they will continue to buy it over and over again – we can see this every day in the purchase of brands offering perceived high value instead of lesser brands of similar quality.

The same applies to sellers. They will aim to induce the same "feel good" customer experience to encourage customers to return again and again. If a company that sells a valued product doesn't make the customer feel good in some way, they will buy it somewhere else.

Frederick F. Reichheld, author of The Loyalty Effect: The Hidden Force Behind Growth, Profits and Lasting Value (Harvard Business School Press, 1996), showed that making loyalists out of just 5% more customers would lead, on average, to an increase in profit per customer of between 25% and 100%. Reichheld's analysis showed that the cost of acquiring new customers was an average of five times the cost of servicing established ones.

The implication is that organisations which depend on gimmicks and ad campaigns to constantly lure new buyers will always be at a financial disadvantage to companies that concentrate on keeping established customers happy. To support this, he recommends loyalty-based management in which businesses not only make a conscious effort to retain customers, but also develop strategies for attracting the kind who are likely to remain loyal.

Internal Customers and Service Quality

When we think of customer service, we immediately think of the way in which people from outside an organisation who buy its products or services are supported and treated. If a customer is a private individual or comes from another organisation, he or she is termed an external customer. However, there is another type of customer – the internal customer.

If we accept the Institute of Customer Service‟s definition of a customer given at the beginning of this chapter, then a customer can be anyone who depends on someone else within the same organisation to, for example, supply information, provide technical support, training – or any other action that ultimately results in serving external customers. So if someone in the sales department asks for information from the accounts department, then he or she is an internal customer of the accounts department.

We have considered at length that giving great external customer service will create customer satisfaction, customer loyalty and customer retention. So why should a business be bothered about providing good service across and between their own departments or roles?

High quality customer service can only work well in an environment where communication between departments and colleagues is clear, effective and timely. Treating colleagues to the same high level of service as external customers means that, for example:

queries get answered in a timely fashion

administration and customer paperwork is processed without delays

solutions to problems are looked for rather than passing them on to someone else because „it‟s not in my job description‟.


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Focusing on developing efficient and effective interactions with the organisation can help organisations to:

• increase productivity, and thereby cut costs

• improve interdepartmental communication and cooperation

• boost employee satisfaction by minimizing internal friction

• align departmental goals giving a real sense of purpose

• harmonise processes and procedures to minimise wasted effort

• replace interdepartmental competition with interdepartmental cooperation.

A spirit of co-operation – of all working towards the same goal of serving the customer – can be created even within non-customer-facing departments, and this ultimately will benefit the external customer.

Good internal customer service makes sound business sense. In order to create positive internal customer service, all departments within an organisation must work together cooperatively, agree on processes and procedures, and negotiate expectations. Like gears meshing in sync, interdependent business units which meet each others' needs and work productively together to meet common goals will deliver high quality products and service to the external customer.

Excellent service to the external customer is dependent upon internal customer service practices which foster the idea that all employees are important in delivering memorable customer service. The importance of internal customers (and we can include here vendors and suppliers as well) should never be underestimated. Organisations that strive for a high quality reputation would say that there should be no difference between the way internal and external customers are served.

Service Excellence and Word Class

Service excellence, as we have said, is both distinctive and yet hard to agree on. We know when we have received it and, rather more frequently, we know when we have not. Such service, both excellent and poor, has a strong emotional impact upon us as customers, creating powerful feelings about the organisation, its staff and its services, and influencing our loyalty to it.

Bob Johnston, Professor at the University of Warwick Business School in the UK, carried out a study to try to identify what makes a company stand out from another so much that customers go back again and again. He published his findings in a paper called Service Excellence = Reputation = Profit (ICS, 2001)

The research on which this paper is based was part of a five-year study into service excellence commissioned by the Institute of Customer Service. The purpose of the research was to understand the nature of service excellence as defined by customers/the public – i.e. what does service excellence mean from a customer perspective?

He formed about 160 focus groups of around five people in each (a total of 803 people), mainly from the UK, but also from across the globe in places such as Singapore, Hong Kong and Denmark. The groups were asked to identify four or five organisations which have a reputation for delivering outstanding service, and four or five that have a reputation for poor service.

The groups were then asked to take each of their organisations and describe what that organisation had done for the customer to make it outstanding or poor. Out of this emerged four major themes:

They deliver the promise


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They make it personal

They go the extra mile

They deal well with problems/queries

Delivering the promise

By this, the participants identified that "world class" companies always do what they say. So, if they promise your dry cleaning will be ready by 5 pm, you can turn up on the dot of 5 and take it away. They also identified that these organisations always provide what the customer perceives as quality and value for money. Additionally, customers found them to be easy and simple to deal with, quick and efficient.

They make it personal

Customers like to be treated as people rather than numbers in a data base. One of the important features of world beating companies is their friendly, caring and helpful attitude. They consistently give personal treatment. Staff are knowledgeable about the products or services and display a professional attitude, taking time to listen to customers and really engage with them.

They go the extra mile

Outstanding companies were judged to provide "a little extra" to the customer that merely "satisfactory" organisations did not. This could be by offering additional products or services, such as gift wrapping items for free, or a restaurant recognising that service has been below expectations and therefore the coffees are "on the house". Most importantly it was felt that these organisations exceeded expectations, anticipated needs and generally allowed their staff to be flexible in their interactions with customers rather than keeping to a "script" or a highly prescriptive process.

They resolve problems well

And finally, if things went wrong for a customer, they knew that the company had a clear and effective system in place to rectify the issue. Staff were trained to take ownership and responsibility for sorting out the problem and resolving it to the customer‟s satisfaction. They had a "helpful and positive attitude" and ensured that customers always received a speedy response even if the problem itself might take longer to fix.

Figure 1.5: Service excellence = easy to do business with

Most people, then, are delighted if organisations simply do what they promise. Dealing well with problems and good recovery processes are critical. The personal touch (caring, helpful

Go the extra mile

Deal well with problems and queries

Provide a personal touch

Deliver the promise


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attitude, personal treatment, knowledge and professionalism) is important. Going the extra mile is the "icing on the cake" once all the others are in place.

However, what Professor Johnston also discovered during this study is that, as delivered service quality increases, so also do customers‟ expectations of subsequent service. As a result, what might previously have been regarded as excellent service becomes simply adequate (expected) service, unless the organisation continues investing in this spiral of increasing quality in order to continually exceed expectations.

“‟Exceeding expectations‟ implies that organisations have continually to do more in order to deliver excellent service and delight their customers… Know your hygiene factors and enhancing factors. Agree, articulate and share the promise. Have excellent recovery systems in place. Specify and „control‟ the „soft‟ but vital personal element. The extra mile only needs to be an inch.” (Johnston, 2001)

The Moment of Truth

What a customer remembers about a service is not just dependent on first and last impressions. It is dependent on the "moments of truth", a phrase coined by Jan Carlzon from Scandinavian Airlines (SAS), the international airline owned by governments and private industry in Sweden, Denmark and Norway and one of the real trendsetters among service companies in Europe during the 1980s.

A moment of truth is when an interaction occurs between a customer and the service provider that can leave a lasting positive or negative impression on a customer. It is how customers evaluate service encounters and is one important ingredient in their overall perception of service quality. Most of us could tell about someone they know who always uses the same organisation for one thing or another: the uncle who always buys the same brand of car; the mother who "swears by" a particular brand of food or cleaning product. Maybe, like many people, you feel comfortable going back to the same shop for your clothes because you know the fit will be right and the price reasonable. In many cases, lasting or even lifelong relationships with a company are based on the customer having had numerous instances of satisfaction or delight in repeated service encounters.

Everyday, each one of us has many tens, perhaps hundreds of "moments of truth": when we check our bank balance online; get cash from an ATM; check our email, or perhaps arrange to get a car serviced. Moments of truth in the hospitality industry, for example, will undoubtedly include, but not be limited to, booking the room, check-in, check-out, dinner reservations, dinner ordering, dinner presentation, eating (quality and quantity of food) and laundry receipt. A moment of truth happens at all the "touch points" with an organisation.

Some examples of moments of truth identified by Jan Carlzon in his own business are:

when you make a reservation for a flight

when you arrive at the airport and check your bags

when you pick up your boarding pass

when you are greeted at the gate

when you are taken care of by the flight attendants onboard the aircraft, and

when you are greeted at your destination.

The list above contains a number of the main moments of truth, but while these may be the most important, there are lots of small ones as well – for example, you might be walking toward your gate at the airport and pass a couple of airline employees, they look up and smile at you. Now that may only be a small moment of truth, but it is an important one. It all adds to the total experience of the customer.


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Disney has taken these small moments of truth to an even higher level acting on the importance that these small touch points have on their customers. They train their cast members (Disney's term for employees) to acknowledge the guest (Disney's term for a customer) with a smile or facial expression if within ten feet. If the cast member gets within five feet of the guest, they are to acknowledge them verbally.

All of the little moments of truth, combined with the major ones, with the addition of the product or service your organisation is selling, add up to the overall level of a customer's satisfaction.

Jan Carlzon identified that, if there are good moments of truth, there are also bad moments. The bad ones are often referred to as moments of misery, and the good ones are referred to as moments of magic. The goal of customer service should be to create moments of magic, even if they start out as moments of misery.

For example, a customer may be checking into a hotel. He or she may have had three flights delayed and is tired and in a very bad mood – it has been a terrible day. It is not the hotel's fault the customer is unhappy, but the person who is checking in this customer has the opportunity to turn the customer's mood around by ensuring the hygiene factors are in place (smooth and efficient check-in, for example) and then going the extra mile (perhaps by offering a complimentary drink in the bar once the guest has unpacked).

E. EVALUATING CUSTOMER SERVICE LEVELS

Unless a customer tells you, you may never know for sure if the organisation is providing these moments of magic. So far, we have concentrated on levels of good service based upon customer perception. Whilst these should be at the heart of any business strategy, there are other standards that we can measure success or otherwise against.

Customer Service Standards

Any organisation which aspires to be world class will put in place written policies setting out what the customer can expect from them. These policies, used in both the public and private sectors, include codes of practice, customer charters or service level agreements which provide a benchmark against which both customers and the organisation itself can measure performance.

These codes and charters will vary from organisation to organisation but will generally contain statements of intent covering:

Timeliness

Accuracy

Appropriateness

The statements should be as detailed as possible – for example, a promise that "delivery will be within two days" looks like a measurable performance indicator for customer service, but is capable of different interpretations: delivery within two working days, delivery within two working days to addresses within the same country as the dispatch address, etc.

Codes of Practice

Currently, there are no global standards specifically dealing with customer service, although some individual countries have their own standards or codes. ISO and The International Customer Service Institute (TICSI) have published the following ones:

ISO 9004:2000 on quality and performance improvement

ISO 10001:2007 on customer service conduct


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ISO 10002:2004 on quality management in handling customer complaints

ISO 10003:2007 on dispute resolution

The International Customer Service Standard (TICSS)

Customer Charters

A Customer Charter is a statement of standards and procedures in which an organisation establishes its commitment to a certain level of service provision including, as a minimum, when and how it will provide information to its customers and its dispute or complaints resolution process. It is a useful tool for customers who know what level of service to expect and is also useful for staff as it gives them, too, a clear picture of what kind of service standards customers expect. Charters, then provide a sound framework for good customer service. The public sector in particular can benefit from customer charters through the greater transparency of having published standards and measuring performance against them.

Service Level Agreements

SLAs were originally used mainly for third party provision of information technology services. In more recent years, there has been a growth in the number and range of services outsourced, as more and more organisations have sought to reduce costs by focusing on core activities. Activities outsourced by organisations may include all or part of the customer service function.

An SLA has been defined as:

“An agreement between the provider of a service and its users which quantifies the minimum quality of service which meets the business need.” Hiles, A (1993 Service Level Agreements)

This might include such standards as:

How many times does the phone ring before someone answers?

How many transfers take place before a customer gets an answer?

How long does it take to process an order?

How long does it take to respond to a complaint?

SLAs differ from a code of practice or customer charter in that it is usually drawn up after some negotiation has taken place. Therefore, SLAs mostly exist between organisations and their partners or suppliers.

Charters and SLAs are often the result of formalising, recording or auditing performance standards that were already in place. However, it is always useful to have transparency with customers on quality standards, particularly when contracting third party organisations to manage the interface with customers.

As the focus on customer service increases, the need for objective evaluations of a business increases as well. The level and quality of service delivered to customers is a strategic activity and as such vital to its success. As well as using published service standards, there are other strategies which can be used to evaluate customer service levels.

Role Modelling

Within every industry there are leaders who are known for delivering excellent customer service. Other organisations can look at these as role models, and scrutinise what it is that has made them so successful.

One such industry leader is Nordstrom, the US company that grew from one shoe store into a nationwide fashion specialty chain which has become well known for its high level of customer service.


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According to its website, the company's philosophy has remained unchanged for more than 100 years since its establishment by John W. Nordstrom in 1901 – offer the customer the best possible service, selection, quality and value.

Nordstrom's salespeople are trained to "go the extra mile" to ensure that a shopper leaves the store a satisfied customer. Well motivated employees perform acts of superior customer service as part of the Nordstrom technique, ranging from going out of their way to locate a product to making deliveries after hours. They are trained to always make decisions that favours the customer before the company.

By searching out leaders in other industries and discovering their customer service philosophy, organisations can model the behaviours which deliver high quality customer service, resulting in customer retention and improved financial performance.

Benchmarking

Benchmarking is based on the concept that “what you cannot measure, you cannot manage”. A benchmark provides a measure to compare any aspect of company performance, usually with standards for the industry as a whole. Thus, such measures as productivity and efficiency, specific processes, policies and strategies, and overall organisational performance can be evaluated. Benchmarks act as tools which show where the organisation is meeting its objectives, and where it is not.

Each organisation will set its own benchmarks, based on what others in similar organisations are doing, and then collect data from their own organisation or customers in those areas for comparison. Thus, such service benchmarks as response times, complaint resolutions, delivery difficulties, etc. can be measured both to assess how an organisation‟s customer service is doing against industry standards and to identify gaps affecting customer satisfaction.

Note that benchmarks are not absolute standards. Nor are they necessarily a precise measure of customer satisfaction – firstly, the areas to be measured should be seen as important by customers in the first place, and secondly, what might be seen as "the norm" is not always the best. So, if an organisation is benchmarking against standard industry response times, for example, that will not necessarily tell it how well it is doing according to its customers – only how well it is doing against its competitors.

Getting Customer Opinions – SERVQUAL

This is a model developed by A Parasuraman in the late 1980s at the University of Miami to assess customer perceptions of service quality in service and retail businesses. It comprises a scale dividing the concept of service quality into five areas:

Tangibles – physical facilities, equipment, staff appearance, etc.

Reliability – ability to perform the service dependably and accurately

Responsiveness – willingness to help and respond to customer needs

Assurance – ability of staff to inspire confidence and trust in the customer

Empathy – the extent to which caring or individualised service is given.

SERVQUAL uses a questionnaire approach to ask customers about both their expectations and their perceptions. The use of questions directed at perceived as opposed to actual service received enables organisations to obtain a direct measure of the importance of each area to the customer, and serves as a benchmarking device as it assesses the customer‟s evaluation of the gap between what the customer expects by way of service quality from a class of service providers (say, all opticians businesses) and a single business (the local optician‟s store).


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Mystery Shopping

The concept of mystery shopping is quite straightforward. Trained researchers visit or call businesses posing as ordinary customers and provide detailed evaluations of their experience using written reports or questionnaires. It has been described as the acid test of customer service – an independent, objective assessment of staff performance as well as the goods and service provided. The practice is also referred to as secret shopping, service performance evaluation, service checks and frontline evaluation.

Mystery shopping allows companies to obtain a "snapshot in time" of their business practices, deliverables and employees from the perspective of a non-biased consumer. It has been estimated that as many as 60% of customers are lost because of customer service indifference – most customers who have unsatisfactory experiences will not complain, but will just never come back. So getting this objective perspective can be a useful method to see the organisation through the eyes of the customer.

Although the mystery shopper report is based on service encounters at one point in time, over a period of time these reports can show trends and highlight not just where the service gaps exist, but also whether or not changes that have been implemented are leading to improvements.

SUMMARY

“A satisfied customer is the best business strategy of all” Michael LeBoeuf ( Professor Emeritus at University of New Orleans)

In this chapter we have

Defined what a customer is

Identified various categories of customer

Examined the purpose of customer service

Evaluated factors which create a world class customer experience

Compared customer service in different contexts and

Explored the ways an organization can find out what their customers think about levels of service.

An important is taking place in the way businesses view their relationships with customers. The change involves moving customers from being satisfied to being loyal.. Moving a customer from satisfied to loyal requires planning, constant attention to the customer and diligence in consistently delivering outstanding service. In return, exceptional customer service will result in greater customer retention, which in turn results in higher profitability.

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Chapter 2

Using Customer Service to Create Competitive Advantage

Contents Page

Introduction 24

A. Customer Loyalty/Retention and Competitive Advantage 24

The Virtuous Cycle 25

The Return on Customer Retention 26

B. The Service/ Profitability Cycle 28

What is the Service/ Profitability Cycle? 28

The Loyalty Ladder 29

C. The Impact of the Wider Environment 32

The Macro Environment and Environmental Analysis 32

D. Macro Environmental Analysis 34

Political Factors 34

Economic Factors 35

Social Factors 37

Technological Factors 39

Legal Factors 41

Environmental/Ecological Factors 41

Ethical Factors 41

E. Porter’s Five Forces 42

The Bargaining Power of Customers 45

Summary 47

24 Using Customer Service to Create Competitive Advantage

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INTRODUCTION

In Chapter 1, we examined the concept of customer service and began to explore its link with organisational success. This chapter is about how customer service can be used to create competitive advantage. We will examine the relationship between customer service and profitability and explore how important the wider environment is to customer loyalty and subsequently to organisational strategy.

Competition is probably the most significant force boosting the demand for world class customer service. More complex products and the role of technology in driving down costs by automating certain tasks and extended customer bases, are forcing companies to re-evaluate how they do business and highlight the need to see world class service as a highly strategic part of the organisation.

A. CUSTOMER LOYALTY/RETENTION AND COMPETITIVE ADVANTAGE

In the early years, customer service departments and contact centres were just concerned with providing reactive customer service – i.e. dealing with problems and complaints. Increased competition has pushed the need for every employee in a customer facing role to become more sales aware, more diplomatic and more empathetic with the needs and experiences of the customer. Each customer call or visit has now become a possible revenue generating opportunity, or at least an opportunity to turn a satisfied customer into a loyal customer, rather than simply complaint handling.

Service, as we have considered previously, is a key factor in purchase and repeat purchases and directly impacts upon the costs, revenues and profits of any organisation. Therefore, it has become an area of high strategic importance as the traditional expense based model of customer service evolves into a revenue generating model.

The fundamental assumption of most business models is that keeping existing customers is less expensive than acquiring new ones. It is claimed that a 5% improvement in customer retention can create an increase in profitability of between 25% and 85% (in terms of net present value) depending upon the industry.

This increased profitability associated with customer retention efforts occurs because:

Most of the costs of acquiring customers occur only at the beginning of a relationship, so the longer the relationship lasts, the lower the amortised cost (account maintenance costs decline as a percentage of total costs or as a percentage of revenue).

Long term customers tend to be less price sensitive and are more likely to purchase ancillary products and high margin supplemental products, as they trust the brand and the level of service they expect to receive.

Long term customers often initiate word of mouth promotions and referrals by either actively recommending the organisation to friends and family, or by speaking positively about their association with a particular firm.

Long term customers tend to be satisfied with their relationship with the company and so are less likely to switch to competitors, making the ability of competitors to enter the market or increase market share more difficult.

Regular customers tend to be less expensive to service because they are familiar with the processes involved and are often consistent in their order placement.

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Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into higher customer satisfaction in a virtuous circle.

The Virtuous Cycle

Schlesinger and Heskett in the early 1990s added employee loyalty to the basic customer loyalty model. They developed the concepts of "cycle of success" and "cycle of failure". In the cycle of success, an investment in employees‟ ability to provide superior service to customers can be seen as a virtuous circle or cycle.

Figure 2.1: The Virtuous Cycle

Effort spent in selecting and training employees and creating a corporate culture in which they are empowered, can lead to increased employee satisfaction and employee competence. This will likely result in superior service delivery and customer satisfaction. In turn, this will create customer loyalty, improved sales levels and higher profit margins. Some of these profits can be reinvested in employee development, thereby initiating another iteration of a virtuous cycle.

For this link to organisational success to be established and maintained, the relationship between customer and organisation must be profitable. Striving to maintain the loyalty of unprofitable customers is obviously not a viable business model. That is why it is important, as part of this strategy, to assess the profitability of each client (or types of clients) and terminate those relationships that are not profitable or not likely to be. To do this, each customer's total relationship costs should be compared to their relationship revenue. This is known as the Customer Lifetime Value.

Employee satisfaction

and competence

Superior service delivery

High sales and profits

Customer loyalty

Training and empowerment

of staff

Customer satisfaction


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The Return on Customer Retention

Customer Lifetime Value or CLV is a concept devised by Northwestern University Professor Paul Wang and takes into account the changing dynamics of a customer relationship. It helps organisations differentiate loyal customers, objectively, by valuing the customer relationship based on net cash flow. To provide a comparable value, it uses accounting techniques where net cash flow from future periods is discounted at the cost of capital to the business.

Activity based costing (ABC)

Historically, average cost or standard cost has routinely been calculated for the components of products rather than customers. Where activities make up the bulk of the cost, it is necessary to determine standard costs for repeated activities.

The accounting profession developed activity based cost management to address this need. ABC takes historical data from the standard accounting ledger and uses it to calculate the average cost of service activities. Using these average service costs, business managers can project the costs at different levels of service activity in a systematic way.

ABC is the critical component of the cost side of calculating CLV. Similar techniques to those used on the cost side are applied to activities to generate revenue, with one important difference – when looking at activity based revenue projections, the revenue is not 100 per cent guaranteed. When several activities are undertaken to interest prospective customers in a product or service, it is not guaranteed that the customer will actually make a purchase. To take account of this, CLV requires the introduction of expected revenue. The formula for expected revenue is:

projected revenue probability of winning the revenue

Thus, it requires an estimate of the probability of winning the revenue. The estimate must be tested and reviewed to be as accurate as possible. You can do this by making an initial forecast, using the average of the last three months' sales, sometimes called the three month rolling average. This can then be revised according to what major customers are planning, inventory shortages and over-stocks, etc.

Calculating customer lifetime value

Can customer retention be converted to a financial value?

Net present value (NPV) value of cash flow over time in today's monetary terms

Expected value probability of event outcome of event.

By measuring the expected financial benefits from retention and referrals, you can make a sustained investment in customer care. By quantifying the expected results, you obtain metrics you can use to gauge the impact of your customer care programmes and actions.

Example

ACE Holdings sells stationery items to various government organisations. Below is a summary of ACE Holding‟s business.

Average no of new customers 1,000 per year

Average sale £2,000 per customer per year

Profit margin 50% of revenue (after selling costs)

Customer retention rate 40% in the year after initial purchase (i.e. 60% of new customers never return)

At this retention rate, therefore, ACE Holding‟s revenue is as follows:


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Year 1 Year 2

New customers 1,000 1,000

Revenue from new customers (£2,000 1,000) £2,000,000 £2,000,000

Expected value of retained customers

(1,000 40% £2,000)

£800,000

Total revenue £2,800,000

Profit £1,000,000 £1,400,000

If the retention rate could be increased to 60%, the revenue would be as follows:

Year 1 Year 2

New customers 1,000 1,000

Revenue from new customers (£2,000 1,000) £2,000,000 £2,000,000

Expected value of retained customers

(1,000 60% £2,000)

£1,200,000

Total revenue £3,200,000

Profit £1,000,000 £1,600,000

With a 60% retention rate, profit rises by £200,000 per year

The customer value model can be used to value customer retention. Customer lifetime value is the profit you earn from a customer over the customer's lifetime. It is calculated as the net present value of the expected value of the profits you earn on sales to that customer in each of the years the customer remains a purchaser.

In the example above, each customer provides ACE Holdings with £1,000 of profit each year that they remain a customer. The net present value takes into account the cost of capital to discount future years' profits and restate them at today's value. If we assume the cost of capital is 25%, ACE Holding's expected profit at today's prices is:

Year 1 Year 2

New customers 1,000

Expected number of retained customers (@ 40% rate) 400

Average profit per customer £1,000 £1,000

Total profit £1,000,000 £400,000

Discount rate (@ 25% factor) 100% 80%

NPV profit £1,000,000 £320,000

Expected profit from 1,000 new customers (cumulative) £1,000,000 £1,320,000

Average two year profit per new customer (expected year 2 cumulative profit divided by no. of new customers in year 1)

£1,320

If the retention rate is 60% the average expected two year profit per new customer would be £1,480.

One of the advantages of customer lifetime value is the ability to incorporate probability in future years. Unlike cost analysis – which is determinate, in that if you do an activity, you will incur a cost – revenue analysis is based on probability: You can do an activity, but you


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cannot guarantee that you will generate revenue. You can increase the chances of a customer purchasing, but there are factors outside of your control that can affect whether or not the purchase will occur. With CLV, you can take these into account.

B. THE SERVICE/ PROFITABILITY CYCLE

Frederick Reichheld, among others, has written extensively about the „loyalty‟ effect, the link between customer retention and a successful organisation. However, he expanded the loyalty business model beyond customers and employees. He also looked at the benefits of obtaining the loyalty of suppliers, bankers, distributors, shareholders and the board of directors. He termed it the Service/ Profitability Cycle.

What is the Service/ Profitability Cycle?

Reichheld‟s basic premise is that some companies enjoy a loyalty premium over competitors – they have more loyal customers, more loyal employees and more loyal shareholders. The increased loyalty of one group results in and from the increased loyalty of the others: i.e. happy employees create happy customers and in turn, happy customers create happy employees – both create a situation of profitability, which in turn makes shareholders happy. His theory is simple: companies that truly understand the importance of loyalty and commit to it, from the leadership levels down, simply outperform others that pursue it peripherally. These „loyalty leaders‟ reap benefits such as lower cost of capital, increased customer lifetime value and higher employee engagement.

Figure 2.2: The Service/ Profitability Cycle

The right customers

Investor loyalty Re-investment Customer loyalty

The right employees

The right investors Competitive advantage

and profitability

Employee loyalty

Superior customer value

Profit

Cost advantage

The right suppliers The right distributors

Superior productivity


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Reichheld goes on to state, though, that customer loyalty isn‟t always something that a company can build. Loyalty leaders target their customer acquisition efforts toward prospects who are more likely to be loyal in the first place. These companies recognise three basic principles:

Some customers prefer stable, long-term relationships

Some customers are more profitable

Some customers will be more responsive to your particular business strengths.

For loyalty leaders, the marketer‟s objective is, first and foremost, to find likely people to introduce to his or her business, whether it be customers, employees, suppliers or investors, they must all align with the values of the organisation. Efforts to personalise service or “exceed expectations” for customer segments that have little chance of being profitable, waste resources and ultimately frustrate employees.

Reichheld found that, on average, corporations in the USA lose 50% of their customers in five years, half of their employees in four, and half of their investors in less than one year. He estimated that disloyalty could stunt organisational growth by as much as 50%. By contrast, businesses that concentrate on finding and keeping good customers, productive employees and supportive investors, continue to prosper. The conclusion was that consistently high customer retention can therefore create competitive advantage.

Customer acquisition is expensive, but essential to all organisations. But many organisations now know that the balance between customer acquisition and customer retention is crucial if they are to make progress at the expense of their competitors. In many markets, especially consumer markets, there are few areas of true differentiation or segmentation and the only real discriminating factor can be price or service. Sectors like banking appear to have spent the past few years using this to actively persuade customers to behave disloyally by encouraging switching through low up-front interest rates on credit cards and mortgages and eye-catching short-term high interest rates on savings accounts alongside, at best, mediocre, depersonalised service.

In a strong competitive market such as financial services, competition for current accounts and other products has led to an internal focus over the past 20 years on price and cost control. In the UK, for example, we have seen this in the reduction of bank branch offices, the increasing automation of payments and withdrawals, and the use of internet based services. However, in the rest of Europe, banks have tended to focus more on customer retention and cross-selling rather than acquisition, to maximise the value of the relationship and minimise the expense of acquiring new customers through advertising and mail campaigns, etc.

Most customers don‟t want to keep switching organisations. It‟s too time consuming and too much choice can be confusing. So, committed customers will stay if they can trust the organisation to look after their interests in the medium to long term.

The Loyalty Ladder

Relationships between organisations and their key stakeholders are not static – they are time sensitive and driven by current circumstances. In today's marketplace, it can be unrealistic to expect a customer to be totally committed to one supplier of a product or service. The challenge for any organisation is to reduce the number of times one of their key stakeholders tries the products or services offered by the competition.

The loyalty ladder is a relationship marketing concept that sees customers moving gradually upward through relationship levels, starting at the bottom as suspects and ending up at the top as advocates, intensely loyal brand champions.


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The loyalty ladder typically looks something like this:

ADVOCATE

The top rung of the loyalty ladder. Customers who become advocates for your company and its products and services. These customers give unpaid advertising for your business, via word of mouth, giving you testimonials or by taking part in published customer success stories and case studies.

REGULAR

A loyal customer who buys from you more than once. Often this will be as a result of them upgrading to a newer or better version of your product (up-selling) or buying a complimentary product or service (cross-selling).

CUSTOMER Those who buy your product or service.

PROSPECT

Someone you know has a need for your product/service. For example, someone who pays attention to your promotion and makes a request for further product details, pricing, or delivery information.

SUSPECT

Individuals or companies you suspect have a need and are able to pay for your product/service. Someone who reads or hears your ad, visits your website, looks at your brochure or encounters some other type of promotion is a suspect. Suspects are typically people who are similar to your existing customers.

Often businesses focus a lot of their time, energy and budget on the first couple of rungs, whilst putting little or no investment into their satisfied clients. The Loyalty Ladder has customers perceiving the benefit most intensely at the highest rung. Whilst that may be true for much of the time, it overlooks the fact that many people are persuaded to buy or not by a powerful force known as „first impressions‟.

In his best selling book Blink, Malcolm Gladwell writes about “our ability to gauge what is really important from a very narrow period of experience”. Through personal taste, experience and social conditioning we like and dislike new things very quickly. In other words we are prone to make snap judgments. Our first response to a person, thing or experience is automatic and it‟s difficult to dislodge this reaction. So the loyalty ladder doesn‟t account for the very real fact that we often „commit‟ at the first encounter with an organisation.

Based on extensive research into companies (from start-ups to established institutions, including Harley-Davidson, Intuit, Cisco, and Dell), Reichheld discovered what he termed the six principles of loyalty on which organisations build successful enterprises:

Try to achieve a win/win situation

Look after partners

Keep it simple

Reward the right results

Insist on honest, two way communication and learning

Explain the principles to those concerned, then abide by them.


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(i) Achieving a WIN/WIN

CEOs of companies with the highest degree of loyalty compete only where they see the potential for building sustainable assets and relationships. Only by targeting high customer value can what Reicheld calls a „loyalty leader‟ ensure that the organisation will stay successful.

Bringing in the right kind of customers can result in long term cash flow advantages as well as in continued growth from referrals and in enhanced satisfaction from employees, whose daily jobs are improved when they can deal with satisfied customers. The value of having the right customers is demonstrated by a company like eBay. More than half of eBay's new customers are from referrals, which helps drive down customer acquisition costs and has contributed to their speedy growth.

(ii) Look after partner interests

As we have seen above, partners include all stakeholders – customers; suppliers; distributors, investors and staff. Organisations who want to build loyalty and generate the loyalty effect need to protect their partners‟ interests. Nothing speaks more clearly about the values and principles of an organisation than their choice of associates and of those promoted to positions of prominence and authority. So they should treat everyone honestly and fairly, with dignity and respect; but these organisations also understand that they can afford to be loyal only to those who can help build mutually beneficial relationships that reflect the principles of loyalty.

Employee behaviour and attitudes, even more than leadership principles and ideals, communicate most directly to customers, suppliers and others just what the company stands for. Loyalty leaders are uniform in setting high standards for employees and they are uniform in the practices they have learned to attract and retain the right employees. They all take pains to ensure that employees‟ first experiences on the job reflect their value to the company as well as the values of the company.

(iii) Keep it simple

Loyalty to a clear and simple set of principles is the basis for flexibility and speed, and gives a real advantage over competitors. One of the best opportunities to simplify, in the interests of organisational speed and flexibility, is to outsource certain functions, such as distribution, where you find it either difficult or costly to provide or maintain high levels of customer value. Equally, many organisations make use of small teams within the main structure of their organisation; building decentralised, locally managed teams which, alongside outsourced non-strategic functions to best-in-class partners, reduces the need for a large headquarters (which generally tend to be bureaucratic).

(iv) Reward the right results

Most business leaders want to be considered responsible and cost conscious managers, so they generally prefer to keep costs as low as possible, including employee compensation, normally by referencing against market norms or averages. It makes sense to limit costs to grow profit. However, many loyalty based firms (such as retailers like the John Lewis Partnership, Tesco or Marks and Spencer in the UK) show it is possible to generate good profits even when they compensate their staff above market rates. Victor Vroom‟s Expectancy Theory, that we judge the amount of effort we are willing to put into a task by the reward or satisfaction we expect to get out of it, points towards the idea that both productivity and loyalty grow whenever there is opportunity for greater rewards.

(v) Honest two-way communication

The Internet is redefining competitive economics, but the basic rules of good communication remain constant. You cannot simply layer new communication tools on


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top of a low-trust communication culture. The information which is given and received must be reliable.

(vi) Keeping to principles

For customers, actions speak volumes, so it is important to ensure that company policies and procedures are fully aligned with the company‟s loyalty principles.

C. THE IMPACT OF THE WIDER ENVIRONMENT

More than twenty years ago, Miles and Snow stated: “These are turbulent times in the world of organisations”. Behind this turbulence, today, lies a series of environmental factors, which have opened up new and exciting markets in developing countries such as the so-called BRIC countries of Brazil, Russia, India and China. Other Asia-Pacific countries such as Malaysia, Australia and The Philippines and resource rich areas such as Africa and the states of the former USSR are creating increased global competition in almost all industrial and commercial markets. These forces have changed and continue to change the dynamics of business operations.

The world has also become a buyers‟ market where increasingly informed and discerning customers are freer than ever to select almost any product or service from the global marketplace that the internet has created.

For the purposes of this manual, we will focus on the main factors that influence the decisions an organisation makes and how this affects the power of the customer. These factors are collectively known as the macro environment and include the economic, demographic, legal, political and social conditions as well as technological changes that affect both for-profit and not-for-profit organisations. These are the factors which are usually outside of an organisation's control – including, for example, competitors, changes in interest rates, changes in cultural tastes and government regulations. This type of analysis of the external world in which an organisation conducts its business is referred to as environmental analysis or environmental scanning and is fundamental for any organisation in drawing up a strategic plan.

The Macro Environment and Environmental Analysis

An environmental analysis identifies internal and external factors that constitute the current state of the organisation. The following chapter in this module will look closely at those internal factors such as organisation structure, and the communication flows it produces, and organisational culture. Here, we are going to examine the influences outside the organisation in what is known as the macro-environment.

So what are the macro-environmental factors which play such a critical part in an organisation‟s success? There are six major macro-environmental forces and these collectively are known by the acronym PESTLE (or LEPEST).

The letters stand for:

P Political

E Economic

S Social

T Technical

L Legal

E Environmental/Ecological


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If we add a bit more detail around what is normally considered under the six areas referenced above, you will be able to clearly see the connection that each one has to business in general and how even small changes to any of them can cause an organisation to have to re-think their strategy, services or even their products.

P Political – Tax policies

– Government laws

– Employment laws

– Trade/Tariff regulations.

E Economic – Growth/decline of manufacturing, service or retail businesses

– Commercial trends such as the rise of importance of internet businesses

– International competition/Trade deficits

– Wage rates/Working hours

– Cost of living /inflation/deflation

– Interest and exchange rates.

S Social – Population size

– Work ethic/Career attitude

– Cultural shifts such as attitudes to working hours or travel to work times

– Gender/age bias.

T Technological – Infrastructure, for example, availability of high speed Broadband

– Information technology advances

– Scientific/engineering breakthroughs, including government attitude to incubator companies.

L Legal – Fiscal law

– Import/export regulations and agreements

– Recycling/disposal law

– Employment law

– Intellectual property law

– International regulation agreements such as the EU‟s Waste Electrical and Electronic Equipment (WEEE) Directive.

E Environmental – Global warming/climate change

– Sustainability

– International requirements for environmental protection

– Waste reduction initiatives and regulations.


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These examples of the macro-environment are not an exhaustive list, but give a flavour of the variables a firm must consider as part of its environmental scanning to better understand the threats and opportunities in their markets and to more fully appreciate how strategic plans need to be adjusted so the organisation can obtain and retain competitive advantage.

It is worth noting that the six paradigms of PESTLE vary in importance for each organisation, depending on the type of business they are in. For example, social factors are generally more relevant to consumer businesses or a “B2B” (business to business) organisation near the consumer end of the supply chain, which are likely to be affected by fluctuations in taste and fashions or demographical changes. Conversely, political and economic factors are more obviously relevant to a defence contractor or public private partnership such as can be found in areas like social services or healthcare.

A recent addition

The 20th and 21st century business world has been rocked by a few high profile scandals (and many more less well known ones) which have led to commercial enterprise in general having a poor reputation among some consumers. Charles Ponzi‟s Pyramid scheme in the USA in the 1920s; Worldcom and Enron in 2002 and more recently the world wide banking difficulties, which led to the collapse of confidence in financial institutions and the virtual bankruptcy of several countries, have all contributed to a view of business among some members of the public as being something less than honest and trustworthy.

So an additional „E‟ should be added to the range of external factors which need to be taken into account, turning PESTLE into STEEPLE.

This additional „E‟ refers to the ethical or moral situation and covers such issues as:

Business ethics such as child labour exploitation

Client confidentiality, including provision of information about off-shore assets

Issues of security of processes, information and personnel

Fair and transparent terms of business/trade

Gaining and retaining the trust of customers

Creating and keeping a good reputation within the industry and for customers.

We‟ll take each of these macro-environmental factors in turn, analyse them and consider what they mean for how we manage the customer relationship.

D. MACRO ENVIRONMENTAL ANALYSIS

Political Factors

The political arena has a huge influence upon the regulation of public and private sector businesses and the spending power of consumers and other businesses. It covers government policy and how it influences the economy, including such things as changes to the tax regime and the degree of intervention in the economy. All governments intervene to some extent in the economic life of a country. In capitalist or „market‟ economies, the government usually looks for fiscal controls but leaves the market to find its own level. It protects the consumer from acts of fraud, etc , but leaves businesses, on the whole, to decide what and how much to produce.

However, government does play a role in influencing this. For example, governments will often set up schemes to encourage inward investment by giving preferential tax advantages. These schemes may target certain industries – for example, IT and knowledge-based industries such as higher education, service industries such as call centres for banks and financial services products, and manufacturing industries such as car production.


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In more socialist economies, the government centralises productive activity and controls outputs rather than merely influencing what is produced. The former Soviet Union and China, for example, had „planned‟ or „command‟ economies. Both state owned and private enterprises received guidance and directives from the government regarding production capacity, volume and modes of production. Recently, economies such as these have moved towards a more mixed approach. Even in countries like Cuba, there is some degree of freedom over production volumes and where, ultimately, the revenues end up, leaving North Korea as perhaps the only full command economy.

Government policy also influences organisational behaviour by the extent to which it believes in subsidising firms. Its priorities in terms of business support may result in laws and policies to protect struggling „home‟ industries against foreign competition, for example. Or it may introduce a „cap‟ on migrant/foreign workers, to influence recruitment strategies. Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the nation and the quality of the infrastructure, such as the road and rail system, all of which will have a bearing on various business decisions at strategic and tactical levels.

When examining political factors, an organisation needs to look at any political changes that could affect the business. What laws are being drafted? What global changes are occurring? Discussion and changes to data protection, health & safety, environmental policy, etc. should be considered at the strategic level for the impact they might have on how the business operates.

As an example, take a company employing a large number of women. Changes in maternity rights may have a major impact on such a business. They will incur additional costs by needing to employ more people on short term contracts to cover for absence; they may need to make adjustments in the working environment and they may also need to invest in re-integration programmes for women returning to the workplace after an extended absence. From a consumer perspective, political decisions have a major impact on the business landscape and how competitive or not it is. Where industries have a lack of competition, it is often said that prices are set for the benefit of the organisation rather than the customer.

Think Point

Political refers to both the big and small „p‟ political forces and influences that may affect the performance of, or the options open to, the organisation concerned. The political arena has a huge influence upon the regulation of public and private sector businesses and the spending power of consumers and other businesses.

Consider how political factors affect the higher education system in general and your own college in particular. For example, think about the following issues:

What is the government's policy on education and how has it changed in recent years?

How does government attempt to regulate the education sector?

What other political forces affect the sector in general and your own institution?

What are the effects of political forces on recruitment of students and the types of courses offered?

Economic Factors

Often, the political factors spill over into economic factors – for example, tax is usually decided by politicians, based on a mixture of political and economic factors, and interest


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rates in many countries are decided by a central bank, but political factors may be influential. The fall of the Soviet Union (a political event) caught most businesses and Western Governments by surprise but not all – some companies, particularly in commodity markets such as oil and gas, had picked up signals that the ailing economy was likely to result in political change.

Economic factors refer to the character and direction of the economic system within which the firm operates. They include such issues as the balance of payments, the state of the business cycle, the distribution of income within the population, and governmental monetary and fiscal policies.

Economic factors have a particular effect on the purchasing power of potential customers. Exchange rates, inflation levels, income growth, debt and saving levels all impact on the availability of money, and consumer and business confidence. When inflation or exchange rates are high, customers are more reluctant to buy or to buy in the same volume;. If the economy in general is faltering through lack of business growth, money for expansion or capital replacements is harder to obtain and organisations may become less competitive within their industry or main markets.

These effects are global, but it is also important to look at factors affecting individual industries, since the impact of economic factors may differ between industries. For example:

Are paper costs rising? For a book, magazine or newspaper publisher, the price of paper is a crucial economic measure.

The UK software industry has complained of a shortage of computer programmers, driving up wage costs and therefore, potentially, prices. Again, the global picture can be important. Some companies are now using programmers in countries like India for software development. This helps them keep costs down and leads to competitive advantage over companies with higher costs.

All organisations are affected by economic factors nationally and globally. Whether an economy is in a boom, recession or recovery will affect consumer confidence and behaviour. The dramatic impact of reduced government funding on universities, for example, is already very apparent in countries such as the UK and the Netherlands ,where they rely heavily on state subsidies to keep tuition fees at a low level. This reduction in state aid will impact upon the nature of the competition faced by the university and, within the university, upon service provision and the financial resources available for investment in things such as student accommodation, IT facilities, etc.

Balance of Payments

The balance of payments of a country refers to the net difference in value of goods bought and sold by citizens of the country. To decrease the value of goods imported into a country, it is common practice to construct barriers to entry for particular classes of products. Such practices reduce competition for firms whose products are protected by the trade barriers.

Mexico has limited the number of cars that can be imported, for example. The purpose of this practice is to stimulate the domestic car market and to allow it to become large enough to create economies of scale and to create jobs for Mexican workers. However, a side effect of the import restriction has been an increase in the price and a decrease in the quality of cars available to the public.

Another potential consequence of import restrictions is the possibility of reciprocal or tit-for-tat import restrictions. Partially in retaliation to import restriction on Japanese televisions and cars by the United States, Japan has limited imports of agricultural goods from the United States in recent times.

Lowering trade restrictions as a means of stimulating the economy of a country may meet with mixed results. The North American Free Trade Agreement (NAFTA) has


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opened the borders between the United States, Canada, and Mexico for the movement of many manufactured goods and even the manufacturers themselves. Government officials in the United States argue the results have been positive, but many local communities that have lost manufacturing plants question the wisdom of the agreement.

Economic Recession

The business cycle is another economic factor that may influence customer relationships. Purchases of many consumer durable goods (large domestic appliances, furniture, and cars) can be postponed during periods of recession and depression, as can purchases of new equipment and plant expansions. Economic downturns usually result in lower profits, reductions in hiring, increased borrowing and decreased productivity for firms adversely affected by the recession. Positive consequences of recessions may include reductions in waste, more realistic perceptions of working conditions, exit of marginally efficient firms and generally more efficient productive systems.

Some organisations may even benefit from an economic downturn. Postponed purchases may result in the need to service existing products. An owner electing to keep a used car rather than buying a new one may need to have it repaired more often, thus creating an increased demand for car mechanics and replacement parts. When money is scarce, customers, whether businesses or consumers, look for value, but also for longevity and reliability of goods and services and will continue to use organisations who have built a solid reputation for these.

The food and drink retail sector represents one of the largest industries in the UK providing employment for over three million people in primary production, manufacturing and retailing. In 2003, retail accounted for 9% of gross domestic product (Datamonitor, 2003). In recent years, UK supermarkets have come under increased scrutiny over their treatment of suppliers, particularly of own-label products, and consequently, the development of strategic supply networks has been an integral part of most supermarket strategies for the past decade. The retail sector is fairly recession prone, but also very sensitive to changes in interest rates. However, the world economy appears now to be improving since the banking crisis, with consumers being more optimistic and retail industry once again booming.

Social Factors

Social factors influence people's choices and include the beliefs, values and attitudes of society. So, understanding changes in this area can be crucial when setting a strategic direction. Social factors will include demographic changes, trends in the way people live, work and think, and cultural aspects of the macro environment. These factors affect customer needs and the size of potential markets. Such changes also impact purchasing behaviour.

Added complications when looking at social and cultural factors are differences between ethnic and social groups. Not all groups have the same attitudes and this impacts on how they view products and services. Typical things to look at for each of these include:

consumer attitudes to a product or industry

environmental issues, especially if the product involves hazardous or potentially damaging production processes

the role of women in society (career attitudes, etc.)

attitudes to health and well being

attitudes to wealth


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attitudes to age (children, the elderly, etc.)

population growth rate

age distribution

internal/external emphasis on safety

internal/external attitudes to change.

Current trends indicate that British consumers, for example, have moved towards „one-stop' and „bulk' shopping, which is due to a variety of social changes including long and non-traditional working hours, the prevalence of mothers to return to work while children are still young and the trend for moving to a new area away from other family members for work, etc. Supermarkets have responded by increasing the amount of non-food items available for sale such as clothing, electrical goods, books and magazines, and toys. Some have even begun offering an optician service, banking facilities and walk-in medical services.

Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. In the UK, for example, the population has been ageing. This has increased the costs for firms who are committed to pension payments for their employees because their staff are living longer. Some firms, such as the supermarket Asda and the DIY chain B & Q, have started to recruit older employees to tap into this growing labour pool. The ageing population also has impacted on demand – for example, demand for sheltered accommodation and medicines has increased whereas demand for toys is falling. Customers are also demanding more experienced and knowledgeable staff in retail outlets and in other businesses with a high level of customer interaction and many businesses see employing older workers as a major advantage in fulfilling that demand.

The type of goods and services demanded by consumers can be seen as a result of their social conditioning and their consequent attitudes and beliefs. Consumers are becoming more and more aware of health issues, for example, and their attitudes towards food are constantly changing. One example of the way supermarkets are adapting their product mix to reflect this, is by responding to an increased demand for organic products.

Changes in consumer taste and lifestyle represent both opportunities and threats for any industry. Opportunities will open up in terms of developing new products, and new markets and consumers for existing products, to meet consumer demand. However, such changes present major threats where they represent shifts in social acceptance of particular products or operational practices. The tobacco industry is a prime example:

Changes in public attitudes in the western hemisphere toward smoking, with its related health risks, have had a very significant impact. These changes have been reflected in many organisations by limiting smoking to designated areas or completely prohibiting it at work. Several governments around the world have banned tobacco advertising and smoking in all public places such as cinemas, bars and restaurants and for many years airlines have operated completely no-smoking flights. This transformation in attitude has had an effect on companies within the tobacco industry and caused them to modify marketing strategies; encouraging many to seek expansion opportunities in countries where consumer attitudes towards smoking have not significantly altered.

Customer attitudes have undoubtedly changed and become more sophisticated. Higher levels of education, alongside greater access to information, around the world have influenced their expectations. This had led to a growth in the number and variety of advocacy groups focussed on customer education, rights and interests. In response, most countries have passed laws to protect consumers against dangerous or faulty workmanship, deceitful sales practices and misleading advertising. In the United States, the governmental agencies responsible for enforcing these regulations are the Federal Trade Commission (FTC) and the Food and Drug Administration (FDA). In the UK, the Office of Fair Trading(OFT) has the primary role, while in Canada, several departments participate in


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consumer protection. There are also many not-for-profit organisations outside of governments who champion the cause of customers. These include general bodies such as the UK‟s Citizens Advice Bureau who offer information and support across a range of areas, to more localised or industry-specific organisations. Many countries have organisations aimed at businesses themselves. Members are offered educational materials and are expected to comply with fair business practices. Complaints against a member are investigated and, if founded, the member is expected to remedy the situation or face expulsion. Consumers are encouraged to check a business‟s standing with such organisations prior to entering into contracts with them.

Consumer advocate organisations that champion causes for underserved communities normally offer both education and advocacy. Education includes helping consumers know what public assistance they may be qualified to receive and providing financial counselling. Advocates for people with disabilities, for example, monitor schools and businesses to make certain they comply with regulations assuring access to education, the work place and public areas. These groups also monitor businesses and financial institutions to make certain fair and non-discriminatory practices are being observed.

Another area which has attracted several consumer advocate organisations is manufacturing. Some organisations monitor compliance with consumer product safety standards, such as the use of non-toxic paint and flame retardant materials in children‟s toys and clothing. If a product is found to be defective, the organisation informs the supplier as well as the public and governmental agencies, to ensure recall requirements are met. Other advocacy groups monitor farming; food processing; automobile safety, drug manufacturing, etc.

Corporations and other groups and bodies which anticipate social changes have a substantial competitive advantage. They adapt quicker, and are seen generally to lead rather than follow. They also manage change more successfully, since they have time to do it.

Today‟s consumers have the knowledge and skills needed to make informed and confident choices about goods and services, while also being aware of basic consumer rights and responsibilities and how to act on them. They are increasingly favouring providers and suppliers who demonstrate an understanding and response to trends and changes in public perception. Failure to do so means lost market share and shrinking popularity, which reduces revenues, profits, or whatever other results the organisation seeks to achieve.

Think Point

Social factors affect the expectations of people in respect of the service that should receive.

How might has the changing role of women in society affected both the attitudes of consumers and the way in which organisations deliver (or not) appropriate levels of customer service?

Technological Factors

Advances in technology can have a major impact on business success. Technological change also impacts socio-cultural attitudes. For example, the way people spend their leisure has changed dramatically over the last 30 years thanks to the impact of new technologies such as the Internet, mobile phones and the increasing advances in computing and computers.

Technological factors are vital for competitive advantage and are a major driver of change and efficiency. For example, think about the potential impact that video-conferencing is


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having on the business travel market. Why would business people spend hours and money travelling some distance for a meeting, when all participants can join in, face-to-face, through a video-conference that lacks only the physical presence of the attendees?

Other effects of technological factors include, for example:

lower barriers to market entry

reduce minimum efficient production level

influencing outsourcing decisions.

The Internet, particularly, is having a profound impact on the strategy of organisations.

Customers can now access many organisations 24 hours a day, comfortably and from their homes.

Expectations in relation to response times, for example, have altered dramatically due to the access that email and various improvements in telecommunications have given to customer service centres.

Changes in retailing methods, such as clothes sales or book purchases via the Internet, is now common place. This technological revolution means a faster exchange of information between the buyer and seller which is beneficial for businesses as they can react quickly to changes within their operating environment.

The new technologies benefit both customers and the company. Customer satisfaction rises because goods are readily available, services can become more personalised and shopping more convenient. The management of food supply chains is an area where customers have seen a huge and rapid improvement.

The major supermarket chains all use the following technologies to ensure that stores are well stocked and the shopper can move smoothly through the shopping experience:

Wireless devices to alert „out of stocks‟

Intelligent scales which are programmed with the prices for a variety of goods

Electronic shelf labelling for speedy and accurate identification of stock

Self check-out machines for shoppers who have few items.

The adoption of Electronic Point of Sale (EPoS), Electronic Funds Transfer Systems (EFTPoS) and electronic scanners have greatly improved the efficiency of distribution and stocking activities, with needs being communicated almost in real time to the supplier.

New technologies also create new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. Technology can reduce costs, improve quality and lead to innovation. These developments all benefit consumers as well as the organisations providing the products.

Think Point

We noted above that technology has brought about a faster exchange of information between the buyer and seller, and services can become more personalised.

Make a list of the improvements in customer relations in the last five or so years which have been introduced by businesses based on these. To what extent do you think these match up to customer expectations?


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Legal Factors

The legal environment facing organisations is becoming more complex and affecting businesses more directly through the costs of either ensuring compliance or the effects of not doing so. Many of these costs are passed on to customers in the form of higher prices and a more conservative attitude by business executives.

In recent years, in the UK, there have been many significant legal changes that have affected firms' behaviour. The introduction of age discrimination and disability discrimination legislation, an increase in the minimum wage and greater requirements for firms to recycle are examples of relatively recent laws affecting an organisation's actions. Legal changes can affect both a firm's costs, if new systems and procedures have to be developed, and the demand for their goods or services, if the law affects the likelihood of customers buying the goods or using the service. All this affects the customer relationship directly through pricing or product availability or indirectly through levels of staffing or the „hidden‟ costs of compliance.

Different categories of law include:

(a) Consumer laws, designed to protect customers against unfair practices such as misleading descriptions of the product.

(b) Competition laws, aimed at protecting small firms against bullying by larger firms and ensuring customers are not exploited by firms with monopoly power.

(c) Employment laws, covering areas such as redundancy, dismissal, working hours and minimum wages. They aim to protect employees against the abuse of power by managers.

(d) Health and safety legislation, aimed at ensuring the workplace is as safe as is reasonably practical. This covers issues such as training, reporting accidents and the appropriate provision of safety equipment.

Environmental/Ecological Factors

Since the early twentieth century, there has been increased pressure on many companies and managers to acknowledge their responsibility to society and act in a way which benefits society overall. The major societal issue has been protection and conservation of the environmental and governments in many countries around the world have launched strategies for sustainability to cut waste, reduce consumption of resources and minimise environmental damage.

The issue of climate change is very much to the fore here. Changes in temperature can impact on many industries, including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness, this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries (for example, more taxes being placed on air travel and the success of hybrid cars) and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities.

The latest legislation in the UK created a new tax on advertising highly processed and fatty foods. The so-called „fat tax' directly affected some Tesco product ranges that have subsequently been adapted to conform, affecting relationships with both suppliers and customers.

Ethical Factors

One of the growing trends in developed markets is the notion that business should behave as responsibly as individual stakeholders and should also operate within a code of ethics


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which seeks to trade honestly and transparently. This has led to many large multi-national organisations subscribing to the theory of corporate social responsibility (CSR).

CSR is the expectation that a business or individual will strive to improve the welfare of society. From a business perspective, this translates into the public expecting businesses to take active steps to make society better by virtue of the business being in existence. Like norms and values, what is considered socially responsible behaviour changes over time. In the 1970s, affirmative action was a high priority – to address concerns about the opportunities available to women and certain racial groups in society. During the early part of the twenty first century, prominent social issues were environmental quality (particularly recycling and waste reduction) and human rights, in addition to general social welfare. More than just philanthropy, social responsibility looks for active participation on the part of corporations to serve, and benefit, their communities.

The stakeholder approach to social responsibility demonstrates some of the complexities of incorporating socially responsible issues into a firm's strategies. Stakeholders are anyone with a stake in the organisation's existence. Highly visible stakeholders are shareholders, employees, customers and the local community. Decisions to be responsible and maximise the return to shareholders may require closing an unprofitable plant. However, employees and members of the local community could view this move as socially irresponsible since the move would have a detrimental effect on the community.

E. PORTER’S FIVE FORCES

Porter's five forces of competitive position analysis was developed in 1979 by Michael E. Porter of Harvard Business School as a simple framework for assessing and evaluating the competitive strength and position of a business organisation. It looks at the external environment from a different perspective than the traditional STEEPLE approach, concentrating on the relationship between the factors outside an industry that influence the nature of competition within it (microenvironment).

The theory is based on the concept that there are five forces which determine the competitive intensity and attractiveness of a market. Porter‟s five forces theory helps to identify where power lies in a business situation, which is useful both in understanding the strength of an organisation‟s current competitive position, and the strength of a position that an organisation may look to move into. The five forces are:

1. The rivalry between existing sellers in the market

2. The power exerted by the customers in the market

3. The impact of the suppliers on the sellers

4. The potential threat of new sellers entering the market

5. The threat of substitute products becoming available in the market.

According to Porter, a business has to understand the dynamics of the industries and markets within which it operates in order to compete effectively in the marketplace. He defined the five forces as those which drive competition, arguing that the competitive environment is created by their interaction acting on a business and that the intensity of competition is determined by the relative strengths of the forces. As one of those is the power of customers, it is worth taking time to review what Porter said about it and how it can be developed for competitive advantage.


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Figure 2.3: Porter’s Five Forces

Understanding the nature of each of these forces gives organisations the necessary insights to enable them to devise the appropriate strategies to be successful in their market.

Force 1 Industrial Rivalry

The key driver is the number and capability of competitors in the market. Many competitors, offering undifferentiated products and services, will reduce market attractiveness. The intensity of rivalry, which is the most obvious of the five competitive forces in any industry, helps determine the extent to which any value created by an organisation will be wasted through head-to-head competition. It is most likely to be high in those industries where there is a threat of substitute products, but is also dependent on the existing power of suppliers and buyers in the market.

Force 2 The Threat of Entry

Both potential and existing competitors influence profitability. The strength of any threat from new entrants to a market is usually based on the existence of market entry barriers. These can take many diverse forms and are used to prevent an influx of firms into a market. Profitable markets attract new entrants, which erodes profitability. Unless incumbents have strong and durable barriers to entry – for example, patents, economies of scale, capital requirements or government policies – then profitability will decline to a competitive rate.

The most common forms of entry barriers, apart from physical or legal obstacles, are:

Economies of scale – for example, benefits associated with bulk purchasing

Cost of entry – for example, investment in technology

Distribution channels – for example, ease of access for competitors

Cost advantages not related to the size of the company – for example, contacts and expertise

Suppliers

(Bargaining power of suppliers)

Buyers

(Bargaining power of customers)

Potential entrants

(Threat of new entrants)

INDUSTRY RIVALRY

Jockeying for position among

current competitors

Substitutes

(Threat of substitute products or services)


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Government legislation – for example, introduction of new laws might weaken a company‟s competitive position

Differentiation – for example, a certain brand that cannot be copied (such as the word „Champagne‟ which can only be applied to sparkling wines produced in the Champagne region of France).

Force 3 The Threat of Substitutes

The threat that substitute products pose to a company's profitability depends on the relative price-to-performance ratios of the different types of products or services to which customers can turn to satisfy the same basic need. The threat of substitution is also affected by switching costs – i.e. the costs in areas such as retraining, retooling and redesigning that are incurred when an industrial customer switches to a different type of product or service. Where close substitute products exist in a market, it increases the likelihood of customers switching to alternatives in response to price increases. This reduces both the power of suppliers and the attractiveness of the market. It also involves:

Product-for-product substitution (such as email for mail or fax), is based on the substitution of need

Generic substitution (video suppliers competing with travel companies)

Substitution that relates to something that people can do without (cigarettes, alcohol).

Force 4 Buyer Power

This focuses on how easy it is for buyers to drive prices down. This is driven by the:

number of buyers in the market

importance of each individual buyer to the organisation

cost to the buyer of switching from one supplier to another.

If a business has just a few powerful buyers, they are often able to dictate terms.

The most important determinants of buyer power are the size and the concentration of customers. A further factor is the buyer's willingness or incentive to use that power, and willingness derives mainly from the “risk of failure” associated with a product's use.

This force is relatively high where there are a few, large players in the market, as is the case with retailers and supermarkets which deal with a large number of undifferentiated, small suppliers such as small farming businesses.

Force 5 Supplier Power

Supplier power is the mirror image of buyer power. It is an assessment of how easy it is for suppliers to drive up prices. This is driven by the:

number of suppliers of each essential input

uniqueness of their product or service

relative size and strength of the supplier

cost of switching from one supplier to another.

As a result, the analysis of supplier power typically focuses first on the relative size and concentration of suppliers relative to industry participants and second on the degree of differentiation in the inputs supplied. The ability to charge customers different prices, in line with differences in the value created for each of those buyers, usually indicates that the market is characterised by high supplier power and at the same time by low buyer power.


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The bargaining power of suppliers exists where:

the switching costs are high in terms of price, time or effort

there is a high brand power (for example, McDonalds, British Airways, Mercedes)

the possibility exists of forward integration of suppliers (drinks manufacturers buying pubs and bars)

customers are fragmented rather than in clusters, with a resultant limited bargaining power (such as petrol stations in remote locations).

The nature of competition in an industry is strongly affected by these five forces. The stronger the power of buyers and suppliers and the stronger the threats of entry and substitution, the more intense competition is likely to be within the industry.

Case Study

The UK grocery market is primarily dominated by four major supermarket brands – Tesco, Asda, Sainsbury's and Morrisons. Between them they possess a market share of around 70% and the smaller chains of Somerfield, Waitrose and Budgens have a further 10%.

There is now a large and powerful barrier for new companies who wish to enter the grocery market. For instance, it has become difficult for new entrants to raise sufficient capital because of high fixed costs and highly developed supply chains. Because of huge investments made by the large chains, such as Tesco, in advanced technology for checkouts and stock control systems for example, customer expectations have been raised that impact on new entrants if they wish to compete.

Other barriers include economies of scale and differentiation in the provision of products or services by Tesco, Asda and the others, which can be seen in their aggressive operational tactics in product development, promotional activity and distribution.

Over the last 30 years, grocery shopping in the UK has been transformed into a supermarket dominated industry. The majority of large chains have built their power due to operating efficiency and major marketing-mix expenditure. This powerful force has had a strong negative impact on the small traditional shops such as butchers, bakers, etc. However, in recent years a crucial change in food retailing has begun to emerge, due in large part to the demands of consumers. Time-poor consumers have developed a greater need for supermarkets to sell non food items. This has provided supermarkets with a new strategic expansion into banking, pharmacies, opticians and even walk-in medical centres.

The Bargaining Power of Customers

Porter theorised that the more products that become standardised or undifferentiated, the lower the switching cost and hence more power is yielded to buyers.

As the effects of deregulation and technological change have rippled through international markets, so the traditional model of the marketing mix, based on product, price, promotion and place (the 4Ps) looks more and more outdated.

The 4Ps framework was developed for the consumer market of the 1950s and 60s boom years, where escalating consumer demand gave organisations little incentive to consider


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customer interactions as part of an ongoing relationship. Each purchase was treated as a single transaction. The recessions of the 1980s and, more recently, 2008 onwards, have shifted the focus away from a purely marketing strategy towards relationship marketing as a way of managing market turbulence by creating customer value, satisfaction and loyalty, leading to improved profitability in the longer term.

We can see the effect of this in the introduction and exploitation of the major supermarkets' loyalty schemes. Tesco's famous loyalty card, Clubcard, is a successful customer retention strategy that significantly increases the profitability of Tesco's business. As was mentioned above, the purchasing power of the food retailing industry generally is concentrated in the hands of a relatively small number of retailers. Operating in a mature, flat market where growth is difficult and consumers are increasingly demanding and sophisticated, large chains such as Tesco are accruing large amounts of consumer information via these loyalty cards that can be used to communicate with the consumer, differentiate the brand and drive further purchases.

Similarly, Sainsbury's have linked their loyalty card with their banking division so that customers can automatically sweep money into their savings account by „rounding up‟ their shopping bill, resulting in a convenience for the customer and an additional valuable customer interaction for Sainsbury‟s with the minimum of cost.

The highly competitive nature of the market has fostered an accelerated level of development, resulting in a situation in which UK grocery retailers have had to be innovative to maintain and build market share. Such innovation can be seen in the development of a range of trading formats, including the internet, in response to changes in consumer behaviour. The dominant market leaders have responded by refocusing not just on price but on reinforcing the added value elements of their service.

The grocery environment has seen a very significant growth in the size and market dominance of the larger players, with greater store size, increased retailer concentration and the utilisation of a range of formats. However, small chains of convenience stores and aggressively priced local shops are beginning to emerge which offer a more personalised or added-value service. To counter this, Tesco, Asda and Sainsbury's are steadily acquiring existing small-scale operations and opening local stores – Metro and Express stores – in town and city centres. Some, such as Marks and Spencer, have even opened „convenience stores‟ at motorway service stations.

Consumers also have become more aware of the issues surrounding fairer trade and, in response to consumer demand, ecologically benign and ethically produced products, such as tea, coffee and cocoa, are now widely available at the majority of large chains.

All organisations must meet the challenges of competitive markets. Doing so involves using a range of approaches and skills. Competitive advantage does not necessarily mean lower prices. Since it is obviously vital in the long term to maximise margins, the key is to find other ways to make customers want to buy or use an organisation‟s services. Other ways to achieve a more competitive edge include:

Having a clear vision for the organisation and communicating this to all the stakeholders

Forming alliances with suppliers and investors which promote the vision and values

Creating an enjoyable atmosphere for employees, and training and rewarding them appropriately so they have more job satisfaction

Building customer loyalty which minimises the costs of customer acquisition.


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SUMMARY

In this chapter we have further examined the relationship between customer service and profitability and how important it is to acquire customers who are profitable now and in the longer term, if organisations are to sustain their competitiveness. Some of the main influences in this are the external environment and how the organisation reacts to fluctuations in, for example, the economic climate or social changes. In the next chapter we will look at internal influences and the impact these have on customers.


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Chapter 3

The Impact of Strategic Choices on Customer Satisfaction

Contents Page

Introduction 51

A. Organisational Structure as a Strategic Choice 52

What Does Organisation Mean? 52

Organisational Structure 52

B. Types of Organisational Structure 54

Entrepreneurial Structures 55

Functional (or Bureaucratic) Structures 56

Divisional Structures 57

Matrix Structures 59

The Service Team Approach 60

C. The Impact of Growth on Structure 62

Greiner's Growth Model 62

D. Organising Processes Around Customers 64

Cell or Zone Systems 64

Job Design 65

Scripting 65

Mission and Values 66

Customer Segmentation 69

E. Culture 70

What is Organisational Culture? 70

Symbols and Culture 72

Formal and Informal Culture 73

Models of Organisational Culture 75

F. Empowerment 79

Self Managed Teams 81

Leadership 81

(Continued over)

50 The Impact of Strategic Choices on Customer Satisfaction

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F. Service Excellence in the Public Sector 82

Summary 84

The Impact of Strategic Choices on Customer Satisfaction 51

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INTRODUCTION

Strategy is the direction an organisation decides to take and how it chooses to use its resources to achieve this. In commercial organisations, this generally takes the form of deciding which markets to do business in or which products will give them an advantage over competitors. In the not-for-profit sector, some of these imperatives may still be important, but the strategy will be mostly about achieving social goals. All strategies are based on identifying the current situation, an overall aim (plus shorter term objectives) and the activities that will enable achievement of the aims and objectives.

Strategic choice involves understanding the nature of stakeholder expectations (the "ground rules" on which they decide to deal with the organisation), identifying strategic options and then evaluating and selecting activities that give the best opportunity to realise the strategy agreed upon. The recessions of recent years (particularly the 1980s and most recently 2008 onwards) have shifted the strategic focus of many large and small, public or private organisations towards relationship marketing as a way of managing economic turbulence by creating customer value, satisfaction and loyalty, leading to improved profitability and sustainability in the longer term.

In the previous chapter we considered factors outside an organisation‟s control that help create competitive advantage for them. Scanning the macro-environment also confers important organisational benefits and helps inform strategic choice by:

(a) Identifying the current position

Environmental scanning helps to assess an organisation‟s position in the market (and measure the success of any previous strategies) and direct future strategy.

(b) Providing information for strategic planning

Sustainable competitive advantage is achieved by generating or possessing resources that are valued by the customer and can be used effectively to distinguish the firm from others in the same market.

(c) Detecting new opportunities

Organisations must understand the changing dynamics of their market. Gathering, analysing and acting on data is a key factor in taking advantage of inflection points (see below) and capitalising on the potential for growth.

(d) Monitoring market trends and fashions

Environmental scanning increases sensitivity to customers‟ changing needs and companies should be proactive in monitoring, predicting and responding to market trends.

(e) Monitoring the dynamic business environment

Small changes in the environment such as legislative, cultural or technological changes, if not anticipated and acted upon, can be the difference between becoming the market leader and insolvency.

Inflection Points

An inflection point is a mathematical term which refers to noticeable changes in the direction of lines on graphs. In business terms it signifies a defining moment resulting in a massive shift in the way business is conducted. As an example, consider the impact the PC and the Internet has had on changing the way business is done in many different companies and industries.

Strategic inflection points can be caused by technological change, but they are more than that. They are full-scale changes in the way business is conducted. According to Andy


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Grove (co-founder of technology company Intel): “A strategic inflection point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end.”

Strategy is also a management activity and the ultimate objective of all management activity, whichever sector the organisation operates in, should be customer satisfaction. Therefore, in this chapter we will be exploring the various strategic choices and issues which affect customer service performance. This will include the influence of organisational culture and Human Resource Management strategies on the way customer service values are implemented and how appropriate leadership can promote service excellence. First we must consider how the way an organisation structures itself affects its ability to carry out its strategy.

A. ORGANISATIONAL STRUCTURE AS A STRATEGIC CHOICE

For many industries and in many parts of the world, protective barriers no longer exist and national and regional markets are open to unrestricted international trade. In others, new barriers are being erected, often under the guise of local quality standards, to safeguard indigenous firms in emerging markets. So the modern global business environment is characterised by rapidly changing patterns of demand, highly complex networks of supply and distribution, constant innovation and increased competition, thanks to technology.

Under these circumstances, the management of any enterprise faces unprecedented challenges. In developing appropriate strategies to meet these challenges, managers have sometimes found themselves hampered by traditional forms of organisation that can hinder or even prevent the development of effective responses to the uncertainties and shifting requirements of today‟s changeable markets.

What Does Organisation Mean?

In the context of business and management, organisation is the form taken by individuals who must work together in a collective manner to achieve the ultimate goals of the enterprise. The purpose any form of organisation is, therefore, to co-ordinate and motivate the activities of all members of the firm to meet its objectives. This is not limited to commercial enterprises, but the same would apply to not-for-profit enterprises.

The success of any enterprise depends basically on two fundamental requirements – strategy and organisation. If the way it is organised is faulty, the enterprise will not be able to deliver sufficiently on its strategy. Superior and appropriate organisation is one of the best sustainable sources of competitive advantage. Resources and technologies can be bought or imitated, but organisation is unique to each enterprise – it is an asset which is developed by each firm and cannot be bought readily „off-the-shelf‟.

Global circumstances now change too rapidly to favour structures that cannot respond flexibly and immediately to unexpected challenges. In this kind of environment, the way an organisation is structured becomes a strategic choice. Indeed, it may be seen as the fundamental strategy on which all other strategies depend.

Organisational Structure

Organisational structure is defined by Wilson and Rosenfield (Managing Organisations, 1990) as being:

“The established pattern of relationships between the component parts of an organisation, outlining both communication, control and authority patterns.”


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So, it involves the grouping of people into departments or sections and the allocation of responsibilities and authorities. This implies a framework to:

Link individuals in a network of relationships so that authority, responsibility and communication can be controlled

Allocate tasks required to fulfil objectives to suitable individuals or groups

Give individuals or groups the authority to perform the allocated tasks whilst controlling behaviour and the use of resources in the interests of the organisation as a whole

Co-ordinate the objectives and activities of separate units so that the overall aims are achieved without gaps or overlaps in the flow of work

Facilitate the flow of work and communications throughout the organisation.

The two terms most frequently applied to organisation structures are „tall‟ and „flat‟. Both of these refer to the hierarchy of managerial layers between the top and bottom of the organisation – between person who runs the company and, say, customer facing staff.:

Tall – many layers with defined responsibilities and authority at each level

Flat – few layers with wider scope for individual decision making

There is no definitive number of layers which differentiates the two. In general, an organisation is flat were it has just one or two layers of management (say director, manager and operational staff) whereas an organisation with an extensive hierarchy of directors, managers, supervisors or junior managers and team leaders would be classed as tall.

Enterprises can be organised in a wide variety of ways. However, a basic distinction may be made between the degree of specialisation or specialised expertise involved in carrying out tasks within the firm and the level of centralisation within the organisational hierarchy, where control is dependent on strict instructions from those higher up the chain of command. The form of organisation may lie somewhere on a continuum between these.

For example, highly centralised organisations are likely to have strict rules and regulations which control the way various departments and functions within departments operate on a daily basis, whereas decentralised organisations allow much greater scope for personal decision making.

Thus, tall or flat structures may be placed on this continuum as follows:

Degre

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Centralisation


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Although many organisations have "de-layered" and have become flatter since the 1990s, they still operate in a hierarchical way, with lines of authority running down through the layers. In these types of organisations there will be a small number of directors and senior managers with responsibility for leading the organisation and developing its strategy to evolve into the future. Underneath this layer will be the middle managers, who are responsible for strategy implementation, with possibly a further layer of junior managers below if the organisation has a large number of staff. It is the junior managers or supervisors who interface with the front line staff and because they have detailed knowledge of how the enterprise operates on a daily basis, they can substitute with operational staff if required.

B. TYPES OF ORGANISATIONAL STRUCTURE

Structure distinguishes the parts of an organisation and delineates the relationship between them. Structures in organisations are about the way people are grouped together into departments, divisions and operating areas. Usually, individual directors are responsible for a specific function within the organisation, such as sales, production, marketing and finance. In larger organisations, separate operating companies may be formed under the overall organisation to make the operations more manageable.

An organisation can structure itself in a variety of ways to ensure it meets its objectives. Key factors in determining the type of structure include:

Mission

What it does

Size

Where it operates

Who it deals with

Culture

Technology employed

Complexity of processes

Future expectations.

Public sector and not-for-profit organisations are also influenced by these factors but their structure may also have to take into account:

Accommodating a level of political control

The extent and type of obligations and duties imposed upon it by Government

Tall

Flat

Degre

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Centralisation


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The expectations of society

Changes in government policies and priorities.

Division of labour accounts for the basic structure of an organisation. Structure is the formalisation of roles and responsibilities. It is also a reflection of specialisation in the performance of different types of tasks and the allocation of areas of responsibility to groups of employees based on their specialised skills. Furthermore, structure clarifies hierarchies of control so that decision making authority can be distributed effectively across the organisation.

Thus, every organisation made up of more than one person will need some form of organisational structure. The organisational chart is the most convenient means of showing the way in which the hierarchy or chain of command works within this structure, and we shall describe and chart the main forms that this takes in the following sections.

Entrepreneurial Structures

Many organisations, particularly in the commercial sector, start out as small businesses. Some of today‟s multinational corporations, such as Ford, Hewlett Packard and Google, began with just one individual, or perhaps a handful of people, with a good idea and plenty of drive and ambition to build a business. This drive and ambition to turn ideas into business success is usually referred to as "entrepreneurship".

In entrepreneurial enterprises, authority and decision making is invariably concentrated in just one or two people one person, at least in the early days of the business when the organisation is relatively small. The structure is likely to be as follows:

Figure 3.1: Entrepreneurial structure

Employee Employee

Managing Director/ Owner

Employee

Employee

Employee Employee

This structure reflects the authority the entrepreneur has over all aspects of the business and its employees. It will usually encourage delegation and empowerment, and is appropriate where quick decision making is needed.

Satisfying customers is likely to be easier in these types of organisation than in larger ones. It is perhaps natural that the smaller the business, in terms of staff numbers, the easier it is to be able to manage it from the perspective of customer care. Many large organisations today work hard to build a strong focus on meeting customer needs. However, in a smaller organisation, staff are more likely to know their customers personally. This key fact makes it easier to keep their requirements in mind.

However, as an organisation gets bigger it becomes difficult for the entrepreneur to maintain direct authority over all employees and a change in structure becomes necessary. The types of larger organisational structure can take many forms, but most fall within three main styles – functional, divisional and matrix.


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Functional (or Bureaucratic) Structures

The traditional approach was to divide an organisation into functional areas such as marketing, production and finance. Each functional area may have many layers of hierarchy within it to reflect the distribution of responsibility and authority.

Figure 3.2: Functional structure

Managing Director

Human Resources

Purchasing Production Marketing Finance

The features of this sort of structure include:

A match between specialisation of job and department

Reliance upon formal procedures for co-ordination, usually linked to paperwork

Clearly marked authority distinctions within the hierarchy and lines of authority.

It is most appropriate for single product/service firms or firms producing a clearly related group of products and/or services. It can be inflexible as there is an inability to quickly change and meet new demands due to competing internal requirements from each functional area and the many layers of decision making that this type of structure encourages.

Each unit in a bureaucratic or functional structure has a separate function and specialises in that only. Jobs found within this type of structure tend to be narrowly defined because of this specialisation, but this also allows the incumbents to become experts in their service areas. Upper management is responsible for coordinating all units, making the distribution of authority very hierarchical. This type of structure is readily understood by employees and outsiders, but because of the specialisation, silos may result. For this type of organisational structure to be effective, it is important to establish effective channels of communication throughout the organisation.

This is probably the most frequently used type of structure within national governments. It differs from department to department in the types of functions emphasised. These are determined, in part, by the size of the department and also by its strategic intent and values and in some cases, by law.

Case Study 1

IBM had a functional structure with a strict distinction between areas such as marketing and research and development until 1988. It was believed that this structure led to delays of up to two years in the introduction of new models and this caused IBM‟s profits to fall after 1984.

IBM has now split its product range into divisions with each having their own production, marketing staff, etc.


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Divisional Structures

Today, many companies have reduced the number of management layers and have reorganised away from functional structure towards a divisional structure. Divisional structures are usually broken down into three main types – product, market and geographic.

(a) Product Structure

Under a product structure, employees are grouped together based upon the specific products produced by the company. An example of this would be a company which produces a range of domestic appliances, such a dishwashers, fridges, cookers, etc.

Figure 3.3: Divisional structure – by product

Managing Director/CEO

Head of Product A

Head of Product B

Head of Product C

Head of Product D

Human

Resources Purchasing Marketing Finance

(b) Market Structure

Under a market structure, employees are grouped together based upon the specific markets in which the company operates. Often, products are sold to individual consumers or business customers. So, the sales and customer service departments are organised using the type of market as a basis for the tasks and activities performed by the staff – for example, consumer sales and consumer customer service will work together while corporate sales and corporate customer service will work together.

Figure 3.4: Divisional structure – by market


Human Resources

Head of Corporate

Business

Head of Consumer Business

Finance

Purchasing Marketing Purchasing Marketing

Organisations with both these types of structure are based on the product or service delivered or programme administered. Each division may include a wide range of functions needed to produce these products/services or to run the programme. One of the drawbacks, then, is the duplication of functions across divisions. Another drawback is that it does not promote economy of size; because each division tends to obtain its own supplies and resources, these are usually acquired at a higher price.


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(c) Geographic Structure

Under a geographic structure, employees are grouped together based upon specific geographic location. This is often used by large companies that operate in many different parts of the world. Within each division, marketing, production and other staff work together on the same projects, generally reporting ultimately to a Head Office which oversees all the various company divisions.

Figure 3.5: Divisional structure – geographic


Head of EMEA Head of Americas Head of Asia Pacific

Human

Resources Purchasing Marketing Finance

Geographic structures by region, district, post, garage, nursery, forest, park, institution, etc. are all parts of a larger whole, but each geographic division is likely to be self contained and operate as a profit centre or SBU (Strategic Business Unit).

The very nature of being spread geographically presents its own advantages and challenges:

It allows for greater potential independence, which may or may not support the overall strategic direction.

Within each division, the functional structure tends to be adopted with most, if not all, support functions present in each division. This may give rise to the drawbacks noted above and further problems if the geographical spread means that only a few employees make up each unit. However, some companies will still keep certain functions such as human resourcing or finance centralised, so as to achieve economies of scale in the parts of the business that are not so sensitive to the specific divisional needs.

Geographically spread units may also be somewhat limited in their potential applicant pool.

Advantages and Disadvantages of Divisional Structures

The advantages of a divisional structure:

Allows individuals to specialise and gain expertise in specific products and markets

Allows a large company to operate as several smaller ones, each with a stronger market identity and autonomy, thus facilitating rapid decision making and response to specific market needs

Offers greater flexibility for growth and expansion as additional profit centres can be grafted on to the organisation as they are identified.

Disadvantages include:

Internal conflict between divisions in, for example, the allocation of fixed costs, setting of budgets and availability of finance


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Possible higher costs, as activities such as marketing will be replicated in different divisions

Co-ordination can be difficult if divisions grow too large.

Traditional functional divisions have come to be seen as „silos‟, hampering necessary collaboration and impeding the transfer of information between different work units, with staff thinking in terms of their own functional role as opposed to the broader needs of the company and its customers

This „silo‟ functionality is best exemplified by the company whose customer care processes are so designed that, when a customer calls a helpline regarding an incorrect delivery they may need to speak to staff in invoicing, sales and even logistics to get a new delivery and the problem resolved. Each function carries out its own tasks independently of the rest of the organisation.

One of the most notable features of organisation in response to the modern business environment has been the deliberate removal of barriers within companies. This has given rise to the development of matrix structures.

Matrix Structures

A matrix structure is the most complex of the different organisational structures. It involves employees being grouped by both function and product, with the management of a task organised along lines that cross normal departmental boundaries, creating cross-functional project teams who all work together to achieve the business aims.

Figure 3.6: Matrix structure


Manager of project

managers HR Purchasing Production Marketing

Project Manager

Staff

Staff

Staff

Staff

Team A

Project Manager

Staff

Staff

Staff

Staff

Team B

Project Manager

Staff

Staff

Staff

Staff

Team C

The matrix structure enables a business to draw on employee expertise from among different functional area to support products or services within a project team.


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A clear example of this type of structure would be the course teams in education, where a general management programme may draw on academic staff from management, finance and law departments of a college or university. Other examples include businesses producing a number of different products

If the project is short term, for example the launch of a new product, then once the project has been finished the team will usually be disbanded, with the individual members being drafted into other teams or absorbed back into the organisation‟s skeleton structure. However, cross-functional team working is becoming more normal in daily work activities as more organisations realise the interdependency of one function on another.

The main advantage of this type of structure is that staff don‟t just work with their functional colleagues, but may be working on projects which cut right across the whole spectrum of organisational activities and roles. This can be highly motivating, as they meet and work with a broader range of colleagues and have an opportunity to understand how other parts of the organisation work. This, in turn, has obvious advantages for internal and external customers as staff become more knowledgeable about the business and it ensures that internal expertise can be efficiently used towards organisational goals.

However, a feature of the structure is that each team member can end up with two bosses – the departmental manager from the functional team and the project leader. For example, a sales manager may report to the marketing director and the person acting as project manager for a new product. Individuals may find it difficult to prioritise differing requirements of their functional and project managers if heavy demands are made on them. There is also a risk of a failure to provide the clear line of accountability which is present when everyone has only one manager. Therefore, this type of organisation structure demands a high degree of collaboration and communication between functions and colleagues.

The Service Team Approach

A variant of the matrix structure used in a number of large service orientated companies and also in some government agencies is the service team approach.

In a functionally organised enterprise, the customer often deals with many different departments within the organisation. Each of these departments has different rules and priorities concerning interaction with their customers. If customer service requires more than one department, one department must hand off service to another department to meet the specific needs with which that other department deals. If the customer contacts a company, for example, without knowing which department can resolve their issue, the members of that department may not specifically know where to refer them or how to coordinate inter-departmental solutions. Worse, the service provider may not ensure that the customer is properly referred and may set the customer adrift to wander from department to department in search of a solution on their own.

Service team structure provides an important opportunity for co-ordinating customer service. We know that a highly engaged team will deliver superior customer service. The service team structure provides a powerful opportunity for self development, even for those employees with little or no learning aim and thereby, fosters engagement. By their very nature, service teams bring diverse points of view to team discussions and may also provide unusual and creative solutions to problem solving. The team members directly witness how the different functions create a whole experience for the customer. Team members have a heightened sense of ownership in delivering exemplary customer service.

The organisational hierarchy on service teams is usually very flat. Often, the team members report to a team leader who reports directly to executive staff. Decision making is pushed to the lowest level at which it can competently be made. The leader acts more as a coach rather than a traditional manager and relies on the team members to collaborate in decision making. Accordingly, team members develop mutual accountability and a high sense of


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responsibility for the success or failure of the team's service efforts. The customer belongs to the team and team members succeed or fail together in delivering their service. Accordingly, the team members have high expectations of their colleagues‟ interaction with their mutual customer. The team members know that the most important responsibilities for customer service rest with them, which serves to energise the participants. In turn, this energy improves the level of service to the customer.

Case Study 2

In a functionally organised enterprise, each department focuses upon the most effective and efficient delivery of one aspect of customer service. Sometimes, a company will develop a highly standardised approach to customer service in the name of efficiency. So for instance, the claims department in an insurance company seeks to improve the processes surrounding the report, investigation and the ultimate resolution of the claim. Though the claim examiner may know who the customer s/he is serving is, they may have no resources or desire to customise the service delivery. In less progressive organisations, an examiner may even see the customer as a problem who disrupts the efficient claim resolution process.

Service teams group customers with similar service needs and assign them to a team specifically designed to meet those needs. So, for example, teams servicing large accounts will have team members skilled in stewardship and presentation; teams servicing numerous small accounts will have more administrators and automation to meet their customers‟ needs. Because all of the team‟s customers are similar, they build specialised service expertise through repetition. Because all of the team‟s customers are of similar importance, the team has no incentive to ignore some accounts because they are too small. Finally, every team member sees how the entire insurance process works for the customer and is made keenly aware of the impact their actions have on the customer.

Remember: Even though an organisation may be structured and operate by division or in cross-functional teams, it will still behave as a hierarchy – either in a tall or flat organisational form – in the way responsibility or authority to act is distributed.

Generally, if an organisational structure is wrong:

Decision making can be slow

There may be lack of co-ordination

Costs can rise

Failure to share ideas is increased

Motivation may decrease as people don‟t know what is happening or why.

The choice of how to structure an organisation is not an exact science. Each organisation is unique in terms of its environment, levels of staff expertise and what it hopes to achieve. The types of structures described above are useful in different ways and at different times of an organisation‟s development.


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C. THE IMPACT OF GROWTH ON STRUCTURE

One model that helps to explain the evolution of organisational structure is Greiner‟s Growth Model.

Greiner's Growth Model

The "Greiner Curve" is a useful way of thinking about the various crises that organisations experience as they grow. By applying this model to a developing organisation it is possible to anticipate many of the problems inherent in organisational growth before they occur, so that they can be met with pre-prepared solutions.

For most people, the word „crisis‟ has a negative meaning, to do with panic. It may, therefore be better to use a different term – and an alternative would be "turning point".

Greiner's Growth Model describes a number of phases that organisations go through as they grow. All kinds of organisations from design shops to manufacturers, construction companies to professional service firms experience these phases. Each growth phase is made up of a period of relatively stable growth, followed by an inflection point when major organisational change is needed if the company is to carry on growing. While organisations need to change at each of these turning points, if they plan properly, it ceases to become a crisis and becomes a "transition".

Figure 3.7: Greiner's growth model

Larry Greiner originally proposed this model in 1972 with five phases of growth. In 1988 he added a sixth phase. The six growth phases are described below:

Phase 1: Growth through Creativity

Here, the entrepreneurs who founded the firm are busy creating products and opening up markets. There are not many staff, so informal communication works fine and rewards for long hours are probably through profit share or stock options. However, as more staff join,

Growth crisis

Leadership crisis

Autonomy crisis

Control crisis

Red tape crisis

Phase 3

Growth through

delegation

Phase 4

Growth through

coordination

Phase 5

Growth through

collaboration

Phase 6

Growth through alliances

Time

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Phase 2

Growth through direction

Phase 1

Growth through creativity


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production expands and capital is injected. There is then a need for more formal communication.

This phase ends with a leadership crisis, where professional management is needed. The founders may change their style and take on this role, but often someone new will be brought in to provide the discipline of formalising procedures and processes.

Phase 2: Growth through Direction

Growth continues in an environment of more formal communication, budgets and a focus on separate activities like marketing and production. Incentive schemes replace stock as a financial reward.

However, there comes a point when the products and processes become so numerous that there are not enough hours in the day for one person to manage them all and he or she can't possibly know as much about all these products or services as those interacting regularly with customers. This phase ends with an autonomy crisis – new structures, based on delegation of authority and responsibility, are called for.

Phase 3: Growth through Delegation

With middle managers freed up to react fast to opportunities for new products or in new markets, the organisation continues to grow, with top management monitoring and dealing with the more business-crucial decisions. Many businesses flounder at this stage, as the manager, whose directive approach solved the problems at the end of Phase 1, often finds it hard to allow others to make decisions, while the „new‟ middle managers struggle with their new roles as leaders.

This phase ends with a control crisis – a much more sophisticated head office function is required and the separate parts of the business need to work more closely together.

Phase 4: Growth through Co-ordination and Monitoring

Growth continues, with the previously isolated business units reorganised into product groups or service practices. Investment finance is allocated centrally and managed according to Return on Investment (ROI) and not just profits. Incentives are shared through company-wide performance schemes aligned to corporate goals. Eventually, though, daily work and decision making becomes submerged under the increasing demands generated by the bureaucracy of standardised processes and growth can become stifled.

This phase ends on a red tape crisis – a new culture and structure must be introduced.

Phase 5: Growth through Collaboration

The formal controls of Phases 2-4 are replaced by professional practice as staff group and re-group flexibly in teams to deliver projects in a matrix structure, supported by sophisticated information systems and team based financial rewards.

This phase ends with a crisis of internal growth – further growth can only come by developing partnerships with complementary organisations.

Phase 6: Growth through Extra-Organisational Solutions

Greiner's recently added sixth phase suggests that growth may continue through merger, outsourcing, networks and other solutions involving organisations or individuals external to the enterprise.

This is a useful model for understanding the internal complexities of an organisation as it develops. However, not all businesses will go through these phases in this order. Growth rates will also vary between and even within phases. The duration of each phase depends almost totally on the rate of growth of the market in which the organisation operates. The longer a phase lasts, though, the harder it will be to implement a transition.


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Organisational structure, then, formally determines the hierarchy within an organisation – in other words, who reports to whom. There are, of course, a number of alternative choices; between vertical or horizontal integration and alternative strategies for exerting control. For a couple of decades now, there has been a general movement from vertical to horizontal integration, formal to informal controls and tall to flat structures, encouraged by continuous improvement in information technology.

Finding the organisational structure that works best for a particular company is very important. Using the wrong structure can result in poor communication, poor product development, poor customer service and a myriad of other business problems. Any of these things can be detrimental and could result in lost revenue or even complete failure of the company.

D. ORGANISING PROCESSES AROUND CUSTOMERS

Cell or Zone Systems

In large organisations there are likely to be many different types of product or services on offer to different types of customer. It therefore makes sense to organise product teams around specific products and service teams around specific services. This is known as a cell or zone system. It is categorised as customer focused because the system is centred on customers or whole products rather than just one process or stage in production.

One example of such systems is the call centre, where teams may be organised in such a way to deal with all aspects of customer service for specific products and services. Customers benefit from not having to speak to several different people or departments within the organisation to solve their enquiry or problem.

Think Point

What advantages can you see in the cell or zone system for delivering good customer service?

There are many such advantages, including:

Teams become more specialised and are better able to meet the needs of their customers

Customers are able to speak to people who are dedicated to a particular product

High levels of product/service knowledge

Speedier resolution of problems

The cell/zone system is customer focussed.

With the continued focus on customer service, customer retention and the lifetime value of the customer, it is no surprise that contact or call centre operations are increasing in importance. For the customer, the person on the other end of the phone is the company and the contact centre is still the most common way that customers get in touch with an organisation.

Research suggests that customers want:

accuracy

personalised service


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customised response

prompt response

sensitivity to needs and requirements.

They want the person who picks up the phone to be their sole point of contact. They want the customer service staff to satisfy their needs, whether it is service, support, order processing or sales. This adds up to more pressure for on-going training in areas of question answering, calming irate or frustrated callers, and cross and/or up-selling opportunities.

The high percentage of contact by telephone reinforces the fact that call centre personnel are key to customer retention, both for current customers and, by word of mouth, for potential and future customers. In those first few moments, based on the first conversation, it is determined whether the customer has a good or bad impression of the service provided by a company. If customers are not listened to, heard, or responded to in an appropriate way, regardless of whether or not their issue, concern, complaint or question can be answered or resolved to their satisfaction, they form an opinion or even a judgment of the company.

Job Design

Jobs are made up of both mandatory actions that satisfy job functions (i.e. the bullet points on a job description) as well as optional behaviours that realise job „essence‟ (for most service based businesses, this is creating delighted customers).

Most work environments reinforce mandatory job functions through job descriptions, standard operating procedures (SOPs), checklists, etc. and pay little attention to the optional behaviours that, in the end, are the difference between an ordinary transaction and a memorable experience.

Those who work in departments that provide internal services to other staff may increase their customer focus by, for example, working for occasional periods within other departments, or „shadowing‟ someone in the departments they generally service.

Senior people should also be customer aware and model customer focused behaviour for other staff. Many successful organisations, such as Marks and Spencer and Tesco, believe it is important that key decision makers and strategy formulators deal with customers face to face, and an essential and core part of the training and development of all management is a period on the „front line‟ serving and speaking with customers. It is a strategic choice to do this.

Customers don‟t establish relationships with organisations; they establish relationships with the people inside the organisations. Good customer service is rarely the result of perfectly executed mandatory job functions. Rather, it is most often the result of optional behaviours such as expressing genuine interest and offering sincere and specific compliments.

Scripting

Scripting and procedural language are often trained into customer oriented employees, particularly contact centre staff, to ensure consistency. However, scripting can make the customer feel they are dealing with a robot. Scripting also leaves service-givers feeling trapped and inflexible when they are asked questions or want to say something outside the script.

You can follow rules and procedures and keep customers within the lines without making them feel they are filling in a form (unless of course, they ARE filling in a form with you) or talking to someone who has no human empathy.

The author E. M. Forster had a two word sentence that sums up the problem with scripting: “Only connect.” It was, he said, essential to the human condition that people want to connect with other people. You can only feel human by connecting. Whether or not you fully agree


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with this, most of us acknowledge that it is always good to be able to „see the face behind the voice‟ when we meet colleagues or customers in the flesh whom we have only spoken with over the phone or by email. It is also evident that, in many cultures, all transactions for goods or services are facilitated by the relationships we build with each other.

Customers want to connect with other people and organisations need to learn to act in a human way to fulfil that need. This does not necessarily mean a Luddite argument against all forms of automation or against consistency in how customers are treated. Amazon, the online retailer, for example, automates 95% or more of their customer interactions, but manages to do it in a way that „speaks‟ to the customer in a human dialogue rather than frustrating the customer.

Mission and Values

At the very beginning of this chapter we said that mission is important to any organisation in making strategic choices. Every organisation needs a clear sense of purpose or direction – it needs to look into the future and ask itself what it wants to achieve. The answer results in a statement that summarises the organisation‟s long term goal, purpose or mission. Here are two examples.

Oxfam‟s purpose

Oxfam works with others to find lasting solutions to poverty and suffering. (Source: www.oxfam.org.uk)

GlaxoSmithKline‟s mission statement

To improve quality of human life by enabling people to do more, feel better and live longer. (Source: www.gsk.com)

The mission statement is broad, general and long term.

As Adcock et al. (1995) put it, in their book Marketing: Principles and Practice, the mission statement sets out:

“… how that organisation intends to fulfil its main business objectives while recognising the legitimate interests of other stakeholders such as customers, employees, suppliers, and the communities in which the organisation operates.”

Many organisations also have a set of values or beliefs that are used as guiding principles when making decisions. Michael Armstrong, a well respected organisational and management theorist and scholar, links mission and values as follows:

The mission of an organisation expresses its sense of purpose – the business the enterprise is in and the broad direction in which it is going.

A value system expresses basic beliefs in the behaviour which is believed to be good for the organisation and in what the organisation considers to be important. It is expressed in a value statement.

The purpose of a value system is to help to develop a value driven and committed organisation, which conducts its business successfully by reference to shared beliefs and an understanding of what is best for the enterprise. Value statements are closely associated with mission statements and, like them, can be used as levers for change – getting people to act differently in ways which will support the attainment of the organisation‟s objectives.

Mission and Vision

Babcock International Group plc states that:

“Our vision is to become the partner of choice for supporting the outsourcing needs of government and private sector customers who have exacting technical and operational requirements.

http://www.gsk.com/


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Our mission is to deliver high quality support services solutions through applying specialist knowledge, expertise and original thinking to the challenges of public and private sector customers.”

There is, then, a difference between a vision statement and the organisation‟s mission.

Mission is the raison d‟être for the organisation: why it exists. It is the original founders' intentions – what they wanted to achieve by starting the organisation. It is concerned with where the organisation is now and it should be re-examined and refreshed periodically if an organisation is to remain dynamic. The mission answers the question: "What business are we in?"

Vision is what keeps the organisation moving forward, sometimes even in discouraging circumstances. It is aspirational in that it sets out where the organisation wants to be in the future. A vision statement is about values and answers the question: "What do we want to be?"

The vision and mission set the goal, and strategy is then the means to achieve the goal. In particular, the strategy is likely to give clearer focus to the vision, since the choices necessary to determine how the goal will be achieved are likely to result in greater understanding and perception of what achieving the goal will mean for any organisation – i.e. what the organisation will „look‟ like.

A mission statement or vision sets out the aims and aspirations of an organisation and will be based on a set of core values. Organisational goals and aims tell us what we will do to achieve those values and aims and specific targets define the „how‟ we will do these things.

So we can say organisational mission is the foundation on which strategy should be built. Missions have two principal elements:

Organisational purpose – what are we here to do, why does this organisation exists

Organisational values – how shall we do it.

The answers to these questions form the basis upon which strategy is devised and objectives and targets are set.

Figure 3.8: The hierarchy of strategic planning

Mission and values

Aims or goals

Objectives

Targets Specific and immediate purpose

Broad purpose

How

Why

What


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Core Business and Values

Sometimes organisations try to be all things to all people. When resources become scarce, there is no way they can do that, even supposing they even could before. Instead, they must focus on their primary purpose, their core business, by asking:

What outcomes are a legal requirement?

What are the most important outcomes we want to achieve?

Who are our primary customers?

What customer needs must we address?

This core business needs to be clearly communicated to staff so every employee understands what is important to the organisation and how that relates to their position.

Core values describe behaviour that is consistent with the core business and is considered critical to the success of the organisation. All members of the organisation are expected to exhibit this behaviour as an integral part of their jobs. For instance, the organisation may champion “customer service” as a core value. What does that mean to each and every employee as they go about their jobs? What actions has the organisation taken to define these core values?

Strategic Intent

In 1989 Professors Gary Hamel and C. K. Prahalad coined the term „strategic intent‟ to describe the importance of intentionally visioning an organisation‟s future rather than simply reacting to external forces and conditions. All organisations do this by answering a series of questions that help it better define their objectives:

Who are we?

What is our purpose?

Where do we see ourselves in the future and why?

How will the organisation add value to our customers?

Typically, this process includes the usual components of strategic planning – mission, vision and values, environmental scanning and SWOT analysis, and the identification of outcomes to be accomplished in the next 3-5 years.

Results and Outcomes

These define the success of the organisation – how it adds value to its customers‟ lives and needs. Unlike the private sector, where profit defines success, success in the public sector is less easy to discern.

Results are the tangibles that we aim for, that we say define success

Outcomes are the intangibles, perceived value.

They are mentioned here because any discussion of „who we are and what we want to be‟ (strategic intent) must include some measure of how we know we have achieved the goals.

Results and outcomes are the focal point of organisational planning – what do we want to accomplish and how will we best utilise our resources to get there? We need to be clear on this framework before setting the strategy.


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Customer Segmentation

Customer segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways relevant to marketing, such as age, gender, interests, spending habits and so on.

Segmentation is best known for its use in marketing – for targeting and acquiring customers and seeking to retain and migrate them to higher value – and also in choosing the right location for a given facility, be it a retail store, library, or other type of outlet. However, over the last decade, the success of market segmentation has expanded its application across other business functions. Market segmentation can be applied to a range of business or organisational functions including:

Strategic and tactical functions ranging from strategy development to customer acquisition and retention

Core business practices and initiative-based activities including planning and forecasting and development of new products and services

Customer management at the portfolio level and in one-to-one sales and services, including media and distribution choices.

Segmentation is part of an organisation‟s strategy. It allows enterprises to target groups effectively and allocate resources to best effect. Traditional segmentation focuses on identifying customer groups based on demographics and attributes such as attitude and psychological profiles. Value based segmentation, on the other hand, looks at groups of customers in terms of the revenue they generate and the costs of establishing and maintaining relationships with them.

Customer segmentation can be a powerful means to identify unmet customer needs. Companies that identify underserved segments can then outperform the competition by developing appropriate products and services. This is most effective when a company tailors offerings to segments that are the most profitable and serves them with distinct competitive advantages. This prioritisation can help companies develop marketing campaigns and pricing strategies to extract maximum value from both high and low value customers.

Organisations use customer segmentation:

To gain insight into their customers and use that knowledge to enhance their profitability and revenue growth, and to attract more customers

To become a customer centric organisation – that is, to make the customer an integral part of their organisation's strategy and decision making.

Customers themselves are always changing and adapting. Changing expectations, lifestyles and life stages, and access to increasing sources of information and competition providing new products and services mean there is little constancy in customer behaviour. Segmentation data provides organisations with information to develop goods and services that profitably serve customers, thereby sustaining the organisation's growth and ability to compete with the development of new products and services.

Companies must be able to discern the difference between how customers appear and how they act. While some customers may look alike, they may behave quite differently, as shown in the following example.


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Demographics: Life Stage: Needs: Attitudes:

Woman

Early 40s

Married

Household income of £50,000

Two children under 10

Working mother

Menu planning advice

Value shopper

Prefers low fat products

Enjoys cooking

Woman

Early 40s

Married

Household income of £50,000

Two children under 10

Working mother

Ready-to-eat products

Home grocery delivery services

Convenience shopper

Prefers organic foods

Does not like to cook

Businesses have been successfully using segmentation for many years to better reach profitable customers. Public sector organisations are now also using this technique – libraries, for example, are successfully using customer segmentation to better reach prospective underserved and underprivileged sections of society. More importantly, all types of organisations are weaving customer segmentation into their core business model and a range of business activities, to improve top line and bottom line performance, by tailoring their offerings to specific types of customers.

E. CULTURE

Why is culture so important to an organisation?

Edgar Schein, an MIT Professor of Management suggests that an organisation's culture develops to help it cope with its environment. Today, organisational leaders are confronted with many complex issues as they attempt to generate organisational achievement. A leader's success will depend, to a great extent, upon understanding organisational culture.

Schein contends that many of the problems confronting leaders can be traced to their inability to analyse and evaluate organisational cultures. Many leaders, when trying to implement new strategies or a strategic plan leading to a new vision, discover that their strategies fail if it is inconsistent with the organisation's culture. A CEO who comes into an organisation prepared to "shake the place up" and institute sweeping changes, often experiences resistance to changes and therefore, failure. Difficulties with organisational transformations arise from failures to analyse an organisation's existing culture.

What is Organisational Culture?

Culture means the attitudes, practices and relationships that are normal in an organisation. It comprises the assumptions, values, norms and tangible signs (artefacts) of organisation members and their behaviours, and encompasses the rules that are not written down, but which everybody knows.

A norm is an established behaviour pattern that is part of a culture. Over time, all organisations, and parts of organisations, will develop 'norms, such as teams going to lunch together. These norms include ways of thinking and doing things that team members have to adopt for them to be fully accepted – for example:

Acceptable dress codes


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Physical aspects of the building – decoration, layout etc

Management style

Company rituals

The approach to individual initiative

The style of language or jargon used within the organisation.

"The way we do things around here" is a common sense definition of culture but this over simplifies the concept and misses powerful underlying concepts and processes. It is better to regard culture as

the shared assumptions, beliefs, values and norms, actions as well as artefacts and language patterns.

It is an acquired body of knowledge about how to behave in a particular environment and includes the shared meanings and symbols which help everyone's interpretation and understanding of how to act within an organisation.

Culture is what determines how a group of people will behave. Cultures are collective beliefs that in turn shape behaviour. They can include:

Shared understandings

Shared meanings and perceptions

Behavioural codes

Values

Stories

Heroes & heroines

Symbols and rituals.

An organisations' culture encapsulates what it has been good at and what has worked in the past. These values can often be accepted without question by long serving members of an organisation.

One of the first things a new employee learns is some of the organisation's legends – perhaps how the founder worked long hours and despised formal educational and training qualifications. Legends can stay with an organisation and become part of the established way of doing things, so the founder's views about the importance of education and training will stay current. Over the course of time there may be a 'culture shift' as new managers move into the organisation and change the old ways. However, a number of legends continue to be important determinants of 'the way we do things around here'.

A key role for culture is in differentiating one organisation from others and providing a sense of identity for its members. Cultures can appear quite haphazard and chaotic to the outsider because they evolve over time. However, a strong culture is one that is internally consistent, is widely shared and makes it clear what is expected and how people should behave.

We can see from this definition that culture plays an important part in defining how an organisation is structured, people are managed and in particular, the “rules or norms” that staff need to operate within. These may be about:

the way work is organised and experienced

how authority exercised and distributed

how people are and feel rewarded, organised and controlled

the values and work orientation of staff


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the degree of formalisation, standardisation and control through systems there is/should be

the value placed on planning, analysis, logic, fairness

how much initiative, risk taking, scope for individuality and expression is given

rules and expectations about such things as informality in interpersonal relations, dress, personal eccentricity

differential status

emphasis given to rules, procedures, specifications of performance and results, team or individual working.

Culture defines how the organisation expects people to work and behave and thus how its managers and leaders are expected to plan, organise, recruit, motivate, reward and discipline. The rules or norms may be evidenced in formal policies and procedures, perceived wisdom, custom and practice and so on.

The impact of culture can be significant – we have all heard of terms such as “blame culture” or “long hours culture” and we all share a common understanding of the behaviours which these terms cover:

In a blame culture, innovation may be stifled, reducing the local management‟s effectiveness at solving problems.

In a long hours culture staff who do not regularly work excessive hours are held in less esteem and may even fail to be rewarded by their organisation, despite the fact that they may be more efficient and effective than other colleagues. (In fact, organisations that fail to recognise the need for a good balance between work and life are likely to increase negative stress and reduce the effectiveness of their staff through exhaustion, depression or burnout.)

Both these types of cultures may impact on staff turnover, increasing recruitment costs, or influencing recruitment decisions by reducing the potential pool of personnel who are considered suitable to work in the organisation. They will certainly impact on the service which customers receive. Stressed, demotivated or disgruntled staff are unlikely to project a good impression of the organisation, nor are they likely to put extra effort into ensuring customers are dealt with promptly and effectively.

Think Point

Think about the organisation for which you work, or the college with which you are studying. Make a list of the features which describe its distinctive culture – for example, how would you describe what its like to work or study there to a friend.

Symbols and Culture

Organisational culture may be visible:

In the type of buildings, offices, shops of the organisation

In the image projected in publicity and public relations in general.

Think, for example, of the differences between a local authority, a computer manufacturer and a merchant bank. The buildings and décor are different and attempt to convey the core values of the enterprise. So the computer manufacturer might choose styles which are bright and modern to convey innovation, whereas the bank may select more sober colours to


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denote stability. A local authority will not want to have offices which appear to be luxurious as they are funded by public money, but a merchant bank may wish to demonstrate their power and wealth (and therefore stability) by having well appointed buildings in expensive or fashionable locations.

Culture often manifests itself in symbols. Symbols can be the high profile and visible “this is who we are” things that are presented to the outside world and represent the external image, or more low profile things that are more routine day-to-day manifestations of what actually happens.

Examples of what we mean by symbols include:

Practices – These are the rites, rituals and ceremonies of an organisation and can take many forms from the office party to long service awards.

Communications – These are the stories, slogans, myths and legends circulated within the organisation. They may be about some incident in the company‟s past or what happened to Fred Blogs the day he wore red socks. They may be about outstanding performance, personal commitment to duty, failures, etc. As they are told and retold they represent the preferred way of doing things. Such things may be communicated during inductions, staff news letters, team meetings or just over a cup of tea or coffee.

Physical forms – An organisation may manifest itself in many physical forms, such as its location in town or in the countryside, open plan or individual offices, suits or causal wear, networks or stand-alone PCs, etc. Do senior managers use a different staff restaurant to the rest of the staff? Does their status decide the type of company car or mobile phone they have?

Common language – Jargon is common in most organisations and often we even forget it is there. Examples include McDonalds calling its staff crewmembers, or universities referring to colleagues and teams as „faculty members‟. These terms give added meaning to working in these organisations and often provide an emphasis on team working.

Think Point

Look around you next time you are in a business district or main shopping area. Many organisations go to a lot of trouble to create an image for themselves – the McDonalds golden arches, the panda of the World Wildlife Fund, or the sunflower on a green background of BP.

Ask yourself what it might be like to work in each organisation, judging by the outward symbols displayed. Also, what messages do these convey about the attitudes towards customers?

Formal and Informal Culture

Culture is not just about the formal rules for doing things that may be laid down in contracts or policies and procedures. It is also about the informal “rules and norms” that exist, such as sending postcards from holiday to the office, or buying cakes on birthdays. There will be ways of working that run alongside the stated formal culture of an organisation.

These not only play a large part in defining the „real‟ culture, they may even mean that the actual culture is very different from the formally stated one.


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For example, consider an organisation that decides to have family friendly policies to encourage women to return to work after childbirth and to make themselves more competitive in the recruitment marketplace. These policies may include the right to part time working, dependency leave to care for sick children and so on. However, in practice, operational managers and colleagues may give very different messages to women about their family responsibilities – for example, managers may hold breakfast meetings or after business hours meetings, which are not conducive to “family friendly policies”. So, in practice, the organisation is failing in its desire to be family friendly as part of its defining culture and may have lost many valuable members of staff as a result. From this example, we can see how an organisation‟s formal and actual culture may differ and the problems inherent in trying to modify an established culture.

Case Study 3

It's Monday morning and John has arrived for his first day in his new job. He feels just like he did when he went to a new school and is wearing a new suit. He walks into reception and asks for Mr Green. The receptionist looks blankly at him.

"Mr Green? Oh, you mean Bob!" She giggles and picks up the telephone. "Mr Green? This is Miss Price, in reception. The new boy's here."

John feels very embarrassed by the receptionist‟s attitude towards him and thinks he is being made fun of. When his manager arrives to meet him he is wearing a T-shirt and jeans.

"Welcome, John. I see you have already met Melanie" (gesturing towards the receptionist) “Don‟t worry, you‟ll get used to her.”

"Good morning Mr Green" says John.

"It's Bob. It's relaxed here, we're all on first name terms. You don't need to dress up either, unless you're meeting customers”.

John feels very uncomfortable. His last job was particularly formal and managers weren't called by their first names. He wonders whether he'll fit in here.

The culture at John‟s new organisation is obviously very different from his old one. As his manager, it is fair to assume that Mr Green took some part in his recruitment and selection. Some of the following points about the organisation's culture should have been explained to John before his first day:

The company dress code

The use of “titles"

Management style

Bob should have briefed the receptionist properly in advance about John‟s arrival and Melanie should have appropriately welcomed John into the organisation on arrival and made him feel at ease in what was obviously quite a stressful time for him. Instead, Melanie made John feel embarrassed. Bob ought to have introduced Melanie in a proper manner rather than with a vague gesture.


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What John finds is a workplace with a very different culture to the one he is used to. Just because it is relaxed and informal does not make it less threatening to someone new. If you are not used to that kind of culture, it can be just as uncomfortable as a very formal one.

Models of Organisational Culture

Many people have written about culture and have devised a number of different ways of describing different cultures. Key writers include Charles Handy, Deal and Kennedy, Carmazzi and Johnson.

(a) Charles Handy

Handy identified four types of culture in organisations.

Power Culture

This culture depends on a strong leader in the centre and is often depicted as a spider‟s web. The central power figure manipulates all the activities of the business. Often small entrepreneurial businesses or family concerns have a power culture.

Employees working in such organisations need to be able to relate well to the central power holder/s and be able to anticipate what is expected of them and perform accordingly. When this happens well there can be great loyalty and commitment to the leadership goals. However, when there are poor relationships between the power holder/s and employees there is generally low motivation and high labour turnover.

The reputation of the company is inextricably linked to the values and leadership style of the central power holder/s.

Task Culture

A task culture is one in which the completion of the task or project is emphasised. There is no single source of power and often the culture is associated with a flexible project based/matrix culture.

This kind of culture depends upon getting the best individuals to work together on the completion of a particular project. Those individuals may come from different functions within the business.

Team work is paramount in this culture. Personal success in this culture comes from one‟s ability to achieve results. Relationships with power holder/s are relatively unimportant as are formal positions in the hierarchy. Technical expertise coupled with good team work are essential in this kind of organisation.

Role Culture

A role culture is one where roles are given primacy over individuals. In this kind of culture, logic and reason, impersonal systems and procedures rule people‟s behaviour.

The formal definition of tasks and roles and how they are co-ordinated through a hierarchical system of authority relationships is more important than the individuals who hold the posts. Large banks, insurance companies and local and national government are often role culture organisations.

Personal success in this culture is determined by the parameters of one‟s role/job. Exceeding the role expectations may be viewed as unhelpful. Usually in this kind of culture, career paths are logical and linked to length of service as


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opposed to levels of performance. Individuals who seek stability, clarity of job role and demarcation of responsibility will enjoy working in a role culture organisation.

Person Culture

The primary concern is this type of culture is to look after the needs of the individuals within it. It is the least common of the four cultures.

Often small groups of specialised professionals like doctors, designers, architects or lawyers may come together to form a business. They do this to enhance and develop their own personal aims and objectives and to share common facilities. Personal success in this kind of culture comes from a shared set of personal values with a group of other like-minded individuals.

The problem with this kind of organisation is that growth can threaten the culture.

(b) Deal and Kennedy

Deal and Kennedy measured organisations in respect of feedback and risk – the degree of uncertainty in the organisation‟s activities. Using these parameters, they were able to suggest four classifications of organisational culture:

The Tough-Guy Macho Culture

Feedback is quick and the risks are high, although the rewards associated with success are also high. This often applies to fast moving financial activities such as brokerage, but could also apply to a police force, or athletes competing in team sports. This can be a very stressful culture in which to operate.

The Work Hard/Play Hard Culture

This is characterised by rapid feedback/reward and low risk, leading to stress coming from the quantity of work rather than uncertainty. This is often found in restaurants or software companies and is typical in large organisations which strive for high quality customer service. It is often characterised by team meetings, jargon and buzzwords.

The Bet Your Company Culture

This is where high risk decisions are taken but it may be years before the results are known. Typically, these might involve development or exploration projects which take years to come to fruition, such as oil prospecting or military aviation.

The Process Culture

This type of culture occurs in organisations where there is little or no feedback. People become bogged down with how things are done, not with what is to be achieved. This is often associated with bureaucracies.

While it is easy to criticise these cultures for being overly cautious or slowed down by red tape, they do produce consistent results which is ideal in, for example, public services.

(c) Carmazzi

According to Carmazzi, the dynamics of organisational culture are an “evolutionary” process that can change and evolve with the proper „psychology of leadership‟.

At each level of organisational evolution, people will be working, acting, thinking and feeling at different levels of personal commitment. There are, he asserted, three such levels of commitment:


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(i) The Individual – People rely on personal skill and direction from leaders. They work because they need to and use and develop their skill because it maintains the security related to their job.

(ii) The Group – People have an emotional connection to their work and this has developed their attitude for success. They thrive on an environment of personal growth with others who have the same attitude, taking on additional tasks and even applying more effort to their jobs. Unlike those working at the level of the individual, they do not need to be told what to do, only to be guided in a direction.

(iii) The Organisation – This comes when work is important to individuals. People see a greater purpose to the work they do, something greater than the individual or the group. At this level of commitment, an individual will identify with the organisation and work in the same way as they would do if it were their own company.

In Carmazzi‟s analysis, culture affects the effectiveness and “level of commitment” of the people within that culture. He identifies five levels of organisational culture.

The Blame Culture

This type of culture cultivates distrust and fear. People blame each other to avoid being reprimanded or put down, and this results in no new ideas or personal initiative because people don‟t want to risk being wrong.

The majority of commitment here is at the level of “Individual”.

Multi-directional Culture

This culture cultivates minimised cross-department communication and co-operation. Loyalty is only to specific groups (departments). Each department becomes a clique and is often critical of other departments, which in turn creates lots of gossip.

The majority of personal commitment in this culture borders on the level of Individual and level of Group.

Live and Let Live Culture

This culture is based on complacency with mental stagnation and low creativity. People here have little future vision or passion for their work. There is average co-operation and communication. Things do work, but they do not grow. People have developed their personal relationships and decided who to stay away from.

Personal commitment here is mixed between the level of Individual and level of Group.

Brand Congruent Culture

People in this culture believe in the product or service of the organisation – they feel good about what their company is trying to achieve and co-operate to achieve it. People here are passionate and seem to have similar goals to the organisation. They use personal resources to actively solve problems and while they don‟t always accept the actions of management or others around them, they see their job as important.

Almost everyone in this culture is operating at the level of Group.

Leadership Enriched Culture

People view the organisation as an extension of themselves – they feel good about what they personally achieve through the organisation and exhibit exceptional co-operation. Individual goals are aligned with the goals of the organisation and people will do what it takes to make things happen. As a group,


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the organisation is more like family providing personal fulfilment which often transcends ego so people are consistently bringing out the best in each other. In this culture, leaders do not develop followers but develop other leaders.

Almost everyone in this culture is operating at the level of Organisation.

(d) G. Johnson

There are some writers who feel it is unhelpful to think of a specific organisational culture as this implies some “fixed” state in which organisation can become trapped. Others believe that cultures are much more “emergent”:

“Organisation culture is the emergent result of the continuing negotiations about values, meanings and proprieties between the members of that organisation and with its environment.” Douglas (1985)

In other words, culture is the result of all the daily conversations and negotiations between the members of an organisation. They are continually agreeing (sometimes explicitly, usually tacitly) about the „proper‟ way to do things.

This concept brings us to the work of G. Johnson who considered the issue of the organisation paradigm and viewed culture as more of a web.

A paradigm is a consistent set of ideas and beliefs which acts as a filter, influencing how we perceive and how we make sense of what we hear and see. In the following diagram, the paradigm in the centre is the set of core beliefs which result from many conversations and which maintains the unity of the culture. The outer circles are the manifestations of that culture which result from the influence of the paradigm.

Figure 3.9: The cultural web

Consider the statements below as example of the way a paradigm, especially the paradigm at the heart of a culture, can influence perception and meaning.

The Paradigm

Organisation structures

Control systems

Rituals and routines

Stories and myths

Symbols

Power structures


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Statement

Interpretation

Blame culture

Forgiveness culture

"You didn‟t do that very well" Accusation Opinion

"I hope you do better next time" Threat Encouragement

There are a number of lessons to draw from this:

Firstly, it is the paradigm which has the major effect on our perception. If we believe that there is a blame culture we will hear the words from that perspective. They might have been meant as opinion or encouragement, but that is probably not the way they will be heard.

Secondly, the prevailing paradigm encourages certain types of behaviour. If everyone believes there is a blame culture it is much more likely that people will behave in blaming ways. In a similar situation in a forgiveness culture, people would be more likely to act in a constructive and encouraging way.

Thirdly, the paradigm tends to be self-sustaining. Because I hear the words, "I hope you do better next time" as a threat I accept them as proof there that is indeed a blame culture: "Did you hear that? She just threatened me – that is so typical of the way things are around here." A paradigm is like a self-fulfilling prophecy; there is a kind of circular logic attached to it which makes it hard to break.

Think Point

Again, think about the organisation for which you work, or the college with which you are studying.

Describe its culture in terms of the models discussed here – Handy, Deal and Kennedy, Carmazzi and Johnson.

F. EMPOWERMENT

During the 1990s, many organisations started to move away from hierarchical structures which tended to differentiate between workers at different levels, towards more flexible organisational arrangements designed to make better use of the skills and experience of their people.

A number of elements go to make up this shift away from traditional working practices towards what is often known as the „empowered‟, or „flatter‟, organisation. Some of the features are shown in the following table.


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Traditional Empowered

Autocratic manager Leader who energises his or her people

Authority by position Authority by merit

Domination Co-ordination

Control from the top Participation and collaboration

Self-advancement Self-development

Individual responsibility Shared responsibility of teamwork

Controlling the workforce Giving the workforce freedom to act

Power. Empowerment.

With organisational culture firmly based on trust and initiative rather than on dominance, blame or fear, the onus is now on mutual advantage and the manager must become a team member as well as team leader.

Mutual advantage means that both those who manage and those who are managed get the best out of the relationship. Workers benefit from knowing that they are doing their work well, that their contribution is valued and appreciated, and that they are using and developing their knowledge and skills; managers are satisfied that the tasks they have responsibility for are being carried out effectively, that performance is improving and that organisational goals are being met.

Organisations which strive to implement empowerment should be designed to motivate and co-ordinate the activities of their members, and their ability to do this will have a decisive effect on their business success. Motivation and co-ordination are closely connected. People enjoy their work and do it well when they are clear about their responsibilities and goals and when they can carry them out effectively so as to secure the expected rewards. In modern business this generally involves members of the organisation having good working relationships.

In this context, business organisation is a matter of ensuring that employees all fully understand what is required of them in any given situation and have the resources and skills to discharge their responsibilities with maximum efficiency. A recognition of this is often referred to as part of the psychological contract that we all have with our employers.

What is the psychological contract?

The term 'psychological contract' was first used in the early 1960s but became more popular following the economic downturn in the early 1990s. It has been defined as '…the perceptions of the two parties, employee and employer, of what their mutual obligations are towards each other'. These obligations will often be informal and imprecise: they may be inferred from actions or from what has happened in the past, as well as from statements made by the employer, for example during the recruitment process or in performance appraisals. Some obligations may be seen as 'promises' and others as 'expectations'. The important thing is that they are believed by the employee to be part of the relationship with the employer. They are not in the written contract of employment but sit alongside it as an unwritten appendix. (Source: Chartered Institute of Personnel and Development, http://www.cipd.co.uk)


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Self Managed Teams

Self managed teams (SMTs) have been developed since the late 1980s as a means of empowering employees to manage their own work outputs. Groups of people, mainly from the same work area, are provided with support and guidance as required by managers, but the focus is on self management and customer orientation.

Self managed teams are more accountable for their performance because they have control over the resources provided to accomplish projects and the team has greater freedom to make decisions and take more responsibility for their actions. However, the team must also take responsibility for the results of the projects, particularly if mistakes are made.

Team working is not easy. There are a number of features to effective team working which need to be recognised and addressed if it is to be successful.

It requires an investment in skills, in the development of those people who lead and manage teams, and in the systems and procedures that are used to enable teams to fulfil their potential. Simply taking a group of people who work together and calling them a team is a waste of time and effort. Similarly, developing systems and procedures that depend on effective team working without investing in the basic structure of the team is also largely a wasted effort.

It is essential that an organisation wishing to implement SMT has a mission to develop strategies and actions to shift the culture of the organisation from a traditional, hierarchical organisation to one that reflects employee empowerment and decision making.

People who are new to a job usually have a high level of dependence on their line manager. This will normally diminish as the job holder gains experience and learns how to carry out their tasks to the required standard. As experience grows, the relationship changes and interdependence evolves, enabling the team to function effectively.

As an increasing proportion of the job will be characterised by a capacity to self manage without supervision, the emphasis of management or leadership will be on how the various activities may be co-ordinated in the most effective way to achieve the objectives set.

The methods by which information is disseminated and collected so that employees know their tasks and how well they have performed them, is an important process for co-ordinating activities in the organisation.

Motivation is generally provided by reward systems designed to secure the willing co-operation of suitably skilled workers to complete the tasks they are given by management.

However, despite all these processes, there will always be a need for leadership.

Leadership

In empowered organisations, leadership is about quality and effectiveness, change and development, and a focus on the future. The style adopted in these cultures should be associated less with directing and instructing and more with supporting, coaching, motivating and delegating, so that people will own their work and be committed to it.

There are various strategies that can help in achieving such effectiveness as a leader – for example:

(a) Management By Walking Around (MBWA) – managers and leaders need to see their main activity as an interactive one, working alongside colleagues where tasks are carried out. MBWA is based on the belief that it is only by getting to know our colleagues and what they do that we can provide appropriate leadership.


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(b) Work Review – this is a non-directed relationship designed to help colleagues develop professional skills through the regular process of reflection on experience.

(c) Critical Friendship – the concept of `critical friendship' is a useful description of the nature of the relationship between leader and team. It is essentially an active listening role for the leader in which colleagues can explore and clarify aspects of their work experience. One-to-one discussions facilitate a deeper understanding of the work issues involved.

Good leadership demands good people-motivation skills and the use of effective techniques to inspire staff to want to do their best for the organisation and their customers. Motivational methods are wide-ranging, from inspirational quotes and poems, to team building games and activities: People playing games or competing in teams learn about each other, they communicate better and see each other in a new light. Mutual respect grows. People often enjoy events which include new non-work activities, especially when bosses and superiors take part in the same teams as their junior staff, which also helps group cohesion and fosters a 'can-do' culture.

Leadership transparency is also a central feature of the empowered organisation and has a huge influence on two major factors for its effective management, which hark back to our discussion of the psychological contract:

Employee trust and openness towards the employer

Employee awareness of facts about the employer and the organisation's expectations.

Transparency tends to be a matter of leadership policy and style, by which clear facts about an organisation's position, activities and decisions are made available to its employees and, ideally, also to its customers.

Note that transparency here refers to the easy and helpful availability of information about the organisation. It is similar to openness, discussed elsewhere in the manual, which is more concerned with honest two way communications within an organisation. These are not fixed definitions of transparency and openness; just an attempt here to explain two different aspects of organisational and management clarity.

Where leadership is not transparent, employees have no reason to trust the employer and, according to human nature, will tend not to be open and trusting in return. Where leadership fails to inform and explain itself openly and fully to employees, employees will form their own ideas instead, which tend often not to be very accurate or comprehensive. Wrong perceptions, especially when we add misinformation and rumour, thrive in an information vacuum. Faulty beliefs become hidden factors which influence the performance in a very unhelpful way. Aside from this, ignorance and uncertainty make people feel threatened and vulnerable.

F. SERVICE EXCELLENCE IN THE PUBLIC SECTOR

Most people assume that customer service, customer excellence and a general focus on meeting the needs of customers and consumers only happens in the commercial sector. However, the idea of customer care has been steadily gaining ground within public services around the world.

The rapidly changing environment that local and national government operate in throws up challenges that are becoming ever more complex in nature. Increasingly, the services governments provide are becoming integral to everyday living within communities, be it social care support for elderly people to live independently, healthy eating and physical activity initiatives for the young, or general improvements of the local streets and environment to improve everyone‟s safety and quality of life.


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Even universities are now beginning to see students as consumers of education and therefore, the customers of their institution. The Times Higher Education Supplement is a very well established and well respected journal of higher education in the UK. In May 2010, it published an article by a leading business scholar on the need to understand the changing nature of interactions between students and academics and to recognise the notion of "service excellence" in higher education. Dr Khan of the Newcastle Business School explained that it was important for universities to view staff as the "face" of their brands and to provide training in communication and interpersonal skills to embed "service excellence" in the fabric of how institutions are run.


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SUMMARY

In this chapter we have:

Evaluated the strategic issues that affect customer service performance

Investigated different types of organisation structure and how this can hinder or help customer service strategies

Examined how job design, empowerment and discretionary behaviour contributes to good customer service

Compared various cultural patterns which an organisation may adopt to achieve strategic intentions.

All types of organisation require some sort of strategy to be successful, otherwise their efforts and resources will be spent haphazardly and likely wasted. Although strategy formulation tends to be handled more formally in large organisations, small businesses too need to develop strategies to use their limited resources to compete effectively against larger firms. Formulation of an effective business strategy requires managers to consider three key stakeholders – the company, its customers and the competition. Many organisations treat the movement towards "customer centricity" as an incremental shift in focus – it is perceived as a matter of simply asking staff to smile nicely and adjusting the overall attitude of the employees. In reality, companies require a more fundamental effort to become truly customer centric. They need to make a strategic choice.

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Chapter 4

Internal Influences on Customer Service

Contents Page

Introduction 87

A. The In-house Customer Service Function 87

The Case for a Specialised Customer Service Function 88

Integration of Customer Service with Other Functions 90

B. Outsourcing the Customer Service Function 92

Advantages of Outsourcing 92

Disadvantages of Outsourcing 93

Offshoring the Customer Service Function 94

C. The Importance of Process in the Customer Service Function 94

Process Methodology 94

Process Improvement Methodologies – Six Sigma 97

Contact or Call Centres 98

Scripting 100

D. The Importance of Technology in the Customer Service Function 101

Interactive Voice Response (IVR) Services 102

The Self Service Option 103

Customer Service Systems 104

E. Customer Relationship Management Systems 105

Principles of a CRM System 105

CRM Technology 106

CRM Implementation 107

Problems with CRM systems 108

Adding Value Through CRM 108

F. Personalising the Customer Experience 110

Personalisation Techniques 111

(Continued over)

86 Internal Influences on Customer Service

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Service Level Agreements 112

Summary 113

Internal Influences on Customer Service 87

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INTRODUCTION

In this chapter we will identify and explore the different internal tactics that an organisation can use to improve customer service, from personalising the service to the role and significance of the infrastructure (processes, systems and technology) in creating a positive experience for customers. As part of this, we will also look at the role of customer service within the enterprise and the risks and benefits of organising it as an in-house function as opposed to outsourcing support roles and facilities for customer interaction.

Customer services have been transformed in recent years. Even ten years ago, customer service was seen in many organisations as merely the „complaints department‟, with the tasks of customer service personnel being almost exclusively concerned with dealing with letters and calls from irate customers in accordance with the organisation‟s policies. Today‟s customer service function is often outsourced, off shored and global, supported by technology and concerned with the whole customer experience. It is a support, sales and relationship management function, which tracks the customer throughout their association with the enterprise.

A. THE IN-HOUSE CUSTOMER SERVICE FUNCTION

Customers expect customer facing personnel to be helpful, friendly and efficient, and at least in part, base their purchasing decisions on their experience of that. In turn, customer service staff influence purchasing behaviour by answering questions and offering suggestions, developing customer relationships by the efficient handling of all aspects of purchasing transactions and helping customers meet their specific needs.

Customer service, then, acts as the bridge between the customer and the company that the customer is dealing with. It is a critical business function.

It makes good sense, therefore, to have some control over the way customers are dealt with, and to this end organisations establish their own specialist customer service function. The choice, in that case, is between establishing a separate department, or creating a section within the sales or marketing department to deal with customer issues.

As we have seen, many organisations remain fairly traditional in structure with finance, marketing, sales (both B2C and B2B), research and development, IT and customer support/services as main operating entities. However, there is no such thing as a typical organisation structure and each enterprise groups its processes and staff in ways which most closely meet their needs. In recent years, those needs have been increasingly recognised as including interacting with their customers and many businesses have found that the key to success is to provide excellent customer service. Therefore, within most organisations, no matter whether they are offering a service or a product, you will find a customer service function within their structure.

Putting the Customer at the Centre

In the traditional organisational chart, sometimes referred to as a "Pyramid Form" because of the shape that the outline of the hierarchy within functional levels creates, the senior management is at the top of the triangle. The other internal positions and departments etc are placed somewhere between the top and the base line where the customers are usually positioned. Some organisations invert this pyramid and put the word "customer" at the apex. This is designed to show the importance of the customer to the organisation and the way it operates – i.e. all functions exist only to support the customer.


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Figure 4.1: Alternative views of the organisational hierarchy

(a) Traditional view

(b) Customer centric view

The Case for a Specialised Customer Service Function

Proper organisation of the customer service function can help provide direction for employees and the business. Clear duties and assigned levels of responsibility, for each customer service employee, can help improve customers‟ perceptions of the enterprise. And, whatever the structure, it should define a distinct and clear customer service group and give it the resources it needs to satisfy customer issues.

The kind of customer service structure found in any organisation will largely depend on the type of business and its size. For example, businesses with few employees may consider limiting the customer service function to a manager or other reporting authority, with several customer service representatives handling customer interactions. Larger organisations probably need to develop a customer service department with an established hierarchy which is an integral part of the chain of command and so allows for a continual flow of information through all levels of the organisation. This ensures that customer complaints and concerns receive the necessary attention at the time of the initial contact and that other internal departments receive appropriate communication related to possible problems with products, services or initiatives.

The customer service function is critically important to retaining customers. It requires a dedicated group of staff – whether as a separate function or integrated within other functional areas – for two main reasons:

CEO/MD

Senior management

Functional/operational staff

Customers

CEO/MD

Senior management

Functional/operational staff

Customers


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Customer service is a skilled role. Staff need to be expert at call handling and problem management, well trained in interpersonal skills in order to work with frustrated and irate clients, and knowledgeable about the organisation‟s products or services. They need to understand the process documentation provided by various departments, and be trained to diagnose and resolve most routine problems with the minimum need for second-level support. Developing all these skills, methods, tools, and processes requires staff to become expert in the customer service profession.

Staff must be available and ready to deal with customers all the time and should not be distracted by other routine responsibilities, such as reconciling accounts or counting stock. The organisation as a whole must understand that supporting customers is a top priority. Creating a separately funded and resourced customer service function sends a strong signal that customer satisfaction is a large part of the overall business strategy.

Positions within a customer service department normally include customer service representatives (CSRs) or agents and a level of management, often either a team leader/supervisor and/or manager. While customer service representatives do the majority of work related to customer contact, team leaders and supervisors may take over escalated calls and contacts. Managers oversee the department as a whole and make sure department-wide objectives receive appropriate attention. They also serve as the point of contact for other internal departments, such as marketing and sales.

Although a sales function is often combined with some customer service roles, the customer service role can be far more complex than a basic selling role. Customer service covers some of the essential elements of some very specialised and highly regarded professions, such as counselling, coaching, training, consulting and project management. The customer service role, by its nature, requires a greater ability in problem solving and project management than many sales roles. It involves an emphasis on mediating, problem solving and the need to react positively and creatively to diverse and unpredictable customer situations. Central also to the value and expertise of the customer service role is the strong emphasis on empathetic skills demanded in modern customer service. Dealing with emotional people, and solving problems with significant emotional implications for the customer themselves, requires highly developed interpersonal capabilities and attitudes.

These positions within the customer service function may communicate with internal and external customers in different ways. CSRs or agents may be tasked solely with handling customer phone calls according to a predetermined script, while those with seniority will have greater decision making powers and therefore, communicate with customers in a more personal and individual manner. In addition, a business may have a need for multilingual employees throughout all levels of the customer service department.

The primary function of customer service is to provide information to the customer and help resolve any problems the customer presents, while maintaining a positive impression of the company. However, the remit goes wider than simply ensuring customer satisfaction with regard to purchases. It is likely to involve administration of the customer relationship – updating and changing customer account information, entering invoicing information, or cancelling accounts following a customer's request or at the request of the organisation if the terms and conditions require it.

Customer service departments work with customers in person, over the phone, or via email and chat programs. Customer service agents are often required to multi task while listening to a customer's problem. They could be looking up customer information, accessing account status, providing information, or making notes while providing the customer with a quick and accurate response. Sometimes the customer service department will instruct its agents to offer additional services or products to their customers after resolving the customer's problems (a process known as up-selling).


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Integration of Customer Service with Other Functions

The overall structure of customer services lays the groundwork for several significant business functions. The organisational structure helps determine how the organisation responds to complaints and passes along important information arising from these, which impacts upon internal projects and overall customer satisfaction activities. So, it is very important for companies to design the structure of their customer services function in a way that facilitates activities other than just general support. These additional functions may include product/service development; customer management, customer retention and service/product delivery.

Some companies designate a specific customer service role or executive position, while with others the function lies within a central marketing function. However, real benefits can be found in the full integration of customer services and support activities with the rest of the organisation. This may require a complete redesign of processes, which have probably evolved over time to suit the organisation and its structure, rather than the customers‟ perspective. This may have resulted in functional silos, where staff focus on their domain activities (accounts, production etc) instead of seeing themselves as supporters of customers. Many world class companies have discovered that one way to redesign processes to fit with a more customer centric approach is to provide cross functional training, so that employees at least understand and are more aware of the entire customer cycle.

However, one way to strengthen the message to the whole enterprise that customer satisfaction is a major part of the organisation‟s strategy and ensure cross functional cooperation happens, is to have the customer service function report direct to the Chief Operations Officer or Chief Executive Officer.

In many companies, even the business units designed to serve customers rarely interact, whether they are serving the same customers or not, for example, where organisations are structured by product/service or division. This is a disadvantage for any organisation because of the missed learning and potential cross selling possibilities. If problem resolution is done poorly in one area, it could also mean lost customers across the organisation. When clients turn to the organisation for help with questions or problems, they need to have a simple and straightforward way to contact them. Ideally, they want to know that they can call a single phone number or other point of contact that covers the organisation's entire product or service line. What they do not want is to have to do any preliminary diagnosis of their own to determine who best to contact at the organisation or to get passed from one department to another because the organisation itself does not have any clear pre determined system for identifying where the resolution of a problem lays. So, co-operation and co-ordination between different parts of an enterprise is vital for a streamlined customer service proposition.

Eliminating the layers of bureaucracy between customers and those employees best equipped to solve their problems is the first step in the process of building cross functional co-operation. Some companies assign customer accounts to teams from various areas where contact with customers is paramount, for example, product design; marketing, sales and accounts receivable. Others may designate a single company contact with the responsibility for all enquiries regarding credit; invoicing, payment and even order fulfilment.

Too often there is inadequate co-operation between functions, leading to gaps in knowledge and poor service. One of the worst case scenarios is where an organisation implements a strong marketing campaign (using advertising, promotions and offers), but the contact centre staff are not informed. Sales enquiries will then be channelled to agents who find themselves trying to respond to questions to which they have no answers. Customers will be similarly frustrated if, after being directed to a web address, they find that there is nothing there about the topic or that it is hidden somewhere else on the site.


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Integration and Customer Relationship Management

Integration does not just apply to channels of communication. It must apply as much, if not more, to the different customer facing functions and departments within the company, including sales, marketing and customer service operations. Integration makes it easier for the sales team to view customers‟ payment histories and assess their purchasing power before placing orders. Sales staff then can make more informed decisions about pursuing or rejecting deals. In essence, every channel of communication to which customers are directed should be primed and ready to respond professionally.

The key principles involved in relationship marketing are the gathering, co-ordinating and analysing of accurate data on customers, developing marketing strategies that personalise the relationship and maximising the value to the organisation by focussing on higher value customers. This calls for a considerable degree of cross functional co-operation. For example, all of the departments that have dealings with customers (e.g. accounts; despatch; sales, customer service and even distributors and agents) normally hold data on them. Organising the whole firm around its customers requires the convergence of these disparate information systems, to accelerate processes and facilitate “whole customer” information sharing. This is a key customer relationship management role. This convergence of business functions assists in cost reduction, efficiency improvements and increased productivity and should permeate the culture of the organisation. However, even where organisations have technological integration, performance integration does not always follow.

Many departments and individuals see customer handling as a sales or marketing function and regard the release of their data to another function as signalling a loss of power. While the role of key account manager plays an important part in customer relationships, functional boundaries can limit managers‟ ability to fulfil the key account role effectively. Therefore, to neutralise the negative impact which functional boundaries can have on the successful implementation of CRM, an integrated approach is required, with marketing, operations, information technology and financial accounting all participating.

Integration Issues

Before you can integrate functions, you need to define them. Simply put, front office functions are customer facing and therefore, require an understanding of customers and their needs. Examples of such functions include sales, marketing, order entry and customer service. Back office functions are typically transaction and rules oriented, focused on the management and tracking of data – including accounting, finance, inventory and distribution.

A common problem among some small or medium businesses (SMBs) is that they have not integrated their front and back office operations and so it is difficult for staff to readily share information across organisational boundaries. A lack of integration can result in distributed intelligence that severely limits the ability of all staff to sell to and profitably manage customers. In contrast, integrated front and back office operations can deliver several benefits, including:

Stronger competitive differentiation – Integration improves information sharing, giving a more complete view of customers no matter where or how the data is obtained. It allows the organisation to position products and services uniquely to address specific customers‟ needs.

Improved productivity and data accuracy – Integration generally also leads to shared systems. This then minimises the need for re-entering data and so reduces the opportunity for errors or inconsistencies.

Increased revenues and lower operational costs – Organisations can offer products and services to customers in a more targeted manner because they can better analyse customer purchasing patterns to identify cross-selling and up-selling opportunities. It will also contribute to a lower cost of sales, with streamlined processes helping to reduce overheads.


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Sharing information across departments is critical to the delivery of responsive customer service. It is also crucial for adhering to the process efficiency mandates of government regulations such as Sarbanes-Oxley, a set of U.S. Government rules designed to improve the accuracy and reliability of financial disclosure.

B. OUTSOURCING THE CUSTOMER SERVICE FUNCTION

The outsourcing trend, which began in earnest in the 1990s, shows no signs of declining and many companies have extended their outsourcing into increasingly large and critical business functions. It is not unusual to see large companies or even small businesses outsource key functions such as HR, IT systems management and support, financial services, sales lead generation and other functions which have historically been kept in-house.

Outsourcing occurs when an enterprise purchases products or services from a third party, as opposed to producing them in-house. These third party vendors often specialise in one or two business areas and sometimes limit their expertise to certain industries. Through large investments in technology and by acquiring clients with similar needs, they can use economies of scale to deliver a service usually at a lower cost than in-house provision.

The outsourcing of customer service has been an obvious choice for organisations, as many companies respond to economic trends and look for greater flexibility of staffing in this area, without having to manage sometimes complex „hiring and firing‟ issues. With contact centre labour costs running at 50% to 70% of a total operating budget, many companies look at outsourcing as a strategy to lower operating costs, without sacrificing the customer support effort. By outsourcing, companies can use their capital investments elsewhere. However, by its very nature, customer service outsourcing can have many difficulties and must be done carefully.

Advantages of Outsourcing

The biggest advantages, and often the driver of outsourcing, is lower costs to the business.

By outsourcing roles to non-employees, a business does not have to pay salaries consistent with other parts of the business or offer the sometimes substantial benefits enjoyed by salaried staff such as pension contributions or healthcare costs. If the service function is outsourced to a third party there is also a significant cost saving to be made from not having to train and update customer service staff, or maintain the technology that is required – the cost of this is passed to the external contractor. This can all add up to considerable savings.

Other benefits from outsourcing include:

It can speed up the time taken for a transaction since it concentrates on one or two specific areas of customer interaction and enables a degree of expertise to develop.

It provides flexibility in that third party vendors can be changed when necessary, for example, due to a change in strategy or to take advantage of new services, technology or methods of business. Although some time and effort is required to choose and contract a new vendor, it can be less time consuming and expensive than the recruiting, selecting and training of internal staff.

Management is limited to the business partnership and contracted service levels.

Many service providers operate their support facilities 24/7, 365 days a year. This provides an enhanced service for customers, which most small and medium sized companies with limited resources would simply not be able to supply.

With outsourcing you normally contract a fixed price, service level agreement and thereby obtain more flexibility to handle and pay for variations in call volume. When


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handling calls internally with employees, you pay regardless of the service they provide or the call volume.

Disadvantages of Outsourcing

The biggest disadvantages of outsourcing is the potential for a loss of control over the level of service provided. When third party providers are contracted, there are always minimum standards laid down in the agreement. These usually refer to call volume and answer times etc. – things which can be measured and reported on. What these agreements do not normally contain is the unquantifiable, yet significant, contribution that energetic and enthusiastic staff can make to the customer experience. In the event that a third party vendor does not meet the standards laid down in a contract or maintain the level of service that the purchaser expects for its customer strategy, there is the possibility that the company will lose customers, or at least some element of customer goodwill.

Other drawbacks from outsourcing include:

It may be seen by the organisation as a simple way to save money without looking at the opportunity costs – i.e. what hidden costs there may be to the business. Outsourcing to a third party may be cheaper, but there is a loss of skills, knowledge and expertise within the organisation that cannot easily be replaced.

Organisational communication may be an issue. It is not so easy for staff in other departments to build those internal relationships which integrate customer service into the culture and organisation of the whole organisation if the customer service staff are in a separate organisation and possibly thousands of miles away.

Communication between the organisation and its customers can be problematic. It can be very frustrating for a customer who is calling in with an issue:

– If the CSR has only limited powers to resolve the issue according to the third party agreement and the customer is then referred back to someone in the originating organisation until the appropriate responsibility level is reached

– If the problem originates from the organisation and the customer is left waiting what to them is an unreasonable or inconvenient amount of time for it to be resolved.

Frustration is one of the words frequently used when customers are asked about their experience with outsourced customer service, as the following story shows.

Case Study 1

Banks often outsource their customer service function to third party companies. There was the case of a worker for a large multinational company, who we shall call Tim, who was sent on secondment to their offices in Bangalore, India. During his first week there he called his bank to find out why his new credit card hadn‟t arrived before his departure from the UK. The customer service agent apologised, but could not give him an explanation. However, she offered to arrange for a new card to be sent out, which from the bank‟s point of view offered a suitable resolution to the issue. That, however, would take four weeks to arrive leaving Tim without a reasonable means to pay his business trip expenses. The card had to be sent from the manufacturer to Tim‟s address in the UK, then he needed to arrange for it to be forwarded to his address in Bangalore. This left him feeling very inconvenienced and frustrated as the card manufacturer and the call centre office that Tim spoke to were within five miles of where he was calling from!


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Offshoring the Customer Service Function

Some organisations choose to take their outsourcing a step further by offshoring to a part of the world which has significantly lower labour costs or significant tax incentives.

Understanding the difference between 'outsourcing' and 'offshoring' is important. Outsourcing occurs when an enterprise purchases products or services from a third party, as opposed to producing them in-house. Offshoring is when this process is outsourced to a third party organisation in a different country. Often this is in low labour-cost countries such as India or The Philippines, which offer high numbers of university educated workers with English language skills.

Doing this, again, may have a considerable financial saving over in-house services.

However, a significant disadvantage is that third party personnel may not be native language speakers, nor have the cultural insight which is necessary to develop strong customer relationships. Some third party service companies in countries such as India have recognised this and have established special training programmes for their staff, which drill them not only in colloquial language skills but also in popular culture, such as current TV programmes and national news items. This is not yet common practice and, therefore, some enterprises still receive numerous complaints from customers regarding CSRs whose strong accent cannot be understood, or who do not respond in a manner which is customary in the country of origin.

In addition, any remote company offering customer service needs to demonstrate how they deal with technological considerations. For example, phone centres overseas may still have a delay on the phone depending on their system and service providers. Even a small delay is a long time to the caller and irritations such as these could cause further frustration and dissatisfaction.

C. THE IMPORTANCE OF PROCESS IN THE CUSTOMER SERVICE FUNCTION

We know from numerous studies, as well as our own personal experience, that frontline personnel are a compelling reason for customers selecting one company over another. Customer satisfaction levels depend on a well organised customer service function. Consistent, professional, knowledgeable customer service is critical to business maintenance and sales penetration. All positions within the department have the ability to negatively or positively affect customer satisfaction.

However, customer expectations in all areas are increasing – most customers are no longer willing to accept, for example, non-specified delivery times – and customer demand is now forcing new business models for customer service. This has implications for organisations. Proper policies and procedures and a clear delineation of duties and responsibilities for each position within the department are needed to create an environment of trust and lead to a positive customer experience, both internally and externally. And to produce a consistent positive customer experience over the customer lifecycle, organisations need to map and establish clear processes for each stage in any customer interaction. Customer service at a basic level is very process driven.

Process Methodology

By definition, a business process is a series of steps, designed to produce an outcome such as a product or service. Since they are the recipients of these products or services, customers are central to each of the processes and they should be designed with the customer, internal or external, in mind. Above all, they should be designed to facilitate:

Consistency


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Communication

Understanding.

Processes should be written and documented to allow for a clear understanding, by whoever needs to use them, of what needs to be done, by whom and include any deadlines or time schedules. All process change and additions should be based on business need. However, without consistency in the process, you cannot properly review it for improvements and an opportunity is missed to develop performance. You need to have control points allowing you to gather feedback information on the process. However, even the most well written process will not guarantee high standards of performance: If customer facing staff do not fully understand the process, then it will never be correctly followed. It is critical, therefore, to communicate it correctly and to train staff so that they not only understand the process itself, but also how it helps both the member of staff and their customers.

Many processes emerge from frontline staff thinking about how their tasks could be carried out better. Others are more „top down‟, designed by management critically looking at how to achieve greater efficiency in the business. Whatever the origins of a process, staff will want answers to questions such as:

What is the cost of this process?

What are the interdependences?

What are the added values for staff or customers?

Why is the process more effective or efficient than current practice?

Why does the process help?

What are the benefits and why should staff support the process?

In addressing customer service issues, it sometimes makes sense to clarify each process using a flowchart, which is an elemental list of procedures, arranged according to a strategy.

Using a customer service process flow chart can help employees deal with customers in a way that represents the company's overall customer service methodology. The flow chart can be particularly useful as a visual tool in a sales office or call centre.

Figure 4.2: Basic Process Map for Customer Service

Materials Methods

People Technology

CRM application

Knowledgebase

People skills

Domain skills

Problem solving skills

Reward and incentive structure

Work environment

Call assignment

Call workflow

Call escalation

Customer Service


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All organisations need to make sure that their process and policy is very well documented. The customer service process flow provides the overall structure for this, providing a consistent set of processes to record and track all customer contacts, which can be separately written up and communicated.

At its very basic, a customer service process involves the customer service representative (CSR) taking a few simple steps with each interaction. They should:

Record the customer‟s contact information and the reason for the interaction

Classify the customer‟s contact according to a pre-defined list for monitoring purposes

Determine how far the customer‟s issue can be resolved

Resolve the issue possibly with the co-operation of other staff

Confirm the resolution and closes the issue

Ensure friendly and helpful service throughout.

In the event that the CSR cannot immediately resolve the customer issue, most companies will have a process for escalating customer problems rather than risk losing their custom. At a minimum the process should include the following levels of escalation.

(a) When the CSR is working with a customer, it is their responsibility to try to resolve the customer's issue or problem within the guidelines of company policy. Built into the process should be time and resource for maintaining CSR skills through training on how to improve the service offered on the phone or in person. Since the CSR job can be stressful and information needs to be constantly updated in line with new products and services being launched, it is important to offer periodic retraining as well.

(b) The customer's issue may be related to a technical problem or a specific product and the CSR may not have the information to help the customer. The CSR should let the customer know that an expert will need to handle the issue and give an idea when the customer may expect to hear back from the expert. The expert should reply as soon as they find an answer for the customer. Providing a list of product or technical issue experts that CSR's may refer to will be required.

(c) When there is no expert or the expert does not resolve the issue, the CSR should request the issue be promoted to the customer service supervisor or manager. The customer may request this third level of escalation themselves, if they are unhappy with what they have encountered thus far. The supervisor should resolve the issue for the customer immediately after they receive the escalation. They need to explain what they are going to do or have done and, of course, an apology for the time and inconvenience to the customer is always required.

A customer service escalation path that is well designed and has properly trained representatives should produce no need for customers to want to seek a fourth level of escalation. However, the customer may not be satisfied with the way the issue was handled or the solution that was offered and may choose to escalate the issue themselves, either to a higher level within the organisation or occasionally to an independent third party such as an Ombudsman.

An Ombudsman is an official usually appointed by the government to represent the interests of the public in a particular area, such as financial services. Their remit usually covers the handling of complaints that have escalated beyond the ability of a company or organisation to deal with and they make recommendations for change.

At each level of resolution, records must be kept of the nature of the issue, the actions taken (with dates) and all communications undertaken. A clearly documented process for escalation of customer issues will help customer service staff work confidently, effectively and efficiently and also help them to maintain good relationships with customers.


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Process Improvement Methodologies – Six Sigma

We mentioned above that process needs consistency to work well. For many years, businesses have used process improvement methodologies such as total quality management (TQM) and Six Sigma to develop efficiencies in production. More recently, this has been applied to service environments – particularly Six Sigma, which has become known as Transactional Six Sigma.

This methodology was developed by Motorola in the 1980s as a systematic means for improving the operational performance of an organisation by eliminating variability and waste. Originally applied to the manufacture of its own products, it has now become an established system, not only for manufacturing but also for service where it is used in financial, telecom and health care organisations.

Transactional Six Sigma is a customer focused process improvement methodology; based on a rigorous focus on:

Defining opportunity

Measuring performance

Analysing opportunity

Improving performance

Controlling performance

Customer service and support contains a number of „hidden‟ variables due to the high dependence on the human factor. However, it also generates a significant amount of data: Transactional Six Sigma provides a structure to the analysis of these variables against the model of „ideal‟ metrics. It plays a significant role in gathering, aggregating and analysing „voice of the customer‟ data, crucial to customer centric organisations, and to focusing the results on process operations to achieve improved customer service processes, improved customer problem resolution and improved internal support processes.

"Voice of the Customer" is a market research method of identifying and prioritising customers' needs and wants to improve product development and service quality. Using a combination of qualitative and quantitative research techniques, companies can identify both articulated and unarticulated needs. Methods may include focus groups, individual interviews, among other techniques. The results can help identify new products or services, refine existing products and improve quality.

Below are examples of where Six Sigma can be applied within a customer service environment:

Customer complaints– where it can provide a means to understand why customers are complaining and identifies internal processes that are causing customer dissatisfaction.

Employee dissatisfaction – for example, customer service representatives will often express frustration that they cannot do their job because someone else does not do theirs.

Help desks – where it can determine why so many calls are being placed with the help desk and identifies different types of calls.

Technology – where it forces a review of systems and processes that are in place and how efficient they are in helping CSRs perform their jobs consistently.

Processes need to be reviewed and their success measured over time to ensure continuing efficiency. Six sigma can help in both identifying the key success criteria and the establishment of performance criteria for each. Using a call centre as an example, this analysis might result in the following requirements:


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Key requirements Success criteria Performance criteria

Availability Time taken to answer when called

Answer all calls between 0800 and 1800, within 30 seconds

Response Action taken when receiving a call

Log request and complete initial research for solution within one minute. Take action within 10-30 minutes depending on the nature of the call

Knowledgeable staff How customer service staff address the situation during the call

No returned calls needed. 98% of calls satisfied on first attempt.

Follow through Ensuring customer satisfaction, collecting payments, etc.

All post-call activities completed within 5 minutes

Contact or Call Centres

The contact or call centre has become the primary mechanism for delivering customer service for many organisations. They offer a specialised service focused on the customer and his/her needs, which if appropriately met, can enhance customer retention and develop the lifetime value of the customer.

In the early years, contact centres were just about providing reactive customer service, but increased competition and more sophisticated customers have increased the need for customer service representatives or agents to become more sales aware, more diplomatic and more empathetic. Each call has become a possible revenue generating opportunity or, at least, an opportunity to turn a satisfied customer into a loyal customer. Service, as we have considered previously, is a key factor in purchase and repurchase and its quality directly impacts the costs, revenues and profits of any organisation. Therefore, the traditional expense based model of customer service, where resources were rationed because there was no direct impact on the balance sheet, has evolved into a revenue generating model.

Organisations know, from extensive market research that customers want:

the person who picks up the phone to be their sole point of contact, and

for that person to satisfy their needs, whether it is service, support, order processing or sales.

For the customer, the person on the other end of the phone is the company and the contact centre is, therefore, the most public face that it presents to customers and potential customers. So, there is more pressure, more reason for continuous training in areas of question response, calming irate or frustrated callers and cross and/or up-selling opportunities.

In general, customers understand the need for and accept the use of contact centres as the first point of contact. What they do not accept, though, is poor or inefficient service resulting from their use or the overemphasis on process to address issues. The consequences of customer dissatisfaction should not be underestimated. It used to be said that a satisfied customer would tell about ten people, whereas a dissatisfied one would inform 100 people. In the age of email and the Internet, however, bad news is likely to reach many more than


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100 people. Just as we all now use the Internet to compare prices, so an increasing number of people also use it to gauge customer service as well and it is becoming quite common now for consumers to look at online customer reviews before choosing to deal with a particular organisation.

In short, contact centres are in the front line of customer relationships and can influence the way in which the organisation is perceived by present and future customers. This is why more and more companies are reviewing their contact centre operations, in an attempt to enhance efficiencies and optimise customer retention and satisfaction.

The high percentage of contact by telephone reinforces that call centre personnel are key to customer retention, both for current customers and by word of mouth, for potential and future customers. Those first few moments of contact can determine whether the customer has a good or bad impression of the organisation and its service. If customers are not listened to, heard, or responded to in an appropriate way, regardless of whether or not their issue, concern, complaint or question can be answered or resolved to their satisfaction, they form an opinion or even a judgment of the enterprise which may be negative and long-lasting.

Technology and processes clearly have a key role to play in helping to deliver a higher quality customer experience. The identification of process criteria is, as we have seen, a central consideration, and technology offers the ability to easily measure performance in areas such as:

Average productivity and quality targets

Abandon rate

Service levels (per cent within 10, 20 and 30 seconds)

Speed of answer

Call handling time

First call resolution

Agent availability

Post- call activities

Contacts per agent

Customer satisfaction

Call monitoring

Courtesy/professionalism

Product/procedural knowledge

Accuracy in problem solving

Agent performance

Listening skills.

All of these measures can help organisations to design and refine processes that are more efficient. However, some organisations are so metrics-orientated that they hire large numbers of temporary staff just to meet their call answering SLAs (service level agreements), without any real appreciation of the brand damage that these staff can do by not providing callers with an appropriate level of customer satisfaction. While surveys and studies consistently show that having a human available is one of the keys to ensuring customers remain loyal, many companies are compensating customer service agents based on how quickly they handle each call and this feeds forward as one of the main ways of establishing a contact centre's success. A typical measure might be for 90% of calls to be answered within 10 or 20 seconds. However, just because there are no calls waiting in the queue and


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all the agents are on the phone, it does not mean that customers are happy. Similarly, trying to ensure that all calls are kept to less than two minutes might make the call volumes metrics look good, but are the agents effectively solving the customers‟ queries, or merely getting them off the phones only to have to call in again later as the „problem‟ has not been fully settled?

The metric of how fast can you get somebody off the phone measures a notion of transactional efficiency but may not be an appropriate metric. If the goal is to build a series of positive experiences with customers, there is a need to think about service in different ways. A measurement that captures how the customer/company relationship has been enhanced would be more in alignment with the organisation‟s customer management vision. It can take years and thousands of pounds of investment to build up brand loyalty, but just one bad call centre experience to undo all of that work. Not surprisingly, many organisations are now starting to realise that there is more to customer service than simply hitting measurements. Of course you can answer more calls if you limit their length or if you only provide a basic level of service and perhaps call volume is such a large issue that this is a good tactic for ensuring that at least customers can make contact. However, where the standard of customer care has the potential to be a key differentiator, badly run call centres will always end up, in the long run, costing much more than they save.

Think Point

What is your own experience of using contact centres?

What was your "customer experience" like – what actually happened when you made contact? Did you receive a recorded message or get to speak with a live agent immediately? Did you have to wait, and for how long and how did this make you feel?

Did you receive "customer satisfaction" – i.e. did the issue you called about get resolved? Ideally callers should receive first call resolution for their enquiry.

What effect did the experience have on your "customer loyalty"? How likely are you to keep on using the same organisation to meet your needs?

Scripting

When developing a customer service function, whether in-house, outsourced or offshored, businesses are generally looking for a balance between managing costs, protecting the brand and ensuring that customers are satisfied. An increasingly popular way to achieve this is through the use of scripted responses.

For complex conversations, for sales calls and for high level customer complaints, scripted responses are nearly always unsuitable, simply because they don‟t allow the flexibility that is required. However, for other more process dominated issues, scripted responses can offer several benefits.

They can standardise the amount of time that agents spend dealing with customers, which in turn ensures that they can handle an optimal number of calls.

Agents who are handling scripted responses, generally, also require less training and tend to be less experienced, which means that rates of pay are at the lower end. Staff turnover can be higher, due to a lack of job satisfaction but this is not such an issue in regard to cost as there is little training required for these types of roles and so the investment in the hiring process is lower.


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It is important that all customers receive a consistent message if they are querying the same thing. Scripted responses ensure that all agents give exactly the same information to all customers. This can be particularly important in heavily regulated environments such as the financial sector, where there may be a number of legal requirements about what can and cannot be said to customers. Where agents are given little opportunity to vary the information offered, it is unlikely that there will be confusion or misinterpretation.

In a fast changing business environment, it can be extremely difficult to ensure that all staff members have and use correct, up to date information. With scripted responses, system-based scripts can be updated rapidly, even during the working day, which means that agents have the very latest information to hand. In less procedural environments, if problems are identified with information offered by agents, it can take weeks to re-brief and train all the staff members affected. With scripts, it rarely takes longer than 24 hours.

Where customer service agents are based in an outsourced location, a scripted response can be a good way to bridge any language gaps. Agents overseas, for example, often have a very good level of spoken English, but simply need some additional guidance on how to direct the conversation. A scripted response makes this far easier to do.

In call centre operations, each agent‟s interactions must be monitored to ensure consistent standards and correct and appropriate responses are applied. Call monitoring can be an expensive drain on the time of call centre managers and supervisors. Where agents are using scripts, call monitoring becomes less important as you can be more confident about what agents are saying to customers. This frees up time to spend coaching and developing in other areas, with only spot checks and random monitoring in place as a minimum requirement.

Scripted responses for the customer service team are not always popular with customers. However, used in the right way and at the right time, an enterprise can see real benefits from rolling out this kind of approach. The trick is to have scripts which offer a balance between a standardised approach and the ability to interject those small remarks that add warmth and empathy to a conversation.

D. THE IMPORTANCE OF TECHNOLOGY IN THE CUSTOMER SERVICE FUNCTION

Customer service can be many things – simple information giving, resolving transaction problems such as delivery difficulties or faulty goods, or providing sophisticated technical solutions. Because of the ability to handle simple transactions by using sophisticated technology, customer calls, faxes, and/or e-mails coming into a support centre are often now more complex. The current state of web technology has made doing business faster, but only when it is simple – it has not helped to speed up solving problems.

However, technology allows an organisation to make the most of customer contacts, easily logging all interactions between the customer and any employee. With the explosion of e-commerce, the need to reinforce the human element in the service equation is still important and phone-based service is still the predominant form of support today. When it comes to the simple task of answering the call, for example, organisations have a lot of choices. Do they automate the process or do they invest in approaches such as workforce management, to make sure they have the right number and right calibre of agents in the right place at the right time to answer and handle the calls? Similarly, when it comes to solving customer queries, instead of an agent spending a few minutes searching for the right product information sheet, a simple computer application can recognise the product ID or description


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and provide an agent with fast on-screen access to the information needed to resolve a query.

Case Study 2

Some airlines identified a large percentage of their call centre traffic was being taken up by standard enquiries from passengers and taxi drivers who were simply calling to check whether a flight was on time. Using technology, these calls are being answered effectively around the clock and it has freed the live agents to focus on more complex customer enquiries and achieve improved first call resolution for customers.

Another industry using this approach is car insurance. The industry in the UK is highly competitive and all companies look to ensure that they can answer calls quickly, with almost all telephone enquiries handled by live agents. As part of this process, insurance companies have invested heavily in technology to identify individual customer touch points such as when a customer changes their car or aspects of their insurance details, with the objective of proactive intervention to improve interaction across the entire customer lifecycle. By focusing on specific customer touch points, such as annual insurance renewal, summer holidays or typical car replacement cycles, companies can position themselves to keep producing positive experiences for their customers.

Interactive Voice Response (IVR) Services

Most customer support is still done over the phone, so this is where many organisations choose to place most of their investment into technological customer service solutions. IVRs are sometimes referred to as Telephone Trees or Telephone Menus and are one of the most commonly used technologies in customer service.

Ask most consumers what they think of IVRs and they may well launch into a tirade of how much they hate these kind of impersonal automated services. Badly implemented IVR services can damage customer confidence, weaken organisational reputations and frustrate customers. Yet the problem is not so much with the use of IVRs but with the way they are used. The secret is to ask: are the options clear and do they accurately reflect the reasons why people are calling in? It is critical to get this right and review it often in the light of customer and CSR feedback.

One of the main problems with interactive telephone systems is that the customer is given too many choices. Organisations often forget that a customer calling in to get support has their issue uppermost in their mind at the time of calling. They do not expect to have to memorise a series of options. Most users are comfortable with a maximum of five menu choices and they should not be expected to follow through to more than two levels before they receive an answer or reach an agent. It is also essential to ensure that there is a clear way of shortcutting the recorded options and going directly to an agent. Not all customer calls need human intervention.

Where the customer interaction is straightforward and clear cut, people can save time with „self service‟ transaction activities. This approach tends to work well where transactions can be carried out very quickly – for example, credit card validation, card and bank balance enquiries and in the public sector, confirming details on the electoral register. Where human interaction is needed, the IVR system needs to be structured to ensure that customers are directed to the people best qualified to help them.


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There is no doubt that IVRs can speed up many of the simpler customer transactions. Whilst customers want to waste as little time as possible sorting out their problems, time is not necessarily the main consideration. Given the choice between a slightly lengthier call that produces a resolution and a shorter one that does not, the customers tend to prefer the former. Resolution is the key, not only to driving customer satisfaction but also to lowering costs. First time resolution ensures a happy customer and also means that the issue does not need to be escalated further, which would incur further time and costs.

The temptation with IVR, as with other aspects of customer service, is to place the emphasis on the technology involved rather than on its interaction with people. It is important to think of the human dimension and make the technology and processes operate in a people friendly way. It is no good building the most impressive multi-channel integration solutions if you are not solving basic customer queries effectively.

The Self Service Option

One other strategy, which helps companies enhance customer interaction, is by placing the power in the customer's hands, literally, with a customer self service portal.

Self support, or self service automation is the term organisations give to the support structures that provide online libraries and tools for self help and easy troubleshooting solutions to resolve problems and incidents. These automated means can be based entirely on self service, but may also be based on service by means of artificial intelligence. Examples of customer service by artificial means are automated online assistants that can be seen as avatars on websites. Once the investment has been made, customer self-support technologies help enterprises to reduce their operating costs.

A self service tool presents an online mechanism, allowing a customer to login at any time to initiate an inquiry, view their profile and the status of issues currently being worked on, as well as past interactions and other relevant account information. The customer sets up an account online with a unique identifier and password. In requiring customers to identify themselves with a login and a password, the system „knows‟ who the customer is from the start and can, therefore, provide relevant information and the accompanying services that are best tailored to his or her needs.

The login usually also allows the customer to search for information held on the organisation‟s website. This could be technical manuals, training guides, general information, etc. When a customer searches the knowledge base of an organisation‟s website, it is important that they are not inundated with useless or irrelevant documents and only presented with information that is relevant based on the context of the individual customer or the individual issue.

An enhancement of this self service approach to customer service and support is assisted support automation. Assisted support automation software enables computer support personnel to remotely access a customer‟s desktop or server for diagnostics and problem ticket resolution. It can also allow any service representative to see what the customer sees. So if a customer is having difficulties navigating an online process, the CSR can give immediate and effective help. Providing this tool serves a dual role – while reducing the workload on the internal customer service department and agents, at the same time it reflects the increasing desire of the customer to engage with their own issue resolution and be self-supporting.

Other uses of automated self service support include:

Automated attendant – whereby a caller or visitor to a website is provided with a menu of options, including pre recorded FAQs, general news and information on the organisation and its services or products, plus a route to specific staff.

Automated call distribution – whereby in-bound calls are routed to the next available representative. It can be used effectively by organisations that have staff in different


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locations and provide an seamless interface with the organisation for the customer. It also, automatically, puts callers on hold and can play company announcements.

Automated number ID – whereby the caller or website visitor is automatically routed to the relevant department within an organisation, based on user provided information about, for example, account numbers, language, geographic location, and company (if it is being used by a multi company call centre).

Computer telephony integration – which enables the automatic retrieval of customer records (via pop ups on screen).

Media blending – which allows an organisation to communicate with its customers over the phone and internet simultaneously. It is often integrated with a „call me back‟ web button and is useful for providing personalised information to a customer while they are using another automated process such as ordering or paying.

Customer Service Systems

Increasingly, the organisations which are flourishing are the ones that understand how contact centre business processes and their supporting technologies can be combined to allow for a more holistic customer experience. Currently, many of the different technologies that can support the goal of a more integrated customer experience are installed as stand alone systems, with only basic links between the different components. A customer service system (CSS) is a configuration of technology and organisational networks designed to deliver services that satisfy the needs and wants of customers.

Properly designed service technology systems allow relatively inexperienced people to perform very sophisticated tasks quickly. However, all too often, inadequate systems and inefficient processes lead to uneven service operations, inconsistent customer experience across different channels and costly workarounds. In this context, customers may suffer from too many service interruptions, overly long invoicing cycles, slow resolution for service queries, a lack of customer friendly tools and too many problems with ordering and activating new products and services. The end results include reduced consumption of existing services, missed opportunities for growth, declining margins and customers more prone to complain and leave.

Technology has also created a set of complexities that, although not in themselves problems, must still be addressed, particularly the proliferation of access methods that customers use to interact with companies. Once, interactions were face to face. Now, with the widespread use of call centres, interactive voice response and the Internet, there has been a fragmentation of controls on the customer relationship. Although customers can interact with a company in many different ways, they do not want or expect different responses from those different access methods. Customers want a common and co-ordinated response each time they interact with a company.

There is also the challenge of data complexity. Companies have large amounts of data housed throughout the organisation that is usually not organised or usable. Today, technology has improved the ability to create a more intimate relationship with many customers. Data warehousing and data mining techniques can help analysts gain insights into what customer‟s value and how to appeal to their individuality. Detailed customer profiles facilitate the precise matching of marketing offers or services to prospects and can be used to track the effectiveness of marketing programmes as well as providing the basis for future planning. Conversely, customer data analysis and profiling also enables an organisation to identify the customers it does not want to serve. The Pareto rule suggests that 80% of profits are generated by 20% of customers, but in some industries even more extreme differences in customer profitability exist.


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E. CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS

Customer Relationship Management (CRM) is an organisation-wide business strategy, designed to reduce costs and increase profitability by encouraging and solidifying customer loyalty. The goal of the strategy is to be customer focused and customer driven – running all aspects of the business to satisfy customers by addressing their requirements for products and by providing high quality, responsive customer service. Companies that adopt this approach are called customer centric, rather than product centric. It is also a strategy used to learn more about customers' needs and behaviours and, thereby, to develop stronger relationships with them.

Principles of a CRM System

There are three key elements to a successful CRM system – people, process and technology. The people throughout a company, from the CEO to each customer service agent, need to engage with and support it. The company's business processes must be engineered to bolster its customer relationship initiatives, based on the principle of how they can best serve the customer. And organisations must select the right technology to drive these improved processes and provide the best data to employees, while at the same time being easy enough to operate without extensive training or resulting in too many errors.

(a) Processes – Though CRM systems have many technological components, business processes lie at their core. A CRM system can be seen as a more client centric way of doing business, enabled by technology that consolidates and intelligently distributes relevant information about clients, sales, marketing effectiveness, responsiveness and market trends. Therefore, a company must analyse its business workflows and processes before choosing a technology platform. Some of these workflows and processes are likely to need redesigning to better serve the overall goal of winning and satisfying clients. And, at their heart, there needs to be a clear specification of the types of client information that are most relevant and how they can best used.

(b) People – For an initiative to be effective, an organisation must convince its staff that the technology and workflows will benefit employees as well as clients. Senior executives need to be visible advocates who can clearly state and support the case for change.

(c) Technology – CRM systems use complex databases which automate many business tasks such as inventory control, sales processing and the tracking of customer interactions, as well as analysing the data from them in order to produce such reports as sales forecasts and performance. They bring together information from all data sources within an organisation (and where appropriate, from outside the organisation) to give one, holistic view of each customer in real time. Access to this information allows customer facing employees in such areas as sales, customer support and marketing to make quick yet informed decisions on everything from cross-selling and up-selling opportunities to target marketing strategies and competitive positioning tactics.

Businesses may develop their own custom versions of the software specifically for their needs, or choose from among the increasing number of sales automation software products, such as contact management programme s like ACT! and GoldMine. In evaluating the most appropriate technology, key factors include alignment with the company‟s business process strategy and goals, including the ability to deliver the right data to the right employees.

Although CRM systems were originally conceived as a „guaranteed‟ way to turn customer data into increased sales performance and higher profits, by delivering new insights into customer behaviour and identifying hidden buying patterns buried in customer databases, they are now viewed more as a customer driven, business process strategy.


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CRM Technology

To be customer focused, organisations need to collect and store meaningful information in a comprehensive customer database. The database must be current, accessible and actionable, to support the generation of leads for new customers, while supporting sales and the maintenance of current customer relationships.

Organisations collect information every time a customer comes into contact with them and virtually all departments within a company hold at least some customer information. The goal of CRM is to collect that information in a central repository, analyse it and make it available to all departments. Ideally, the CRM database should contain each customer's history of past purchases, demographic information, known activities/interests/opinions, preferred media and other useful information, which can help the organisation to tailor their services to his/her individual needs, and taken as a whole, enable it develop products and services to suit general and particular customer preferences.

A wide variety of customer relationship management systems exist, from very simple to complex and they range from online solutions to off-the-shelf software and custom tailored programmes. The use of databases or contact management software to keep track of interactions with customers would be considered a simple CRM system. To adopt a more effective system, however, you would require a comprehensive, company wide effort to integrate information and develop strategies involving people, policies, processes and technology across the whole organisation.

Because a full-blown customer relationship management system is so complex, often involving multiple silos of information and multiple pieces of software, all tied together in a single interface, it is often hard to set up initially. Indeed, because of this complexity, smaller companies often see it as too expensive. However, it is important to remember that a CRM strategy is not necessarily dependent upon the technology and even the smallest company can implement one. While a FTSE100 company may spend hundreds of thousands of pounds annually on customer relationship management, a small one-man shop may handle CRM with a box of index cards and a ball point pen!

Even for very small businesses, CRM technologies have become accessible and cost effective as solutions have increased and prices have fallen. Mid-size companies often use simple, off-the-shelf software such as contact managers and databases and still have a very effective system that can help them to serve customers in the best possible way and to make the most advantageous use of information that has been collected. There are also a wide range of online options – web-based applications that require no software purchase or installation; the company simply pays a subscription fee.

The complexity of systems – and the way in which they have come down in price to become accessible to small businesses – can be illustrated by considering the use of "screen pops". These are used extensively in call centres where the CRM system, linked to the phones, automatically senses who is calling and by the time the agent answers the phone, produces a screen on the computer that lists important information about the caller, such as what they have purchased in the past, what they are likely to buy in the future and what products the company may have available that would go well with what the customer has already bought. This „screen pop‟ is made up of several bits of information from different databases – it may draw on information from the accounting department, to show the agent what their current balance is, it may draw on information from the sales department to show what has been purchased recently and it may draw on information from the credit department to show the agent what terms can be offered. Originally such applications were hugely expensive and exclusive to the contact centres of large companies. Now, however, it is quite common for a local pizza delivery shop to have such a system and, on answering a call, to know who the caller is, their address and general preferences for ordering.


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Many businesses opt to deploy CRM technologies in stages, perhaps starting with sales force automation or call centre software. As the business grows and employees become more familiar with the software and its capabilities, other features may be introduced. A fully integrated CRM system can provide the business with:

Central database – all employees can access a central database to view and update customer data, ultimately improving customer service, loyalty and retention and eliminating duplication and the opportunity for error or inconsistency.

Customer analysis – customers and prospects can be segmented, enabling an enterprise to customise marketing or sales campaigns, improve campaign targeting and closing ratios.

Customer service – customers can be provided with the ability to self order and self help using a password accessed, web based system, thereby reducing order entry costs and customer service costs.

Prospect tracking – sales leads can be tracked from start to close while analysing closing probabilities and ratios. Proposals, products and pricing for each of the organisation‟s prospects can be tracked.

Reporting – forecasting revenues using automated reporting and trend analysis, results in faster and better supported decision making.

CRM Implementation

CRM projects require careful planning and implementation. To be successful, CRM should be enterprise wide in scale and scope. However, many organisations find that it is easier to take an incremental approach. Introducing one CRM application at a time enables the company to train staff thoroughly on its use and evaluate the benefits before introducing more complexity into the system.

CRM systems can be implemented at three general levels:

(a) Single Function

The first level is where organisations purchase and implement single function client/server systems to support a particular group of employees, such as the sales force, the call centre representatives or the marketing department. A CRM system initially means automating existing marketing activities and processes. However, automating poorly performing activities or processes does little to improve the quality of the return on investment, so it is crucial that the enterprise spends some time initially on reviewing its processes.

(b) Cross Functional

At the second level, organisations demand more cross functional integration, to create a holistic view of their customers' relationships. Also, the integrated system's goal is to provide a single face to the customer by enabling employees to work from a common set of customer information, gathered from demographics, Web hits, product inquiries, sales calls, etc. Cross functional integration allows the whole organisation to take responsibility for customer satisfaction and allows for better predictive models to improve cross-selling and improved products and delivery options.

(c) Internet

The third level of a CRM system is heavily influenced by the Internet: customer self service and Internet based systems. However, there can be obstacles caused by a lack of seamless integration into the organisation's operational systems and a lack of integration across customer touch points, such as call centres, web transactions and other various interactions. By rethinking the quality and effectiveness of customer related processes, many organisations can eliminate unnecessary activities, improve


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out dated processes and redesign systems that fail to deliver the desired outcomes. At this level, the big CRM vendors use Internet based systems to extend the reach of CRM to thousands of employees, distribution partners and even the customers themselves. Also, most organisations at this level tie together their CRM systems with their ERP (Enterprise Resource Planning) system and other organisational operational systems.

The latest generation of CRM systems are designed around what matters most to the customer and customers have direct access to all of the information they need to do business with the organisation. Customer driven CRM means that organisations first understand the customer and then move inward to operations. The next generation of CRM also focuses more on financial results. Not all customer relationships are profitable and very few companies can afford to deliver an equal level of service to all customers. Organisations must identify existing profitable customer segments and develop the business requirements to support sustained relationships with these profitable segments. However, organisations also need to find cost effective alternatives for current non buyers or low margin customers.

Problems with CRM systems

One of the major problems with CRM systems for most medium to large organisations is the large investment to build and maintain a customer database, which requires computer hardware; database software; analytical programs, communication links and skilled personnel.

There is the difficulty, too, of getting everyone in the organisation to be customer orientated and to actually use the customer information that is available. Providing adequate training so that personnel feel comfortable using a new system is critical.

One thing that is often overlooked by organisations seeking to implement customer relationship management systems is that not all customers want a relationship with the enterprise and some may resent the organisation collecting information about them and storing it in a database.

From a business perspective, the major issue is the long wait for a return on investment. A three year wait for ROI is still common, despite the cost of a CRM system falling dramatically over recent years. Research conducted in 2001 suggests that 45% of companies are unable to compute ROI from their CRM investments and, more recently, research conducted by Cap Gemini Ernst and Young found that two thirds of companies could not provide any estimate of their ROI on CRM investments. This makes the investment more of a leap of faith than a rational business proposition.

As we have noted before, a CRM system needs to ensure that data is captured accurately and analysed properly, and that the people are seeing the results and using the information correctly. If the system does not achieve all of this, there is a risk of investing a considerable amount of time and money implementing a strategy of little or no benefit. However, such is the requirement to gain a competitive edge by retaining customers that organisations are still prepared to make the investment.

Adding Value Through CRM

CRM will enable enterprises to actively manage customer relations in an organised and strategic manner. In practice, that means developing the company's methodologies; internal operations, software and Internet capabilities to be able to better address customers' needs and as a result, make the relationships with their customers more profitable.

Using a CRM system, organisations can keep track of key customer information such as contacts; communications; accounts, buying histories and preferences - allowing them to match customers' needs with products and services. By analysing the data, organisations can:


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Identify their most profitable customers

Enrich and customise the way customers are communicated with

Manage marketing campaigns

Reduce customer response times

Serve wider geographical regions.

Hosted CRM is becoming increasingly important as a means of strengthening customer relationships. While voice communication remains a major part of customer interaction, there is steady and noteworthy increase in the use of email and web self service. Organisations must fully integrate their handling of these voice and non-voice modes, mirroring in this respect, what customers do naturally.

Whilst it is perfectly legitimate to encourage the use of lower cost communication channels, it is essential that all of them work together seamlessly. It is important and also a legal consideration, that the system must guarantee privacy and confidentiality – communications between all parties must be private and secure.

CRM is founded on four relationship based tenets:

(a) Customers should be managed as important assets

(b) Customer profitability varies; not all customers are equally desirable

(c) Customers vary in their needs, preferences, buying behaviour and price sensitivity

(d) By understanding customer drivers and customer profitability, companies can tailor their offerings to maximise the overall value of their customer portfolio.

The successful implementation of CRM requires the marketing and IT functions to work closely together to maximise the return on customer information. In essence, CRM provides management with the opportunity to implement relationship marketing on a company wide basis. However, for CRM to be successful, all of these activities need to be managed in combination.

Management academics have been encouraging more customer orientation for decades, but practice in many industries has remained stolidly product orientated. However, a combination of factors has now simultaneously obliged and enabled firms to re-organise around their customers – widespread changes in business processes, growth of the services sector and the availability of cost effective software solutions to the challenges of „mass-customisation‟. All these factors are easing the shift from product management to a customer focus, impacting on the ways that companies view their customers and how they treat them, how they are organised and how they measure and reward success.

Although most organisations now have at least some form of customer database, they do not always perform well in supporting customer development. Developments in technology must be combined with a relationship management philosophy that calls for the reorganisation of the organisation around its customers, which has some immediate implications for the enterprise:

A culture change that recognises that customers, not just products, drive profits. Marketing actions must, for example, focus on long term customer relationships, not just the short term campaigns.

A change in business measurement and incentives, so that they reflect this new culture. For marketing, this might mean setting targets for customer retention as well as for new customer acquisition; for IT, this might mean measuring the success of a CRM technology project in terms of its contribution to building relationships with customers rather than its architecture and functionality.


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A change in working practices, so that information is shared between departments to build up a picture of the firm‟s total relationship with the customer. This may also entail a change in organisational structure from traditional functional silos to cross functional teams.

Customer relationship management is a combination of organisational strategy, information systems and technology that is focused on providing better customer service. CRM uses emerging technology that allows organisations to provide fast and effective customer service by developing a relationship with each customer through the effective use of customer database information systems. The objectives of CRM are to acquire new customers, retain the right current customers and grow the relationship with an organisation's existing customers. CRM has grown in scope; it initially referred to technological initiatives to make call centres less expensive and more efficient. Now, a lot of organisations are looking at more macro organisational changes. Organisations are now asking how they can change their business processes to use the customer data that they have gathered. CRM is changing into a business process instead of just a technology process.

An integrated business model that ties together technology, information systems and business processes along the entire value chain of an organisation is critical to the success of CRM.

F. PERSONALISING THE CUSTOMER EXPERIENCE

Not only do customers' individual needs vary on a case by case basis, but as an aggregate whole. Customers' needs are maturing and have become much more complex and demanding than in earlier generations and, as a result, the need for higher standards of service has arisen. Companies are constantly looking for ways to not only meet these high expectations, but to exceed them. One way for companies to take customer service to the next level is to take into consideration the element of context and how this can translate into improved customer care. Identifying the context of a customer and their specific concerns can lead to more tailored resolution and a more satisfied and loyal customer.

People want not only personalised answers to their enquiries; they are also looking for personalisation in the way they are handled by a company and its service representatives. One way in which customer context can be factored in, to achieve a more tailored support process, is by supplying more information about the customer to the CSR at the point of contact.

As an example, once a call is placed to a customer service agent, it can be immediately tied to the customer's record. As soon as this correlation is established, the agent is provided with not only that individual's order information (both past and current) but also with supplementary information that can be helpful in solving the problem or dealing with the purpose of the call.

Depending upon what is learned from each interaction with an organisation, customers may alter their behaviour in ways that affect their individual profitability. So, by managing these experiences, companies can orchestrate more profitable relationships with their customers. The work of management consultants Bain and Co (inventors of the Net Promoter Score) in directly linking customer retention with profitability has meant that building closer relationships with potential and existing customers is now a vital competitive strategy for most organisations.

The Net Promoter Score

The Net Promoter Score is a calculation that takes into account how strongly people would be likely to promote your brand and returns a single score, expressed as a percentage. It was developed by Frederick Reichheld for Bain and Company.


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The main premise of the technique is that a single question provides an accurate measurement not just for customer loyalty but corporate success. Customers are asked a single question to be rated on a 0 to 10 scale: "How likely is it that you would recommend our company to a friend or colleague?" Based on their response, they are coded as promoters (9-10 rating), passives (7-8 rating) or detractors (0-6 rating).

The NPS Score is simply the percentage of promoters minus the percentage of detractors. Any score over 50% is quite good while 75% or above is exceptionally good. Low (or negative) scores are indicative of companies that may have serious issues regarding customer loyalty.

Research by Bain has shown a correlation between NPS and revenue growth, the higher a company's NPS score the higher the revenue growth.

Personalisation Techniques

Research has illustrated that there is a general consensus among executives, across a range of industries, that customers often value how they interact with organisations as much as or more than what they actually buy. Consequently, increased emphasis is being placed on managing the customer experience during the service interaction, whilst personalisation strategies aimed at providing customers with individually tailored services are becoming increasingly important. Better education, technological innovations and the availability of information means that more knowledgeable customers are now better placed to engage in informed interactions with customer service personnel. They want to collaborate with customer service professionals in determining what the specific service offering should entail and this collaboration is increasingly helped by technology.

The essence of this is information – from the company's point of view, about the customer, but also from the customer's point of view about the organisation he/she is dealing with. This may include acquiring information relating to the customer and the company itself, the company's industry, publicly available financial information, recent company news or press releases and the like from external applications. It may also incorporate information developed from informal internal sources such as:

Journaling – Journaling by customer facing employees is a useful tool for gathering deep insight through observation and conversation that is often not captured in systems. These informal impressions include the reason for engaging with a company, reactions to steps in a specific process that they may find confusing and/or unnecessary, and suggestions for improvement.

Personas – Personas help bring customer segments to life or, if none currently exist, can be an ideal way to begin creating informal customer segments. Personas are created by using data from all potential sources such as front line employees, partners, databases etc. and provide a rounded picture of customers beyond standard demographic data by recording personal preferences, skills, interests and hobbies, buying behaviour, etc.

Unstructured data – Companies today have access to an untold amount of customer data through a variety of channels such as blogs, online forums, wikis, call centres and more. However, most companies have yet to determine how to exploit that data effectively. Companies that make the effort to identify the most relevant sources of customer insight, understand the data and analyse it in conjunction with structured customer data from internal databases and CRM systems, will have the most comprehensive understanding of their customers.

The collected data, which is pushed to the customer service agent immediately, enables that agent to further understand who the customer is and the context of the enquiry. This creates not only a more engaging one to one interaction but also adds depth to the level of customisation the caller receives.


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Giving support and service staff access to client histories, a variety of support documentation and the most relevant information relating to the context of the contact enables them to harness this pre-existing data and use it to their advantage – both to solve the problem and make for a better customer relations environment in the process.

Customer relationship management systems can flash suggestions on the screen to help service reps identify potential solutions for an individual customer. However, computer software cannot pick up human nuances. Software is no substitute for good judgment based on training, experience, and selection of perceptive agents.

Case Study 3

Examples of good practice include Dell Computer Corporation, whose technicians are trained to hone the customer relation skills they need for telephone support and problem guidance and to focus directly on the customer‟s needs without using technical jargon.

The Ritz-Carlton hotel group combines employee training with information systems to provide its guests with superior service, whenever they stay with the hotel chain. Employees are given a „guest preference pad‟ to record every preference gleaned from conversation, or observation. These are entered daily on to a worldwide database so that the requirements of a guest staying at any other Ritz-Carlton in the world are immediately known to the staff. In both cases, staff training and motivation are vital – a great deal depends upon accurate and consistent recording of information and the ability of staff to multi-task across functional boundaries.

Service Level Agreements

Following on this concept of pulling in pre-existing information to enhance the interaction between a CSR and the customer, another way in which a client's account context can be incorporated into the customer service process, particularly in the business to business area, is to manage service level agreements (SLAs). SLAs often play an important role in the business to consumer relationship, in that they lay out the service responsibilities that are to be delivered by the organisation to meet the expectations of the customer.

While SLAs can be universal in nature, an individual SLA can also be unique due to variations in the specific nature of the business to client relationship. Any single SLA can include many different service options, which define the type of service that will be available for example, in terms of IT support, advanced technical support, phone support or simple email and online support – as well as the time frame during which any issue should be closed or how problems should be escalated. Based on predetermined standards in an SLA, the customer service team immediately knows what level of service should be given to any particular customer and can prioritise the customer service response based on this information. Also, the available services and a customer's privileges can vary from one customer to another, given the context of the SLA. Having this predefined in the SLA and automatically accessible for reference, allows the service representative to immediately know what format of service should be applied to the enquiry.


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SUMMARY


Examined how internal processes, including IT, contribute to the efficient delivery of the customer experience

Identified the factors for and against the establishment of a specific customer service function and how co-operation between functions is crucial to customer service success

Analysed the risks and benefits associated with outsourcing and offshoring for service support roles or direct customer interaction facilities

Investigated the importance of personalised service organisation.

Competition is probably the most significant force boosting the demand for world class customer service. More complex products, the role of technology in driving down costs by automating certain tasks and extended customer bases are forcing companies to re-evaluate how they do business and serve to highlight the need to see world class service as a highly strategic part of the organisation. Delivering exceptional customer service can be a key differentiator for success in competitive markets.

Contact centres and automated software applications may be viewed by some as impersonal and separate from the main business of the organisation, but there is no reason why they should not be customer centric by design and efficiently operated to provide excellent customer service.


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Chapter 5

Obtaining and Dealing with Customer Feedback

Contents Page

Introduction 117

A. Communicating 117

Encoding the Message 118

Choosing the Channel 119

Noise 120

Decoding the Message 121

Feedback 121

B. Communication Methods 122

Written Communication 123

Non-Verbal or Body Language 126

Visual Communication 127

C. Communicating with Customers 129

Web-based 129

Outsourcing 129

Product Information 130

Intranets and Extranets 130

Community Forums 130

Service Agreements 131

D. Customer Feedback 131

Informal Feedback 132

Formal Feedback 132

Customer Helplines 134

Online Feedback 135

E. Techniques to Support Effective Communication 135

Building Credibility and Rapport 136

Questioning Techniques 139

(Continued over)

116 Obtaining and Dealing with Customer Feedback

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Active Listening 139

Transactional Analysis 140

F. Complaints 141

Verbal Complaints 141

Complaints Procedures 142

Best Practice in Handling Complaints 145

G. Negotiating with Customers 146

Summary 149

Obtaining and Dealing with Customer Feedback 117

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INTRODUCTION

Feedback is a huge part of maintaining any good relationship. Finding out what customers want; what they like and what they don‟t like, as well as what they think and believe, takes any organisation one step closer to keeping their customers satisfied and loyal. It is part of the broader area of how and when we communicate with customers. So in this chapter we will look at communication methods, particularly those which enhance service levels. We will examine how organisations communicate to their customers and how they can gather and analyse solicited and unsolicited feedback. We will investigate procedures for managing and responding to customer complaints and identify mechanisms for dealing with difficult customer situations.

An important skill in maintaining good customer relations is being able to communicate well. You need to find out about the wants, needs and expectations of customers; to inform them about products and services on offer, to listen to their queries and deal with their problems. All staff need to do this is a way that not only satisfies them, but goes beyond their expectations. However, our communication skills are something we tend to take for granted. Of course, we are all skilled at communicating – we have been doing it since the day we were born. We communicate spontaneously, often without thinking. Having a greater insight into what happens when we communicate, though, increases our ability to adapt the way we interact with people and influence their response to us. Increasing our awareness of the process and context of communication, therefore, increases our effectiveness in working with others.

A. COMMUNICATING

The most widely known and used model of the communication process was developed by Claude Shannon and Warren Weaver. The aim of the model was to enable engineers from the Bell Telephone Company to transmit mechanical messages more effectively.

Figure 5.1: The communication process (Shannon and Weaver)

Noise

Information Source

Encoding

Channel

Decoding

Receiver

Although developed for mechanical messages, the model provides a starting point for understanding what happens when people communicate. However, the terminology needs some translation:

Information source – The person who sends the message

Encoding – The sender chooses the words for the message

Channel – The medium through which the message is transmitted, such as be face to face, email, phone call, etc.

Decoding – The receiver of the message has to interpret the message and understand it

Receiver – This is the person who will receive the message

Noise – Anything that interferes with the message being received by the receiver


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In communication terms:

We decide we need to send a message

That message may be distorted by technical, human or environmental distractions

We choose the most appropriate format for the message

The person receiving the message filters the message.

So the diagram looks like this:

Figure 5.2: The communication process

Interference

Sender The

message

The form of

the message

Interpreting

the message

Receiver

Breaking down the communication process into these stages can help pinpoint where pitfalls can occur. For example, we may choose words that are confusing or over complicated and so the message fails at the encoding stage. Alternatively, the person receiving the message may not be paying attention or may not have the knowledge to interpret the message, so it fails at the decoding stage. Sometimes the message may not even get to the intended person.

Encoding the Message

Most people focus on selecting the right words to convey a written message. But according to many psychologists, the words themselves are only a small part of the meaning of any message. For example, Mehrabian (1970) in Tactics of Social Influence claims that:

55 per cent is based on your body language

38 per cent on the way you say something

7 per cent on the words you use.

In speech, we convey a lot through the way we say things – the pitch of our voice, rate of speech and volume all combine to convey meaning. A person can use exactly the same words when answering a phone on two occasions, but convey completely different meanings, depending on the emphasis placed on the words.

With the written word, misplaced punctuation or misspelt words can sometimes convey a whole different meaning to a sentence. Here are some examples of the ambiguity which can arise from this:

In Sheffield they used to manufacture iron and steal products

In Sheffield they used to manufacture iron and steel products.

We obviously do not want to tarnish the reputation of anyone from Sheffield, but the two sentences above illustrate how just changing one letter in one word can alter the meaning drastically.

The people in the queue who managed to get tickets were very satisfied

The people in the queue, who managed to get tickets, were very satisfied.

In the first sentence it is implied that not everyone got tickets, but those who did were very satisfied. In the second version everyone got tickets and all due to a couple of commas!


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Similarly, where words are placed in a sentence can alter the meaning:

“Last night I shot a bear in my pyjamas.”

Who was wearing the pyjamas? The sentence could read as “Last night I shot a bear whilst wearing my pyjamas”, or “Last night I shot a bear who was wearing my pyjamas. ”A piece of silliness, perhaps, but it illustrates how simple sentences can be interpreted by the receiver.

Choosing the Channel

Traditionally, it was thought that the words chosen and the way they were interpreted were solely responsible for a successful message. However, since the early 1960s, many people have thought that „the medium is the message‟. Today, with the help of media richness theory, most people realise that the appropriate choice of communication channel (medium) contributes significantly, along with the words, to the success of a message.

Media richness theory proposes that a communication channel becomes richer as you add human elements like voice tone, facial expression, and physical presence.

Figure 5.3: Media richness theory – scale from rich to poor

Rich media Lean media

Face to face Personal Interactive

Impersonal Interactive

Personal, static

Impersonal, static

(e.g. telephone) (e.g. email) (e.g. voicemail) (e.g. letter/ report)

The more complicated, personal or emotional the message is, the richer the channel should be. When the message is routine and easy to understand, a lean channel is sufficient.

Making the appropriate choice of medium helps senders communicate clearly, saving them and their businesses time and money. Therefore, examining various communication channels, to understand their most effective use, is important.

The first distinction to make is a fundamental one – between channels which are based on verbal communication and those which are based on written communication.

Verbal channels Written channels

for example for example

Face-to-face (individual)

Small group

Large group

Presentation

Phone

Video conference

TV or radio advert

Letter

Email

Internet (inc. webpages, Twitter or other social media)

Sms

Printed document such as leaflet or brochure

Notice board

Newsletter

Advert

While these channels are not the only ones available, they clearly show that the sender of a message has a range of choices to consider when thinking about how best to communicate.


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The choice of channel will depend largely on things such as:

Is the message part of a two way communication?

How permanent does the message need to be?

Is it a legal requirement?

The likelihood that the receiver will get the message (i.e. where are they likely to expect to see the message?)

Is it a formal or informal message?

The timeframe for receiving the message or giving feedback to it.

How many people need to receive the same message?

What the budget is.

Noise

When things get in the way of effective communication, they are called “barriers” to communication or “noise”. These could vary from our own perceptions and emotions such as when we are tired or grumpy and take things the wrong way, to real noise from machines or other people.

There are a wide number of sources of noise or interference that can enter into the communication process, affecting the channel and causing the message to fail to reach the sender, or become distorted. For example:

Actual noise in the immediate environment of the sender and/or the receiver – including general background noise in an open plan office, etc. which can be so distracting that you cannot either physically hear the other person or focus on what they are saying.

Interruptions to the communication – including breakdowns in the technology (such as losing the signal on a mobile phone) and distractions from the surroundings, such as telephone calls or people stopping at a desk to chat or chatting as they pass by to the coffee machine.

Technical problems which mean an inability to actually send the message, including computer equipment failing, loss of internet connection, etc.

The use of jargon or technical language with someone who is not from the same industry or background – where the words used mean something to those who are working in that industry or interacting with it regularly, but which may be meaningless to „outsiders‟, which might well include customers in the B2C markets.

The absence of non-verbal signals (body language) in the communication, which can affect both the way in which the message is sent and the way in which it is received – for example, when using the phone, there are no facial expressions to assist understanding and if the receiver is nodding his/her head in agreement, the sender might interpret silence as meaning disapproval.

Failing to consider the needs or knowledge base of the receiver – including not taking account of particular communication problems such as deafness or speech difficulties, language difficulties (especially where one of the parties is not a native speaker of the language being used), choosing a channel of communication which is not appropriate for the other person or providing information which is inappropriate for the other's needs (such as giving the full technical reasons, at length, as to why something failed to happen, when all that is needed is simply a summary so they can decide if it justified the loss of service).


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Making false assumptions about the other party or parties to the communication, often based on stereotyping or prejudice, which can result in the sender making an incorrect assessment of the receiver's needs, or the receiver ignoring or putting the wrong interpretation on the message.

Not providing all the required information that the receiver needs – either due to a failure to consider the receiver's needs properly (as above) or due to insufficient planning or preparation on the part of the sender.

Choosing a channel of communication which is not appropriate for the situation – such as undertaking a disciplinary hearing on the telephone.

Lack of feedback to check that the receiver has understood the message.

Lack of understanding between the parties to the communication caused by conflict or status differentials, resulting in altered perceptions of what has been conveyed in the message.

Noise refers to anything which distracts the communication process and becomes a barrier to mutual understanding.

Decoding the Message

Responsibility has to lie ultimately with the receiver – they have to decode the message and make sense of it. However, there is a common belief that if you send information to someone, the communication is complete. As noted earlier, though, sending a message is not communicating. The message has to be understood to be called „communication.

Look at the following examples, both of which abdicate some of the sender‟s responsibility for communicating effectively:

“I told them all about it during the site meeting, including what to do if they had concerns. It‟s no good introducing problems at this late stage”

“I will send the email with the customer feedback report attached and ask for comments by the 26th. If I don‟t hear anything by then, I‟ll assume they‟ve got no comments so we‟ll go ahead with the recommendations.”

The act of sending information does not automatically shift responsibility on to the receiver for making sense of that information. First, the sender has to make sure that the receiver is actively engaged with the communication process; only then can responsibility shift to the receiver to interpret the information. In the first example, the message may not have got across, or the problems may not have arisen until late in the process. In the second, the sender should give the receivers a realistic time to respond and ask them to confirm that they have no comments (if that is the case).

Feedback

The Shannon and Weaver model represents a one way communication process, which is essentially about giving information. For example, a presentation to a large audience is a prime example of one way communication. There is little or no facility for the audience to respond.

You can only be sure that communication has taken place if it becomes a two way process – feedback from the „receiver‟ is returned to the „sender‟ to show that the message has been received. There are various types of feedback that help us to know whether or not we have got our message across. Some require a full response, but generally we feel reassured that we are being understood and therefore communicating if we receive simple gestures such as smiles or nods, along with such phrases as „OK, I understand‟.

So the process of effective communication – even in simple situations – is more accurately represented by a loop.


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Figure 5.2: Two-way communication incorporating feedback

Sender The

message

The form of

the message

Interpreting

the message

Receiver

Feedback

Communication can, therefore, be defined as:

„A process involving the exchange of information, ideas or feelings between people resulting in a common understanding‟.

It does not have to be two way for communication to take place. There are times when one way communication may be more appropriate or when minimum feedback is called for. However, there is no way of knowing if common understanding has been reached and communication has been effective without feedback.

Think Point

Although mechanistic, briefly stopping to consider the process of communication and where the problems can occur can be helpful in preventing a communication failure. After all, if a message is not received and understood, can we really be said to be communicating?

When was the last time you had a failure in communication – either a message you sent which was not understood or you did not understand a message sent to you?

Using the Shannon and Weaver model, explain why the communication failed.

B. COMMUNICATION METHODS

There are lots of different ways in which we communicate with each other, but they can be grouped into four main types:

Written

Spoken or verbal

Non verbal or body language

Visual.

Within these groupings lie a range of methods, some simple and others more sophisticated and perhaps requiring additional technical skills to use.

Whichever type of communication is used, it can be further categorised as formal and informal.

Formal communication has a set of rules that must be followed, such as the way a letter or report is set out. Organisations often have a set of procedures for formal communication that includes the use of „standard‟ letters, or templates for memos and agenda.


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Informal communication is less rigid, such as the type of language to use when having a chat with friends or colleagues rather than in a more formal meeting.

Whether the communication is formal or informal, you need always to think carefully about the purpose of the communication and what the communication is trying to achieve.

Written Communication

Unless you are writing to a friend, most forms of written communication will be formal and, therefore, have a particular format that needs to be followed.

The main advantages of written communication are:

You are able to review your message and adjust it before sending

It permanently records what has been said or agreed for future reference

It may be sent to many people at the same time

A consistent format can be applied

It allows complex details or jargon to be fully explained

It can form the basis of a contract or agreement.

The disadvantages of written communication are:

You are not usually present when it is received and, therefore, cannot immediately gauge the reaction or deal with feedback.

It can be misinterpreted – for example, if the tone is wrong

It can be too impersonal if poorly written

May be unintelligible if not checked for spellings and grammar

It can be time consuming to do properly

The cost of preparation and circulation (paper, postage, etc.) may be high

It may be easily ignored or binned

There may be a delay in the recipient receiving it and there is not necessarily any record of it being received at all.

General rules regarding written communication to internal and external customers cover:

How it looks It should look neat, tidy and professional. Customers will judge the level of service they can expect based on how the organisation projects itself through its communications.

How it sounds The tone of written communications should be polite and friendly. Avoid using industry „jargon‟ unless you are sure that the reader will know what it means. Proofread and ask someone else to read the document before it is sent to make sure the meaning is clear.

How long it is There are few rules regarding how long a document should be. However, certainly with business documents, it should be as brief as it can be while covering all the essential points of information.


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How it reads Spelling, punctuation and grammar are still very important in written communication. Putting a comma or full stop in the wrong place can completely alter the meaning of a sentence and poor spelling can mean that even a carefully constructed document is unreadable.

E-communication

These days, the most common form of written communication used in business is email. Although it is hard to imagine a world without email, it has its disadvantages. Here are some examples.

It is overused. The ability to „copy‟ emails to many people has added to the problem of „information overload‟. This means that people often get information that they either do not need or have not asked for. Even if you don‟t spend time reading it, the act of filtering out what you do need to read takes time and can be irritating. When communicating with customers by email, it is worth remembering this and making sure that any „Subject‟ line clearly communicates to the customer so that they do not delete your email unread in mistake for what is known as „Spam‟ or „junk Mail‟.

Too much information is sent. The ease with which attachments can be sent means that vast quantities of information may be received. It is a technique for shifting, from the sender to the receiver, the responsibility for filtering out the relevant parts. In practice, it often means that no one actually reads the relevant information, so if you have an important message for your customers, it is wise to ensure that only relevant information is included.

It is used to avoid face-to-face communication. Emails can be used to „dump‟ work on to people or deliver bad news. Although this may feel easier to the sender, in fact it can complicate matters and make the receiver feel angry because they have no immediate opportunity to ask questions, respond or give feedback. Bad news is always best delivered using a rich media.

It is easy to breach confidentiality. It is a very simple process for an employee to make a mistake and press the „Send‟ button before checking that the message is being sent to the appropriate person. Whether sending a hasty email to the wrong‟ Bob‟, accidentally replying to the entire department when you meant to send a heads-up to a colleague, attaching the wrong document to a message, or perhaps mistakenly forwarding a message that contains past messages you would rather the recipient had not seen, human error can be at best embarrassing or at worst cost the business. It is important to recognise that email is not a private communication channel.

Case Study 1

The following article appeared in the UK newspaper The Independent in 2010.

„Email gaffes at work have seen one in 20 people reprimanded or even fired, a survey revealed today.

One in five admitted sending an inappropriate email in the heat of the moment, while one in three (31%) said they have hit "reply all" instead of "reply" by mistake.

More than one in 10 (13%) have mistakenly sent an email insulting a colleague to the person they are insulting.


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Men were more likely to make a mistake, with 28% having made an email faux pas, compared to 17% of women.

Almost half (44%) said they do not send letters any more.

And it seems people sometimes choose not to pick up a phone or meet somebody face to face either – one in five admits dumping a partner by text and one in 10 has ended a relationship by email.‟

Spoken or Verbal Communication

Effective verbal communication is particularly important when building relationships with clients and customers. Because, generally, it is less formal than written communication, verbal communication is much more likely to contain emotions, ideas and opinions. However, note that when representing the organisation to customers, it is crucial that these aspects do not get in the way of presenting the right information in the right way.

The advantages of verbal communication include:

It is fast and immediate – usually incorporating response into the communication

It is ideal when decisions need input from several people

It can be more informal than written communication

There is more flexibility, as it can be altered as the communication proceeds

It allows questions can be asked for the purposes of feedback

Can include body language for emphasis and reinforcement when the communication is also visual (for example, not just over the telephone when the communication would be auditory).

There are also disadvantages to spoken communication and these include:

It may be time consuming and costly where several people are involved

There is no record unless separate notes or minutes are taken

Problems can occur with noise and interruptions

Misunderstandings may occur due to language or jargon used.

There are some occasions when you need to communicate in writing and others when you need to communicate orally. Quite often it is necessary to back up spoken communication with written communication. For example, you may need to write to a customer to confirm the actions you intend to take following a complaint. If you need to inform all your clients about a change to your contact details, you may choose to let your clients know your new details by speaking to them face to face or by phone, but would almost certainly always back this up by sending the details by post, fax or email.

Listening

Many people assume that verbal communication is all about speaking. However, listening is just as important.

Listening is not the same as hearing. Hearing is a passive activity – we can hear something without actually processing the information. Listening involves making sense of what we hear. It is an active process that demands complete attention.

Listening enables you to understand another person‟s point of view – in fact it is the only way of doing so, and has to take place at the time the spoken communication is taking place.

Listening also sends a powerful message to the speaker that you value him/her. Implicit in listening is the message „you are worth devoting my time to; what you have to say is


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important‟. In contrast, paying lip service to listening will soon send a loud and clear message that you do not value the other person.

Behaviour that conveys someone is not listening includes lack of sufficient eye contact, a glazed expression, interrupting, not being able to reply to questions, turning your body away and showing impatience. In practice, it is quite difficult to carry on talking when it is clear that someone is not listening.

It is only by questioning anything that has been left unsaid or by reflecting back to check understanding that a receiver gives the sender conclusive proof of listening. Note that this involves talking and leads us to consider verbal communication as a two way rather than simply a one way process.

Think Point

Think about two instances of written communication and two of verbal communication in which you have been involved, either as the sender or the receiver. One of each type should be where you considered the communication to be effective (i.e. the intended message was received) and the other you though was ineffective (i.e. the intended message was not received). This could be in your workplace, at college or among friends.

Make a list of the elements in the two forms of communication which contribute to them being either effective or ineffective.

Non-Verbal or Body Language

There is a saying in English that “actions speak louder than words” and this can be very true when dealing with people. We use non-verbal communication all the time – sometimes consciously and other times unconsciously, mostly the latter. Non-verbal communication covers all the ways in which we send messages to people when interacting with them that do not involve the use of words. It includes the following:

(a) Facial expressions

These reflect what a person is feeling – for example, interest, surprise, fear, etc. They can often override the message that is being sent in words. For example, a person may hear „Pleased to see you‟, but a momentary frown might have sent a clear message that they were not pleased to see you at all!

Most facial expressions are the same across all cultures; they are innate and shared by all human beings.

(b) Eye contact

This plays an important part in verbal communication. Generally, people who like each other have more eye contact than people who don‟t. You search for more eye contact when you listen than when you speak.

The amount of eye contact varies between cultures. In some parts of the world it is seen as rude or defiant, whereas in most parts of Europe and North America the lack of eye contact is interpreted as hiding something from the other.

(c) Posture and gestures

These include the way we stand, sit and move. They can give strong messages about what a person is feeling. For example, arms crossed can mean a person is feeling defensive or unsure. Covering your mouth can indicate lack of confidence, while drumming fingers indicates impatience. People who are deeply engrossed in


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discussion will mirror each other‟s body language, an unconscious process which helps to create rapport.

(d) Use of space and touch

This is influenced by cultural rules. Some cultures („contact‟ cultures) readily integrate the use of touch, whereas other cultures (non-contact cultures) are less tactile. People from contact cultures stand or sit closer to each other than people from non-contact cultures. A study by Jourard (1996) showed how many times couples touched each other in cafés in different parts of the world:

– Puerto Rico 180 times per hour

– Paris 110 times per hour

– London 0 times per hour.

Obviously, one study does not, in itself, mean very much. There are many reasons why the researchers‟ observations produced the results above. But what it does tell us is that we should think carefully about „personal space‟. Some people interpret a hand on the shoulder as a friendly gesture; for others it may be taken as a more hostile gesture.

Body language is a large part of how we communicate face to face, so it is useful to be aware that:

your body language will be sending messages every time you interact with other people

the more you „tune in‟ to other people‟s body language, the more effective you can become in interpersonal relationships.

Visual Communication

The use of visual communication in the business environment is well established due to its ability to improve the efficiency and effectiveness of communication, both internally and externally. Three main factors contribute to this:

(a) Information overload

With so much data being generated on a daily basis, the use of visuals to summarise complex information can make it easier to digest and understand large amounts of data. A flowchart, bar graph or timeline makes it much easier to absorb and retain the information presented.

(b) Globalisation

Global companies must have efficient, effective means to communicate with employees, customers and partners who speak different languages and dialects. The use of visuals makes it much more effective to communicate even relatively complicated information to a diverse group of people, without the worry of misunderstanding or something being "lost in translation."

(c) Brevity

When communicating with spoken or written word, it becomes easy to ramble on, especially when trying to convey complicated information. Many believe that writing or saying more will aid understanding when often the opposite is true. The very act of creating a visual presentation forces the creator to refine the message or argument, clarify points and summarise explanations. This forced clarity distils messages to their core meaning, which helps the audience achieve a better understanding.


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In an emergency, would you rather have a map to the fire escape or written directions on how to get there? Visuals allow the audience to see and understand relationships between information and concepts more clearly than words can ever do alone.

Other examples of visual communication are

Signs

Diagrams

Graphs

Demonstrations

Charts

Slides

Videos

Models.

This method of communication is often used to support verbal and written communication and provides a visual encouragement that can help to simplify difficult concepts. Sometimes it is more effective to use visual communication than either written or verbal communication because:

Information can be conveyed more concisely than using words

Meanings are instantly recognised, such as road signs, logos, computer icons and directional signs etc.

It does not rely on the use of a particular language such as English, Chinese, etc.

It enables people with hearing or speech impairments to communicate at the same level as others

There are many examples of visuals all around us:

Logos to denote organisations

Road signs – speed limits, road works, diversions

Icons on the computer screen

Common information signs like no entry, ladies‟ and gentlemen‟s toilets, hazards.

Think Point

Take a look around the room where you are reading this and note all the examples of visual communication. Do the same when you are out later – note all the visual signals which convey some sort of distinctive message in, say, a five minute period.

Is this an effective means of communication? Are there particular types of message for which it is most suitable and are there any types of communication for which it is not?


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C. COMMUNICATING WITH CUSTOMERS

Efficient and effective communication with customers is not just about answering the telephone within five rings. There are ways of sharing information that will build a solid relationship with customers.

Web-based

The Internet is an interactive medium which is increasingly overtaking traditional business approaches. It can be used to enable customers to select items for purchase, specify designs, or make comments and suggestions on products and services. It can supplement the traditional relationship between supplier and consumer and permit those managing within an organisation to get closer to its customers than ever before.

The simplest way to provide good customer service is to provide the customer with information they need. This can be as simple as putting a catalogue online with pictures and specifications of the available products. Because publishing electronically is much cheaper than traditional printing on paper, more information can be made available to more customers in this way at a fairly small cost.

An organisation could, for instance, not only put its entire product or service offering online, but also provide a searchable database of product information. When sales are made electronically, it is often possible for the buyer to see in real time how many of the products are in stock and then to track the order through to payment and delivery. Many software companies, for example, make their complete database available to the public so that customers can find information on known bugs and download the appropriate fixes.

Delivery services such as FedEx, TNT and the Royal Mail allow users to enter a tracking number at their websites and immediately see where a parcel has been and how far it still has to go to reach the recipient. Receipt signatures are also often shown. This makes the service more transparent to the user and thereby, more attractive.

While most customers who buy online generally appreciate the fact that they can shop for products independently, at times it can be useful to have someone whom you can ask questions or get advice from. Also, when using online services, such as those provided by government agencies, it is useful to be able to ask questions, which do not appear on the FAQ (frequently asked questions) pages and get an almost immediate response. So, many websites now provide an integrated telephony service with a phone button (linked to an internet telephony service such as Skype), instant chat facility or customer call back system, which allows real-time discussion with an advisor.

Outsourcing

One of the most important consumer satisfaction elements is the ability to ask questions and to receive appropriately satisfying answers from the organisation‟s representatives. About 65% of all customer service activities are outsourced to Business Processing Units (BPUs). That means the organisation does not always directly handle customer interactions and queries.

This has led to a belief that the only way to ensure the organisation‟s own standard for customer interaction is applied is by making all service encounters follow a standard script – with the added benefit that contact times can also be kept to a minimum while yielding the same information or result.

Scripting and procedural language are often trained into employees – particularly contact centre staff – to ensure consistency. However, scripting can make the customer feel they are dealing with a robot. Scripting also leaves service givers feeling trapped and inflexible when they are asked questions or want to say something outside the script. You can follow rules


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and procedures and keep customers within the lines without making them feel they are filling in a form or talking to someone who has no human empathy.

Case Study 2

Some years ago I was talking on the phone to a UK insurance company. At the end of the conversation the CSR said: “Is there anything else I can help you with?” I asked her what made her ask me that question. “Well, a group of us were chatting over lunch and decided it would be a good question to ask customers at the end of the conversation,” she said. When I first heard it, it was an example of the kind of genuine, human, unscripted connection that makes a customer feel valued. Today, many call centre agents will ask that question and it is too often a code for “Can I sell you something else?”

Product Information

Customer communication may take the form of advertorial or promotional information prior to sale or use, using brochures or leaflets; it may also take the form of technical guides or usage guides published in hard copy or on the web. Product information may also be disseminated via product reviews in trade or other publications. Industry trends for these opt-in services include hiring third party companies to create informational products, tips and installation advice that can be accessed by download, mobile phone, text messaging services and other handheld mobile technology like PDAs. Some retailers dedicate sections of their website to product specifications and buying guides. The use of video and podcasting for this material is also growing. With the wider use of smartphones, many companies are now also turning to various „apps‟ such as bar code scanners for promotional discounts, etc. As this technology gets more sophisticated and easier to embed into websites, it will become a more widespread. As technology advances, so the range of methods for communicating with customers increases.

Intranets and Extranets

The relationship with suppliers, distributors, etc. means that the division between internal and external customers is becoming blurred. This has occurred to some extent due to the increased use of ICT. Intranets and extranets provide a quicker and more efficient method of communicating information and many organisations choose to use these for both internal and external customers so that any message remains consistent. Even end-users (who are still largely categorised as external customers) can use digital, web based or voice activated systems for information, ordering, complaints or enquiries without encountering a „human‟ interface.

Community Forums

These are websites set up by organisations to meet the need for interaction between various customer segments and/or to provide an area for swapping ideas or best practice, etc. Guitar manufacturer Fender, for example, hosts a community for guitar players on its corporate website. The Fender Lounge Forum is an electronic bulletin board featuring advice from fellow Fender guitar owners, purchasing tips and social networking. Fender's guidelines explain the forums are not places to get customer service and that complaints or compliments should be directed to the appropriate customer service agents at the organisation‟s support section. Company forums, like many other retail features, usually require you to create a user name and password to access the system.


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Service Agreements

Most organisations now have published service agreements, which describe the minimum performance criteria a provider promises to meet while delivering a service. It typically also sets out the remedial action and any penalties that will take effect if performance falls below the promised standard. It is an essential component of the legal contract between a service consumer and the provider.

The following is an example from the UK‟s Security Industry Authority, a part of the Government‟s Home Office:

Our Commitment

We understand that it is important for you to get your licence as quickly as possible. With this in mind, we aim to process your correctly completed application within six weeks from the date we receive it.

We understand that being stuck in a telephone queue can be frustrating. That is why we aim to answer all calls to our contact centre within 30 seconds.

We understand that some of you prefer to write to us. We aim to answer your written enquiries (letters, e-mails and faxes) within 3 working days.

We want you to be satisfied with our service, but if you ever have reason to be dissatisfied we will respond to written complaints (letters, e-mails and faxes) within 12 working days.

There are a variety of techniques to ensure regular contact between an organisation and its customers. However, the success of any relationship marketing strategy is dependent on the two-way flow of information between the enterprise and its customers. Therefore, feedback from customers is an important element of organisational success and should be a continuous cycle of collecting customer information, disseminating it, tailoring products and services to customers and receiving feedback on the success of products, services and their delivery.

D. CUSTOMER FEEDBACK

Customers are not usually slow to say what they think about an organisation and its products or services if there is a problem. Often, though, they will not be so quick to say when they have been satisfied, or indeed delighted. Mostly this type of feedback needs to be prompted by the organisation. Finding out what customers like and dislike about products and services is part of the wider area of „marketing research‟. It is important to get feedback from customers so that you can then understand their needs and also their expectations of the organisation and its products or services. If you do not, then you are just guessing.

While you may be right some of the time, you will not be right all of the time and could end up losing good, valued customers because of it.

Positive feedback may be rarely volunteered, but it is invaluable as it tells you what you are doing that makes the customer happy. It is, therefore, worth making the effort to solicit this kind of information. So what are the best ways to obtain customer feedback?


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Informal Feedback

One of the most effective ways to find out what customers like and dislike is to speak to them. When they are not in a hurry, most customers like to chat. Handled skilfully, these brief conversations can provide valuable information about the customer‟s experience of buying from an organisation or using a service, as well as their views on customer service in general or that provided by competitors. Often it is the casual comment that reveals an area of customer service that the customer is not entirely happy with. The „problem‟ may not be bad enough to have put the customer off using a particular company, but if any aspect of a service or product is perceived by the customer in a negative light, then it is worth taking time to consider how easily or efficiently it could be put right.

Typical examples might be where the customer comments that something is „fine, now‟, or „the order arrived much quicker this time‟. Just ignoring remarks such as this, or recognising that there may be a problem, but failing to probe a little deeper, could result in a missed opportunity to really get the service right and delight the customer next time, instead of just satisfying their basic requirements.

Similarly, a customer may mention something offered by an organisation which has caught their attention, for good or bad, and this then can provide insights into customer expectations. Front line employees are in a position to pick up comments from customers relating to satisfaction or complaints and it is simple to set up a procedure for reporting and recalling this type of information.

Formal Feedback

Channels used for customer support and after-sales care can all be used to explore customer opinions in ways that are meaningful to the customer. These might include, for example, customer charters, extended warranties, statements (and monitoring) of performance standards. Organisations have many formal methods of finding out what their customers like and dislike. Common types of formal feedback systems include the following.

(a) Questionnaires and surveys

These still seem to be the most common form of customer research. They consist of a number of questions that are used to ask the opinions of existing or potential individual customers, and may be carried out in written format – either on paper or on-line – or face to face by personal interview. Telephone interviewing is also used as it can be an effective method for gathering information quickly, and the interviewer is also able to clarify questions if the respondent doesn‟t understand something.

Companies also offer customer surveys on Freephone customer service lines. Banks and other organisations randomly select customer service line callers for surveys. A recorded message tells callers they have been selected and if the customer chooses to participate, they may take a quick phone survey by pressing buttons on the telephone keypad to answer pre recorded questions.

Similarly, „pop-up‟ surveys often appear on computer screens asking visitors to participate in brief online surveys.

Personal interviewing is a more expensive method of gathering feedback, but it allows the organisation to ask more questions and record additional comments about the respondent, such as the body language displayed when answering. It also allows the use of more interactive probing, such as showing visuals, giving demonstrations or allowing the customer to use/handle products.

A survey carried out in this way can be pre arranged where customers are contacted for an appointment either in their home or at an office, although many involve stopping people in a shopping mall or in the street.


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Questionnaires look very simple to design but they need to be carefully developed and tested to give useful and usable information. It is important, for example, to be sure of the survey‟s primary objective – is it to understand the customer‟s perception of the service, to know which competitors s/he considers, or to uncover which media s/he best responds to?

One of the first things a customer will normally ask in these circumstances is ‟how long will this take?‟ Most surveys by phone are carefully scripted so that they can be carried out in the minimum amount of time. This also ensures a more consistent experience if more than one person is carrying out the survey. However, from the customer‟s perspective, sometimes this can make the experience seem a little impersonal.

Completing customer satisfaction surveys is not necessarily a reliable way of determining customer satisfaction:

Firstly, the design of most surveys is often poor – they generally ask a series of questions that require an opinion on how well the service was provided, rather than exploring the value of such services. For example, the customer's opinion is often prompted by something similar to "The booking was handled with efficiency and attention to my needs" with the answers permitted ranging from totally disagree to totally agree on a five point Likert scale. This can give a misleading view as they do not seek to understand the importance of the particular service.

Secondly, even if they are designed well, surveys tend to condition the recipients to give a response. In a study reported in the Harvard Business Review in 1995, Jones and Sasser noted that customer retention levels of around 40% correlated to an average rating of "satisfied" and did not reach 80% until the average rating reached very satisfied. A separate study similarly reported that 80% of customers who churned from an internet service provider had responded that they were satisfied or very satisfied with their service. Relying on surveys to determine what good customer service is and how well an organisation has performed can be risky.

(d) Panels/focus groups

These involve the selection of groups of customers or potential customers who are asked to discuss and give their comments on/reactions to new or existing products or services. They may be asked to test new ideas or products over a period of time and to have regular interviews/discussions on developments.

(e) Employee suggestion cards/boxes/systems

Many managers know that their employees are in the best position to know what is working well and what is not. In some organisations, managers hold regular meetings with their employees where customer feedback or customer service can be discussed and ideas for improvement put forward. Other organisations prefer to have pre printed cards or forms that employees can use for their suggestions.

(f) Customer complaints

Complaints are a source of extra information, but given that only a small percentage of customers who are dissatisfied actually fill them out, they cannot be the sole source of information. However, monitoring complaints is a good method of gauging customer satisfaction. We will be looking more closely at complaints procedures a little later.

Some organisations pride themselves on having had no complaints from customers. While this might be a good measure of their performance, it may also be hiding problems that they have not identified themselves.

From a customer feedback view, a customer who makes the effort to complain should never be ignored and the organisation should treat a complaint as an opportunity for


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identifying things that may not be working as well as they should. For example, are all the complaints related to the quality of the product or are they related to the attitude or behaviour of staff? Analysing the nature of customer complaints will help formulate an action plan to avoid them in the future.

Think Point

Think about your own experience of interacting with organisations' formal feedback procedures.

Have you ever been asked for your opinion about a particular product or service? It is relatively common now, particularly when using on-line services. How would you rate the experience? Did the questionnaire/survey ask you the right questions, or allow you to express opinions outside of the responses given?

Have you ever made a complaint about a product or service? How easy was it and did you feel that the company would actually respond to the complaint?

Assessing and assimilating customers' opinions and attitudes takes time and effort, but is a necessary part of maintaining a god relationship with them. Sometimes, inaccurate perceptions of customer needs can result from factors such as:

Untested assumptions about what customers think

Weak, anecdotal evidence based on only one or two incidents

Atypical complaints, with too much weight given to the opinions of small numbers of articulate or vociferous customers.

Enterprises need to take a deliberate approach to finding out what customers think. Ideally they also need to ask non-customers why they do not buy, use or choose a product or service, although this may be a more difficult area to investigate. Attitudes and opinions are difficult to quantify and many factors will influence people‟s decisions to purchase, or to remain loyal to a brand. Customers may be influenced by other factors than product quality, such as staff courtesy or promptness and a consequently strong impression of good service. Detailed research may be needed to explore these areas, but at the simplest level, just establishing a strong customer focus within the organisation will inevitably lift quality, service and respect for customers, creating a virtuous circle which should benefit all concerned.

Customer Helplines

All organisations need mechanisms to respond to inquiries or requests for help from existing and potential customers. These customer helplines are essential for delivering support, service, advice and information; they can also add value to a business.

Helplines are most effective when they are staffed with knowledgeable people who have good interpersonal skills and training in customer service techniques. Trained customer service staff can help customers report a problem effectively and may be able to offer advice or help up to a certain level. To maximize the benefit to customers, queries need to be responded to immediately where possible; where this is not possible, when the query goes beyond their level of knowledge or with more complex queries, many organisations will offer to call the customer back. This will not necessarily always ensure that the customer is satisfied with the response, but it does reassure them that the enterprise has a genuine desire to resolve difficulties or conflicts and maintain a good relationship with their customers.

There is much debate regarding whether or not helpline services be provided free of charge, particularly in the public sector where there is a strong feeling that the service should be


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provided as part of the „contract‟ with the Government that lies at the heart of the taxation system. Some would argue that helplines should always be free because they are essential for customer satisfaction, they add value to the original purchase and strengthen the relationship with the customer. However, this comes at a cost to the organisation and if you also offer general information services to the public alongside the helpline, it is reasonable to wish to charge callers, which is usually through a local rate number. How this issue is resolved is up to each organisation, but there is now a very strong negative consumer reaction to paying for a service that they perceive as part of the „deal‟ and especially when often they feel they are being kept on the phone an unnecessarily long period of time at their own expense.

Online Feedback

When a user sends feedback about a website to the organisation, he or she is telling you how the site made them feel. If the site made them cross – maybe because its content was difficult to access, or its functions did not work the way they were supposed to – the user is not likely to come back for more. If all an organisation is looking for from their site is to generate a lot of ‟hits‟, that might be okay. A disgruntled user may tell their friends and family about their experience of using the site and this may generate a few curious visitors. But if the website is meant to be an interface for building customer relationships, then user feedback needs to be taken more seriously.

Many sites use web forms for feedback. These are easy to design and not too time consuming to manage; they are, therefore, popular with programmers, web designers and business managers. However, they are not always popular with users. For example, web forms generally have a character limit, which is not always enough to provide any real information. It subconsciously sends a signal to the customer that the organisation has little interest in receiving useful information from its users.

Not only do web forms often limit the amount (or type) of information a user can send, but they are also difficult for a customer to track. If you send a message through a web form, you do not usually have the chance to keep a copy unless you specifically save the text in a different format. Keeping a copy is the only way to remind yourself about the message – when it was sent and what was said – so that you can track the timeliness of any response, which may be important to any future decision to use the organisation again. This is not a problem when using email.

One of the easiest ways to set up a feedback system online is to provide email or phone contact details on the website. The importance of providing contact information on the website cannot be overstated. A user who wants to reach an organisation for help, advice or to use a service, expects to be able to do so by phone or email immediately these days. Preferably, this should be a single number or email address that sends the user to a central location from where the message can be directed to the person responsible for the specific concern. Nothing is more frustrating for a customer than calling department after department in search of someone who will take responsibility for dealing with an issue.

E. TECHNIQUES TO SUPPORT EFFECTIVE COMMUNICATION

We have seen in previous sections that communication has to be two way to be effective. Even if the conversation is one sided, some feedback is necessary, to demonstrate to the sender of the message that it has been received and understood. Following the principles outlined earlier will help effective communication, but we know that barriers or noise can get in the way. Some of these barriers can be physical or environmental, but some can be attitudinal.


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Not all communication goes smoothly – both the sender and the receiver may get frustrated or even angry, situations can become difficult for many reasons and there could be a sense of conflict which needs to be overcome. Understanding and using the following techniques will help to alleviate these situations and encourage more productive relationships with customers, suppliers and colleagues.

Building Credibility and Rapport

It is crucial that customers and clients believe and trust that customer-facing staff can help them with any issues.

(a) Credibility

Trust is at the core of credibility. There are three main kinds of credibility:

Personal credibility

This is about personality and personal style, but it also relates to how non-verbal communication is used to signal that what you say can be trusted. Do you look and sound as if you know what you are talking about? Making good eye contact when speaking with a customer fosters a sense of trust and using a firm speaking voice also adds to the overall impression. Margaret Thatcher, former prime Minister of the UK, is famously noted for having voice coaching lessons whilst an MP to lower her speaking voice and add credibility to what she said.

Business credibility

This is concerned with the ability to make sound business decisions and judgements. Experience and general business sense must correspond in some way with how the client perceives the organisation. For example, being aware of the costs of actions and activities and including this awareness in explanations to the client may help them to feel that solutions have been considered from a practical perspective.

Technical credibility

This involves examples or corroboration of some kind that the mechanical or other technical processes which affect the customer in any way work effectively and efficiently. Vague assurances that „our systems are usually reliable‟ seem far less credible than an assurance that „we have only had two hours down time with this system in the last 18 months‟.

(b) Rapport

Any client relationship works best when there is rapport between them. Rapport is often defined as „getting on‟ well with someone. Whilst this is true, it is a bit more than this. Rapport is about identifying the needs of another and responding by modifying our own behaviour, language, tone of voice, etc. to take this into consideration. It involves combining emotional understanding with control.

Rapport or trust is necessary, for example, before you can move forward and resolve any complaints a customer may have. Building rapport is a skill that can be learned and developed with practice.

Here are some general points to remember:

Vocabulary

The longer we work in a particular industry or sector the more we are likely to use jargon and technical terms without thinking. Although we may feel completely comfortable with this, the customer may not. They may have come to you for your technical expertise, but they will want to understand what you say.


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You will, therefore, have to judge how much of an „expert‟ they themselves are and therefore, whether they will know what an „ROA‟ or‟ E21 part D‟ is.

Similarly, care needs to be taken when talking about particular techniques or frameworks. In most cases, the customer will only be interested in the work you do for them, not the processes themselves.

Tone and Structure

Another judgement is about the style of language and tone used. Some situations may call for enthusiasm and energy. So, for example, using short sentences and emotive language such as „This is a great opportunity!‟ would be better than „I believe this will be a significant prospect for the organisation‟.

Neuro Linguistic Programming (NLP)

NLP is difficult to define, but in essence it explores the relationships between how we think (neuro), how we communicate (linguistic) and our patterns of behaviour and emotions (programmes). Neuro Linguistic Programming was created in the early 1970s by Richard Bandler, a computer scientist and Dr John Grinder, a linguist and therapist, using a process known as 'modelling'. They wanted to explore the types of behaviour that makes people effective and then to train others in their methods. NLP teaches that you should listen carefully to the words that others use and identify whether they are predominately visual, auditory or kinaesthetic (VAK). This process is known as identifying the preferred sense.

– Visual people use phrases like „I see‟ and other words connected with vision, such as „looks good to me‟ and „I get the picture.‟

– Auditory people like phrases using „hearing‟ words, such as „This tells me…‟ and „that rings a bell.‟

– Kinaesthetic people, on the other hand, like using emotional words such as „I feel.‟ and „I‟m happy with that.‟

If you can identify a predominant theme like this, then reflecting it back to the person by using the same kind of words sends a subconscious message to that person that you have things in common with them. This will then create a sense of trust and mutual understanding.

If rapport, then, is about building and sustaining mutual trust, then in visual, auditory or kinaesthetic terms it is about:

– Seeing each other‟s point of view

– Being on the same wavelength

– Going hand in hand with the customer.

Activity

The Preferred Senses test is a simple way to gauge which of the VAK senses predominate. For each question in the following table there are three answers. By circling or ticking the answer that most closely represents what you do, you can find your own dominant sense – the sense you are most comfortable using to understand or process information.

This test is only indicative and is not meant to be a scientific measure. However, by observing customers and colleagues and applying the grid above, you should find a pattern begins to emerge.


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Visual Auditory Kinaesthetic

When you Do you?

Spell a word Try to visualise it (does it look right)

Sound it out (does it sound right)

Write it down (does it feel right)

Are concentrating Get most distracted by what is around you

Get most distracted by noise

Get most distracted by physical movement

Reward someone Tend to write praise in a note

Tend to praise using spoken word

Tend to give them a pat on the back

Talk Speak fast and use lots of images e.g. it‟s like looking for a needle in a haystack

Talk fluently in a logical order with few hesitations

Use lots of hand gestures

Meet people Remember their face before their name ort where you met them

Remember their names or what was said

Remember mostly what you did with them or how they felt at the time

Try to interpret someone’s mood

Mainly note their facial expression

Listen to their tone of voice

Watch their body movements

Are recalling something

Remember what you saw – faces, how things looked

Remember what was said, people‟s names, the jokes they told

Remember what was done, what you felt like at the time

Are memorising something

Prefer to write it down repeatedly

Prefer to say it to yourself over and over again

Prefer to use actions to help you remember

Are angry Become silent and seethe

Have an outburst Storm about clenching your fists or throwing things

Are inactive Look around, doodle, watch something

Talk to yourself or others

Fidget and walk about

Are learning something

Prefer to read or look at illustrations and diagrams, or sketch it out for yourself

Like to listen to someone speak about it, attend lectures, discuss

Like to get involved and try it out

Assemble equipment

First look at the diagrams and read the instructions

Ask someone to tell you how to do it then repeat what they said as you do it yourself

Look at the pieces first and try to figure it out

TOTALS


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Questioning Techniques

By definition, a question is a request for information, but it can also be a means of controlling a conversation and leading it down a path towards a particular objective. There are two basic types of questions: open and closed.

Closed questions can generally only be answered with a „Yes‟ or „No‟. They start with phrases such as „Did you..?„ or „Have you..?‟. They are very useful for getting confirmation quickly, for example „Have you bought this brand before?‟ They do not provide much information, but are a powerful and efficient means of confirming information. However, there will be many situations when more detail will be required than simple one word answers. To do this you need to use an open question.

Open questions require a more detailed reply and can be used to open a discussion. They allow the other person to elaborate on something and, potentially, provide much more information about what the customer really wants or how they feel about the product. This is known as „soft fact recognition‟.

The following six words usually prefix open questions. They are:

– Who as in: Who have you come to see?

– What as in: What will you be using this for?

– Where as in: Where would you like to sit in the dining room?

– When as in: When would you like the goods to be delivered?

– Why as in: Why do you think we will be more expensive than your usual supplier?

– How as in: How did you hear about our organisation?

Note that not all questions have to start with „What‟, „How‟, „Why‟ etc. A statement with the voice rising at the end and a raised eyebrow will be interpreted as a question.

Most conversations and discussion will use both types of question, with open questions being used first to allow ideas to flow and closed questions used to make sure the information has been understood and bring the discussion to a close. To help this flow of ideas and prevent any questions from seeming more like an interrogation, it is wise to alternate questions with a statement, such as „I understand the figures from last year‟s sales were 35% better than this year‟s. Is there a reason for this?‟ rather than the straightforward „What do you think caused the drop in sales last year?‟.

Active Listening

Hearing and listening are not the same thing. Hearing is automatic as long as your ears are functioning. Listening should be considered to be an activity and needs concentration to be done effectively. We saw from the communication diagram that feedback is an important part of the communication process. Effective communicators make sure they give or obtain feedback to show they are actively listening.

Feedback confirms the receipt of communication

Feedback confirms the receiver‟s understanding.

There are a number of ways in which you can demonstrate to a customer that you are actively listening to what they say:

(a) Ask questions and listen carefully to the answers

(b) Invite others to summarise back to you what has been said

(c) Use visual aids such as diagrams to clarify what is being communicated


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(d) Observe body language.

Some ways you can show you have understood what you have been told is to briefly summarise the message. This enables the person communicating with you to put right any misunderstandings straight away.

Transactional Analysis

Transactional Analysis was founded by Eric Berne who made complex interpersonal transactions understandable when he recognized that people can interact from one of three "ego-states" – Parent, Adult or Child. Each one of these ego states has a system of communication with its own language and function; the Parent's is a language of values, the Adult's is a language of logic and rationality, and the Child's is a language of emotions.

At the core of Berne's theory is the notion that effective transactions (i.e. successful communications) must be complementary. For example, if the stimulus is Parent to Child, the response must be Child to Parent, or the transaction is 'crossed' and there will be a problem between sender and receiver.

If a crossed transaction occurs, there is an ineffective communication. Worse still, either or both parties will be upset. For the relationship to continue smoothly, the agent or the respondent must rescue the situation with a complementary transaction. In serious breakdowns, there is no chance of immediately resuming a discussion about the original subject matter. Attention is focused on the relationship. The discussion can only continue constructively when and if the relationship is mended.

Examples of the three ego states are:

Parent

Physical Angry or impatient body language and expressions, finger pointing, patronising gestures.

Verbal Judgmental words; critical words; patronising language; posturing language.

For example: always; never; for once and for all.

Child

Physical Emotionally sad expressions; despair; temper tantrums; whining voice; rolling eyes; shrugging shoulders; teasing; delight; laughter; speaking behind hand; raising hand to speak; squirming and giggling.

Verbal Baby talk; many superlatives; words to impress.

For example: I wish; I dunno; I want; I'm gonna; don't care; oh no, not again; things never go right for me; worst day of my life; bigger, biggest, best.

Adult

Physical Attentive; interested; straight forward; tilted head; non- threatening and non-threatened.

Verbal Comparative expressions; reasoned statements.

For example: why, what, how, who, where and when; how much; in what way; true, false; probably, possibly; I think; I realise; I see; I believe; in my opinion.

Emotional situations are usually the most difficult to handle. Aspects of Transactional Analysis theory are helpful in understanding and managing emotionally charged situations. Understanding where anger and upset come from and what triggers these emotions can help


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us to remain objective and to separate the emotion from the actual content or facts of the matter. Transactional Analysis is a tremendously useful way to develop this understanding and the interpersonal (and self awareness) capabilities which can be so helpful in handling difficult complaints and emotional people.

F. COMPLAINTS

A complaint is an expression of lack of satisfaction with any product or service. It may be made verbally, or in writing, and may come from an internal or external customer.

Although negotiating „transactions‟ with difficult customers or suppliers can take a great deal of skill to do well, possibly the ultimate test of communication skills is in dealing successfully with customers who are unhappy.

Verbal Complaints

Remembering that complaints should be dealt with promptly, accurately (it may just be a misunderstanding or lack of information) and efficiently, individuals in the 'front line' who are customer facing need to be familiar with the rules for dealing with verbal complaints. These are:

Listen patiently – let the customer air their grievance without interruption.

Acknowledge the customer's viewpoint – even if you do not agree with it. By understanding and being empathic about the other person‟s emotions they will often naturally extend some leeway for a little firmness where required about the process and the next steps.

Apologise – it is always necessary to say sorry if a mistake has been made. Even if the mistake was not intentional or perhaps the complaint is unfounded, it's always worth apologising just for the fact that the customer is unhappy and has been put to the trouble of making a complaint.

Find a solution – establish what needs to be done to rectify the problem.

Keep the complainer informed – lack of information can exacerbate the problem.

Resolve the immediate problem quickly – a more permanent solution may take longer to find.

Follow up – check that promised action happens.

When someone is very angry, exasperated or distressed, it is worth remembering that, in Transactional Analysis terms, they are feeling rather like a child does when upset and seeking reassurance or help from a parent or adult. They want to unload and often just allowing people to do this will alleviate 90% of the problem.

Do not confuse anger and rage on the other end of the telephone line with rational behaviour. By behaving calmly and rationally the other person will be able to shift from 'Child' back to „Adult‟ again. Again, Transactional Analysis theory is helpful in understanding how and why this happens.

Many complaints these days are made by phone. In these cases, the customer's phone number should be immediately taken in case the line is cut off. This will help pre-empt and diffuse a major cause of distress and frustration in what is an already unsatisfactory situation.

Demonstrating that you have anticipated and guarded against this is a very positive first step and is especially helpful if the customer has been hanging on the phone, been transferred, or made previous attempts to resolve the problem. If the company policy permits giving a name and direct line, then both should be given.


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In an age of anonymity, faceless voices, avoiding responsibility and automated answerphone menu systems, when an organisation‟s staff demonstrate a firm clear personal responsibility for dealing with customer issues, this is another positive step.

Think Point

Have you ever complained to an organisation?

If so, think about the experience. Were you angry or emotional about it? It is often the case that customers who do actually take the trouble to complain are extremely upset about their situation, so it would be quite natural to be angry or emotional.

How did the organisation – or rather, the person you contacted – deal with you? Did he/she make you feel less or more angry? It is very difficult to remain angry and emotional much beyond a minute or two if the customer services person is really listening, allowing you to unburden and understanding how you feel.

Complaints Procedures

Almost all organisations, from the smallest family concern to the largest government department or multi-national, will have some kind of process in place to deal with customer complaints. However, just because there is a process in place does not automatically guarantee that it will be either efficient or effective at resolving whatever the issue is in a way that satisfies both the customer and the organisation. There are some fundamental principles which need to be observed and also some „Best Practice‟, which is worth bearing in mind during the process.

A complaints procedure should provide a clear approach to understanding what has upset a customer sufficiently to cause them to make a formal complaint. It should also engender confidence in staff on how to tackle complaints. It should put in place steps which must be followed from the moment a complaint is received and remove people‟s personal feelings from the situation.

A complaints procedure should be part of an overall management policy which recognises complaints as a tool for:

improving relations with customers or clients

providing information that contributes to improvements.

The prompt and sympathetic handling of complaints can turn a disgruntled customer into a happy and longer lasting one. Research has shown that people whose complaints are fully dealt with tend to be more loyal than those who have made no complaints at all.

Often, those who receive the complaint are not at fault, yet they bear the brunt of customer dissatisfaction. It is vital that all staff are familiar and comfortable with the organisation's complaints procedure so that they are prepared to receive complaints and to start converting the customer from dissatisfied to satisfied.

Procedure Checklist

The following checklist outlines the key features for handling complaints in small or large, manufacturing or service and private or public sector organisations.

(a) Establish a common approach to handling complaints

The approach taken with customer complaints must be accepted by all staff, from the top to the bottom of the organisation and including those who do not come into direct


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contact with customers. This will ensure that everyone is thinking about customers in the same way so any follow-up activities will be actioned appropriately.

The approach established should be embedded into the organisation's culture, and is primarily the responsibility of senior management.

(b) Have a standard complaints form

This is a valuable tool for ensuring that full details are not only taken at the time of the complaint, but are recorded for analysis later. A complaints form should include the following information:

(i) Product or service and receipt details:

description

date bought or received

staff involved, i.e. department/division.

(ii) Customer details:

name

contact details

identifier, such as account number.

(iii) Complaint details:

reason for complaint

action required

action agreed

staff dealing with complaint

date action completed

sign-off by line manager.

(c) Ensure complaints are assessed correctly

On receipt of a complaint, the recipient should think of it as an opportunity for a second chance to satisfy the customer, rather than a threat.

Staff should:

be courteous and empathise with the customer

be satisfied that the information is factual

let the customer voice their feelings fully

take responsibility for checking out what has happened (though without admitting to any liability or fault at this stage).

Subject to appropriate information seeking and establishment of the facts, the recipient, in conjunction with a line manager if necessary, should assess whether the complaint should be considered a major or minor one. Minor complaints may result from misinterpretation, misunderstanding, detail errors or straightforward carelessness. Major complaints may involve breach of the criminal law or have health and safety or financial implications.

(d) Establish ownership and responsibility

Staff should be empowered to take appropriate action if the complaint is clearly justified, falls within their jurisdiction and can be rectified immediately.


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If the complaint cannot be resolved by the recipient, details of the customer and complaint should be noted on the form and passed quickly to the relevant person, area, or level of responsibility. The customer should be told that a reply will be given as quickly as possible and certainly within a stated time limit. The complaint recipient should give his or her name, as there is nothing more frustrating than dealing with a faceless organisation, or being passed from one person to another.

(e) Establish escalation procedures

In the case of major complaints, the manager should decide on the appropriate action and this may involve:

consulting a higher authority

the production of a detailed report on the events

contact with the organisation's solicitor

contact with the police.

(f) Emphasise customer contact for complaint resolution

If the level of seriousness has been properly understood and the facts have been correctly established, then the appropriate action should become apparent. When a customer has a genuine grievance and should perhaps be compensated, it is no time for negotiating or bartering. The complaint should be resolved as quickly as possible to the customer‟s satisfaction and he or she should be contacted at regular intervals, so that a progress update can be given.

(g) Ensure complaints forms, if used, are signed off

When the problem has been resolved to the customer‟s satisfaction, the member of staff dealing with the complaint or their line manager should sign off the complaints form and send it on for analysis.

In some circumstances, there can be no satisfactory solution, or the customer is seeking something „unreasonable‟ from the organisation to correct or compensate for the complaint made. If so, it may be appropriate to:

inform the customer that expectations exceeded capabilities

re-affirm what steps can be taken

state that a report will be passed on to senior management.

(h) Build in customer satisfaction checks

After an appropriate interval, contact the customer to confirm that the complaint was resolved to the customer‟s satisfaction and to check that the organisation still has a customer.

(i) Decide internal corrective action

Having dealt with the complaint, decide whether any system, equipment or personnel related improvement is needed. Deal with improvements in internal processes or training requirements as soon as possible after the complaint is resolved. This will ensure that the chances of the same problem happening again is minimised.

All complaints should be forwarded to a central point where a manager should have responsibility for regularly monitoring the level and nature of complaints. The results of this analysis should be reported to senior management on a regular basis, together with details of any corrective action taken. By looking at the types of complaints that an organisation has received from customers, it may be possible to spot trends – things that a number of customers have made similar complaints about. It is then possible to decide on the best strategy for ensuring that the same problem does not happen again.


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Best Practice in Handling Complaints

When a customer has a complaint or a problem, there are a number of different things which will help to diffuse potentially stressful situations:

(a) Taking responsibility

Although the policies of some organisations specifically prevent it, it can be very helpful in customer relationship terms to have some personal commitment from a designated member of staff to manage the complaints process. Even if they subsequently need to rely on others to fix the problem, the customer is seeking someone to look after them from start to finish. Customers do not like to be passed from one member of staff or department to another. If they have a problem which causes them to complain, they want it to be dealt with in the least amount of time and with the least amount of fuss. Many organisations empower their staff to take responsibility for resolving a complaint. They may need to refer to a colleague who has more knowledge or authority, but they make it their task to do this for the customer rather than pass them on to someone else or tell them to contact a different department.

Customers failing to find anyone to accept personal responsibility for resolving their problem or complaint is a major cause of extra upset and frustration for them, so when a distressed customer finds someone who promises to take responsibility, this lifts an enormous pressure and creates a very positive impression.

(b) Remaining objective

The customer may be quite upset and emotional when making a complaint. At the very least they will feel let down by the company and frustrated at having to take the time to complain. Staff should be trained not to make excuses or become defensive in this situation. The customer is rarely upset personally with the employee they are complaining to – it is the organisation that has caused the difficulty.

Using some of the techniques from NLP or Transactional Analysis can help the staff member to take control of the situation and calm the customer down so that a reasonable solution to the issue can be found. Stepping back and looking at the situation objectively with the other person, rather than getting drawn into an argument or a head-to-head confrontation is a much more positive approach. Encouraging both parties to work on the problem together to agree what should happen next should ensure a good outcome for both the customer and the organisation.

(c) Showing empathy

Understanding how the other person feels is not the same as agreeing with them. It is important to show empathy in tense situations with customers, suppliers and colleagues. It is not possible to agree with an emotional interpretation or a mood and, until the facts are properly known and substantiated, it is not always possible to agree with even a perfectly balanced unemotional and reasonable claim or complaint. However, you can always show that you understand how the other person feels and this is a very big part of the customer's need and expectations at the time of their complaint.

(d) Listening carefully

In fraught situations it is very easy to jump to conclusions about the nature of the complaint and what the customer wants to be done about it. Actively listening and letting the customer explain about their complaint, without interruption, will ensure that the problem has been properly understood. Often, the customer wants no more than a product that works the way it should or to receive a service as described in the organisation‟s information material. Often questions will need to be asked to clarify exactly what has gone wrong, but actively listening shows the customer that their complaint is being taken seriously. It will also be useful to take notes.


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Getting the facts and taking the time to do so shows you are taking the problem seriously, that you value their words and their time spent explaining the problem. Also, by encouraging the other person to focus on the facts you can help to move the engagement away from emotion and into content and facts, which will normally reduce the stress for both parties.

(e) Resolving the problem

The customer will always expect to have the problem resolved sooner rather than later. If the problem is difficult to resolve quickly, then the customer will expect and should be informed of timescales and the activities that are being taken towards resolving the issue.

If the complaint is plainly justified and clearly demonstrates a failing of the organisation's service or product, then this must acknowledged. However, on occasions, customer's expectations and demands are not realistic and this needs managing. The worst thing is to promise or agree to remedial actions or compensation that the organisation will subsequently be unable to deliver. It is easier to be firm where you need to be if you have first shown a strong understanding of how the other person feels.

A further stage in managing complaints is to check with the customer that any solution has worked and that they are satisfied. This may entail a follow-up phone call or letter, or staff remembering to ask the customer when they next contact them. It is also important to analyse complaints, to identify any trends or patterns that need to be addressed. Many customers like to know that their complaint has been useful in helping the organisation to improve its operations and, where this opportunity arises, recommendations should be fed back internally and the customer informed accordingly.

Remember that when customers complain, they like to be:

aware of who is dealing with the complaint

listened to and believed

treated fairly and efficiently

kept informed of progress

compensated if compensation is appropriate.

Courtesy, speed and a personal touch are all essential elements of any complaints response procedure. A complaining customer who gets all three will usually emerge as a happier customer, who feels more satisfied with your service and organisation than before the complaint was made. People who feel this way frequently tell others about it.

G. NEGOTIATING WITH CUSTOMERS

In 1906, an American retailer called Harry Selfridge purchased a site in the centre of London and built the famous store that bears his name and thrives today. A shrewd marketer, Selfridge promoted the then radical notion of shopping for pleasure rather than necessity. His fashion-forward shop adopted the slogan now heard round the globe: "The customer is always right."

So is every customer always right?

The answer is yes, except when they act illegally or unethically – such as by asking for a receipt in excess of what they paid. For all other situations, there may be times when a clear cut solution to a customer complaint or problem is not immediately available.


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Negotiating is essentially a bargaining process through which commitments and compromises are reached which suit both parties. The aim of negotiating is not to get the best position for the organisation at the expense of the customer, as this causes resentment and a break down in the relationship between an organisation and the customers it is trying to reach.

There are three basic ways in which a problem can be worked out:

Method Explanation Frequency

Win-lose One party gets what they want at the expense of the other party

Very common

Lose-lose Neither party gets what they really want

You might think this a senseless outcome, but actually compromises fall into this category, so it is very common

Win-win Both parties get as close as possible to what they really want

This may not be as common, but working towards it often brings out the best solution

No organisation can afford to make a loss these days – whether they are in the private or public sector. So how do you arrive at a win-win situation with the customer without making unreasonable concessions?

Raise the value of the product in the customer‟s eyes – benefits, demand and popularity are indicators of value.

Recognise that the customer may attempt to lower the value by explaining that they are talking to other prospective suppliers, or that budgets are tight.

Defend the price – use reason and logic to explain it. Once a price is dropped it is always difficult to raise it again in the future.

Always have something to trade that is not just the price – for example an after sales or warranty programme.

Identify concessions that can be offered – these should be of low cost to the organisation, but highly valued by the customer.

Do not give concessions without getting something in return, for example improved payment terms.

Be prepared to change the package rather than the price – for example, there may be an opportunity to offer “add-ons” instead of discounts.

It is not generally a good idea to say “yes” too quickly, as the customer may begin to think that they could have got a better deal. Always take notes so that the accuracy of what was proposed and agreed can be checked. Only ever enter into negotiations to the limits of your authority – if you negotiate something you are not authorised to give, it may cause major problems for your organisation, leading to a possible loss of integrity. You must always consider the implications to the organisation in terms of resources and cost when you offer customers a concession.


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Case Study 3

Jasmine is a team leader working in the sales order department of a large stationery supplier. She is on the telephone to a customer who is asking for a 50% discount on a large order. According to organisational policies, Jasmine is only authorised to offer the customer a 10% discount, but realises she may lose the order. As this is such a large difference, she clearly needs to seek the guidance of her line manager Azra. She may choose to increase Jasmine‟s authority to say 15% or ask her to turn the negotiation over to her. Obviously, there will need to be some very careful negotiations with the customer to close the gap between what the organisation is able to offer and what the customer is asking for and that may require consideration of other incentives besides a straightforward discount.

If you are unable to supply a customer with the goods or services they have requested, they may feel that they have received bad customer service. Therefore, it is important to provide alternative solutions.

Sometimes what the customer needs, your organisation cannot provide or you do not have the authority to provide it. When that happens, the best policy is honesty. Giving false information to customers about products or services means an organisation could end up facing legal proceedings. It is better to give clear reasons to the customer why their needs cannot be met.

The work of management consultants Bain and Co, directly linking customer retention with profitability, has meant that building closer relationships with potential and existing customers is now a vital competitive strategy for most organisations. This makes customer relationships and excellent customer service the remit of all managers.

It may not be feasible to ask customers individually about their preferences but depending on the service on offer and the use of communications and database technologies, treating customers as individuals is increasingly possible. The information which is gathered can help staff at all levels to tailor responses and services to a customer‟s needs and this capacity to adapt communications or products at a personal level will support a closer customer relationship.


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SUMMARY

Communication should be a two way process, involving giving information and receiving feedback. Feedback should be a permanent channel for relationship building. It can include activities like giving feedback to customers through publishing the results of surveys, producing a new mission statement re-stating a commitment to customers, or giving details of new products, product amendments or services that result from customer research. Keeping customers informed about reactions to their suggestions, complaints and new ideas encourages further comment.


identified some of the key challenges in managing customer communications

investigated how we communicate

explored the various communication methods which can enhance service levels

analysed how customer feedback may be obtained and used to improve customer satisfaction.

Additionally, the procedures for processing and resolving customer complaints and mechanisms for handling difficult customer situations have been investigated.

Good, regular customer feedback, whether it is complaints or statements of satisfaction, can help improve customer service from just being „OK‟ to being special and is a real opportunity for an organisation to stand out from its competitors and maintain critical customer relationships.


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Chapter 6

The Impact of HR Policies on Customer Service

Contents Page

Introduction 152

A. Recruitment and Selection 152

Recruitment Processes 153

Selection Processes 159

Trends in Recruitment and Selection 164

B. Induction and Development 166

Induction Processes 166

Development Processes 168

Competency Frameworks 171

Planning Development Programmes 173

C. Employee Resourcing Issues 179

Managing Performance 179

Staff Turnover 180

Reward and Recognition 183

Summary 185

152 The Impact of HR Policies on Customer Service

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INTRODUCTION

Customer service is the backbone of many organisations. It is the „face‟ any organisation presents to the world and customer service representatives (CSRs) are usually in the front line, providing the first experience a customer may have with the organisation. It therefore follows that having the right people in the customer service team is essential in ensuring that each customer has a positive experience.

There are many ways to attract, recruit and select the best candidates to fill customer service positions. Once you have found the right people, you need them to become effective quickly and a good induction programme is the key to helping a new employee settle into the organisation and work efficiently.

This chapter has not been written to transform you into an HR expert, but we will examine not just how to attract and select good staff, but also how to keep them by providing development and reward systems which build service priorities into the way they are managed and appraised. Step by step we will work through the process and understand how having the right Human Resource Management policies in place can help to deliver service excellence.

Each organisation will have its own system, but for our purposes, the main parts of a general human resource planning process can be divided into four core areas: recruitment, selection, induction and development. Within each core area, each of the stages contributes to the overall process.

A. RECRUITMENT AND SELECTION

The recruitment and selection of staff is the process of attracting; assessing, selecting and employing people to carry out the work activities required by an organisation. An effective recruitment process ensures that an organisation has the people it needs to implement its strategy and meet its objectives.

The goal of any recruitment process is to find the

Right people with the

Right skills for the

Right job at the

Right time and the

Right price

There, basically, six steps in the complete recruitment and selection procedure, with each part comprising three, as follows:

(i) Identify vacancy

(ii) Prepare job details Recruit

(iii) Attract candidates

(iv) Manage the response

(v) Arrange and conduct selection process Select

(vi) Appoint candidate

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It sounds simple but actually can be quite difficult, particularly in stressful areas such as call centres and other customer facing roles. Getting the „right people‟ means planning and carrying out the recruitment process so as to select people whose skills, knowledge and behaviours are consistent with the needs of the business and can be fully used in the job role to which they are appointed. It involves a systematic procedure from sourcing the candidates through arranging and conducting the interviews to on-boarding and „settling into the job‟.

Recruitment can be expensive, but so too is the appointment of an employee who is inadequately qualified, fails to perform well or leaves the organisation before he or she has been able to make a significant contribution. Therefore, recruitment and selection also needs to take into account how many staff leave; whether any departments suffer more from this than others and also how this „staff churn‟ can be minimised. Time and effort invested in carefully planning the number and type of staff required can help to get the right person for the job, reduce labour turnover and so enhance competitive advantage.

Recruitment Processes

Identifying the Vacancy

The recruitment process begins once someone has identified that a new member of staff is required. That may be through the Human Resources department working with senior managers to plan for future requirements (due to expansion or changes to the external environment) or may be a request from an individual manager in response to a current member of staff leaving the organisation.

Normally, the reaction would be to go ahead and begin the process of attracting a candidate to the job. Increasingly, a vacancy presents an opportunity for an organisation or department to consider whether or not a new member of staff is necessary, or to reassess the requirements of the job.

If an employee is leaving, the organisation needs to review the work load and decide whether a full-time permanent replacement is needed, or whether an alternative option would be more appropriate. For example, would a part-time or temporary worker be sufficient? Should the work be restructured or outsourced? What would the staffing implications of this be?

If there is still a need for a replacement, then questions should still be asked such as:

Has the function changed?

Have work patterns, new technology or new products altered the job?

Are there any changes anticipated which will require different, more flexible skills from the jobholder?

Answers to these questions will help to clarify the actual requirements of the job, how it fits into the rest of the organisation or department and thereby what kind of person is required to successfully fill that role. This assessment is valid whether it is to fill an existing job or a new one.

Only once it is clear that a replacement needs to be found, should you go ahead with the rest of the recruitment process. This may entail getting the vacancy authorised by a senior manager or HR department who will assess the business need and whether or not the organisation can afford it.


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Preparing the Job Details

This falls into three categories: a description of what the job covers; an analysis of the qualities required by the ideal candidate and the amount of pay and benefits that the organisation wishes to pay for this.

(a) Job description

A job description is a structured and factual statement of a job's functions and objectives, and should give the boundaries of the job holder's authority. Job descriptions give an overview of the purpose of a job, what it contributes to the organisation's aims and objectives, how it fits into the overall structure and, perhaps most importantly, the main duties, responsibilities and reporting lines. A good job description should include:

Main purpose of the job – in one sentence if possible

Main tasks of the job

Scope of the job – expanding on the main tasks and the importance of the job

Job importance can be indicated by giving information such as the number of people to be supervised, the degree of precision required and the value of any materials and equipment used

Responsibilities and accountabilities such as reporting lines.

One idea for finding the best customer service representatives for a business is to have experienced customer service managers or supervisors assist with writing the job description. General customer service job descriptions may not accurately reflect exactly what is needed in a particular role or company. Customer service in telemarketing, for example, is slightly different from retail in that telemarketing deals with audio interactions whereas retail requires face-to-face service and the skills involved are different. Providing accurate job descriptions will help attract more suitable candidates.

A good job description is useful whatever the job. It can help with induction and training by providing a framework for activities. It is also useful for evaluating performance, with both the job holder and their line manager having a clear set of guidelines or criteria for assessing how well they are doing. Lastly, it provides the basis for drawing up a person specification – a profile of the skills and aptitudes considered essential and desirable in the job-holder – enabling prospective applicants to assess themselves for the job before applying and providing a benchmark for judging suitability during the selection process.

(b) Person specification

All of us have the skills and abilities to take on a number of roles in life but we are only really suited for some. Drawing up the person specification allows the organisation to profile the ideal person to fill the job. It is very important that the skills, aptitudes and knowledge included in the specification are related precisely to the needs of the job.

One good reason not to set unnecessary requirements is to avoid any possibility of discrimination against particular groups of potential applicants. The very process of writing a job and person specification should help the employer to develop and implement a policy of equal opportunity in the recruitment and selection of employees.

Note the importance of fairness. In many parts of the world but in English-speaking countries and the European Union in particular, an employer has the legal responsibility to ensure that no unlawful discrimination occurs in the recruitment and selection process on the grounds of sex, race, disability, age, sexual orientation and religion or belief.


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Equality of opportunity is, therefore, an integral part of the recruitment and selection process and to this end, employers often offer specific encouragement to under-represented groups. Examples include pre-application assistance for those who do not have English as their first language, or management development training for women where they are under-represented in management grades. Job advertisements also often explicitly state that the employer encourages applications from minority or under-represented groups.

Factors to consider when drawing up the specification include:

Skills, knowledge, aptitudes directly related to the job

Type of experience necessary

Competencies (or behaviour) necessary

Education and training but only so far as is necessary for satisfactory job performance (unless the person is being recruited on the basis of future potential – e.g. graduate trainees).

When drawing up a profile of the ideal candidate for the job, the criteria are normally listed under two headings: Required/Essential and Desirable. This can be especially helpful at the selection stage by helping to differentiate two or more candidates whose background and qualities fit the basic requirements.

Any criteria relating to personal qualities or circumstances, however, must be directly related to the job. So, for example, you should not specify that a candidate must be of one gender or another unless, as in the case of a personal carer for example, it is essential for the job. The criteria must be applied equally to all applicants irrespective of age, sex, race, nationality, religion or belief, disability, membership or non-membership of a trade union etc. To do otherwise is potentially discriminatory and therefore illegal.

The person specification should help the selection process to operate in a systematic way and be as bias-free as possible.

A sample job description and person specification for a customer service job is set out on the following two pages

(c) Pay

After setting the job and the person specifications, consideration should be given to pay rates. Factors such as scales, grades and negotiated agreements, as well as market rates and skills shortages may affect the wage or salary offered and organisations should be aware of the requirements of equal pay legislation and any minimum wage requirements.


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Sample Job Description

Role: Customer Service Associate

Department: Operations

Responsible to: Customer Service Manager

Our Customer Service Associates (CSAs) play a critical part in our mission to deliver timely, accurate and professional customer service to all our customers. In a fun and fast-paced environment, this position requires heavy phone, instant-messaging chat and e-mail communication with customers. A wide variety of internet and software tools are used to navigate customer accounts, research and review policies, and communicate effective solutions. Reporting both individually and as a team to the Customer Services Manager, the postholder‟s essential job functions include:

1. Entering all phone, email and fax orders

2. Creating and maintaining scheduling agreements

3. Outbound selling

4. Unblocking internet and business to business orders

5. Releasing orders from compliance

6. Resolving complaints

7. Running backorder reports

8. Raising quotations

9. Supporting field sales and customers with advice and information

10. Creating and maintaining pricing agreements

11. Supporting creation of tenders and contracts

12. Maintaining customer master data

13. Any other tasks necessary to support the team‟s activities

Base: This post is based at Head Office.

Managerial responsibilities: There are no managerial responsibilities

Other remarks: No regular business travel is envisaged for this role.


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Sample Person Specification

Customer Service Associate

The successful candidate must be hardworking and possess a positive attitude. They should have an approachable and friendly manner towards customers and team colleagues, be self confident and have the ability to be flexible. The post holder will be customer focused with the ability to turn things around quickly coupled with possessing a strong attention to detail and be able to use their initiative.

Basic Qualifications

5 GCSEs or equivalent

One year of customer service or related experience

Basic keyboard, phone, and computer navigation skills

Preferred Qualifications

NVQ 2 or above in customer related subject

Essential skills/knowledge

Professional telephone manner

Excellent written and verbal communication skills

Team working

Interpersonal skills

Computer literacy (Microsoft Office products and Internet usage))

Ability to work accurately under pressure.

Methodical

Attention to detail

Work under their own initiative

Questioning skills

Health and safety awareness

Motivated and adaptable to change

Problem solving

Decision making

Customer focused

Conscientious and reliable

Proficient in the English language.

Desirable skills

A knowledge of SAP and Lotus Notes

Ability to promote products

Ability to identify areas for improvement

European language skills


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Attracting Candidates

Marketing the vacancy needs to be done in way that ensures the best response at the least cost to the business. The objective is to get a good selection of good quality candidates. There are several possible methods which can be used but they can each be considered as either internal or external channels.

(a) Internal

Advertising vacancies within the organisation can be used as a way to motivate employees. Offering opportunities for development and promotion by changing roles can enable staff to extend their competencies and skills to the benefit of both the organisation and the individual. Using an organisation‟s own website to advertise vacancies is becoming widely utilised. Not only can it save expensive advertising costs but it also tends to attract candidates who already have a positive regard for the organisation. However, it can also restrict the pool of candidates to those who regularly view the site. Organisations may also be able to call on retired employees in cases of a shortage of qualified personnel or an increase in workload. Recruitment of such people saves time and costs as they are already aware of the organisational culture and its policies and procedures.

Another internal channel for attracting candidates is employee referral or recommendation. Many organisations have a structured system where current employees can refer their friends and relatives for a vacancy in their organisation. Indeed, in some organisations there are formal agreements to give priority in recruitment to the candidates recommended by employees and others also pay an „introductory bonus‟ to the referee.

(b) External

In addition to those mentioned above, there is a wide range of channels external to the organisation including the following:

Commercial recruitment agencies – often specialise in particular types of work, e.g. secretarial, office work, industrial, computing, and may already have potential applicants registered with them. They charge a fee often based on a percentage of the total benefits package.

National newspapers – advertising in the national press is expensive, but likely to produce a good response for particular, specialist vacancies. Remember too there are national ethnic group newspapers which will reach a wide audience.

Specialist and professional journals – less expensive than the national press, these journals can guarantee to reach the precise group of potential applicants for specialist and professional vacancies.

Local newspapers, radio – for less specialised jobs, or to target groups in a particular local area, advertisements in the local media may produce a good response.

Local schools, colleges and the Careers Service – maintaining contact with schools, colleges and careers advisers will ensure that the organisation's needs for school/college leavers with particular skills and abilities are known. It can be particularly useful to offer students the opportunity to spend some time at the company, on work experience, or 'shadowing'. This source is known as Campus Recruitment.

Unsolicited applicants – Many job seekers visit the office of well-known companies on their own or send in letters and CVs to the Human Resources department.


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Whichever format or channel is used, it is important to ensure that the job advertisement complies with relevant legislation and presents a positive picture of the organisation. Any application form used should be checked to make sure that it requests all the details needed to help assess the candidates. In this respect referring back to the Job Description and Person Specification will be helpful. Some organisations also send an information pack to those requesting further information. If references or medicals are to be taken up before the invitation to interview stage, it should be made clear on the application form/information pack sent to the applicant.

Application forms

Application forms can help the recruitment process by providing necessary and relevant information about the applicant and their skills. Using application forms has the following advantages:

Comparing like with like is easier. CVs can be time-consuming and may not provide the information required.

They provide the basis for an initial sift, and then for the interview.

The standard of completion can be a guide to the candidate's suitability, if writing and presentation skills are essential to the job; however, be aware of the possibility of disability discrimination.

They provide a record of qualifications, abilities and experience as stated by the applicant.

Care also needs to be taken over some less positive aspects of application forms:

There is a temptation to use application forms to try to extract too much information. The form should concentrate on the experience, knowledge and competencies needed for the job.

Some very experienced people may find the space in the form inadequate, whilst those with little in the way of qualifications or experience may be intimidated by large empty spaces on the form.

Application forms add another stage, and therefore more time, to the recruitment process.

Application forms may inadvertently be discriminatory. For instance, to require a form to be filled out 'in your own handwriting', where written English is not relevant to the job, may discriminate against those for whom English is not their first language, or who may not have well-developed literacy skills.

Any information such as title (marital status), ethnic origin or date of birth requested for monitoring purposes (e.g. for compliance with the legal requirements and codes of practice on race, sex, disability and age discrimination) should be clearly shown to be for this purpose only, and should be on a separate sheet or tear-off section. Such information need only be provided on a voluntary basis. Medical information should also be obtained separately and kept separate from the application form to conform to confidentiality requirements.

Selection Processes

Managing the Response

The experience of most organisations is that even basic job vacancies can attract hundreds of responses. While many or even most of those may be suitable candidates, because of time and expense, it would not be possible to put all of them through the selection process.

Whatever form the applications take, there will be a need to sift them before moving on to the interview stage. Such a sift serves to match the applicants as closely as possible to the job


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and person specification and to produce a shortlist of people to interview. To avoid any possibility of bias, such sifting should be undertaken by two or more people, and it should involve the direct line manager/supervisor as well as the human resources department.

The sifting stage can help the organisation by providing feedback on the advertising process (quality and quantity of responses) and the suitability of the application form. It can also identify people who might be useful elsewhere in the organisation.

The candidates who best match the specifications may then be invited for interview. How many people are invited to the selection process will depend on the time and resources an organisation has available, but generally three to six is adequate for each vacancy. A Selection Matrix is a useful tool to use here as it lists the candidates and compares their applications against criteria from the job details, enabling a clear comparison to be made at this point and also identifying where questions may need to be asked of the candidates (say, regarding employment gaps or skills) during any interview.

Example of part of a selection matrix

Joe Bloggs Martina Roes

Wong Kin Ho

Patrick Olumfemni

3 Years CS experience

N Y Y Y

Clear voice Y ? No phone contact

Y ? No phone contact

Helpful attitude Y ? Y ?

Problem solving experience

N Y Y Y

The Selection Process

What is the selection process going to be? Customer facing roles, such as those found in customer service departments, normally require a high degree of personal skills such as empathy and the ability to listen rather than just „hear‟. Therefore, some kind of practical assessment of these skills is part of the selection process alongside the more traditional interview.

In some companies there will be a personnel or human resource specialist who will undertake most of the sifting and shortlisting. But it is very important that the line manager/supervisor for the job also be involved, both at the job and person specification stage and at the interview stage. The final selection will thus normally be a joint decision, except in those very small companies where only a line manager/supervisor is available to do the recruitment of staff.

Gaining the commitment of the immediate manager/supervisor by involving them in the selection process can be vital to ensuring that the new employee is settled successfully into the organisation once appointed. It may also be useful both for the candidate to see the environment in which they would be working and, if they are to be part of a team, for the current team members to meet the candidate.

When embarking on an assessment programme, it is important to establish a clear framework of competencies, cultural values, personality traits and drivers against which you can measure potential employees. There are four initial steps to take:

Define success criteria for the role


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Investigate the skills, knowledge, attitudes and behaviours your top performers use

Identify the soft skills and attitudes that the candidate must demonstrate

Understand your company values and culture to ensure a good „fit‟.

Once you have identified this framework, the most appropriate assessment tools can be selected for a fast and efficient recruitment process. There are many methods available to help in the selection process – including interviews, tests (practical or psychometric), assessment centres, role plays and team exercise. Usually a range of methods will be used by the organisation depending on the type of job to be filled, the skills of the recruiter and the budget for recruitment.

(a) Interviews

Most jobs are filled through interviews. The interview has two main purposes – to find out if the candidate is suitable for the job, and to give the candidate information about the job and the organisation.

If there is more than one interviewer, then time should be spent before the interview agreeing on what questions should be asked and by whom. The same, or broadly similar, questions should be asked of each candidate in order to make comparisons easier and also to ensure fairness. An interview is a two-way process so every candidate should be offered the opportunity to ask questions of the interviewer. You will be able to gauge from this just how interested the candidate is in the organisation and the vacancy.

Think Point

Customer service is only as professional as the people delivering it; attracting new customers and retaining existing ones are tasks for competent people so focusing the interview on customer care can mean introducing questions at the interview stage covering, for example:

Candidates' experiences with customers

Service levels and customer expectations

Priority of customer needs over in-house organisational activities

Incentives which are likely to motivate front-line staff.

Draw up a list of questions for each of these areas – say, two questions per area – which could be used in an interview. Are there other areas which could usefully be focussed on in respect of assessing the candidate's competence in customer service.

(b) Practical tests

Customer service covers a range of tasks and responsibilities. If the job involves practical skills, it may be appropriate to test for ability before or at the time of interview. Telephone skills, for example, are generally a requirement, and candidates for telesales/call centre work will almost invariably be asked to undertake a practical test. Consideration in giving any test must include being clear on what exactly you are testing for; whether the test you have devised will demonstrate this; how practical the test is given the number of applicants and the costs of administering the test.

(c) Psychometric and psychological tests, including biodata

There are numerous tests commercially available which can assist in measuring aspects of personality and intelligence such as reasoning, problem solving, decision making, interpersonal skills and confidence. Although many large organisations have


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used them for a number of years, they are not widely used and some tests are considered controversial – for instance, those that assess personality. Tests should never be used in isolation, or as the sole selection technique.

Biodata (short for biographical data), is a questionnaire format with multiple choice answers. The questions are of a biographical nature and answers are scored according to the scoring key developed by the employer. In general biodata is successfully used only by really large employers, who have a large throughput of applicants.

Note that all tests should be administered and assessed by qualified personnel and that results and any other personal information should remain confidential.

You need to think carefully before using any test – is it actually necessary for the requirements of the job? Is the test relevant to the person/job specification? What is the company policy about using tests, storing results and giving feedback to the candidate? Assessment criteria must be objective, and the record sheets should be retained in accordance with any Data Protection or other legislation.

(d) Assessment centres, role plays and team exercises

Assessment centres are where a range of tests and exercises are used to gauge applicants‟ reactions in a multitude of situations. They are often complex and expensive to run. They are used by large organisations who recruit large numbers of new employees at a time. Exercises, sole and group, may take place over a few days, sometimes in a residential setting, so that applicants can be assessed in a variety of different situations both formal and social. The applicant may also be required to make presentations and to take part in role-plays or team events.

Customer service candidates should be required to demonstrate their abilities during any selection process. So it makes sense to present them with sample customer service scenarios and observe how well they handle the situation. The scenarios should be true to the organisation and industry and reflect a typical customer service situation as well as some non-typical situations for a thorough assessment of the candidate's abilities.

If you have a group of candidates together at one time, it can be more effective and efficient to talk to them altogether about the culture of the organisation, what it's like to there and the expectations on both sides. Any ensuing discussion can act as a strong indicator of the candidates‟ own views and attitudes towards team working and customer culture.

(e) Work shadowing

If there aren't a sufficient number of candidates for group assessment, an alternative approach could be to invite the candidates in to work alongside their potential future colleagues. It is very difficult to maintain a facade in that situation. Moreover, if the business has an established positive culture it is useful to listen to the views of work colleagues on any future appointee.

The pressure on organisations to deliver efficient and effective processes, which demonstrate return on investment, has never been so high. Testing the ability of applicants through objective assessment helps organisations to avoid the impact of a bad hire by identifying those applicants that are most likely to succeed.

The Importance of Attitude

Southwest Airlines in the USA has a simple mantra: "Hire for attitude, fire for attitude." Similarly US retailer Nordstrom would rather hire „nice‟ people and teach them to sell, than hire salespeople and teach them to be nice. Nordstrom, it is said, "hires the smile and trains the skill."


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The question is why don't more businesses follow this approach? Is this just a strategy for US organisations where the service culture is perhaps more established and embedded than other countries? The answer is that many organisations find it difficult to articulate exactly what the attitude is that they are looking for. You often hear phrases such as: “I look for people who I can „click‟ with at the interview”; or “I think they will fit in with how we do things here”. Those businesses that have developed a successful mission statement (see later chapter) are usually more able to easily describe the type of person that would fit the bill.

Making the Decision

In identifying new staff for support or service roles, the selection methods need to allow you to look for evidence of skills, experience and ability but also openness, collaboration and the ability to relate to others. Evaluating one candidate against the next for these traits is very subjective. So using a structured scoring system of some kind will help bring some objectivity to the process. It is normally based on the applicants' competencies, and helps avoid the pitfalls of stereotyping and 'mirror-image' effects (that is, a subconscious subjectivity – looking for similarities to oneself in the candidate). Structured scoring also allows the organisation to weight some elements or competencies to reflect priorities and to compare a candidate's score with the job specification‟s 'ideal' score.

Examples of scoring systems for shortlisting

Example 1

Highly suitable Strong evidence is demonstrated across the relevant short-listed criteria in the job and person specification and this has been clearly presented in the application

Suitable Some evidence is presented and the bulk is of an acceptable standard against the relevant short-listing criteria in the job and person specification

Not suitable The evidence presented does not demonstrate the statements of competence against the relevant short-listing criteria in the job and person specification

Unable to judge Where you feel you have not seen evidence of the competence/short-listing criteria

Example 2

Strong evidence = 3 Evidences and demonstrates high level achievement of the short-listing criteria

Good evidence = 2 Evidences and demonstrates achievement of the short-listing criteria to the appropriate level for the job

Some positive evidence but falls short = 1

Demonstrates some evidence of the short-listing criteria

Little or no evidence = 0 Fails to demonstrate the competency required for the job (no evidence for short-listing criteria or insufficient to satisfy the interviewers)


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Brief notes on each candidate should be written up immediately after each selection activity, recording relevant answers and details. This is not only for the decision-making process but also to provide feedback to the candidate, if requested. Be aware that reasons for appointing or not appointing a particular candidate may be challenged under discrimination legislation.

Appointing the Candidate

The offer letter is an opportunity to reinforce the culture and service aims of the organisation. It should be written as a two way contract along the lines of: "We are offering you this job with the following salary and package of benefits. In return we will expect you to meet these expectations” and spell out what the business aims for internal culture and external service are. In this way there is absolute transparency at the beginning of the relationship and should the new recruit prove to be unsuitable, then you have covered the first base of employment law by being absolutely clear about what is expected – even before they have signed a contract.

Trends in Recruitment and Selection

The following trends are being seen in recruitment and selection.

(a) Outsourcing

HR processes are being outsourced from more than a decade now. A company may draw their required personnel from other companies, rather than employing them directly. Such outside firms develop their own human resource pool and make available suitable personnel to various companies as per their needs. In turn, the outsourcing firms or the intermediaries charge the organisations for their services.

The advantages of outsourcing are:

Company need not plan for human resources much in advance

Value creation, operational flexibility and competitive advantage

Turning the management's focus to strategic level processes of HRM

Company is free from salary negotiations, weeding the unsuitable resumes/candidates

Company can save a lot of its resources and time.

(b) Agencies, Headhunting or Poaching

“Buying talent” (rather than developing it) is the latest mantra being followed by the organisations today.

One approach is for a company to use an external agency or specialist "headhunter" to identify suitable candidates for vacant positions, rather than undertaking the recruitment and selection process themselves. Outsourcing in this way can help the organisation by the initial screening of the candidates and creating a suitable pool of talent for the final selection by the organisation.

Poaching means employing a competent and experienced person already working with another reputed company in the same or different industry; the organisation might be a competitor in the industry. A company can attract talent from another firm by offering attractive pay packages and other terms and conditions, better than the current employer of the candidate.

(c) E-recruitment

Many large organisations are now using the Internet as a source of recruitment. E-recruitment is the use of technology to assist the recruitment process by advertising job vacancies through the worldwide web and allowing candidates to make their applications on-line, completing their application forms or sending curriculum vitae


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through e mail. Alternatively job seekers can place their CVs in the worldwide web through job agencies such as Linked In, which can then be drawn down by prospective employers depending upon their requirements.

The advantages of e- recruitment are:

Low cost

No intermediaries

Reduction in time for recruitment

Recruitment of right type of people

Efficiency of recruitment process.

(d) Labour markets and the labour force

In times of changing labour markets, organisations need to adapt their recruitment and retention policies to allow them to compete more effectively for staff, particularly those with skills that are in short supply. The offer of training and development opportunities is often a strong attraction to potential recruits.

If recruitment is difficult in certain jobs or skills, consideration may need to be given to re-designing the job to make it a more attractive prospect – perhaps by offering a greater variety of tasks or increased self-management.

Employers also need to encourage a good 'work-life balance' within the organisation by giving consideration to more flexible ways of working. Employees with young and disabled children and the carers of adults, have the right to request flexible working arrangements – including job-sharing, part-time working, flexi-time, working from home/teleworking and school time contracts – and employers must have a good business reason for rejecting any application.

These variations on the 'standard' forms of working, open vacancies to a wider pool of potential talent – people who might otherwise be unable to consider it. Many companies are now offering 'family-friendly' policies. Equally, the offer of assistance with domestic care arrangements and costs, such as child care can prove highly attractive to people with these responsibilities. The balance of the labour force is changing, with some increase in the numbers of women, young people and most particularly older workers, available for work. Employers are beginning to give serious consideration to the employment of older workers and a voluntary Code of Practice to counteract ageism in employment has been introduced in many western European countries.

These changes in the labour force have been accompanied by an huge increase in the availability and value of labour market information. This allows employers to forecast future trends in the labour force and provides the information from which they can decide how best to plan for future recruitment – for example:

Should the organisation make a positive move to attract older workers?

What might best be done to counter any shortage of potential recruits with particular skills?

Should training new and existing workers move higher up the priority list in the firm?

Should the organisation make the introduction of family-friendly policies a priority so as to attract the widest range of suitable staff?

Looking at all the options means that recruitment will be better targeted and therefore more efficient and effective.


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B. INDUCTION AND DEVELOPMENT

Stages in the process of induction and development of newly appointed staff:

(i) "On-board" and induct new staff Induct

(ii) Train and develop Develop

(iii) Monitor effectiveness

Induction Processes

Once someone has been selected and appointed, thought has to be given to how the new appointee will be introduced to the organisation and the way that it works, as well as the specific job area.

Many organisations try to do all of this in the first week, or even on the first day. It is important to make sure that organisational policies, procedures, standards and targets are explained to the newcomer as early as possible. And of course there are such matters as health and safety procedures to be explained. But when a new team member starts their employment, there is more than just the nature of the work to learn.

On-boarding

On-boarding refers to the initial process of „plugging the employee into the organisation‟s systems‟. Even the smallest organisation will have a payroll system, for example, which will need to have certain information if the new recruit is to be paid. There may be further documentation to complete or equipment to issue. The Human Resources Department, or the person who deals with these matters, if there isn‟t one, will certainly want to take personal details from the new member of staff to begin the creation of a personnel record. These details may be next of kin (in case of any accident or illness at work), current address and contact details, bank details and tax or national insurance codes, etc.

Perhaps a preliminary discussion about training either immediately or in the future and an explanation of the development opportunities that are available will be necessary. Any particular health and safety requirements should also be made known, together with details of whom to go to for help and advice during the course of their employment. Many companies use a 'buddy' system, where an experienced worker is nominated to assist the new recruit in all the day-to-day questions that may arise.

Induction

The process of integration known as an induction is a formal process where a person is introduced into an organisation or team. An induction is important when a new member joins the team:

To enable the new member to become productive as soon as possible

To ensure that the new employees are familiar with the workplace environment

To ensure new employees are fully briefed on organisational policies and procedures.

Effective orientation is a gradual process and does not end after the first few days on the job. While the initial induction of employees during the first few days is vital, it is even more important to make sure new employees fit in and feel comfortable over the longer term.

Here are examples of points that should be covered in any induction plan to help with integration:

Meet other members of the team

Introduction to personal work station, locker and role within the team

Issue an employee handbook if there is one


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Layout of the work environment and work station

Location of facilities such as the canteen and toilets

Organisational requirements – such as timekeeping and absence reporting, smoking regulations etc

Health and safety requirements

Specific job information

Reporting lines and an organisation chart

Opportunity for questions.

The induction plan should be broken down into immediate essentials – the basics to get the person started on useful work – and further development. A timetable needs to be set, typically spread over the first month. Before the new appointee starts, the team should be informed of their new colleague‟s start date and role and a mentor should be identified to provide informal guidance. Other team members may have to play a role in the induction for example explaining particular activities. There will be essential equipment to organise, such as a computer, stationery, telephone etc,

Whether experienced or not, all new appointees will need some training on the organisation‟s processes and systems. They may also need some induction into the culture – a specific set of attitudes or values that have been adopted. But the focus of initial training efforts should be on the most urgent and important in terms of safety and ability to do their job.

(a) Who should carry out the induction?

There are no hard and fast rules about who should carry out the induction process. In some organisations, the human resources department takes responsibility for arranging all inductions and in other organisations it might be the responsibility of the new team member‟s department team leader. It may also depend upon the seniority of the new employee.

Generally speaking the following are examples of who might carry out an induction for a new team member:

Personnel staff

Team leader

Manager

Mentor or buddy

Another team member.

A good induction programme makes business sense, whatever the size of the organisation, and whatever the job as it enables the new recruit to work productively as quickly as possible.

Induction need not be a very formal process but it needs to be properly managed. If a group of new employees is recruited at the same time, it may make sense to hold group induction sessions on the common topics to be covered – discussion, videos, slide presentations can all add to the effectiveness of the programme.

Even people transferring from one part of the organisation to another need induction into their new area. It should not be assumed that they will know the relevant people or the skills they will need in the new job.


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Think Point

Think back to when you first arrived at school/university or to work in an organisation. How did you feel? Did you have a formal induction? Was it well organised?

Hopefully you found your induction useful and informative and that your colleagues helped you to settle in quickly. All too frequently, though, new staff turn up on their first day enthusiastic and excited, only to find that they spend their first day sitting and listening to talks from various people when they would rather be getting to know their new colleagues and their new role and responsibilities.

What lessons can you take – positive or negative – from your own experiences which could be used to improve the way new people feel part of the team?

(b) Employees who may need special attention

The new starter who has considerable recent work experience and is a confident, out-going individual will have a different induction need from the person with little or no experience and who may be shy or reserved in this new work setting.

(i) School and college leavers: For school or college leavers, who may be nervous but excited at their first job, it is particularly important for the employer to encourage a positive attitude to work, and to allay any fears the new recruit may have.

(ii) People returning to work after a break in employment: Men or women returning to work after some years caring for children or other relatives may feel apprehensive about the new job. They may feel out of touch with developments, and in need of re-establishing themselves.

(iii) This is also true of those who might have been living/working abroad, or who are changing their career focus.

(iv) Employees with disabilities: Careful pre-planning can reduce the problems which may arise for employees with disabilities, whether in terms of access, equipment or dealing with colleagues.

(v) Minorities: They should have the same induction programme as any other new starter, but attention should be paid to any sensitivities. Employers may need to be aware and take account of any particular cultural or religious customs of new employees who are part of an ethnic or religious minority so that misunderstandings do not occur.

Getting the „right people in the right job etc‟‟ means adopting consistent policies and practices for the induction, training and development of new members of staff. It also entails integrating them into the organisation and involving them as partners in the business. It is easy to forget that the selection process is only the beginning of the employment relationship, and the future of that relationship depends to a considerable extent on how the new employee is settled into the job. Most labour turnover is among new employees, and work efficiency is reached only after a period of learning and adjusting to the new environment.

Development Processes

The Chartered Institute for Personnel and Development (CIPD) in the UK estimates that it costs an average of £3,600 in recruitment costs alone for each employee – maybe a little less for unskilled posts or more (up to £8,000) for more senior positions. But whatever the figure, the fact remains that it costs money to employ new staff. So, it makes sense to keep


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the good staff that are currently employed and ensure that they have the right knowledge, skills and attitudes to undertake their present responsibilities and, potentially, future roles in the organisation.

Employers are increasingly aware of the importance of investing in their staff and good employers put structures in place to provide opportunities for the training and development of their employees. However, it is not, or should not be, all one-way traffic – employees also need to take personal responsibility for renewing and updating their skills and knowledge throughout their working lives. Personal development is a lifelong process of shaping and improving skills and knowledge to ensure maximum effectiveness and on-going employability.

However, these attitudes are not universal among employers.

Think Point

The following statement is a commonly held attitude to training. Consider the implications of this viewpoint. What are the possible effects on the organisation?

“Training is a waste of time and money. My staff don’t need training because they already know what they are doing. They are too busy with their jobs to squander time on training. If we need to introduce something new, a brief demonstration is sufficient and anyone who doesn’t master it within a month is let go.”

This attitude is at best very short sighted. Poorly trained staff will lead to poor performance, high staff turnover and the resulting costs to the business. In addition, low levels of training and development opportunities can lower motivation and morale, and even cause health and safety problems.

Training and development can be seen, therefore, as a key financial investment for the organisation and as with any investment the organisation will look to gain profit from their expenditure.

Training and Development

We have mentioned these two terms several times now, so we should define what they mean. Whilst they are usually seen as being interdependent, they do represent different approaches to the gaining of knowledge and skills in the workplace. We should also add a third term – learning:

Training is an instructor-led and content-based intervention leading to specified changes in behaviour, designed to improve effectiveness in the workplace. It is usually undertaken somewhere away from the immediate workplace.

Learning is the process by which change takes place in the individual‟s skills, attitudes or knowledge. It is independent of any particular method initiating the change.

Development is an umbrella term which covers both training and learning which may be of both immediate value to performance in the individual's present role and provide experience that may allow him/her to do undertake another role at some point in the future. It may cover a long period of enhancing skills and knowledge through a wide range of techniques – whether training, coaching, education or informal interventions.

It is very helpful to have an understanding of the way in which people learn as this can help identify the most appropriate method of training and development for particular people or particular types of knowledge and skill.


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When gaining new skills and knowledge the learner needs to go through four separate stages of what is known as “the learning cycle”. The cycle refers to the process by which individuals (and teams, and organisations) think about and understand their experiences, and consequently modify their behaviours. It was first coined by David Kolb in the 1980s and is a keystone for learning and development theories which emphasise the practical nature of how we learn. There four stages to the learning cycle are:

The elements of the cycle are described below.

Experience

Concrete experience is the basis of the cycle. We use experiences that we have had in the past, or take experiences which are new to us, in order to further our learning. These experiences may be structured and planned, or may be "accidental", in that they happen to us in the course of our work or our everyday living. They may be experiences which happen to us on our own, or involving others.

Reflection

Having been through an experience, the next stage is reviewing it in order to identify what actually happened and to attempt to understand what the experience might mean. Sometimes one can go through this alone by thinking things through, consciously or unconsciously, whilst at other times, it may be a something which benefits from discussion with others.

Conceptualisation

Having made the experience "coherent" through reflection, we then start to generalise from the individual experience and consider how it can be used in other ways – in terms, perhaps, of principles or behaviour patterns.

Application

This stage is the action of modifying our understanding and/or behaviour and using the new learning in practice. The experience of applying it in real situations begins the cycle again.

This cyclical process needs to be completed in full for effective learning to take place. If, for example, one is tempted to jump from stage two to stage four without fully analysing and conceptualising the experience, it is unlikely that any new behaviour will be effective or helpful – there will be no true understanding of why things happened as they did, and no sense will be made of the experience.

Personal Development

Many organisations now encourage staff to take responsibility for their own development by assessing their own needs and putting forward plans to their direct line manager. Adopting a constructive approach to personal development planning (PDP) will help individuals to consider how they want their careers to develop and establish a schedule to work to.

Experience

Conceptualisation

Reflection Application


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Personal development planning is a process where individuals can establish aims and objectives, what they want to achieve or where they want to go, in the short- or long-term. It can help with identifying needs for skills, knowledge or competence and to select appropriate development activities to meet those perceived needs.

The identification of development needs may emerge from intended or actual new tasks or responsibilities or from dissatisfaction with current routines. Some people know what they are good at, others may be less sure. Various instruments such as self-assessment tests, benchmarking exercises and personal diagnostics are available to help assess skills in a structured way.

With PDP, employees‟ development needs will depend largely upon their own career goals but with care can be aligned with organisational aims and objectives and be a very powerful motivator, particularly within stressful roles where staff churn often means valuable employees leaving the organisation rather than moving to less stressful activities. If they intend to remain in similar employment, they may feel the need for development to re-motivate them or to improve their current performance and effectiveness. Alternatively, development may be required to prepare them for promotion or an upcoming project assignment.

Competency Frameworks

One of the conundrums of the recruitment and selection process is how to tell if someone is qualified for the role. Most people rely on formal education and training and look for candidates to have the appropriate certificate or diploma to attest to their ability or knowledge. Others believe years of experience are a reliable indicator of performance; yet others might argue that personal characteristics hold the key.

While all of these are important, they do not describe the sets of behaviours or traits needed for a particular role. Nor do they guarantee that holders of the post will perform to the standards expected by the organisation. Therefore, since the late 1980s more and more organisations have been using competency frameworks.

What is a Competency Framework?

Competency frameworks are a method of describing the knowledge and skills required to perform a particular occupational role at a particular level. There are national competency standards for many occupational groups, and these form the basis of the national vocational qualifications framework in the UK.

Competencies can be used as part of, or to support, a job description and person specification, and as such act as a signal from the organisation to the individual of the expected areas and levels of performance. In this role, the standards can be adapted to incorporate the underpinning values that shape and define the culture of their organisation. For the individual, they provide a map or indication of the behaviours that will be valued, recognised and, in some organisations, rewarded. They also provide clear focus to support the development of staff in order to deliver the best possible service.

Customer Service Competencies

A recent study carried out in 2004 by a research group on behalf of the industrial giant, General Electric, found 15 customer service competencies that twelve major companies had in common. The companies they looked at were: PPG, MCI, S. C. Johnson Company, 3M Worldwide, General Electric, Lands End, General Motors, Tiffany & Company, Polaroid, Roadway Express, Florida Power and Light and the Cross Company.

The study found that the most common competencies required in customer service roles were those listed below. Underneath each competency is a list of attitudes/behaviours that would indicate competence in the relevant area. The list is not exhaustive, but is designed to


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give a flavour of the approach that an organisation may encourage in all staff that the framework applies to.

1. Builds customer loyalty and confidence

Takes a proactive approach to meeting customer needs.

Establishes “partner” relationships to help customers.

Does what is feasible and sensible to maintain good will.

2. Empathises

Displays sensitivity to feelings of customers.

Recognises different personalities and responds to the needs of each.

Interacts with customers, showing genuine concern and respect.

3. Communicates effectively

Expresses self in an articulate easy to understand manner.

Demonstrates ability to influence others when appropriate.

Asks appropriate questions.

Makes appropriate use of written communication.

Demonstrates diplomacy.

Responds to customers to build positive relationships.

4. Handles stress

Stays organised, calm and constructive in stressful situations.

Demonstrates tolerance, appropriate humour and patience with irate, difficult customers.

Controls emotions.

5. Listens actively

Hears not only customer‟s words but also their meaning.

6. Demonstrates mental alertness

Processes information quickly.

Learns and understands readily.

7. Works well as part of the team

Demonstrates ability to work cooperatively with others.

Maintains positive and productive relationships with all departments within the organisation.

8. Demonstrates reliability and loyalty

Works consistently.

Demonstrates loyalty to company in words and actions.

9. Demonstrates personal motivation

Demonstrates caring, optimism, and helpfulness.

Shows interest in continuing self-development.

Maintains a sense of purpose.


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Maintains positive, yet realistic self confidence.

Works independently with little direction

10. Solves problems

Gathers and analyses all the information for appropriate resolution.

Makes use of specialised knowledge to assist customers in resolving problems.

Demonstrates ability to troubleshoot a wide range of problems situations.

Thinks analytically.

Negotiates solutions.

11. Maintains professional image

Presents self well.

12. Understands their company and industry

Demonstrates knowledge of the company‟s industry.

Demonstrates understanding of other department‟s functions and responsibilities.

Knows capabilities, tolerance and limitations of the organisation.

13. Maintains high energy level

Sustains a high level of work activity.

14. Applies technical knowledge and skills

Uses all state of the art resources to assist in work activities.

15. Organises work activities

Takes an orderly and efficient approach to all tasks.

Planning Development Programmes

There is no sense in training staff to do the wrong thing, so training and development must be planned in a systematic manner in order to be effective. This is a four-stage process:

Stage 1 Identify needs

Stage 2 Set development objectives

Stage 3 Plan appropriate development interventions

Stage 4 Evaluate and feedback results

Identifying Needs

The first stage of any systematic training and development process is to identify needs. To do this organisations carry out regular reviews of performance on staff to monitor how they are doing against an agreed set of criteria – often those same criteria which are used in the recruitment and selection process. If things are not as we would like them to be, this is referred to as a performance gap.

Just as with the preparation of job descriptions and person specifications, the starting point for preparing programmes is to focus at the task level. This means breaking each job down into a series of tasks and assessing the skills and knowledge necessary to conduct the task.


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Example

Susan supervises a team who work in a bakery/coffee shop. Their job is to serve customers with a range of pastries and bread as well as hot and cold drinks.

Individual tasks that this job might involve are:

Dealing with customers, including handling complaints

Cleaning food preparation areas and equipment

Packing bought goods

Re-stocking bread and pastries

Operating the cold drinks machine

Identifying different bread and pastries in line with customer requirements

Operating the cash register, handling cash and change.

For each task, Susan will have to assess the extent to which the team, as individuals or as a group, possess the skills and knowledge necessary in order for the job to be done. So, for new starters, it may be that they have little or no knowledge and skills, whereas for experienced staff, it may be that some are highly knowledgeable and skilled in certain tasks, but not in others. In order for the whole team to be effective, each member must be able to perform the tasks to the required standard, and also work together where necessary. Where this is not the case, there is a training need.

Training needs must be agreed and approved, if necessary by HR or the budget holder, as well as the member of staff in question. By „agreement‟, we mean that the employee recognises that they need to have the training. This could be for personal development, job skilling or performance management reasons.

Having reached agreement, it is necessary that the agreement is recorded. There is no set format of recording the agreement, although it should always be in writing. A short memo, letter or report giving details of the decisions arrived at is all that is needed.

All information recorded about training needs and outcomes must be kept confidentially in personnel files and discussed only with the individual concerned and the appropriate line manager.

One way of classifying staff from the analysis of performance is represented in the following diagram.

Potential Low High

Perf

orm

ance

Hig

h

Workhorse

Individuals who produce effectively, but have reached their level of

competency.

(Rising) Stars

Individuals who have real potential for the future and are high

performers.

Lo

w

Deadwood

Individuals who have no potential and perform

poorly. They are in the wrong role.

Problem Child

Individuals who have potential but are not

performing in their role.


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If you have studied Marketing, you will immediately recognise that this is based on the Boston Consulting Group (BCG) matrix for identifying products which are likely to do well and those which either need support or need to be removed. The same process can be applied to staff, with the action deemed appropriate for the four different groups being as follows:

Potential Low High

Perf

orm

ance

Hig

h

Workhorse

Action: Teach

Give recognition

Use to coach others

(Rising) Stars

Action: Coach

Stretch with challenging work

Coach and mentor for career development

Lo

w

Deadwood

Action: Remove

Counsel

Agree aims and monitor

May need to exit

Problem Child

Action: Discipline

Counsel

Motivate and encourage to reach potential

Maybe due to boredom or early promotion

This simple method helps dictate where scarce training and development resources should be spent:

Rising Stars Most investment. This is where the business is going to get the best return on there investment. Invest sufficient to keep engaged and grow for the future.

Workhorses Minimal investment. Invest only to keep motivated or to upgrade skills.

Problem Children Targeted investment. Action plan which includes giving them technical skills to perform at the required level. Any investment will only occur after full analysis of an individual‟s motivation to move from where they are currently. If they do not respond, move to another role or exit business.

Deadwood No investment. Action plan to either find a more appropriate role or exit business.

Setting Development Objectives

All objectives set for training and development must follow SMART criteria. Whatever type of objective is stated it is important that it is SMART. Setting objectives that are not SMART is meaningless and have little chance of actually being achieved.

SMART objectives may be defined as:

S Specific

M Measurable

A Achievable


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R Resource constrained

T Time bounded

S – The objectives of a particular training programme must be defined in terms of the specific desired improvement in both work performance and standards.

M – The purpose of setting objectives is to enable some measurement of success to take place. This means that objectives must be expressed in terms that are possible to measure.

A – Objectives should only state what it is reasonable to expect the trainee to achieve. For example, it would not be realistic to expect a trainee to become competent at computer programming within a one-day programme.

R – Objectives must also be framed within the resources available – in terms of financial, material and personnel.

T – Training objectives should clearly state the time within in which the trainee is expected to achieve the desired results. If the programme is a one-week course, are they expected to achieve results at the end of that time? Is further practice required and if so what period of time is it reasonable to expect the results by?

Training and Development Methods

There are numerous training methods available and the choice will depend on the analysis of training needs.

There is a basic division between on-the-job and off-the-job. Both have advantages and disadvantages and may be usefully combined to create a comprehensive training programme.

On-the-job

The main on-the-job training methods that are used are:

(a) "Sitting next to Nellie"

“You've not done this before – come and sit with Nellie for a few days and she will show you what needs to be done.”

This is one of the most common approaches, involving an experienced and proficient practitioner at the particular job passing on his/her knowledge and skills about how to do it:

– Explaining the job

– Demonstrating the operation

– Giving opportunities to practice

– Checking and assessing performance

– Following up and monitoring performance.

At least that‟s the theory!

The method is a good way of using competent staff to pass on not only their skills, but also their work ethic. But it does have some disadvantages too. Even if we assume that "Nellie" enjoys showing new people what to do and makes every effort to be a good trainer, she may not have received formal training herself. The “watch me do this” method can leave out any explanation to the learner about the principles involved in the activity. Also an unskilled trainer may pass on bad habits as well as good; the training may be unstructured, not planned and not prepared – which can mean, sometimes, not effective!


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(b) Job rotation or “shadowing” which involves the learner being given a range of different jobs in succession in order to gain wider experience.

(c) Project work – learners may be appointed to project teams to gain experience of relevant areas of the organisation‟s activities in addition to multi-disciplinary team processes and problem solving.

(d) Coaching – this a broader and more intensive process than simply sitting next to Nellie, often involving “assistant to” positions when a person with management potential may be appointed to work closely with, assisting or shadowing, a manager while learning all the tasks and responsibilities involved.

The main benefits gained by on-the-job training may be summarised as:

No time spent away from work

Team members learn in their work environment

Training can be organised around the demands of the work schedule

Actual or “real” tasks and activities can be demonstrated – takes the context of the job into account

No direct training costs involved – for example accommodation or travelling expenses.

Off-the-job

External training providers or consultants may provide off-the-job training in the form of short (one day or even half a day) courses, intensive programmes lasting several days or longer programmes involving day-release or study breaks. Off-the-job training may be used for training in knowledge and skills relevant to the organisation‟s products or services as well as for techniques like negotiating, interviewing and team working, and for qualifications.

Although external training is often seen as more expensive, it may be more effective in terms of

No interruptions from work demands

More chance to concentrate

Can develop skills and practice in a „safe‟ environment away from colleagues and supervisors

Mistakes can be made without damaging the business

Benefits of meeting people from other organisations, including new ideas

Gain wider experience if the course covers aspects outside of current role.

However, off-the-job training may be perceived as a waste of performance time as it takes the trainees away from the workplace. Staff may see it as threatening if it is associating with inadequate performance. Some courses, particularly those which result in recognised national qualifications, are seen by some as too theoretical and the assessment may not be suitable for all learners.

Mentoring

Mentoring is a relationship in which one person – usually not the line manager – helps the learner or new recruit to discover more about themselves, their potential and their capability in the workplace. The mentor's role is not one of giving instruction, rather one of helping the learner to develop within the role. Mentors need to have appropriate skills including the ability to give constructive feedback and help plan ways in which the learner can access learning opportunities within the organisation. Mentoring is also discussed in a later chapter.


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Training Methods

Some of the most commonly used are described below.

(a) Presentations

Presentations are commonly used as a training format – in the form of lectures, expert expositions, etc.. The presenter/trainer shares his or her knowledge whilst the learner is expected to listen or take notes as appropriate. This is usually followed by a question and answer session in which the learner may clarify points.

The presentation needs to be carefully prepared and structured with a clear introduction, main focus of the presentation (middle) and a consolidation (end) that includes an opportunity to recap on important points.

(b) Demonstrations

The purpose of demonstrations is to pass on skills by imitation and practice. It should be planned and combined with clear explanations of what is involved and the reasons behind the actions, for example safety precautions. There should be ample opportunities for the trainees to practice under supervision what they have seen.

(c) Talks and discussions

A talk is a prepared speech that is usually followed by discussions on specific topics. They are a good way of imparting information to a group rather than simply to individuals. The idea of a discussion is to get a group of people actively participating in learning.

All these forms of training essentially involve one person imparting knowledge and/or skills to a group. In all such situations, there are many benefits to learning through using different media and equipment to augment the learning experience. Below is a synopsis of the benefits of some old and newer aids.

Video Good for showing how things are done and gives some variety to a training session. Can be used for sole or group viewing and is good where sessions need to be repeated.

Whiteboard Useful for drawing diagrams or writing lists and working out ideas as a group.

Flipchart Good for brainstorming diagrams and lists. Easy to use and can be kept for later training sessions.

Overhead projector (OHP) Good for showing diagrams and lists prepared in advance. They can use colour, charts and graphs.

Digital projector As above, but can also include movement and sound. Need to rehearse before doing for the first time.

Handouts Can contain summaries of the training session, exercises to complete, problems to solve and information to use in the future.

Tools and equipment Good for practicing skills. Learners become familiar with equipment and its features/components.


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Computerised training Can be traditional format (presentation style) or interactive. Allows trainee to access training from own workstation.

Immersive environments Like Second Life. Allows single or multi user simulation.

Evaluate and Review

So far we have identified the concept of training and development, how to successfully plan training programmes and the different methods used to facilitate training. It is equally as important to identify accurate training needs and implement training. However the task is not completed at this stage – we need to assess the outcomes.

Evaluation is the key stage in the learning cycle. There are two issues you should reflect upon: whether the development activity undertaken was appropriate and worthwhile and whether and how skills or working behaviour have improved as a result.

Evaluating development activities also involves asking the following questions:

What is being done better as a result

Has this experience thrown up further development needs?

How well did this development method work?

Could we have gained more from this activity?

Would we follow this approach again?

C. EMPLOYEE RESOURCING ISSUES

Here, we consider a number of issues which can impact strongly on customer service through the quality of service provided and the continuity of personnel.

Managing Performance

All organisations monitor their business performance in a number of ways, resulting in a set of statistics. A reduction in sales figures, for example, could be caused by a number of factors such as competitors, seasonal demand (Christmas, Easter etc), consumer “fads” and fashions, or it could be because of a reputation for poor levels of customer service.

Performance Indicators

One of the most effective ways of monitoring internal performance is through using performance indicators. Performance indicators are a description of results to be achieved and a measurement of success against objectives. These measurements can help achieve business objectives by breaking down key areas of the organisation to see how they are contributing to overall profitability.

Just as two businesses in the same sector may have different performance indicators depending on their business goals, so performance indicators will differ between roles and departments.

A performance indicator for a business as a whole, for example increased customer satisfaction, may be interpreted into different targets for different departments. So the manufacturing department's performance indicator may be to reduce the number of units rejected by quality control, while for the customer service department it may be all or some of the following:

98% of calls answered in the first three rings


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95% of goods delivered to the customer within five working days

The number of customer complaints

The number of transactions completed within a certain time

Time spent with each customer

It is important not to set indicators that are either too easy or too difficult to achieve. Performance indicators that are unrealistic can be very demotivating, especially if the standard is continually missed.

Standards need to be strict but achievable in order to keep team and individuals focused on achieving objectives. A poor or non existent articulation of what the required standard is will leave staff confused and lead to directly or indirectly to dissatisfied staff eventually exiting the organisation. By that point they will have done inestimable damage both to the businesses' customer experience and internal culture.

Setting personal performance indicators for managers and their team members is as important as setting business targets. It encourages employees to meet goals that are beneficial to the business and helps give employees a sense of achievement. These indicators are normally reviewed regularly as part of a performance management system and take the form of a performance appraisal meeting.

Performance Appraisal

Performance appraisal may be defined as a structured formal interaction between a subordinate and supervisor, that usually takes the form of a periodic interview (annual or semi-annual), in which the work performance of the subordinate is examined and discussed, with a view to identifying weaknesses and strengths as well as opportunities for improvement and skills development.

In many organisations but not all, appraisal results are used, either directly or indirectly, to help determine reward outcomes. That is, the appraisal results are used to identify the poorer performers who may require some form of development, counselling or, in extreme cases, demotion, dismissal or decreases in pay. By the same token, appraisal results are used to identify. the better performing employees who should get the majority of available merit pay increases, bonuses, and promotions.

Staff Turnover

Some staff turnover is inevitable and beneficial, but too much is costly. These costs can be broken down into:

The costs of leaving: The payroll and the personnel administration of the employee leaving.

Recruiting new staff: The money and time spent on interviewing and any placement fees involved.

On-boarding: The training costs of new employees, the unproductive time while the new employee is learning the skills required and any induction costs for the new employee.

Indirect: The potential loss of revenue because of decreased levels of customer service.

Apart from the significant economic impact of an organisation losing any of its critical employees, there is also the knowledge that is lost with the employee's departure. This is the knowledge that is used to meet the needs and expectations of the customers. These are not tangible and will not show on the company‟s accounts, but are evidenced through a lack of skills which can in the long term reduce profit.


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Turnover can be self-perpetuating in that it affects the morale of those who stay. Turnover also causes inefficiencies, not least because of the disruption caused by resignations and the gap between leaving and appointing a new starter.

Better management of employee turnover involves assessing the amount and types of turnover that are acceptable within the particular employment sector, exploring possible reasons for turnover and considering what can be done to retain more staff.

Defining the Issue

Turnover is defined as the number of employees who leave within a given period. It can be classified in three ways:

Employer controlled (dismissals, redundancies and early retirements)

Employee led (due to dissatisfaction of varying kinds)

Employer and employee uncontrolled (maternity leave, retirement, etc).

Retention involves managing in ways which encourage staff to remain in employment with the organisation. To do this you need to establish the extent of the problem.

Four main methods are used for calculating the turnover rate or „churn‟ of employees.

(a) Crude Wastage Index

The global turnover rate for an organisation, otherwise known as the crude wastage index, is the most frequently used measure. It is calculated as follows:

yearin employed number Average

yearin Leavers x 100

The advantage of this measure is that it is widely used, so comparisons can be made between companies.

However, it has severe limitations in including all leavers and ignoring

reasons for leaving

the department in which they worked

age

length of service.

Relying on this technique may leave you with an imbalanced workforce with, for example, all employees over 50 or under 30.

(b) Stability Index

The stability index is a frequently used additional measure, usually calculated in this way:

ago yearone employed staff Total

service s year'more or one w ithStaff x 100

(c) Cohort Analysis

Cohort analysis takes a group of employees who joined at the same time and tracks the way the group behaves over a period. The rate of leaving of this cohort can be plotted as a wastage curve.

(d) The Census Analysis

This method takes a snapshot of the total situation, rather than examining one group over a period. Leavers are studied in groups according to length of service and then plotted as a proportion of total staff in that group.


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One way of judging whether turnover rates are reasonable is to compare them against national, regional or industry figures. Regular sources of statistics include the surveys conducted by employer organisations such as the Confederation of British Industry, and the Chartered Institute of Personnel and Development. Employers can also turn to periodic studies by government of turnover in a particular sector. Some companies belong to informal employer networks where information on various personnel topics is exchanged.

Many organisations also monitor labour market trends to assess how these will affect their business. These include demographic factors such as age or geographic location; number of women, ethnic minorities and graduates in the workforce; and labour mobility.

Other external forces influencing staff turnover may include shortages of supply in some occupational groups, but internal factors are usually more significant. The work of motivation theorists is worth consideration here.

Motivation

There are a number of theories about motivation and these all feed into the issue of staff turnover.

Expectancy theory, for example, calculates motivation in terms of the effects of individual employees‟ expectations and preferred outcomes at the workplace. Expectancy is defined by Vroom as the degree of confidence in the likelihood of particular acts being followed by particular outcomes. Maslow‟s "hierarchy of needs" theory argued that people‟s needs range from physical needs to self-actualisation, with the next level assuming precedence once the preceding one has been satisfied. Herzberg distinguished between hygiene and motivation factors, with the former being, where they are absent, strong demotivators and the latter being those that motivate staff to higher performance and greater satisfaction. McGregor's behavioural approach emphasised the way in which management treat subordinates can affect motivation, with a perception that employees need to be directed and controlled (Theory X) being essentially demotivating whilst the promotion of opportunities for employees to make a significant contribution to work (Theory Y) being more likely to motivate.

It is important to consider the effects of physical or hygiene factors such as pay and working conditions on staff retention, but other issues are just as important in determining people's attitudes towards their employment.

Motivation factors vary with individuals but may include:

Working for an efficient manager

Thinking for yourself

Seeing the end result of work and gaining a sense of achievement

Being assigned interesting and challenging work

Being informed, listened to, and respected

Being recognised for effort

Having opportunities for development

Working with good and supportive colleagues

Feeling valued.

And of course there is often the question of pay.

Managing the Issue

Managing staff turnover to improve retention can lead to better recruitment, lower costs, improved morale and a better knowledge base. Staff turnover fluctuates with economic cycles and during a recession, for example, often falls as people become reluctant to change jobs in an uncertain financial climate. This may disguise underlying problems (such as


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dissatisfied staff or lack of new talent), so it is important to periodically consider underlying factors, even though turnover itself may not always be a problem.

The main method of finding out what the cause of poor or good staff retention is by asking. Organisations conduct an exit interview with leavers, or give them a questionnaire to complete. Although it can give a lot of insight into what is going wrong or right, it is not always reliable. When asked why they leave, staff usually cite poor pay. Sometimes this is a genuine reason but it can also be covering up a different reason.

Think Point

John has been working in the customer service department of Ajax plc for three years. He is bright and hardworking but does not get on terribly well with his new supervisor. Recently his application for promotion to team leader was blocked. John, obviously disappointed, looked for and found a new job working as a Customer Liaison officer for his local authority. The pay was only slightly more than he was getting at Ajax, but he also would be eligible to join a final salary pension scheme after six months. At his exit interview he told HR that he was leaving to get better pay and conditions.

Was this the real reason for leaving?

Sometimes, too, there are trends behind involuntary turnover. For example, a rise in health-related departures may give rise to concerns about health and safety at work.

Reward and Recognition

Research and experience shows that people thrive at work when they receive personal recognition for the work they do. Although everyone is expected to do their job well, recognition encourages and motivates them to exceed what is expected of them. Regularly rewarding and recognising members of staff when they do something right instead of waiting for formal appraisal opportunities or commenting only when they do something wrong can help to motivate staff. There are two main ways to recognise and reward good work contributions.

Informal Recognition

This takes very little planning, time or money. It is the spontaneous “Well done. That was tough but you handled it well” or “Thank you for putting in the extra time and effort to get the job done”.

It is these „little things‟ which demonstrate that effort has been noticed which can be so powerful. Things such as

Taking the time to write a personal note, or even simply sending an email, to say “Thank you”

Asking a senior executive to personally speak to a member of staff who has done a good job

Instigating a „Hall of Fame‟ to recognise and remember moments of excellence

Displaying letters from customers.

Formal Reward Programmes

This is the pre-planned company or department-wide system of providing tangible incentives to demonstrate those behaviours which the organisation values and wishes to encourage.


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Service interactions vary greatly and unexpected and challenging situations frequently arise. Since all of these situations and their required behaviours cannot be foreseen and specified in advance, a traditional incentive program is limited in its ability to create positive service interactions. This is because most incentive plans are of a “do this/get that” nature. While some behaviour such as “smile,” “greet the customer by name,” and similar behaviours can be defined, it is unlikely that all of the requirements of good service can be known in advance and incorporated into an incentive program.

Given these limitations of a traditional incentive system, straightforward financial „rewards‟ only have a limited effect and managers must determine other ways to encourage these positive service behaviours. Sign-on bonuses based on experience, as well as other monetary incentives initially attract many candidates to a position. The drawback is that incentive programs can often motivate employees for selfish reasons rather than for the good of the customer or the company.

One way to encourage positive, customer-focussed behaviour is by making employees feel valued. When employees feel valued by their organisation and by their manager, they are more likely to act in the best interest of the customer. Offering different incentives is another useful method.

The best reward and recognition programmes are simple and direct. Everyone should easily understand them. They should also see a direct connection between what they or their team does to serve customers or colleagues and their compensation. There should be a good balance between rewarding and recognising both current performance and improvements. If teamwork is important, then competitions should be used sparingly as they encourage a personalised rather than a collegiate response.

The one-on-one relationship between the manager and the employee is critical to reward and recognition. Employees must feel that their managers and the leaders of the organisation want them to be successful. This means they must really understand each customer service representative‟s goal for employment in the organisation and how they can participate to help them achieve it. For some CSRs, the driving force is to have a long and focused career. For others it is that the job offers the perfect hours and location to serve other priorities in their lives. Therefore a variety of reward and recognition methods will need to be used to ensure it has true worth and value for the employee.


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SUMMARY

The attraction and retention of key talent is increasingly pivotal to organisational success and the ability to achieve competitive advantage through people depends in large part on the composition of the work force. Recent studies conducted by the Royal Bank of Scotland show that, in addition to the recruitment costs themselves, the true cost of a wrong hire can be in the region of one to three years‟ salary, without even taking into account the opportunity cost of not having a high performer in the role. It is not just the time and resources involved in recruiting that create organisational costs; other impacts of a weak recruitment process that add costs can be:

Poor customer service

Lost business opportunities

The negative impact on co-workers‟ morale and productivity.

In this chapter we have examined

Recruitment and selection methods

How a good induction programme can help staff settle into their role

Using training and development to inculcate customer service values

The way reward and recognition systems can be used to foster customer excellence.

There have been several studies which point to a strong link between customer retention and staff retention. Therefore, ensuring an organisation has the correct Human Resource Management policies is an integral part of creating and delivering service excellence.


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Chapter 7

Managing Staff to Create Customer Service Excellence

Contents Page

Introduction 188

A. Work-related Stress 188

Stress in Boundary Spanning Roles 188

Stress and Work Performance 190

Causes of Stress at Work 191

Management Support 191

Dealing with Stress and Stressful Situations 192

B. Internal Marketing 194

The Internal Marketing Concept 194

Attitude Formation and Change 195

The Service Profit Chain 196

C. Employee Satisfaction 197

Job Enrichment 198

Job Enhancement 198

Delegation 199

Empowering Frontline Staff 200

D. Management Support for Boundary Spanning Roles 201

Managing Human Resources Efficiently 201

Staff Development 202

Motivation 205

Team Building 206

Summary 210

188 Managing Staff to Create Customer Service Excellence

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INTRODUCTION

In Chapter Six we looked in detail at how human resource policies help to attract people with the right skills and attributes into customer facing roles and briefly explored some of the factors which contribute to them staying with or leaving the organisation.

In 1994 a group of Harvard Business School professors published a paper which identified a clear link between company value and profitability and employee satisfaction. It began by stating: “….in the new economics of service, frontline workers and customers need to be the centre of management concern.” A well motivated and satisfied employee is more productive and gives high levels of service. This chapter will examine aspects of these important roles, which impact on the customer experience and the techniques managers can use to support frontline staff in delivering service excellence.

Boundary Spanning

Boundary spanning is a term which is often applied to customer service staff. A boundary spanning role has been described as “one that links an organisation with the environment in which it operates”. These roles are not just those within customer service departments, but include any which interface with customers or the public in general – so they would encompass sales staff, obviously, but also include display staff who operate on the sales floor of retail outlets during customer hours, security staff, catering staff and even delivery drivers or accounts staff if they deal directly with customer enquiries.

It is the task of people within these roles to create the links between the company and the external environment. To do so they must be motivated to both give the appropriate and relevant information required by the customer and to be good representatives of the organisation and its values. In this chapter these boundary spanners will also be referred to as frontline staff – anyone who interacts with the customer.

The importance of these frontline staff in the quality of any service encounter has already been examined in detail. Staff who are in regular contact with customers are faced with multiple challenges, on a daily basis, ranging from technical hitches to rude or inappropriate behaviour. It is the manner in which these challenges are dealt with and the degree to which staff can cope with these and other stresses of boundary spanning roles which distinguishes excellent customer service providers.

A. WORK-RELATED STRESS

Stress in Boundary Spanning Roles

Role conflict and ambiguity occurs as a result of inconsistent expectations and influences on the boundary spanners from the organisation and from the external environment. The „Two Boss Dilemma‟, a term coined in the 1980s, refers to this role conflict, which contact personnel feel as a result of a wish to meet the needs of two different groups – the customer and the organisation.

It has been recognised for a long time that staff in call centres are particularly susceptible to stress arising from role conflict and ambiguity. For call centre personnel, expectations of the organisation – expressed perhaps by the supervisor or team leaders emphasising operational efficiency – may clash with the demands of customers who want problem resolution. In many instances, the focus of the organisation is on technology to speed up and structure the process of customer interaction, not realising that a critical element of call centre employee performance is the level of satisfaction based on meeting customer expectations.

In many call centres there is a strong emphasis on the role that information technology plays in guiding employees through customer interactions, by selecting the appropriate path for

Managing Staff to Create Customer Service Excellence 189

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them to follow through so-called “screen pops” containing communication scripts. This closely resembles the production line approach to service delivery that has been effectively used in the fast food business. However, in many telephone service encounters, call centre employees have to deal with unusual and unexpected situations in which the emphasis on rules and regulations of the scripted approach lacks the required flexibility and discretionary behaviour needed to satisfy customers. One approach to mitigating the effects of this would be to allow employees the freedom to influence pace, working method and the sequence of tasks in dealing with customers. However, this is dependent on the culture and strategy of the organisation.

Furthermore, call centres are typically a setting in which electronic performance monitoring takes place. The number and length of calls, what is known as „talk time‟, is measured through Automatic Call Distribution (ACD) technology and customer service representatives (CSRs) have been found to experience work overload, insufficient time between calls and computer failures, which all contribute to a dissatisfaction with their ability to give a good customer experience.

Call centres are the most visible environment for boundary spanning roles. However, in more general customer facing jobs, one of the problems most frequently associated with boundary spanning is role conflict. A boundary spanner interacts with different stakeholder groups and each group has particular expectations about the boundary spanner's role, including how they should act, what values they should express and what interests they should represent. Given that each group of stakeholders – customer, supplier, internal colleagues – has different values and interests, the boundary spanner is likely to experience conflicting expectations of how to fulfil his/her role. The individuals may suffer from stress due to the difficulty of satisfying all parties, the suspicion shown to them and the inherent ambiguity of their role. The stresses involved in trying to satisfy these different demands can have dysfunctional effects on both the individuals in the role and their relations with others.

Salespeople, customer contact/service employees and other boundary spanning staff often experience high levels of role ambiguity because they:

operate between the firm and its environment

produce individual solutions often to non-routine problems

experience differing role expectations from inside and outside the organisation.

As well as the above, there are a number of other sources of stress which can demotivate boundary spanning employees. One study of cashiers working in a supermarket highlighted two main sources of stress which can apply to most frontline activities and roles.

Difficulty forming social networks – Many organisations discourage frontline staff from chatting with each other. Whilst this may result in staff giving undivided attention to customers, it also prevents them from developing strong social networks with colleagues. The lack of a social network in the workplace may lead to feelings of isolation among staff members.

Formal customer-employee relationship – The nature of the relationship between frontline staff and customers is quite formal and constrained at in terms of their role, even though they may operate in a friendly manner. Therefore, the employee is often restricted from engaging in much conversation with the customer, even if they are regular or long standing. Along with the restriction placed on staff speaking to each other, this can isolate the employee further.

It is no wonder, then, that personnel who are operating in boundary spanning roles are prone to high levels of emotional burnout.


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Stress and Work Performance

Each individual is exposed to a range of stressors both at work and in their personal lives, which ultimately affect his or her performance. Pressure at work can be positive and lead to increased productivity. However, when this pressure becomes excessive, it has a negative impact.

Stress is said by some to be a good thing, for themselves or others, as it promotes excitement and positive feelings. If these are the effects then it's not stress as defined here; rather the excitement and stimulus derived from working hard, in a controlled and manageable way towards an achievable and realistic aim.

Stress in the workplace affects the performance of the brain, including memory, concentration and learning, and reduces performance and productivity. Individuals perceive themselves as being unable to cope and not to possess the necessary skills to combat their stress. It also makes people ill and is widely acknowledged to be one of the main causes of absence from work.

Figure 7.1: The link between stress and performance

In one US study as many as 40% of workers described their jobs as very stressful. While not a scientific gauge and not measuring serious stress health problems, this gives some indication as to how prevalent work related stress is. An American poll found that 89% of respondents had experienced serious stress at some point in their lives. The threat from stress is perceived so strongly in Japan that the Japanese even have a word for sudden death due to overwork, 'karoushi'.

Stress leads to staff attrition. The statistics on CSR turnover make depressing reading. According to a 2004 study, the annual turnover among call centre CSRs was between 33 and 200 per cent. Simply put, the less stress accompanying the call centre job, the longer you'll to be able to retain staff. More relaxed agents will also cope better with their work and provide exemplary service, which means customers will be more satisfied.

In the UK over 13 million working days are lost every year because of stress. Stress is believed to trigger 70% of visits to doctors and 85% of serious illnesses (UK HSE stress statistics, 2009). Stress at work also provides a serious risk of litigation for all employers and organisations, carrying significant liabilities for damages, bad publicity and loss of reputation. Dealing with stress related claims also consumes vast amounts of management time. So, there are clearly strong economic and financial reasons for organisations to manage and reduce stress at work, aside from the obvious humanitarian and ethical considerations.

Performance

high

low

low

high

Pressure

Boredom Anxiety

Area of optimum

performance


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Causes of Stress at Work

Stress is caused by various factors, not all of which are work related (which incidentally does not reduce the employer's obligation to protect against the causes of stress at work). Causes of stress, known as stressors, come in two categories: external and internal:

External stressors – physical conditions such as heat or cold, or stressful psychological environments.

Internal stressors – physical ailments such as infection or inflammation, or psychological problems such as worrying about something.

It is easy to see that work can be a source of both external and internal stressors for example:

Bullying or harassment, by anyone, not necessarily a person's manager

Feeling powerless and uninvolved in determining one's own responsibilities

Continuous unreasonable performance demands

Lack of effective communication and conflict resolution

Lack of job security

Long working hours, particularly where work responsibilities and pressures disrupt the life-work balance (diet, exercise, sleep and rest, play, family-time, etc).

Office politics and conflict among staff

A feeling that one's reward is not commensurate with one's responsibility.

It is often thought that only people in high level, past-paced jobs such as top executives or entrepreneurs suffer from stress. Yet research has shown that stress may well be experienced as a result of not feeling in control, and the lack control that frontline employees often have over their position and how they interact with their customers may result in difficulties of this kind. All human beings like to be in control of whatever situation they are in and the service encounter is no different. Complaints or other problem solving processes may be well developed within an organisation, but there will always be times when frontline staff will be unable to provide the solution a customer is looking for.

The locus of control in the service setting is often a source of tension and therefore stress. One way to minimise this is to establish and maintain high levels of motivation in customer facing staff by developing a focus on internal marketing (see next section).

Customer Related Stress

One of the biggest factors leading to stress in boundary spanning roles is conflict with customers. The vast majority of people in these roles enjoy their work and genuinely want to help customers find solutions. However, customers can often get frustrated at organisational policies or processes, and take out their frustration on CSRs.

There is also a class of customer – often referred to as „dysfunctional customers‟ – who intentionally or unintentionally, overtly or covertly, act in a manner that in some way disrupts otherwise functional service encounters. With the objective of gaining faster, superior, or even free service, such customers use service encounters in a dysfunctional manner (at least from the perspective of service providers and other customers). Such customers have a particular personality tendency which can turn any customer encounter into a conflict.

Management Support

The key tenet of health and safety law is that employers must not put staff in situations which pose a risk to their health and well being. This concept is well understood and practiced where employers recognise physical situations such as not exposing staff to faulty equipment


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or to the possibility of slips and trips. It is less well practiced when the health and well being of staff are put at risk from exposure to customers' aggression.

When problems arise with customers, the manager is the one who has the potential to diffuse the situation or to exacerbate it. Whether the conflict is with an internal or external customer, the manager‟s role is to ensure the smooth running of operations to achieve business success and, therefore, ultimate responsibility for resolving conflict rests with them.

The conflict may arise from the customer‟s perception of poor service. Well trained boundary spanning staff can usually ensure this does not happen very often, but when the situation is beyond their ability to bring things to an acceptable resolution, they need to feel sufficiently well supported by their manager to be able to ask for assistance. Setting clear guidelines for staff in regard to the scope and boundaries of their role will help with this.

Sometimes conflict spills over into aggressive behaviour. Managing the impact of customer aggression seems less clear cut than managing the risks to staff from equipment failure. However, the impact of being constantly on the receiving end of emotion loaded customer frustrations can be severe, including extreme stress and burnout.

Organisations have a legal duty to do all they can to support staff dealing with customer aggression. In practice, this means playing an active part in managing the behaviour of customers.

Organisations should look at the management of customers' behaviour at three levels:

(a) Individual level. – where the staff member may attempt to manage the conflict directly with the customer. Staff should be trained on how to recognise and separate the issue under discussion from the customer's behaviour and how to manage that behaviour effectively. If a staff member cannot calm the situation, the customer should be directed on to a supervisor or manager.

(b) Supervisor/manager level – where the supervisor or manager should aim to calm the customer down by again attempting to address the customer's behaviour. There is frequently an automatic down shift in a customer's aggression level when they perceive a 'win' by getting through to a manager. Unfortunately, this does not always improve their behaviour when they call or turn up at the 'frontline' next time, particularly if they perceive their aggression worked first time round.

(c) Organisation level – where if the aggression persists or is repeated regularly (daily or weekly), the supervisor/manager should involve senior managers. Decisions taken at this level might include requesting that the customer only communicates with the organisation in writing, or speaks with a manager only, or attends a specific location to access the service, or in extreme circumstances, the service might be withdrawn.

Supervisors or managers can assist team members in handling problematic customer service situations or conflicts effectively by helping them see the other point of view and developing mutually beneficial solutions to issues. Wherever possible, managers should allow team members to resolve the issues on their own and intercede only when the problem or conflict threatens important objectives or key relationships.

Dealing with Stress and Stressful Situations

In this modern world it is difficult if not impossible to change stressful situations. However, what we can do is change and reduce our exposure to those stressful situations and the way we deal with them.

Reducing conflict

Is all conflict bad?

No necessarily – there can be constructive and destructive forms of conflict.


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Building trust in a team of frontline workers means encouraging constructive conflict. Constructive conflict is not about shouting at each other, but more about putting individual points of view about issues. It can help to define the power relationships within a team, focus attention on individual contributions, bring emotive and irrational arguments out into the open, resolve longstanding conflicts, enhance problem solving and act as an emotional safety valve.

Destructive conflict, where team members are allowed to air personal grievances in a non-structured manner, destabilises relationships, leads to a polarisation of views and positions, undermines focus on common objectives, leads to negative and defensive behaviour, and leads to win/lose conflicts in which emotion becomes more important than reason.

Managers of customer facing teams can mitigate the instances of destructive conflict by setting „ground rules‟ for voicing opinions and constructing regular meetings in a way which encourages team members to discuss problems in a positive way that seeks solutions rather than just identifies issues.

Anger management

The term 'anger management' is widely used now and is simply an aspect of managing stress, since anger in the workplace is a symptom of stress. However, it can have very serious effects on team spirit and is very distressing not just for external customers, but also for those within the organisation.

Anger is often stress in denial and as such, is best approached via one-to-one counselling by properly trained professionals. Training courses can convey anger management and stress reduction theory and ideas, but one-to-one counselling is necessary to turn theory into practice.

Management of anger and any other unreasonable emotional behaviour and the stress that causes it, can only be improved if the person wants to change, so awareness is the first requirement. Some angry people take pride in their anger and don't want to change; others fail to appreciate the effect on themselves or others. Without a commitment to change, there's not a lot that a manager or employer can do to help; anger management is only possible when the angry person accepts and commits to the need to change.

De-stressing

The key to de-stressing in the moment is getting away from or removing yourself from the stressor. This can be physically removing yourself or just finding a distraction which takes your mind away from the situation.

Some people call this meditating, or finding a sanctuary. It is often associated with „whacky‟ or „new age‟ practices, but in fact it is a technique that for thousands of years has been helping people to manage periods of stress. Developing new habits, which regularly remove you and distract you from stressors and stressful situations and pressures, is essentially how to manage stress on a more permanent basis.

Humour

Most people like to laugh but humour is more than telling jokes or forced frivolity. Every individual has a sense of humour; what they find funny or enjoyable. This will have been influenced by family, community and personal taste. Moreover, every organisation has a sense of humour. This will have evolved from the collective humours of the individuals making up the organisation and from external sources such as the media, culture and the nature of the business. Humour has the power to make people feel good. When you inject fun into the workplace it simultaneously improves morale, reduces stress and facilitates team building.


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With the prevalence of telecommuting and workgroups scattered geographically, the challenge of furthering working relationships, bonding and building camaraderie is real and sharing humorous moments can help to foster a positive team ethos.

Boundary spanning employees undertake work that can be classified as „emotional labour‟. In other words, they may have to express emotions whilst with a customer that they may not necessarily feel, both about the customer and any technology that they are using to mediate the conversation. This often leads to user stress, a poor customer experience and high staff turnover. People who use and are surrounded by positive humour in the workplace generally have higher levels of job satisfaction than those who don‟t.

In one university study, 300 workers from 20 different countries were surveyed about their individual use of humour in the workplace and how they perceived the humour used by their colleagues. The results showed a strong correlation between a worker‟s job satisfaction and their level of productivity. These findings contradict a common misconception that people who enjoy themselves and make jokes in the workplace, are not as productive.

Humour is one of the greatest and quickest devices for reducing stress. It works because laughter produces helpful chemicals in the brain. It also gets your brain thinking and working in a different way – it distracts you from having a stressed mind set. It is about taking what you do very seriously while not taking yourself and the situation very seriously.

Although humour in the workplace can have beneficial effects, not all humour is good humour. However, the challenge is to interject appropriate humour and fun into workplaces without hurting others or seriously undermining the company. Joke telling, practical jokes and once popular activities such as paint-balling or go-karting, are subjective. They run a high risk of offending or creating negative competitiveness. Employment law, presently sides with the offended – if you think there has been a slight, then there has, whether the other person meant to offend or not. Perceived offence is grounds for litigation. Humour, therefore, with its subjective nature, is a minefield, but the rewards far outweigh the risks.

B. INTERNAL MARKETING

Internal marketing was first proposed in the 1970s as a solution to the problem of delivering high quality service. It is a concept aimed at developing customer-conscious employees who will consistently deliver superior quality service to the external marketplace.

The Internal Marketing Concept

Internal marketing is a structured approach to informing and educating employees throughout the organisation regarding the organisation‟s mission, the benefits of the product or service being sold and the expectations of the organisation‟s customers. The term is used widely as a means of highlighting commitment to improving the effectiveness of the services offered by an organisation.

Internal marketing aims to:

Ensure the entire organisation understands each department‟s function within the organisation

Market the organisation‟s products or services to its own employees (as internal "customers")

Improve employee routines through internal motivation

Improve customer consciousness by changing the behaviours and attitudes of the frontline employees,

Note that it is not a departmental function or a marketing function, but rather a whole-organisational activity.


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Internal marketing has been defined as the approach used by the organisation to ensure that customers receive the highest standard of service as a result of employees‟ commitment to service quality. It achieves this through the attraction, retention and motivation of service minded employees, and ensuring that those employees are consistently conscious of delivering service quality. It should be supported by management with open information exchange, recruitment and training, and employee decision making. In this way, employees will realise the importance of their position within the organisation and develop into satisfied individuals.

Job satisfaction is important to internal marketing as, if the internal customer is satisfied in the service position, it is believed that this satisfaction will be transferred to the external customer. Job enhancement, which is examined in more detail later in this chapter, is integrated into the model to highlight the importance of allowing the employee some flexibility in decision making during the service encounter.

Service is provided for people by people, so if the people providing the service are wrong, the service is spoiled. As a consequence, the role of people providing customer services is especially important. Put simply, the quality of customer service depends entirely on human factors and can be summed up as:

Initiative – anticipating problems and opportunities and not just reacting

Personality – customers will evaluate the friendliness, understanding and co-operation of the person providing the service

Expertise – customers expect members of organisations to be thoroughly familiar with their product and industry

Commitment – customers appreciate individual attention to their needs and complaints

Efficiency – resolving queries and problems to the customer‟s satisfaction quickly

Listening – customers will be expressing the needs the organisation is trying to meet.

How well they perform in each contact with their customers depends on a number of factors. Their training will have an impact, as will their knowledge, skills and motivation but one of the strongest influences on their performance with the customer will be attitudes.

Attitude Formation and Change

An attitude is a person's predisposition to respond in a particular way to something. All of us form attitudes towards just about everything and, while attitudes are relatively stable over time, they can be influenced and changed.

Attitudes have three components: emotion, knowledge and behaviour. They are all important in developing a customer focussed attitude amongst boundary spanning staff.

Emotion

To influence staff feelings towards customers – the emotional component of attitude – they must feel empathy and respect for the customer. One way to achieve this is by viewing the customer-employee relationship from the perspective of the customer. Storytelling about experiences as customers and role playing customer interactions put employees in the customers' shoes.


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Case Study 1

At a recent workshop, a colleague told a story about shopping in a branch of a national chain of department stores. She asked an employee for assistance in finding the children‟s department. She did not feel particularly appreciated or well served when he did not stop or even turn to her. He merely pointed and carried on with putting the goods on display. I asked her if there were any signs or maps indicating where the children‟s department was. She replied, "Maybe. But he was right there. He could have helped me!" Later, another colleague commented that most customers never bother to read signs.

By recalling the previous story, we were able to shift feelings about customers from judgemental to empathy. Positive feelings towards customers can be infectious in a customer focused organisation, so it is important to share and discuss positive stories.

Knowledge

The knowledge component of attitudes is information and beliefs. Employees need to understand the relationship between customer satisfaction and business success. They also need skills to deliver good service and the opportunity to practice their service skills away from customers. As people develop more information and skills in a particular area, they often have more positive feelings towards it. Building knowledge affects feelings and changes attitudes.

Behaviour

Because of our feelings and knowledge about something, we develop behavioural tendencies. Positive feelings about customers combined with skills will likely cause staff behaviour to be service oriented. We can further influence staff attitudes by developing and reinforcing behaviour based service standards. For example, employees can help develop a programme of recognition and rewards that reinforces and sustains high levels of service. As people are rewarded for certain behaviours, they feel more successful and build more knowledge about what works and what doesn't. Behaviour influences both feelings and knowledge and the dynamic nature of attitudes will therefore continue to improve service as part of a virtuous circle.

The Service Profit Chain

The basic idea behind the service profit chain is that employee satisfaction increases when they are equipped with the right skills and tools to do a good job of satisfying customers. If employees are satisfied, they are less likely to leave and more likely to be loyal to the company. This, in turn, fuels an increase in employee productivity and this translates into higher levels of service to customers, who become more satisfied and loyal. As it has been estimated that just a small increase in customer loyalty produces an increase in company profits, it is clear to see that ensuring employees are managed well to be motivated and engaged with their work has a direct and tangible benefit to the company.

The following diagram illustrates this interdependency.


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Figure 7.2: The Service Profit Chain

Note that it is described as a chain because each „link‟ can either strengthen or weaken the entire sequence.

C. EMPLOYEE SATISFACTION

The previous chapter dealt with recruiting, selecting and training people for a customer facing role. In the Service Profit Chain this is linked with good job design to achieve employee satisfaction. So what do we mean by employee satisfaction?

One working definition is: “An employee’s rational and emotional reactions to how their organisational and external environment impact their ability to accomplish goals that are important them.” This focuses on the employee‟s priorities and how the organisational and external environments impact on the employee‟s ability to address those priorities. This has several important implications:

Employee satisfaction is not just about what you do for employees, nor the managerial or physical environment in which they work. It is about how an employee reacts to their environment and how that environment helps or hinders them in addressing their own priorities.

Different employees will have very different experiences of relatively similar work situations based on their individual priorities, motivations, what they are looking for from their job, etc.

Employees‟ experiences must be designed to reinforce the specific motivators, enablers and triggers required to produce group behaviours that are consistent with and generate a high quality customer experience.

First, it is essential to create an environment where people enjoy working – frontline staff must be basically satisfied with their jobs to give good service to customers. If we follow Maslow‟s hierarchy of needs, then they must feel that their employment is reasonably stable, they are respected and fairly compensated for their work and that they „fit in‟ to a team.

Internal Service Quality

Employee Satisfaction

Employee Retention

Employee Productivity

Profitability

External Service Value

Customer Satisfaction

Customer Loyalty

Revenue Growth

Operating Strategy and

Service Delivery System

workplace design

job design

employee selection and development

employee rewards and recognition

tools for serving customers

service concept: results for customers

retention

repeat business

referral

service designed and delivered to meet targeted customers' needs


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However, employees sometimes have unrealistic expectations for workplace satisfaction and can become disillusioned. Being clear with current, new and potential employees about the nature of the work and the realities of the workplace can help employees develop realistic expectations.

Job Enrichment

Maslow‟s hierarchy of needs is a well known model for identifying the various factors which contribute to staff motivation. The very basic issues which influence these feelings of satisfaction are safety and security. In job terms, this equates to having a safe environment where they do not feel they will come to harm and the stability coming from having a legal contract. This encourages employees to feel it is worth committing to the organisation.

As social beings, people also have a need to identify with the group they spend their time with. So in the workplace, people feel more settled if they get to know their colleagues and feel they „fit in‟.

Moving up the hierarchy from safety and social considerations, once these are met people will normally seek out what Maslow termed „esteem‟ and then „self-actualisation‟. Satisfaction of this need produces feelings of self-confidence and control. They begin to feel that they are useful and have some effect on what happens in their environment, i.e. the workplace.

There are three basic changes to the way boundary spanning roles are designed, which can achieve this; they all enable the employee to have some control over operational decisions. We call this job enrichment and it involves one or more of the following:

Job enhancement

Delegation

Empowerment.

You may hear the word „empowerment‟ used interchangeably with „job enhancement‟ but they are two separate and different ways of broadening the work of boundary spanning staff. The purpose of empowerment is to free someone from rigorous control and give them the freedom to take responsibility for their ideas and actions, releasing hidden resources that might otherwise remain locked away by giving them:

More responsibility and accountability

More control over the work they do.

Whereas job enhancement is more about designing work and workplaces where people can have:

A greater variety of tasks

An opportunity to learn new skills.

Job enrichment can motivate any member of staff whether frontline or not because it offers the opportunity for personal growth and autonomy. Research shows that job enrichment programmes usually achieve increased productivity. Therefore, by enriching the job role, organisations can have a positive impact on external service value.

Job Enhancement

One of the key factors in good job design is job enhancement, most notably promoted by psychologist Frederick Herzberg in his 1968 article "One More Time: How Do You Motivate Employees?" This is the practice of enhancing individual jobs to make the responsibilities more rewarding and inspiring for the people who do them.


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Job enhancement is when an employee is given new responsibilities or tasks that give him/her the opportunity to develop his/her skills or abilities. For example, a cashier at a grocery store could be taught how to prepare the weekly work schedule. As a result, they could learn about scheduling and have the opportunity to use different work related documents like timesheets, for example. At its simplest, it is a broadening of the tasks which an employee undertakes as a normal part of their role. It can include cross-training, so that employee A, for example, learns to do the job of employee B. This not only gives the organisation a degree of flexibility in task allocation, but can also foster a team spirit through a better understanding of what colleagues do.

Job enhancement is an effective way to help employees improve their essential skills by, for example:

better preparing employees for promotions and organisational changes

helping address skill shortages

improving performance

increasing job satisfaction

increasing motivation and self-confidence

reducing employee turnover and stress

supporting a healthy learning culture in the workplace.

With job enhancement, you expand the set of tasks that someone performs, providing more stimulating and interesting work that adds variety and challenge to an employee's daily routine. However, job enhancement on its own only offers a horizontal improvement to a role. Some view it as merely a way for organisations to increase employees‟ workloads and its introduction has to be handled with care so as not to produce the opposite effect to what is intended – demotivation and increased stress. Therefore, managers need to consider carefully the capacity and attitude of their staff towards diversifying tasks.

Delegation

For any job enrichment programme to work effectively, managers may need to feel able to delegate tasks to their team members. Cross-training can add value and interest to a role, but when a line manager allows an employee to perform a task normally done by them, it sends a very strong message about the value of the employee and recognises their skills and ability in a very visible way.

What do we understand by the term delegation?

To delegate is to entrust a representative to act on your behalf.

For delegation to be successful there must be a relationship of trust and respect between the manager delegating the goal or task and the team member to whom it is delegated. The manager must be sure that the employee to whom the task has been delegated is able to act appropriately – for example, by either completing the task independently or by asking for help when required. So the first question a manager should ask themselves is whether the task is within the capability of the individual.

If the answer is „No‟, is that because the individual does not have the right skills or experience? If so, then training may be required to fill in any gaps. If the answer is „Yes‟, then the manager needs to ascertain whether the individual would find it challenging and rewarding. It is true to say that not everyone wants greater responsibility at work, but most people welcome it and will take up the opportunity if presented to them.

When allocating the task, it is important to make it very clear what is to be achieved and the scope and limits of authority must be specified. Delegation should never be used by a manager as a tool for passing on jobs they dislike doing. The rule is – never delegate


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anything you are not prepared to do yourself. Like all job enrichment, delegated tasks are an opportunity for the staff member and the organisation. The manager is still responsible for the successful completion of all tasks which contribute towards their team or department‟s objectives and targets, and cannot avoid that responsibility by getting others to do the tasks for them.

What are the advantages of delegation for employees and for managers?

For managers they include:

Increased productivity by their team

More time to work on and develop new projects and initiatives

Increased loyalty to the organisation by staff

Better working relationships with members of their team.

For frontline staff they include:

Increased job satisfaction

Increased feelings of recognition

Opportunities for future promotion and personal growth

Opportunity to become an expert in some specific tasks.

Empowering Frontline Staff

Delegation does not automatically mean that a member of staff has been given more authority. Delegation can be about asking staff to carry out some of the more routine tasks that a manager has to do, such as administration or attendance at informational meetings. However, it can be about giving staff additional responsibility and authority to act on their own initiative – for example, involving staff in customer service decisions. Frontline employees in particular have direct information about what customers want. By including employees in the process of designing and implementing a customer service strategy, for example, an organisation can help motivate them to make it work, as they will be more likely to consistently offer exceptional service if they have been instrumental in defining it.

A further example, of employees being empowered to give excellent service would be authorising every employee to handle a situation in which a customer is unhappy with a product he or she bought, without having to tell the customer "I'll have to get the manager"; or "I'm not sure that our policy allows that." Circumstances will obviously mean that not all service encounters can be handled independently; there will be some occasions when the line manager will need to get involved. However, research has shown time and again that allowing staff discretion to resolve difficulties, up to a certain value, or to add value to an encounter by offering small additional benefits, not only makes customers feel better, but staff too, as it recognises this element of trust and skill in the employment relationship.

When employees are motivated and trained to meet customer needs, they can be trusted to deliver a service that works in the interests of the customer and for the good of the company. For example, delivery staff for a large chain of department stores in the UK are empowered to offer an immediate exchange or refund if the goods delivered are not in perfect condition. They carry with them electronic devices which „talk‟ to the organisation‟s main computer and can immediately log the faulty goods and arrange for a fresh delivery or for the customer to be credited with the purchase price. Similarly, staff in many hotels and restaurants are empowered to offer complimentary drinks or other perks to guests who have experienced difficulties with their booking or the service received.

For the company, empowerment means improved performance. For employees, it means greater job satisfaction. For customers, it means there is always someone available with the skills and authority to meet their needs.


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The basis for empowerment is trust in employees. Empowered employees have ownership of their jobs and have the authority to use their best judgment in performing their work. They are accountable for their performance and therefore feel respected by the company.

Training may be necessary, if some of the work to be delegated is unfamiliar, or the staff member is unused to taking operational decisions. Formal training may be the best solution, but many organisations and staff find that coaching is a better method as the individual can be „trained‟ on the job by an experienced person and so learn not only the processes and information, but also the attitude and approach required to deal with situations.

D. MANAGEMENT SUPPORT FOR BOUNDARY SPANNING ROLES

One of the main stressors discussed at the beginning of this chapter is that of role ambiguity inherent in the requirement to satisfy not just the customer, but also the organisation. Because role ambiguity is negatively associated with important work-related outcomes such as performance, job satisfaction and organisational commitment, managers and supervisors/team leaders should be concerned about the amount of role ambiguity these critical employees experience.

Boundary spanners, like all employees, look to their line manager for guidance in handling work related tasks, including the amount and types of role ambiguity experienced. Underlying all supervisory activities are the line manager‟s communication practices.

Because communication is composed of information and instructions, management communication practices can offer a powerful means to address employee role ambiguity and job outcomes by providing support, clear direction and up-to-date, sufficient information.

We saw in an earlier chapter that communication is a two-way process. Organising regular team meetings, where staff have the opportunity to ask questions and share information and experiences, formally circulating news and information to all team members, and giving constructive and individual feedback as a norm, rather just than in response to a situation, can all mitigate role conflict and the stress which results.

There are other measures a manager can take to support frontline staff.

Managing Human Resources Efficiently

Of all the resources available, human resources are the most important. Properly trained and experienced employees are the organisation‟s important assets and without them the organisation would not be able to achieve its objectives effectively.

Managers must ensure that all team members are fully occupied throughout the working day. A team that is under worked actually uses more of the budget than it contributes in workload, but on a personal level it can be just as dispiriting and demotivating to have little to do in a day as being overworked. An overworked team can burn out and then the workload becomes backed up causing difficulties. The objective is to ensure that the team can work at the best possible capacity, although some periods of overwork and under work may be unavoidable. This is a particular challenge in work areas such as call centres or customer service departments where the flow of customer traffic can vary according to seasonal and economic factors, the introduction of new products or services, or a number of other factors outside the control of the customer facing staff.

There are many strategies available to deal with work flow issues which may be used singly or in combination, including:

Redistribution of work – changing projects or assignments, or adjusting elements of the task


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Modifying the team‟s working hours – for example, through additional shifts or overtime

Removing members from the team and reassigning staff to other teams.

Staff Development

Competencies are now seen as a key underpinning for training and development activities for customer service staff. It is widely recognised that there are eight core areas of competency which can be developed in boundary spanning staff;

Interpersonal skills and empathy

Communication

Handling stress

Active listening

Team-working

Problem-solving and complaints-handling

Product and organisation knowledge

Commitment to aims and values of organisation

Coaching

Coaching is a proven method for developing skills, potential and performance. It means working one-to-one with the learner and:

establishing the most appropriate approach to learning

encouraging the learner to experiment

providing encouragement

guiding the learner with objectives in mind.

Coaching is targeted at partially trained individuals, rather than novices and is a process through which skills and knowledge are built up over time with progressively more complex tasks being introduced. The main aim of coaching is to develop people‟s work performance by taking every opportunity to:

delegate work – particularly when it is challenging, new or different for the person to whom the work is delegated

increase the level of responsibility that someone assumes

provide the right environment and conditions in which someone can learn and practice new skills and knowledge.

Are Coaching and Mentoring the Same?

At first glance you may think that coaching and mentoring are the same but they are not. A coach is trying to help someone how to learn, whereas a mentor advises someone on their role.

Coaching is usually about moving someone from “can‟t do” to “can do” and often involves the transfer of specific skills and knowledge from one person to another within an agreed coaching plan.


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Are Coaching and Training the Same?

Coaching differs from training in a number of ways:

Traditional forms of training Coaching

Wholesale transfer of new skills – for example, to facilitate change in procedures or new systems.

Helps to eliminate specific performance problems.

Programmes are usually not tailored to individual needs. Delegates complete standard modules and there is little room for tailoring the programme to account for existing knowledge.

Centres on the needs of the individual, usually on a one-to-one basis.

Often used for new employees. Used to develop the individual.

Not always sufficiently similar to the „live‟ working environment to ensure effective skills transfer.

Performed in the „live‟ environment. Develops skills within the work context.

Best suited to transfer of knowledge and certain skills rather than the development of personal qualities or competencies.

Develops skills of an existing employee to meet new targets.

Some of the occasions a manager may use coaching rather than a more formal training programme are when a team member:

lacks confidence

is not performing their job well or to their full potential

has been trained, but has problems using what has been learnt in the workplace environment.

The Manager as a Coach

The most effective coaches are people who:

bring out the best in the individuals they manage

encourage people to develop skills and attributes by giving them new experiences

set challenging, but achievable goals for their team members

are tolerant of genuine mistakes because they understand the learning cycle

provide encouragement, praise and support.

To do this, managers must have a good understanding of the individuals in their teams and their performance levels. They must also understand where the problems are. Having regular conversations with customer points-of-contact to solicit ongoing feedback on performance and customer service is one way of achieving this.

It is important to remember that some people feel uncomfortable or embarrassed about asking for support internally and so they go without. However, all of us need guidance and motivation at different times in our lives and managers should recognise the importance of remaining positive particularly in difficult situations or circumstances.


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This is particularly important in providing feedback on progress during review sessions. Coaches need to display a positive attitude which will provide the support necessary for the learner to achieve his/her potential. The essential factors when giving feedback to an individual are:

Ensure privacy and confidentiality – find a suitable venue for your discussion where you will not be overheard by other members of the team

Emphasise the positive aspects of a team member‟s performance – use what is called the „Praise Sandwich‟ when delivering negative comments, where the negative comment is the „filling‟ between two pieces of more positive comment

Keep the comments objective – always refer to the learner's performance and not his/her personality.

Case Study 2

Helen is the manager of the Customer Service department of a large organisation. She has been coaching Linda in negotiation skills for some time and now feels the time has come for Linda to negotiate in a real-life situation.

They meet with a recruitment agency supplier to renegotiate a long-standing contract for Customer Service Representatives. Linda is in charge of the meeting and achieves the deal she and Helen agreed beforehand. However, when the supplier leaves, Helen says “You were very lucky to get away with that. Why didn‟t you do what I told you to do? Stick to what I tell you next time.”

This is not a helpful approach. Linda achieved the desired outcomes but in her own way; she was, after all, in charge of the meeting. Helen‟s criticism, which is really about her own self-importance, is neither useful nor helpful. A much better approach would have been to say, “Well done, you handled that really well!” “What made you decide to differ from the tactics we had agreed?” This would have given Linda the opportunity to explain her thinking and as a result Helen:

(a) may have learned something herself

(b) may have been able to explain to Linda why she was fortunate on this occasion, but that on another occasion with a different supplier, Linda‟s approach may not work.

Developing a Coaching Plan

Coaching someone doesn‟t just happen overnight. Coaching, at its best, addresses the whole person and works towards a sustainable change in behaviour. The emphasis is on producing action; delivering results, improving performance and delivering more fulfilment.

There are four important features of formal coaching to be considered:

Goals are agreed by both parties

Timescales are agreed

Both the coach and the team member are committed to the process

Both understand their roles.


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Typically, coaching takes place face to face, on the telephone or via e-mail. Often the relationship starts with a face-to-face meeting and is supplemented by weekly or fortnightly telephone calls. Email can also be a useful resource between official sessions.

Once you have identified that there is a need for coaching either to correct an element of performance or to support further development of a team member, the next step is to prepare a coaching plan. This should include:

(a) Targets – the specific and measurable improvement or development you want the individual to achieve in performance.

(b) A time target by which the learning/improvement should have taken place.

(c) Monitoring and review points at which progress can be tracked with the learner, including discussions and log sheets.

The coaching techniques you plan to use to achieve the targets set should also be considered in the plan. Examples of coaching techniques include:

Work shadowing – arranging for the learner to work alongside or observe a more experienced member of staff, particularly those with a reputation for achieving customer satisfaction

Special opportunities – enabling learners to meet important clients or suppliers, putting someone forward for a special project team or facilitating visits to other branches or departments which have established a reputation for exceptional customer service.

Discussion – through question and answer and general conversation about the skills, knowledge or attitudes you want the learner to acquire, with the manager or with others to better understand how they have turned around problem customers (i.e. sharing success stories).

Role playing scenarios – in which you put forward a specific scenario to the learner which is then simulated with "actors" (often the manager or other staff) playing the roles. Such scenarios may cover common, or unusual, types of customer interaction and provide an opportunity to practice specific techniques such as active listening and taking notes when communicating with the customer. Learners can be encouraged to find a partner from among their colleagues to conduct „dry runs‟ with the partner sitting in as the customer, which helps build rapport and understanding between team members. Any such sessions should be followed by a review and debriefing session to ensure that learning is embedded within the individual and the team.

Motivation

Theories of motivation fall into three categories: reinforcement, content and process.

(a) Reinforcement

Reinforcement theories emphasise the linkage between individual behaviour and some specific outcomes to show how managers can alter the direction, level, or persistence of individual actions. The theories within this category suggest that the manager‟s job is to create a work environment that responds positively to individual needs.

Reinforcement theory states that behaviour that is rewarded is likely to be repeated, whereas behaviour that has been punished is less likely to recur. Reinforcement is an action that follows directly from a particular behaviour and can be used in a number of different ways:

Positive reinforcement strengthens desired behaviour by providing a reward – this can be in the form of compliments, additional money, promotion, etc.

Negative reinforcement can be seen as punishment for undesirable behaviour –a warning that this behaviour should not occur again.


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Reinforcement can work effectively, but in general, positive reinforcement is deemed to be the most effective action because behaviour that is rewarded is likely to be repeated.

(b) Content

Content theories profile different needs that may motivate individual behaviour. Basically, content theories focus on the physiological or psychological deficiencies that we feel a compulsion to reduce or eliminate. Four of the better known are Abraham Maslow‟s hierarchy of needs, Clayton Alderfer‟s ERG theory, Frederick Herzberg‟s two-factor theory and David McClelland‟s acquired needs theory. They are intrinsic theories, where the manager‟s influence on motivation is about creating the right environment for staff to feel valued.

(c) Process

Process theories focus on the thought or cognitive processes that take place within the minds of people and that influence their behaviour. The most well known theorist in this area is Victor Vroom and his expectancy theory, which correlated the importance of the reward with the amount of effort an individual was willing to sustain.

All motivation theories overlap in their promotion of the idea that all employees have different triggers for motivation and different levels of satisfaction with motivators. For example, one person may be motivated to work harder because her manager has often told her she does a good job whereas another needs the prospect of a promotion to put more effort into what she does. It is a common misapprehension that money motivates everyone and some would even state that it is the only motivator. Whilst most people would welcome a bonus or salary rise, financial rewards generally only work in the short term to motivate (it has been suggested that this is around three months). Once an employee gets used to the increase in cash, then they look for something else. Even studies among sales staff on commission consistently show that factors such as recognition can be a more powerful motivator than money.

Team Building

What are the benefits of team working?

A team is more than just a group of people who happen to work together. It is a group of people working towards common goals and objectives and sharing responsibility for the outcomes. Team building is the process of selecting and grouping team members effectively and developing good working relationships and practices enabling the team to steer and develop the work and reach their goals. Increasingly, a team may be composed of people drawn from different functions, departments and disciplines who have been brought together for a specific project.

One of the most common metaphors for team working is a sports team. It is the ability of the team to perform collectively which enables them to succeed where others fail, not because they have the best individual performers but because of their synergy.

Synergy means the whole is greater than the sum of its parts. Therefore, a team of individuals who are of average ability but who work well together may be better than a team that is made up of stars who lack team philosophy or the ability to work together.

However, a team can only possess synergy when the team members are themselves capable of playing the game. This means that they must possess the skills necessary for their particular role and they must understand the purpose of the game and the rules that govern it. Not only do team members need skills but they may also need to be specialists, since each position on the field will require particular qualities.

Specialisation enables people to perform the tasks they are most skilled at and to use the most appropriate equipment available, but a team made up wholly of specialists unable to


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stand in for others is weakened. Teams need players who can move positions, deputise or stand in for others and provide team flexibility. This is what we mean by multi-skilling. The extent to which team members should be completely interchangeable or simply able to stand in at short notice for emergencies, will depend on the type of process and level of skill required.

The key is to pick people with a mix of different skills which enable them, collectively, to fulfil all the roles necessary.

Team Roles

In the 1970s Dr Meredith Belbin and a team of management researchers at Henley Management Centre in the UK set out to try to understand why some teams were better performing than others. They identified various roles which needed to be filled by the team to achieve high levels of performance. These team roles were:

(a) Action Oriented Roles

Implementer – The implementer‟s strength lies in translating the team‟s decisions and ideas into manageable and practical tasks or actions.

Shaper – The shaper is goal directed, and this role requires a dynamic individual who boldly challenges others during discussions, can handle work pressures and has the courage to overcome obstacles.

Completer/Finisher – The completer/finisher is meticulousness with great attention to detail and the ability to meet deadlines.

(b) People Skills Oriented Roles

Co-ordinator – The co-ordinator‟s strength lies in enabling and facilitating interaction and decision making.

Team worker – The team worker is a good listener, being collaborative, co-operative, easy going and tactful.

Resource Investigator – The resource investigator‟s strength lies in being an extrovert who can develop contacts, communicate well, explore new ideas and opportunities and bring enthusiasm and drive to the team effort.

(c) Intellectual Roles

Planter – The planter is a problem solver with out-of-the-box thinking.

Monitor/Evaluator – The monitor/evaluator‟s strength lies in good judgment and good strategic thinking ability.

Specialist – The specialist is a dedicated and focused individual who likes to learn and constantly build his or her knowledge. The specialist likes to dig deep and is therefore a good resource who can contribute information and knowledge in a team situation.

A person can have strengths in more than one role and deficiencies or weaknesses in many of the other roles. For instance, a person can be a good implementer and a good co-ordinator, but a very poor completer/finisher. So nine roles does not mean that Belbin thought the optimum team size was nine!

Stages in Team Formation

Most teams pass through several stages of growth before starting to produce their best work. Building a team of customer orientated professionals is a challenging task at the best of times. Varying opinions are widespread, personalities are all distinctive and each person has a different way of leading. It is at that point that a theory or model helps us understand the developmental process of the formation of teams.


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In the early sixties, Professor Bruce Tuckman published a sequence model to help analyse and identify the process a group experiences as it grows and solidifies into a team. The stages are:

(i) Forming – as team members come together

(ii) Storming – as they work through the issues

(iii) Norming – as conflicts are resolved and working practices established

(iv) Performing – as objectives are achieved.

Call centre and other boundary spanning roles, such as internal sales teams, can often be transient. Team members have to get used to colleagues joining and leaving the team. Often cohorts will remain together during initial training (which could last anything up to 12 weeks) before moving into different teams „on the floor‟. Tuckman's model explains that as the team develops maturity and ability, relationships establish and the manager changes leadership style. Beginning with a directing style, moving through coaching, then participating, finishing with delegating and almost detached. By understanding these stages managers will be better prepared to detect what is going on and take appropriate action to help the team. Team members will better understand the interactions between other team members and their feelings and the recognition of feelings and resultant behaviours can lead to quicker resolution of issues and a more productive work team.

When a new member is introduced into a team, there will be period when the team goes through the same four stages as it integrates the newcomer. The can prove a daunting environment for a new employee; an established team will have its own culture and newcomers must be introduced with care and consideration. As well as the usual Induction items, the process can be eased by explaining established working practices and rules such as:

Decision making processes

Reporting channels and methods

Open and honest communication

Flexibility of team roles, for example, if the leader is seen not just as the leader, but also as a participating team member

Limits of authority.

In some circumstances teams may be unsuitable, for example, in an organisation with a culture of rigid reporting structures or fixed work procedures. Bear in mind that the formation of a team may not always be the best approach – for example, when one person has the knowledge, skills and resources to undertake the job on their own. Consider whether there is a need for a mix of skills and experience, the sharing of workloads, or brainstorming and problem solving. In such cases a team will be the best option.

Motivating the Team

What can the manager do to motivate team members generally?

Keeping the team informed is essential. Team members will want to feel fully involved in the organisation they work for and will take a professional interest in events and reports concerning the work that they do. A line manager must play a role in keeping them abreast of any developments that will affect them.

Being fair, when allocating or delegating work, gets noticed. A sure way to demoralise people is a perceived unfairness in task allocation – for example, “I get all the hard tasks, whilst Tanya gets all the easy ones”. Perceived inequality in assigning work is often interpreted as a difference in the position of one team member over another.


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Promoting the essential worth of the job makes a difference to staff attitudes. One of the functions as manager is to “sell” the value of the job they are doing to the team and point out ways in which the outcome affects others.

Successful team building can:

coordinate the efforts of individuals as they tackle complex tasks

raise and sustain motivation and confidence, as individual team members feel supported and involved

encourage members to bounce ideas off each other, to solve problems and find appropriate ways forward

help break down communication barriers and avoid unhealthy competition, rivalry and point scoring

raise the level of individual and collective empowerment

bring about commitment to and ownership of the task in hand.

One of the ways in which a customer service team can be motivated is to involve them in developing and improving the service, making the most of the expertise and knowledge of team members which might otherwise remain untapped.

Case Study 3

In one organisation which was experiencing problems with the way in which staff were interacting with customers by telephone, the manager set up a series of team workshops and customer service planning sessions aimed at:

Eliciting ideas for how to improve customer service without sacrificing confidentiality

Increasing customer responsiveness by asking them to identify ways in which they can be more responsive to callers

Enhancing their customer sensitivity by challenging them to experience their services from the customer's perspective.

Among the proposals made by team members and adopted were:

Making a list of what staff believed were the main problems experienced by customers, and then checking with customers whether these actually described their needs. Significant differences were identified.

Using a variety of contact methods for keeping in contact with and maintaining visibility with customers, including setting up reminders to check in with them (particularly key accounts) even when there are no specific problems or issues.

Specifically asking for customer feedback to verify improved service, and contacting customers one week after a complaint had been resolved to check on satisfaction levels.


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SUMMARY

Many organisations say that their employees are their most valuable resource, especially in a service environment. Customers often base their perceptions of the company on the quality of the interaction with service personnel. For this reason it is essential that frontline employees are motivated to consistently deliver a high quality service experience to the customer. Motivation is especially important when employees operate in a boundary spanning position, as this involves high levels of stress and burn out.


examined the role of boundary spanning staff in creating a positive customer experience

investigated methods for generating customer focused attitudes

assessed the challenges faced by customer facing staff, including stress and stressors

evaluated response mechanisms

recognised the pivotal role of managers in supporting frontline staff in the delivery of high levels of customer service.

Good working relationships, based on mutual trust and respect are the key to helping everyone in an organisation to give of their best, realise their potential and pull together for the benefit of all. Ultimately, this will lead to increased job satisfaction and improve organisational performance and importantly the customer experience.

Documents

L5 MCR Manual Advance Edition