Moments of Truth

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MOMENTS OFTRUTH

New Strategies for Today’sCustomer-Driven Economy

JAN CARLZON

MAIN IDEA

A company is defined in the minds of its customers as the composite total of every moment of truth -- those short periods when thecustomer interacts with the company or one of its employees.

The best approach to delivering consistently high-quality moments of truth lies in building a customer-driven company. The essentialcharacteristics of this type of company are:1. The employees who interact with customers have the authority to make decisions on behalf of the company.2. Middle managers who work to manage resources so the frontline employees can be more effective.3. Corporate leaders who develop a vision of where the company should be heading and provide inspiration.4. A flat organizational structure where real-world experience from frontline employees is learned from and built upon.5. A willingness to look at everything solely and exclusively from the same perspective a customer uses.6. A commitment to narrowing the focus of the company to the delivery of exceptional service.

Bring all of those elements together and a customer-driven company can achieve some very significant business success --regardless of external financial conditions, competitive challenges or any other factors.

1. Jan Carlzon’s Business Career Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2

The concepts and philosophies of the customer-driven company were not developed through academicstudies or an analysis of a broad range of companies. Instead, they were developed in Jan Carlzon’sexperiences turning around three Scandinavian companies:1. Vingresor -- a vacation package tour developer2. Linjeflyg -- Sweden’s domestic airline3. Scandinavian Airlines --Sweden’s international airline

2. What is the ‘‘Moment of Truth’’ For Any Business? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 3

The moment of truth for any business occurs whenever a customer comes into contact with an employeeof the company. These person-to-person contacts -- which may be only 15 seconds in length -- determinewhether the business will fail or succeed. In essence, the company is created afresh in the mind of theconsumer whenever a moment of truth occurs.

3. Characteristics of the Customer-Driven Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 4

A customer driven company is built on the foundation that its only true assets are satisfied customers,each of whom wants to be treated like an individual.

4. Building a Customer-Driven Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5

In essence, building a true customer-driven company requires a pure customer orientation -- looking atyour business solely from the customer’s point of view, and using that to decide what line of businessyou’re truly in.

5. Managing a Customer-Driven Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 6

The real litmus test of a customer-driven company is whether or not the employees are prepared to makedecisions on the basis of the information available to them -- and then to be responsible for theconsequences of those decisions.

6. Employees and a Customer-Driven Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 7

A customer-driven company will always have a flat organizational structure because everything thecompany management does will be focused on enhancing the capabilities of the frontline staff rather thanbuilding a huge pyramid hierarchy.

7. Communications and the Customer-Driven Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8

In a customer-driven company, the employees can’t be ordered to do things differently. Instead,employees must be informed, persuaded and inspired by the company’s vision. In short, the company’svision has to communicated effectively to employees, and then leave them to take responsibility and makedecisions that are consistent with that vision.

Moments of Truth - Page 1

1.Jan Carlzon’s Business Career Highlights

Main Idea

The concepts and philosophies of the customer-driven companywere not developed through academic studies or an analysis ofa broad range of companies. Instead, they were developed inJan Carlzon’s experiences turning around three Scandinaviancompanies:1. Vingresor -- a vacation package tour developer2. Linjeflyg -- Sweden’s domestic airline3. Scandinavian Airlines --Sweden’s international airline

Supporting Ideas

The management challenges faced in each of these threecompanies were significant and daunting.

Vingresor

When Jan Carlzon was appointed president at age 32, hesuddenly found himself in charge of 1,400 employees.

He started out trying to make every decision himself, until afriend told him to be himself rather than trying to act like amanagement guru. Instead, Carlzon started focusing oncreating an atmosphere where all employees could be moreproductive.

When the company found itself in a market slump, JanCarlzon suggested increasing the service level andsqueezing costs. The entire company was reorganized tohandle customers more efficiently and flexibly.

Within a year of Jan Carlzon taking over, Vingresor earnedthe largest profit in the company’s history -- and continuedto grow and expand from that point onwards.

Linjeflyg

At age 36, Jan Carlzon was offered the presidency ofLinjeflyg, Sweden’s domestic airline -- which had lost $3million the previous year.

Carlzon changed the company’s emphasis from beingproduct-oriented to being customer-driven. One of his firstacts was to cut fares -- to encourage people to fly more anddrive less.

Carlzon’s four-point strategy for Linjeflyg was:1. Use fixed resources better to increase revenues.2. Establish great customer service as a new standard.3. Spread responsibility among more people.4. Streamline administrative processes.

The company introduced a new marketing strategy, builtaround the theme, "All Sweden at Half Price!", and the"hundred Note" -- meaning standby tickets were offered for100 Swedish kronor -- approx. $20. The promotion was sosuccessful passenger number rose by 125,000 in the firstyear alone.

Without investing in any more airplanes, Linjeflyg’srevenues increased from $84 million to $105 million in thefirst year Carlzon was there.

Scandinavian Airlines

After two years at Linjeflyg, Jan Carlzon was appointed CEOof Scandinavian Airlines (SAS). This coincided with SASposting its first ever loss of $20 million after 17 years ofprofitability.

Instead of cutting fares and squeezing costs which had beenso effective at Linjeflyg, Carlzon developed the strategy ofproviding frequent business travelers with the best servicein the market.

With that strategy in mind, Carlzon increased expenditureon anything that contributed to the goal of serving thebusiness traveler. In fact, Jan Carlzon recommended thatSAS spend an additional $45 million and increase operatingcosts $12 million a year to position SAS to better servebusiness travelers.

At the same time, SAS also moved decision makingresponsibility to the frontline staff -- who were now expectedto make decisions based on their own good judgment ratherthan on whatever was written in the rule book.

With the entire company focused on delivering service to thefrequent business traveler, drives were made to simplifyeverything and eliminate any policy or procedure which didnot fit in with the vision and objective of serving the businesstraveler.

SAS dropped first class sections on its planes, and offered"EuroClass" -- which was promoted as first-class service atfull-fare coach prices. Movable partitions were installed inairplanes, so the EuroClass size could be increased orreduced to match demand. In addition, better check-infacilities, airport lounges, food and more comfortable seatswere offered.

Jan Carlzon also stunned the airline industry by mothballingSAS’s flagship Airbuses and 747s, instead keeping olderDC-9s in the air because they best served the needs of thebusiness traveler.

Within a year of adopting the new strategy, SAS revenuesincreased by $80 million -- even in the middle of a seriousindustry slump in which other international airlines lost a totalin excess of $2 billion. Within 3 years, SAS had increasedfull-fare passengers by 23-percent and discount passengersby 7-percent, even though the overall market was stagnant.

SAS has continued to increase its passenger loadings andwin numerous awards for the service it delivers. Thecompany is now well positioned for the challenges that maylie ahead in an era of deregulation and increasedcompetition.

Despite all the progress made with SAS, Jan Carlzon hasrefused to become a prisoner of success. He has, therefore,continued to set new goals and new challenges for SAS. The company has enthusiastically moved forward into anera of deregulation and increased competition. Carlzon hascontinued to push the envelop in customer serviceinitiatives, as well as in numerous other areas.

SAS’s new vision? To build the most efficient airline inEurope.


2.What is the ‘‘Moment of Truth’’ For Any Business?

Main Idea

The moment of truth for any business occurs whenever acustomer comes into contact with an employee of the company.These person-to-person contacts -- which may be only 15seconds in length -- determine whether the business will fail orsucceed. In essence, the company is created afresh in the mindof the consumer whenever a moment of truth occurs.

Supporting Ideas

During a moment of truth, frontline employees effectively‘‘become’’ your company in the eyes of your customers.Therefore, it is imperative that these employees should haveresponsibility for the ideas, decisions and actions they take,rather than relying on rule books or instructions issued by peoplewho have no awareness of the actual situation.

In fact, if a frontline employee only has a 15-second window ofopportunity within which a satisfied customer can be created,they don’t even have time to go to their manager for advice onhow to solve a customer’s problem. Frontline employees mustbe placed in a position to do this themselves.

The traditional approach to business organization has been:

The problems with this business structure are:

1. The people who know the most about what customers wantare the frontline employees -- who are also the mostpowerless to respond.

2. The centralized nature of decisions being made at topmanagement level means they soon become overwhelmedby the number to be made. Consequently, all they end updoing is becoming preoccupied with making decisions ratherthan meeting customer needs.

3. The middle managers aren’t really doing any managing --they’re just glorified messengers relaying decisions madehigher up.

If a company is to be determined by the quality of its momentsof truth, it needs to be organized a little differently. It’sorganization will need to be:

By restructuring their company organization in this way,companies can develop strategies to maximize the quality ofthose moments of truth which occur thousands of times on everybusiness day.

In doing so, companies create a sustainable competitiveadvantage based on creating satisfied customers.

Key Thoughts

‘‘We are at a historic crossroads where the age of customerorientation has arrived, even for businesses that have neverbefore viewed themselves as service businesses.’’

-- Jan Carlzon

‘‘Wiser consumers and new competitors are turning up the heaton traditional businesses. To deal with this market-leddiscontinuity, we must revolutionize our organizations.Specifically, the customer-oriented company is organized forchange. It will simply not survive with a detached, administrative,top-down leadership.’’

-- Tom Peters

‘‘The executive who shares my views on human resources willrealize that he must give all of his employees an opportunity tounderstand the company’s guiding vision. Only then can theyreally pitch in and give all they’ve got. Only then can each andevery one assume full responsibility for his share of the overallgoal. Only then can you unleash the mighty energy generatedby a group of enthusiastic people.’’

-- Jan Carlzon

Top Management

Make the decisions for the company

Middle Management

Convert decisions into instructions, rules, policies and orders.

Frontline Employees

Carry out instructions, rules, policies andorders under supervision from managers

Customers

Top Management

Responsibility to create an environment inwhich frontline employees function well,

communicate the company’s vision,determine the resources needed to realize

that vision, teach and inspire frontlineemployees to achieve greatness.

Middle Management

Responsibility for analyzing problems that occur, managing resources

and support of the frontline employees.

Frontline Employees

Authority to respond to the needs andproblems of individual customers.

Customers


3.Characteristics of the Customer-Driven Company

Main Idea

A customer driven company is built on the foundation that its onlytrue assets are satisfied customers, each of whom wants to betreated like an individual.

Supporting Ideas

The defining characteristics of a customer-driven company are:

1. The company takes risks -- by executing ideas and strategiesthat nobody else has dared to try, but that are consistent withthe objective of creating satisfied customers.

Most of these ideas will be neither new nor original. Acustomer-oriented company, however, will apply thesestrategies with a passion and consistency never beforebought to the commercial arena. As a result, impressiveresults can be realized.

2. The company considers timing very carefully. Ideas aredeveloped and executed that are in sync with externalconditions, rather than fighting against them.

3. The company never vetoes a good idea simply because theyassume it can’t be done, or that regulatory permission willnot be forthcoming.

4. The company follows its intuitions about moves in themarketplace, and takes ‘‘leaps of faith’’ at appropriate times,even in the absence of hard empirical data -- and the conceptof taking risks must be right through the entire organization,not just at the top.

5. Frontline staff have the security to make decisions that entailsome risk if they are working towards creating a satisfiedcustomer. The company, similarly, must be able todistinguish between risk-taking and incompetence on thepart of its employees.

6. The company measures its results in terms of reference thatare important to the customer -- not in terms that areimportant to the company. In other words, the companymeasures success strictly in terms of what was promised tocustomers.

Example: The SAS air cargo experienceSAS used to believe most of its cargo shipments arrived ontime. When the company tested itself with 100 packages, itfound in reality most of the packages arrived about four dayslate.

To improve, a new reporting system was developed calledQualiCargo, which measured the efficiency of the systemfrom the customer’s viewpoint:- Was it easy to send the package?- Did it arrive on the promised date?- How long did it take to get processed at the destination?

Then, a QualiCargo report was issued each month,comparing the results achieved at each cargo processingoperation throughout the company.

As a result, bottlenecks were identified and eliminated. Staffbecame better trained on their roles, and the flow-on effects.And the areas of top priority were clarified and emphasized-- so staff priorities could more accurately match actualmarket requirements.

7. The company has in place an efficient feedback system fordetermining whether or not the decisions being made by thefrontline employees are, in fact, accomplishing thecompany’s objectives. This not only provides guidance forother employees, but also provides regular cues for futuredecisions.

Key Thoughts

‘‘I have a saying that helps shake off psychological obstacles:Run through walls. Your goal may seem impossible, but don’tstop trying to accomplish it until someone really says no. Thewalls towering before you may not be as massive as they appear.Maybe they’re not stonewalls at all but cardboard facades thatyou can run straight through.’’

-- Jan Carlzon

‘‘Having a clearly stated strategy makes the execution mucheasier. It is a matter of courage, sometimes bordering onfoolhardiness, combined with a large portion of intuition. Thesecharacteristics may be impossible to acquire but, if possible, canalways be developed further. ’’

-- Jan Carlzon

‘‘Unfortunately, many corporate executives are noticeablylacking in intuition, courage and conviction. The hierarchicalcompany is traditionally headed by people highly skilled ineconomics, finance or other technical expertise. These peoplemay be extremely bright, but they are often disastrous decisionmakers and implementors. They find 10 solutions to everyproblem, and just as they are about to decide which one to try,they discover five more. In the meantime, opportunities havepassed them by. They are faced with entirely new problems andmust start the process all over again. Sometimes I suspect theythink up new alternatives in order to avoid taking the crucialleap.’’

-- Jan Carlzon

‘‘We had caught ourselves in one of the most basic mistakes aservice -oriented business can make: promising one thing andmeasuring another. Clearly, we needed to start measuring oursuccess in terms of our promises. A decentralized company ismuch more in need of good measurement methods than is ahierarchical, centralized organization.’’

-- Jan Carlzon

‘‘By measuring the right indicators, we were able to identify aproblem area and find a solution that improved service. Themajor improvement in precision and speed did not, however,result from visible measures such as these. Rather, it arose fromthe cargo people’s new understanding of what is important toSAS customers. The new strategy and measurements arecombined with financial information, so everyone can clearly seethe financial consequences of dozens of routine decisions. As aresult, people can now focus on the activities that are profitable.’’

-- Jan Carlzon

‘‘People sometimes make mistakes, but there was nothing wrongwith that. Mistakes can usually be corrected later; the time lostin not making a decision can never be retrieved.’’

-- Jan Carlzon


4.Building a Customer-Driven Company

Main Idea

In essence, building a true customer-driven company requires apure customer orientation -- looking at your business solely fromthe customer’s point of view, and using that to decide what lineof business you’re truly in.

Supporting Ideas

Many business executives use this planning process:

For example, an airline may make a commitment to buy a newtype of aircraft. The company will then adapt its operations tomake sure the new aircraft is being utilized efficiently.

A customer-driven company, by contrast, approaches theplanning process from an entirely different direction. First, thecompany decides what type of business line it actually wants tobe in.

For example:

If the decision is made to pursue a product-oriented philosophy,the three-step planning process given above should be pursuedwith enthusiasm. On the other hand, a decision to follow acustomer-oriented philosophy will require a different planningprocess altogether.

For customer-oriented companies, everything needs to beevaluated from the customer’s perspective. That is, all actionsof the company are intended to make it easier for customers toderive value from the product offerings, rather than what will bestsuit the company.

For customer-driven companies, the planning process is:

Once a company is dedicated to letting its customer’spreferences guide its decisions, it then has to have the selfdiscipline to say no to good ideas that don’t fit. The more thecustomer-driven company focuses on its goals and avoidsdissipating energy on tangential efforts, the better it will do.

The business paradox is that by serving their target customersmore closely and gearing everything to their needs, mostcustomer-driven companies find they are in a stronger positionto be able to serve discretionary markets in innovative ways aswell.

In other words, by focusing, the company becomes stronger andcan ultimately end up serving other markets at the same time.However, if the company sets out trying to be all things to allpeople, it ultimately ends up getting nowhere.

Key Thoughts

‘‘In contrast to a production-oriented company, where decisionsare motivated by the product and technology considerations, thecustomer-oriented company begins with the market and lets itguide every decision, every investment, every change.’’

-- Jan Carlzon

‘‘When you are oriented towards your customers, you areprobably in the business of providing them with a service inaddition to the "hardware" itself.’’

-- Jan Carlzon

‘‘Once you determine who your customers are, you can decidewhat business you’re really in. This sounds easy, but for thosesitting at the top of the pyramid -- and not working on the frontlines, in day-to-day contact with the customer -- it can be tricky.’’

-- Jan Carlzon

‘‘Never forget the hardest part of making good business deals isto resist making bad business deals.’’

-- Simon Spies

‘‘The new leaders’ tools are a clear, concise vision andconsummate communication skills -- with soul.’’

-- Tom Peters

Set corporate goals

Decide on tactics and resources to deploy

Hope that enough consumers will buy to make it profitable

Analyze customer needs

Develop products to meet needs

Put the entire resources behind delivering those products profitably

Are Ford and General Motors in the automobilebusiness, or are they really in the business ofproviding people with the means to transport

themselves safely over long distances?

Automobile Business

The focus should be onstate-of-the-art design,

aerodynamics, fueleconomy and everything

about the car’s technology.

Transport Business

The focus should be onproviding access to safe,reliable motor vehicleswithout the hassles andcosts of car ownership.

Customer-drivencompany

Product-drivencompany


5.Managing a Customer-Driven Company

Main Idea

The real litmus test of a customer-driven company is whether ornot the employees are prepared to make decisions on the basisof the information available to them -- and then to be responsiblefor the consequences of those decisions.

Supporting Ideas

In a conventional company:

1. The chief executive feels compelled to make all the decisionshimself or herself, because presumably they are the onlyperson in the organization who can see the big picture.

2. The number of decisions that could be made were limited bythe amount of time the CEO had available.

3. The CEO takes responsibility for making a decision, butresponsibility for implementation rests with other peoplewithin the business organization.

In a customer-driven company:

1. Everyone already knows the company objective -- to createa satisfied customer.

2. The CEO’s role is to formulate a specific business strategytaking into account the company’s resources.

3. That strategy is then communicated throughout the entirecompany consistently.

4. Responsibility and authority to make the day-to-daydecisions necessary to carry out that strategy are thenpassed to the frontline employees.

5. Measures need to be established (and made known to allemployees) by which results can be evaluated to determinewhether or not you are heading in the right direction.

Clearly, the customer-driven company requires more time andeffort than if a CEO does everything himself. The payoff,however, is that by creating an atmosphere in which everyone’sideas can flourish, the company will be in a far stronger long-termposition.

That’s not to say that a customer-driven company is a corporatedemocracy. Decisions are not made by consensus, and whileeveryone will be given the opportunity to have some input intothe decision making process, ultimately it is the responsibility ofthe board of directors, the CEO and the top management teamto design the business strategy the company will pursue. Oncethat decision is made and responsibility has been delegated, allother employees are then required to align their jobs with thatstrategy. If they don’t have that underlying loyalty, they shouldleave the company.

What are the signs that a customer driven company is startingto take shape within an organization?

1. People outside the top management team will come forwardwith creative ways to add value to the business.

2. Outside consultants with specialist knowledge will be boughton board from time to time to provide fresh ideas and differentperspectives.

3. The company will implement all the good ideas that it hasavailable, irrespective of their source.

4. Frontline employees will feel comfortable making decisionsand accepting responsibility -- because they understand the

company’s vision and specific objectives, and their role inrealizing that vision.

To empower employees with real responsibility and authority,the company must be organized using a horizontalorganizational structure, with three layers:

The advantage of the three layered approach is that the frontlineemployees -- who have the most contact with customers -- havethe greatest amount of influence, responsibility and authority.

Key Thoughts

‘‘A leader is not appointed because he knows everything and canmake every decision. He is appointed to bring together theknowledge that is available and the create the prerequisites forthe work to be done. He creates the systems that enable him todelegate responsibility for day-to-day operations.’’

-- Jan Carlzon

‘‘The board of directors appoints the president and the topmanagement team to design, present and pursue a businessstrategy. Only after the leader has fully developed this strategyand communicated it to everyone else can he begin delegatingresponsibility -- as he must do in a customer-driven company. Aleader is one who creates the right environment for business tobe done.’’

-- Jan Carlzon

‘‘It makes no difference who comes up with good ideas.’’-- Jan Carlzon

‘‘An individual without information cannot take responsibility; anindividual who is given information cannot help but takeresponsibility.’’

-- Jan Carlzon

‘‘Many agree this philosophy contains tremendous potential, sowhy do so few actually try to implement it? In truth, it is a veryambitious and sometimes elusive approach that conflicts withthe ingrained views of work roles. It requires extraordinarypatience, perseverance and courage to see it through. ’’

-- Jan Carlzon

Layer 1 -- Frontline Employees

This is where specific decisions should be made about howto run the company in accordance with its goals and

strategies and corporate vision.

Layer 2 - Managers

Responsible for planning, the allocation of availableresources -- in essence everything that is required

to enable employees to carry out the strategy.

Layer 3 -- Leaders

Responsible for guiding the company, anticipating futurethreats and identifying future opportunities. People at thislevel establish goals and develop strategies for achieving

those goals in the real world the business operates in.


6.Employees and a Customer-Driven Company

Main Idea

A customer-driven company will always have a flatorganizational structure because everything the companymanagement does will be focused on enhancing the capabilitiesof the frontline staff rather than building a huge pyramidhierarchy.

Supporting Ideas

In the ultimate extension of the customer-oriented businessphilosophy, every employee becomes self-managed -- simplybecause every employee has the authority required to:1. Analyze the customer’s needs.2. Decide on the best course of action.3. Follow through and see that action is carried out.

Naturally, achieving this in an existing organization will not bewithout its own dramas and challenges. Most often, the groupthat has to make the largest change of mindset in moving froma hierarchy to a flat organization are the middle managers. Thechange of their role from supervisors to support roles is quitedistinctive and potentially dramatic.

To help this transition:

1. Given middle managers viable alternatives. Their traditionalrole was always to interpret and enforce the company’s rulesand procedures. In a customer-driven company, their role isto support the frontline staff, each of whom having theauthority to do whatever is required to create a satisfiedcustomer in those "moments of truth".

2. Middle managers have to have the ability to take thecompany’s broad objectives and break them down intosmaller objectives the frontline people understand and canaccomplish.

3. Middle managers become coaches, teachers, motivatorsand educators rather than supervisors.

4. Middle managers mobilize resources so frontline staff canfunction efficiently. They may even go to the length ofrearranging previously budgeted expenditure when requiredto assist the frontline staff to function better.

5. Middle managers perform a critical role in any company --they see to it that employees are recognized for exceptionalservice. In doing this, they provide bundles of energy andmotivation to the frontline staff.

In a company which has a flat organizational structure, theneed to reinforce the self-worth of frontline staff is particularlyacute. Middle managers are the key people for delivering thatrecognition and appreciation.

6. The issue of promotions must be handled carefully andthoughtfully. In a hierarchy, talented people frequently getmoved from positions that are important to other positionsthat have no real substance, only higher pay.

In a customer-driven company, by contrast, the flat pyramidmeans there’s no real chance to move up -- only sideways.What is a sideways move? It means taking on moreresponsibilities. By being placed in a position to achievemore, an employee has an increased opportunity to be proudof his or her work.

While this may sound a questionable idea, in practice it worksvery well -- as long as you have a customer-driven company.

Key Thoughts

‘‘It may seem like a mere word game to call everyone a"manager", but I use the term to remind my staff -- and perhapsmost those at the upper levels of the old pyramid -- that theirroles have undergone a fundamental change. If the topexecutives who were once the managers must learn to beleaders, then those people out in the front lines must make allthe operational decisions. They are the ones who most directlyinfluence the customer’s impression of the company duringthose "Moments of truth".’’

-- Jan Carlzon

‘‘I urge others to take a close, hard look at their ownorganizations. If you can flatten your own pyramids you will becreating a far more powerful and resilient organization that notonly serves customers better but also unleashes the hiddenenergy within your employees. The results can be absolutelyastounding.’’

-- Jan Carlzon

‘‘Unfortunately, in many companies the only thing that getsattention is a mistake. Whether you do a good or a poor job -- oreven if you do nothing at all -- no one will bother to comment.Everyone needs to feel that their contributions are noticed. Thework we do and the recognition we get for it contribute to our selfesteem.’’

-- Jan Carlzon

‘‘Of course, praise generates energy, but only if it is justified.Receiving unmerited accolades can be an insult that revealsindifference on the part of the bestower.’’

-- Jan Carlzon

‘‘In a company that has flattened the pyramid, going "up" isn’tnecessarily an improvement. I wanted people to feel like theywere being promoted when they received an assignment thatgave them an opportunity to accomplish something important,even if it did not come with a fancy title and all the trappingsassociated with a high rank.’’

-- Jan Carlzon

‘‘Simply put, the richest reward of all is being proud of your work.’’-- Jan Carlzon

‘‘We all need rewards and, further, we work better when we cantake pride in the work we’re doing. Of course, competent peopleare paid well for their contributions, but receiving well-definedresponsibility and the trust and active interest of others is a muchmore personally satisfying reward. I believe that byunderstanding what the employees want from their jobs, whattheir aims are, and how they want to develop, leaders canheighten their employee’s sense of self worth. And the powerbehind healthy self-esteem generates the confidence andcreativity needed to tackle the new challenges that areconstantly around the corner.’’

-- Jan Carlzon


7.Communications and the Customer-Driven Company

Main Idea

In a customer-driven company, the employees can’t be orderedto do things differently. Instead, employees must be informed,persuaded and inspired by the company’s vision. In short, thecompany’s vision has to communicated effectively toemployees, and then leave them to take responsibility and makedecisions that are consistent with that vision.

Supporting Ideas

Some practical ideas on how this communication process canbe enhanced within a customer-driven company:

1. Have the CEO get out talking to the frontline staff. Ideally,around one-half of the CEOs time should be allocated to thisbusiness activity -- it’s that important.

2. The company leaders have to convey a message that isplain, straightforward and unambiguous. This is usually bestaccomplished by simplifying repeatedly until you reach theessence of what is trying to be conveyed.

3. The company leaders cannot be shy. They must be bold,leading from the front. They need a little showmanship tosucceed in dramatizing what the company is all aboutdelivering.

4. The company leaders should be aware that everything aboutthem -- their lifestyle, their dress at work, their behavior -- hassymbolic value to the employees. Therefore, leaders shouldwatch how they act, because that will become the defactostandard throughout the entire organization. Leaders literallydemonstrate the style others in the organization will follow.

5. In addition to communicating with employees, companyleaders should also liaze closely with unions and the boardof directors. Both groups need to understand the big pictureissues in order to do their jobs well, and to make acontribution.

6. The board of directors should be used to determine thecompany’s strategy -- not for approving minor decisions.Ideally, you have a board so you can harness the collectivebusiness wisdom of each board member. That only occurswhen they see the bigger picture.

7. In a customer-driven company, the role of the unions isfundamentally different. Since the frontline workers aremaking all the decisions, the traditional adversarial role of theunion is changed into a:1. Cooperative, participatory role with management.2. An audit role to ensure laws and agreements are enforced.3. A negotiating role to help shape future arrangements.

Unions that understand and accept these new roles becomea valuable resource to the company leaders.

Key Thoughts

‘‘In a decentralized, customer-driven company, a good leaderspends more time communicating than doing anything else.’’

-- Jan Carlzon

‘‘The most powerful messages are those that are simple anddirect and can serve as a battle cry of sorts for people across allorganizational levels.’’

-- Jan Carlzon

‘‘Unless you can communicate your business strategy clearly toyour customers, you might as well not have developed it at all.’’

-- Jan Carlzon

‘‘Setting a good example is truly the most effective means ofcommunication -- and setting a poor one is disastrous! Mosttraditional managers drape themselves in imperial trappings. Butwhen the customer comes first, you simply can’t afford to dothat.’’

-- Jan Carlzon

‘‘By freeing the board of minor decisions and the paperwork thataccompanies them, the president can enlist the board membersas sparring partners in strategically crucial matters and capitalizeon the potential that their vast business experience holds for thecompany.’’

-- Jan Carlzon

‘‘Early and frequent involvement is important in working with boththe unions and the board. If they understand and embrace thecompany’s overall vision, not only will management’s relationswith them be more cooperative but their participation andcontributions will become truly invaluable to the neworganization. Rather than getting derailed by isolated decisionsor single activities, they will be able to view the big picture andassume even greater responsibility.’’

-- Jan Carlzon

‘‘I believe that the only way any group or individual can takeresponsibility is to understand the overall situation. I routinelyshare the knowledge that I have about where the company isand where it should be heading with the board, unions andemployees. For the vision to become reality, it must be theirvision too.’’

-- Jan Carlzon

‘‘I make no claim to having discovered a unique approach todoing business. Certainly, leaders at many other companiesappreciate the importance of ascertaining the business climateand aligning the company’s goals, strategy and organizationalstructure with it. They too set ambitious objectives and talk aboutdecentralization as a means of achieving them. In fact, manybelieve that they have already decentralized their organizationsand tell their employees, "You can make independent decisionsnow". But I challenge these leaders as to whether they’repassing real responsibility and authority on to their employees.Until they do, and until they choose and communicate a goal thatevery employee can rally around, the leader never truly divestshimself of central control and the employees always need theboss to intervene on matters large and small.’’

-- Jan Carlzon

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