The Art of Staying Small by Bernard Rosauer

The Art of Staying Small Achieving profitable growth in and beyond an era of economic instability.

Why is it that wholesale changes in customer strategies are often preceded by a realization that undesirable results are imminent? How many organizations create perfect customer experiences on a consistent basis? What is a 'perfect' experience and how can it be measured? How many businesses truly understand the anatomy of their customer experience factories well enough to be able to execute specific, targeted improvement efforts successfully at any level? We continue to ask these questions as we begin to make our way through one of America's most challenging economies and biggest-ever shift in workforce demographics. Given the reality of both most would agree that the need for answers and action is immediate to say the least. We believe that purely tactical efforts to overcome the problems will weaken a company's (and perhaps even an entire industry's) ability to compete through and beyond these challenging times. To best manage the steep decline and regain long-term profitability, smart companies will make sure that their core strategies address the current challenges and remain resilient to others over the long haul. Those that prepare for the talent crunch and handle today’s economy right will succeed and even thrive when others struggle to keep their heads above water. This paper contains a 3-part prescription for furthering the service firm's success in the challenging years ahead.

'Colonial Neglect' Let us draw a parallel between businesses that experience significant growth and the unique emergence and growth of our very own country, the United States of America. Every young company is not unlike the early colonization of our eastern shores – a small group of people working together to create a new life…. even willing to fight for independence, growth and success. Opportunities seem plentiful. There's a spirit of personal accountability and teamwork in the air. The mood is good. The plan is to prevail against seemingly overwhelming odds and to create a better place in which future generations will flourish. On the other hand, in modern times, wholesale defensive plays in businesses made to avoid almost certain failure is like the shared ineffective and perhaps even negligent behavior that results in homeless children in the streets across this wealthy nation of ours. The recent economic correction is really no more than an extension of these behaviors that have impacted the poor in our communities for as long as most of us can remember. Somewhere between being small and growing large we see organization after organization lose their edge. As growth occurs they often seem to lose focus on the very needs that they had hoped to meet in the first place. Interestingly, the people on the front-lines in business and in society most often do what comes naturally (for better or worse) given the circumstances or conditions that surround them. This begs the question: Who has the most control over front-line circumstances or 'conditions' throughout the growth of a business or society? And why is broader success so hard to achieve and sustain? Whether it is in society or in business, as an organization grows it’s leaders have most of the control. And most often, it is the highest ranking leader's failure to manage the back-end of large scale growth combined with secondary leader's (middle and lower-level leader's) natural human tendency toward personal ambition that

results in the neglect of its front-lines. Until we reach the top, it seems, a good lot of us are unable to fully put aside our personal agendas for the sake of doing what's truly best for the unit, department, company or society. We believe that these tendencies are mostly natural and not premeditated. Whichever the case, they are controllable. In business, the organization's front-lines often seem to get overlooked as leaders seek more growth (sales) and often more complex successes without growing its attention to the retention and organic growth of existing customers at an equal pace. To make matters worse, an imbalance that heavily favors new growth left unchecked often leads to more complexity in areas that were previously viewed correctly as simple. As indicated earlier, beginning almost immediately, we will begin to see a very steep drop off in the availability of knowledge-workers. They will begin to retire quickly. In fact, by 2012 we are expected to have only onethird the college graduates needed to replace the retiring knowledge workforce. That's only 4 years away! This will have a huge effect on a company's ability to retain customers, much less grow. We believe that there is a way to both keep customers and grow profitably despite the changing economy and talent landscape. It is precisely to address those modern challenges that this position paper is written.

'Condition Control' ‘Attitude', written by Charles Swindoll, hangs on cubicle walls at companies throughout North America. Let's take a look at the words that so many front-line service representatives turn to when working in circumstances or conditions outside of their individual control: The longer I live, the more I realize the impact of attitude on life. Attitude, to me is more important than facts. It is more important than the past, than education, than money, than circumstances, than failures, than successes, than what other people think or say or do. It is more important than appearance, giftedness, or skill. It will make or break a company…a church…a home. The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change our past. We cannot change the fact that people will act in a certain way. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude…I am convinced that life is 10% what happens to me and 90% how I react to it”.

This should concern us. Why do so many employees feel the need to display an open reminders at work about how much of what happens to them is out of their control? And it's not their feeling of being out of control that should concern us so much as it is the fact that those things employees believe they have no control over are impediments to the feeling of achievement and therefore, engagement. We will point out later that the feeling of achievement is one of only a few important ingredients needed to fuel employee enthusiasm. Sadly, we know of one Fortune 500 company that actually distributed 'Attitude' to its front-line employees in an effort to improve morale. The best organizations create big problems for competitors by virtue of their culture and spirit, two conditions that they understand are controllable. This is the same reason they find customer success. They play very little defense because their best efforts simply outperform the competition. The 'spirit' isn't perpetuated by posters, thank-you cards or recognition plaques. It is perpetuated by people. That's right, the same people there will be dramatically fewer to choose from in the future. The same people who currently feel like they have little or no control over what happens to them in the workplace. This brings us to our three-part strategy for thriving through this economy and steep and unavoidable demographic swing headed our way.

Part 1 of 3

Attract and Retain Great Talent

How do we do this? Smart firms like Sirota Surveys, LLC. have answers. Sirota is a human capital consulting and survey firm with over 35 years of experience in listening to what employees have to say. You can visit their site at www.sirota.com. And again, this isn't a sale. We have no connection with Sirota Surveys other than a familiarity with their work. Their information that will provide you with excellent guidance soon. The premise of their most recent work is that understanding the employment life-cycle, the relative importance of equity, achievement and camaraderie, combined with great execution of improvement efforts in those areas, will have a profound effect on employee retention and, importantly, what employees decide to do with their discretionary effort. We had an inkling that while employee demographics will change significantly over the next 10-15 years, Maslow's hierarchy of needs would remain in place and that there would not be a dramatic difference in the needs of employees today vs. the needs of those in prior generations. Sirota, since 1972, has tracked opinions and feedback and found that there's a much stronger correlation between tenure and enthusiasm than between generation and enthusiasm. In short, leaders still have a lot of control about how employees feel about their employment. The 'kids nowadays' excuse doesn't fly as far as some might think. Surely there are other excellent resources for addressing workforce issues. We don't mean to make it sound as if Sirota is the only game in town. As companies consider help with workforce resilience or improvement they need to avoid solutions that are complex and favor those based on simplicity and experience. Sirota, we think, does that well. It is the organization's workers that perpetuate 'spirit' or culture. It is those same people, leaders and nonleaders alike, who have the most control over the customer experience. Yes, as the preceding section points out, those employees are the ones there will be fewer to choose from in the years ahead. Get good ones and keep them. No excuses.

Part 2 of 3

Go 'Lean' Now

"There is nothing so useless as doing efficiently that which should not be done at all." - Peter Drucker By now most executives have at least a working understanding of Six-Sigma and it's applications to manufacturing. Many businesses in the service sector, however, find it difficult to apply SixSigma discipline and achieve meaningful results. The reason for this is because employees and consumers often don't physically see what they are providing or consuming it (respectively). They experience it. To address this reality, we introduce the second part of this strategy: LEAN. More than anything, 'Lean' thinking is about prioritizing activities and abandoning those that do not result in the creation of something value to the end-customer. Peter Drucker was adamant about the importance of addressing business practices, processes and procedures continually to make room for the implementation of new and better things or, perhaps better yet, nothing at all. By doing so, valuable time is created for knowledge workers to 'think' instead of 'process'. He was thinking 'lean' before the term was coined.

You may be asking about the connection between processes and customer experience. The answer is a gem that too few companies know about, much less target: The reason so many customer relationship initiatives fail is because of a failure to understand that most customer touchpoints are directly tied to a string of preceding processes, activities and decision points. While visually hidden from the customer, she experiences the result of this string at point of purchase, consumption and even disposal. Improvement efforts in the services arena all-too-often target only the point of experience without altering or abandoning/removing those existing preceding processes. The result is confused employees and increased costs which present themselves as a less positive customer experience than expected (at best) and/or a higher cost and resource drain than expected. Soon the initiative begins to disappear and eventually drops off the map, often without a post-mortem. Technology can be part of the solution but is rarely the only solution. Automating a crummy process may be an expensive way of speeding up a crummy process and customer experience. No more. Integrating technology without first addressing existing workflows, procedures etc. from a value standpoint can lead to costly headaches in the long terms. Even where speed is the only issue, it may be much less costly to address the issue from a LEAN perspective and drive out waste before making a major investment in technology. We found a book called 'Lean Solutions â&#x20AC;&#x201C; How Companies and Customers Can Create Value and Wealth Together', will provide you with an exceptional view of how Lean thinking can be applied to improve the customer experience. And, where Sirota's focus is on the employee experience and improving the customer experience, Lean thinking can help improve the customer experience in a way that will also ultimately address the needs of the knowledge worker. Mindless, unnecessary processes are reconfigured or removed. For us, the two work together really very well. Lean Solutions was written by James P. Womack, Ph.D. and Daniel T. Jones. Womack is the founder and chairman of the Lean Enterprise Institute (www.lean.org), a nonprofit training, publishing, and research organization chartered in August, 1997, to advance a set of ideas known as lean production and lean thinking, based on the Toyota Production System and now being extended to an entire Lean Business System." Mr. Womack and Lean Enterprise Institute serve as great resources for manufacturing and service companies alike. There are other excellent resources for becoming better acquainted with lean thinking. Just 'Google' Lean Service Thinking and in a short period of time you will be directed to more resources for consideration than you'll ever have time to become formally acquainted with. The nice thing about working with Lean practitioners is that, by the nature of their work, their messages describing products and services is always very succinct and very easily understood. It is rare to receive an e-mail from a lean expert this has more than 10 words!

Part 3 of 3 'Measure Customer Intent' There is no prioritization of the three parts of this strategy. They are all equally important and require understanding (the easy part) and a commitment to execution (the hard part). However, we strongly recommend service providers implement the next and final item on our list before doing anything else. If industry estimates are correct, about one-third of you have at heard of the term NetPromoter ScoreTM(NPS). This score was developed by Frederich Reichheld (Bain & Company) and explained in his most recent book: 'The Ultimate Question'. We believe that the NetPromoter Score TM (NPS) is the end-game of customer experience measurement, but only the beginning of conducting more efficient customer experience improvement initiatives. NPSTM measures a customer's likelihood of referring a businesses product or service to someone they care about by asking one simple question: "What is the likelihood you will refer us to a family member or colleague?"

We ask that the reader not view what is written as a sales-pitch for any firm's product or organization. The reason that we are naming providers of solutions is because they truly are the ones who have done all the work at developing each part of what we chose to include in 'our strategy' (and we use that term loosely) for winning through the upcoming era of demographic change. Most importantly, these resources have developed strategies that are easy to understand. As Peter Drucker might say: "We don't need another layer of strategy. What we need is 'simple' with a heavy dose of knowledge and solid execution." We believe that Bain's NetPromoter Score is key to understanding the impact of your company's efforts before major, and sometimes irreversible trends take place. That is, NPSTM is a leading indicator of success at the customer experience level. And really, if the customer or client experience isn't happening in a way that results in that customer returning or promoting your goods or services, what other direction is there for your chances of success to move but down? We recommend, as do many others, that every initiative, every strategy, be contemplated first from the customer's vantage point. When considering a purchase, a change, a project, we must always ask ourselves "How will what we're thinking of doing impact the customer experience (including the experience of price)"? Reichheld points out how satisfied and even very satisfied customers still often defect. What does that say about our efforts to achieve high satisfaction ratings? To succeed, the goal has to be a high likelihood of referral. After 26 years observing customers we can say with certainty that NPS TM is the better measurement. The concept of this score does not go without criticism. The most common this author hears has to do with a lack of direct physical tie-in between NPS and a company's financial results. Fueling the comments is, I believe, nothing more than fear of the unknown. Firms with high NPSTM today didn't get there by applying the metric. It didn't exist. They got the score by doing a lot of things right. Companies today have the benefit of this new score to help guide improvement activities and, as 'The Ultimate Question' points out, while the measurement is simple, achieving a best in class NPSTM is most definitely not. Bain & Company, along with Fred Reichheld, provide excellent insight into the value of this measurement and where to focus improvement (lean or people performance) efforts. To learn more, visit: www.theultimatequestion.com and www.netpromoter.com.

Technology and Innovation This paper wouldn't be complete without mentioning technology and innovation. After all the 'boom' back in the late 90's was mostly caused by breakthroughs in technology that caused investors to react to the potential almost violently. It was the prosperous heyday â&#x20AC;&#x201C; the spirit was good. Sound familiar? It seems that as the more recent economy correction occurs, companies are choosing not to 'risk' new initiatives involving technology. We think that's understandable â&#x20AC;&#x201C; but not necessarily smart. Similarly, we think that undertaking business initiatives involving technology without understanding in detail the impact on customers, processes and employees is not worth the risk - especially in these tough times. It is our hope that with this white paper some of you will see the power of regaining a complete understanding of your business from a customer, process and employee standpoint. Once you do that, build benchmarks and work to improve them one process, one employee, one customer at a time. With these things, truly valuable innovation will occur and the right technology will be considered by the right people for the right purpose.

Conclusion Now that the reality of our economy is sinking in, more companies will begin to focus on longer term profitable growth. There will be a scramble to gain investor confidence and many teams will be formed to once again bring the consumer front and center. It's a shame that so many companies lost sight of that focus along the way. With growth comes the challenge and responsibility of remaining disciplined about customer centricity. When things expand they become more difficult to control. It's a fact of business life that not one company has to fall victim to. It is avoidable and if it has already happened to you, as our economy indicates it has in many, many cases, you are not alone. But it may not be too late. For years, larger firms have been talking about 'acting small' in an effort to improve relationships with customers. That is what this is paper is really all about: getting companies to understand what it takes to "return to small'. Not one of the three parts of this strategy was developed specifically for dealing with the changes that society and business are experiencing. Yet each contains solid measurements and activities that will result in the strengthening of your business. Used separately or apart, 'Attracting and Retaining Great Talent', 'Go Lean Now' and 'Measure Customer Intent', make the world of sense for any business that values organic profitable growth. Perhaps these words will be enough to help direct your efforts. If not, please contact us at (920)716-1284 to discuss how we might be able to help.

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