consumerdirections www.socap.org.au
The official publication of the Society of Consumer Affairs Professionals Australia
December 2010
Debate rages on food labelling
p10 Member profile: Simon Spruyt
p14 Customer value: turn strategy inside out
p17 Disability and accessibility
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CONTENTS
SOCAP Australia Executive President: Jane Pires, Suncorp Vice-President: Andrew Gavrielatos, NSW Fair Trading
4
President’s message: Jane Pires
Chief executive officer’s message: Amanda Blesing
Public Officer & Company Secretary: Peter Gillson, SFI International
5
News
6
Legislation update
Board Members
Regulating energy retailers’ hardship programs
Dr Brendan French, Commonwealth Bank
Australian Consumer Law up and running
Dr Elizabeth Lanyon, Consumer Affairs Victoria
9
International complaints handling standard review
Vice-President: Andrew Taylor, CaseWork Treasurer: Glen Wells, Travel Compensation Fund
Damian Paull, Code Compliance Monitoring Committee
FMCG Special
Sioned Rees-Thomas, Coles Group
7
Public debate rages on food labelling
Ralph Simpfendorfer, TMI Australia
8
Preparing for mandatory product safety reporting
Leigh Thomas, Listening Post Charlie Trkulja, National Australia Bank
Patron Professor Allan Fels AO
SOCAP Australia Secretariat Chief executive officer: Amanda Blesing T: 03 8687 9061 E: ablesing@socap.org.au Projects and events coordinator: Eliza Smith T: 03 8687 9062 E: esmith@socap.org.au SOCAP Australia Suite 205, 757 Bourke St Docklands VIC 3008 T: 03 8687 9060 F: 03 8687 9063 socap@socap.org.au www.socap.org.au
11
10 Member profile: Simon Spruyt 14
Ombudsman Schemes 11 I ndustry Ombudsman schemes 20 years on – World benchmark or industry captured?: Bill Dee, Simon Smith and John Wood
Customer Value 14 ‘ Outside in’ strategy for the C-suite – put your customers ahead of your capabilities: interview with George Day
Research
17
17 Disability and accessibility: Freya Purnell
International 19 C omplaint resolution, efficiency and social media – US benchmarking study highlights: Elizabeth Kelleher
Consumer Directions is produced by FlapJack Media Pty Ltd on behalf of SOCAP Australia. Editor: Freya Purnell T: 02 9929 5465 M: 0412 602 579 E: editor@socap.org.au Designer: Justin Knights Disclaimer: Views and opinions reported in Consumer Directions are not necessarily those of SOCAP Australia. Whilst all care is taken for accuracy, no responsibility is taken by SOCAP Australia. Consumer Directions is printed on recycled paper. ©Copyright 2010 SOCAP Australia
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SOCAP AUSTRALIA WORKING PARTIES 2010/2011 Communications Working Party Convenor: Glen Wells Members: Karen Andrews, Andrew Gavrielatos Product Development & Content Working Party Convenor: Leigh Thomas Members: Damian Paull, Loraine Dartnell, Elizabeth Lanyon, Rosemarie Price 2011 Symposium Working Party Convenor: Jane Pires Members: Brendan French, Juliette Mansted, Bill Dee, Andrew Gavrielatos, Linda Van Gent, Amita Laroiya, Simon Tracy, Liljana Leotta, Sioned Rees-Thomas Online Working Party Convenor: Andrew Taylor Members: Brendan French, Leigh Thomas, Linda Van Gent, Gayle Herriman Awards Working Party Convenor: Ralph Simpfendorfer Members: Glen Wells, Caroline Lovett, Simon Tracy, Liljana Leotta, Loraine Dartnell, Lanie Chopping
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Government Sub Committee Convenor: Elizabeth Lanyon Members: Lindy Kerr, Jill Jenkins, Claire Munro www.socap.org.au
FROM THE PRESIDENT Jane Pires
The months since August have gone quickly and our SOCAP events program is back in full swing with workshops in each of Western Australia, Queensland, Victoria and New South Wales, along with seminars in Perth and Brisbane. The Brisbane breakfast on Hardship Policies, presented by Catherine Uhr, Legal Aid Queensland, raised several hard-hitting issues that warrant further discussion amongst the membership more broadly and we look forward to sharing this information with you. The SOCAP Australia staff and Board have been working hard to design new membership options for SOCAP members and their staff – our new Corporate Group membership (Bronze, Silver, Gold or Platinum). These options are designed to ensure we provide corporate members with cost-effective membership options to enable multiple staff working in complaints handling to have a professional membership and enjoy member benefits. Please take the time to read the information and consider if one of these new options may be of benefit to you and your organisation. Our working parties have reconvened for a new round of meetings to ensure that SOCAP continues to remain
relevant to the membership. For anyone looking for ways of participating more fully in growing SOCAP and ensuring that we remain relevant, the SOCAP working parties are a great way to get involved. The sharing of ideas and networking with others in the industry is a great benefit as well, along with gaining a deeper insight into how your association works. I am currently working with consultant Bill Dee and James Thomson from Standards Australia on the ISO 10002 Standard. Standards Australia will be holding a forum on Wednesday 9 March 2011 to discuss with stakeholders (including SOCAP members) whether Australia should support and be engaged in the review of ISO 10002 Quality management – Customer satisfaction – Guidelines for complaints handling in organisations. Standards Australia will consider approving the formation of a national mirror committee if the forum demonstrates that there is wide stakeholder support, adequate resourcing and a demonstrable net benefit to Australia. There is further information about this review on page 10 of Consumer Directions and I look forward to receiving your input. Finally, I would also like to take this opportunity to wish you and your teams all the best for the festive season and the New Year.
FROM THE CHIEF EXECUTIVE OFFICER Amanda Blesing
Congratulations to our new and returning working party and committee members and thanks to our meeting convenors. Our committees have kicked off with a high level of enthusiasm for all things new, and I eagerly anticipate the challenge of keeping up with your ideas and motivation. The Symposium working party has reviewed the feedback received after our 2010 event and are diligently working to create a program to top 2010, including expanded networking opportunities, increased interactive sessions along with exciting keynotes to amaze and inspire. You may have noticed our call for papers; we are keen to ensure that we include peer presentations and relevant case studies directly from the membership. After the success of launching the brand new Rising Star Award, our Awards working party is currently considering what criteria would be best acknowledged and celebrated in a more senior manager. What do you think? Email us and let us know. All feedback welcome. We have a committee considering a new tag line for SOCAP Australia members. We have another in 4 | December 2010 | Consumer Directions
the process launching our exciting new Corporate Group membership category to better assist larger organisations in arranging membership benefits for their entire complaints team (contact me directly if this is relevant for you). Others are considering our online content and also reviewing research and benchmarking proposals for SOCAP members. All committees and working parties meet via phone and your contribution is sincerely appreciated. Please contact me directly if you think you might want to take part. In November I visited with members in Perth and participated in two activities there. The enthusiasm for consumer affairs and complaint handling by those participating was contagious. Special thanks to BankWest for your support. It is a privilege to be part of a committed professional community of individuals who are determined to smooth out that sometimes prickly surface of a business to consumer relationship, and I am enthused and motivated to continue through 2011. The SOCAP office will be closed for just over a week for the Christmas/New Year period.
News
Consumer Affairs portfolio dumped Prime Minister Julia Gillard scrapped the consumer affairs portfolio in her recent Cabinet reshuffle, leaving consumer groups questioning the newly re-elected Labor Government’s commitment to consumer reform. The consumer affairs portfolio, which was re-introduced in 2007 after being subsumed under Financial Services and Regulation and later Treasury by the Howard Government, will now become the responsibility of Treasurer Wayne Swan and Parliamentary Secretary to the Treasurer, David Bradbury. In a statement, the Treasury said that consumer affairs would get more attention under the attention of a Cabinet Minister. However, CHOICE spokesperson Christopher Zinn said a dedicated Minister is needed to drive the next phase of consumer reforms. “Labor had spelt out significant issues it wants to champion over this term such as completing consumer protection and credit reforms, strengthening the Trade Practices Act and raising the awareness of consumer rights,” he said. “We’re concerned the loss of a Minister specifically tasked with driving these issues may mean this agenda gets bogged down.” CHOICE is calling on the government to recommit to its consumer reform program. “It’s of course better that every Minister going right to the top is focused on putting the consumer first, be it in health, education or whatever,” said Zinn. “But if the Consumer Minister is to be no more, we want signs of leadership from the government that these issues still count.”
UK FSA cracks down on complaints handling in bank sector Britain’s Financial Services Authority (FSA) has proposed tougher regulations for complaints handling in the banking sector. Although complaints in the sector have reached their lowest level since 2006, the FSA has released a consultation paper suggesting that financial service providers identify senior executives responsible for handling complaints, abolish complicated resolution procedures and devote more resources to identifying the root causes of recurring problems. The paper also suggests additional guidance be given in relation to learning from Ombudsman decisions and previous complaints. Sheila Nicoll, director of conduct policy at FSA, said, “Good complaints handling standards should be the rule, not the exception, and complaints handling forms a key part of our intensive and intrusive approach to supervise how firms deal with their customers.” Nicoll said dealing fairly and effectively with customers who make a complaint provides a valuable opportunity for firms to rebuild their relationships with their customers. “We will continue to work closely with firms to help push up standards in this area and to deliver improvements in the way firms treat their customers, and we have already referred two firms to enforcement as a result of poor complaints practices.”
ACMA chair disappointed by response from industry in customer service inquiry The Australian Communications and Media Authority (ACMA) has held a series of public hearings as part of its ‘Reconnecting the Customer’ inquiry into customer service and complaints handling in the Australian telecommunications industry. The
public hearings, which will supplement over 120 written submissions that have been tabled by industry, government, consumer representative groups and individuals, took place in Sydney, Melbourne, Adelaide, Townsville and Launceston. ACMA will now compile a draft report, which is slated for release in February 2011. ACMA chairman Chris Chapman said there had been a strong response from members of the public and consumer representatives, but that the quality of industry submissions had been disappointing. “Frankly the response from industry falls short of what we had expected, given the early positive signals from industry chief executives,” he said. “Too many of the submissions were little more than reiterations of the current self-regulatory framework and cautioned against any regulatory intervention. I was surprised the telcos did not come up with more constructive solutions to issues they admit are major problems.”
What Australian consumers really want A new CHOICE survey has found that Australian consumers’ top gripes are hidden fees, having problems when returning a faulty product under warranty, and being put on hold or not being able to speak with someone on the phone. The survey, which involved more than 1000 CHOICE members, also identified receiving no response to written or verbal complaints, nonchalant customer service and poor service from airlines as major grievances. CHOICE spokesperson Brad Schmitt said the survey shows that it is the “simple things” that companies often get wrong. “Australians appreciate honesty and good service and our report suggests that this is simply not happening,” he said.
New SOCAP Australia members: Sept – Nov 2010 Name Elissa Freeman Inta Tumuls Lisa Quinn Ai-Lin Lee Mariana Diamantopoulos Elizabeth Hampton Loraine Dartnell Allan Asher Tracy Bridges Craig Moore Fiona Britten Lisa Handley Nicky Wood Simon Spruyt Joanna Moreland Janine Donaldson Janine Young Kelly Maclean Sarah Vo Tim Oakes Toni Longden Daryl MacKay Bernie Wise Lina Gucciardo
Company ACCAN ACCC ActewAGL ASIC CHOICE Civil Aviation Authority Commonwealth Bank Commonwealth Ombudsman Foxtel Foxtel Hunter Water Corporation Johnson & Johnson Johnson & Johnson National Foods Patties Police and Nurses Credit Society Public Transport Ombudsman RAC Schweppes SOCAP in Europe State Transit Authority State Transit Authority TIO Transport Ticketing Authority www.socap.org.au
Legislation update
Regulating energy retailers’ hardship programs In 2009, the Ministerial Council on Energy developed a National Energy Customer Framework, which required the Australian Energy Regulator (AER) to report on the performance of energy retailers and to that end, develop performance procedures and guidelines in consultation with stakeholders. Within its new regulatory function, the AER was also required to report on hardship program indicators, which it would develop through a separate process of public consultation. This was initiated in a consultation paper in April 2010, which was followed by stakeholder forums and meetings with energy retailers, consumer groups and energy Ombudsman schemes. The AER’s latest position paper, ‘Retail Market Performance Reporting’, which was released last month, outlines several proposals for monitoring the performance of hardship programs. The AER is proposing to collect data on: • the number of customers on a retailer’s hardship program, as well as the number of customers entering the program; • the number of hardship program participants who are in receipt of an energy concession administered or delivered by the retailer; • the number of customers denied access to hardship programs; and
• the average level of debt upon entry into hardship programs. In response to several submissions in the first round of consultation, the AER is now proposing to collect information on the types of assistance provided by retailers to customers under their hardship programs. It has suggested that retailers be required to report on the number of hardship program customers who were referred to a financial counselling service, received energy efficiency information, had their prepayment meter removed or had their market retail contract reviewed. In its latest position paper, the AER also proposes that retailers submit case studies from their hardship programs which they believe reflect best practice. It is proposing to collect the case studies annually, on a voluntary basis, and publish a selection of good practice examples annually in its consolidated Retail Market Performance Reports. Responses to the current position paper are due by 24 December 2010 and will be used to finalise the AER’s approach to retailer performance monitoring under the new framework. For more information on the proposals outlined in the AER’s latest position paper, visit www.aer.gov.au/ content/index.phtml/itemId/737816.
Australian Consumer Law up and running The Australian Consumer Law (ACL) comes into effect on 1 January 2011, replacing provisions set out in 17 existing national, state and territory laws with a national enforcement regime that gives consumers the same rights and protections across Australia. It will be administered by the Australian Competition and Consumer Commission (ACCC), each state and territory’s consumer agency, and, in respect of financial services, the Australian Securities and Investments Commission (ASIC). The recently released Provisions Guide outlines a number of principal changes introduced by the ACL. • The ACL outlines a single set of definitions and interpretative provisions, some of which differ from those currently used in the Trade Practices Act. The definition of ‘consumer’ has broad application in the ACL – a person is understood as a ‘consumer’ if they acquire goods or services that are priced at less than $40,000. A person is also a ‘consumer’ if they acquire goods or services that are priced at more than $40,000, if they are “of a kind ordinarily acquired for personal, domestic or household use or consumption”. • A new national law on unfair contract terms is set out in the ACL, defining the terms of a contract to be ‘unfair’ if it causes a significant imbalance in the parties’ rights and obligations arising under the contract, is not reasonably necessary to protect the legitimate interests of the supplier and causes financial or non-financial detriment to a party. Terms which relate to the main subject matter and upfront price of the contract are not able to be challenged under these provisions. 6 | December 2010 | Consumer Directions
• New national consumer guarantee provisions will replace laws on statutory conditions and warranties. The ACL sets out the remedies that apply to breaches of statutory consumer guarantees, and the approach taken to the terms of consumer transactions will also eliminate the distinction between ‘conditions’ and ‘warranties’. • A new national regime for unsolicited consumer agreements will be put in place, replacing existing state and territory laws on door-to-door sales and other direct marketing. It outlines supplier obligations about the way in which consumers are approached, supplier disclosure obligations about the making of contracts, consumer rights, including a 10-day cooling-off period and the right to terminate a contract after the 10-day cooling-off period in various circumstances, and supplier obligations about postcontractual behaviour. • Basic rules for layby agreements have also been set out in the ACL. • A new national product safety legislative regime will be introduced (read more in our FMCG feature on page 9). • Finally, new national provisions on information standards will commence, applying to services as well as goods. From 1 January, the Commonwealth Minister will be able to prescribe standards about the information required to be provided by suppliers. Failure to comply with these information standards will be considered a criminal offence, with penalties of up to $1.1 million to apply. For more information, visit www.consumerlaw.gov.au.
FMCG
Fat
Some stakeholder groups were in favour of a front-of-pack scheme using a multiple traffic light approach. This uses a colour scheme to identify the relative amounts of risk-associated nutrients in a food product. Advocates of the multiple traffic light system were generally supportive of its implementation as a uniform mandatory front-of-pack scheme. Arguments for a mandatory interpretive scheme related to the need to reach consumers with varying degrees of literacy and numeracy, and ensure that health-related information on food labels could be universally understood to help overcome health inequities in the population. Nutritionist Dr Rosemary Stanton, in her submission, argued in favour of a single labelling scheme, specifically traffic light labelling. “Research from the Food Standards Agency Studies in
LOW
Traffic lights: stop or go?
Saturates
The review was initiated by the Australia and New Zealand Food Regulation Ministerial Council, at the request of the Council of Australian Governments (COAG), and has seen an independent panel of experts undertake a comprehensive review of food labelling law and policy using an evidence-based approach. In the second round of consultation, more than 500 people attended the public consultation forums, and almost 600 written submissions were received from stakeholders in response to the Issues Consultation Paper. Former Australian Health Minister, Dr Neal Blewett AC, speaking on behalf of the panel, said a range of issues generated considerable debate during the consultation. Examples of these include the role of food labelling in addressing population health priorities, and the extent to which information about food ingredients, production processes, manufacturing technologies, and the presence of additives and allergens should be declared on food labels. “There were diverse views about the current requirements and further justification for country of origin labelling and extensive discussion about the degree to which endorsements and health claims should be standardised and regulated,” Dr Blewett said. One of the key areas of focus for submissions to the panel was front-of-pack labelling.
LOW
Salt
A wide range of viewpoints have been put forward in the Independent Review of Food Labelling Law and Policy, which is now in its final stages, following two rounds of public consulatation. Freya Purnell and Elizabeth Kelleher report.
HIGH Sugar
MED
Public debate rages on food labelling
the UK found that multiple front-of-pack labelling schemes are difficult for the shopper. It is important for government to recommend and mandate a single scheme. Based on evidence from surveys of shoppers in Australia, New Zealand and Germany, a traffic light labelling scheme is the best method, achieving success among people of various ethnic groups with varying educational and socioeconomic status. “FSANZ (2006) consumer research found that many people do not understand or use the %DI labels. There is no evidence that such labelling is effective in promoting healthier food choices and reducing sales of less healthy foods, and so it would help consumer understanding if such information was removed from the label,” Dr Stanton wrote. Other stakeholder groups supported the continuous use of voluntary front-of-pack measures that display a food’s energy and nutrient per serve, such as the Daily Intake Guide scheme developed by the Australian food industry. Nestle Australia was one stakeholder who argued for the maintenance of the Daily Intake Guide scheme. “Percentage daily intake information provides consumers with the facts on foods they are consuming whereas a ‘traffic light system’ (interpretive labelling scheme) offers an opinion and makes assumptions about consumers’ diets. Nestle is opposed to an introduction of ‘traffic lights’ or other simplistic schemes which focus on the negative aspects of nutrients and do not offer factual, useful information.” Many stakeholders supported the development of robust criteria to underpin any interpretive front-of-pack scheme introduced by government, which could be readily adapted for use across a variety of food product categories. Submissions highlighted low literacy and numeracy in the population as a major barrier to many consumers’ understanding of the information presented on food labels. On this basis there was support from numerous stakeholders for a front-of-pack nutrition labelling system that would use colour to provide a clear visual representation of different food products’ nutritional value. General legibility issues such as the placement of information and the size and colour of labelling fonts were also discussed by stakeholders such as the Food Technology Association. The Review Panel made a presentation to the Food Standards Ministerial Council at its meeting on 3 December 2010. COAG will decide on the public release of the recommendations after it receives the final report in early 2011. For more information, including all the public submissions, visit www.foodlabellingreview.gov.au www.socap.org.au
FMCG
Preparing for mandatory product safety reporting One of the components of the Australian Consumer Law (ACL), which takes effect from 1 January 2011, is a new product safety system. With a requirement for mandatory reporting within two days of a supplier becoming aware of a safety issue with a product, organisations must ensure they are ready to comply. With the changes introduced as part of the Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010, Australian businesses must comply with a new mandatory reporting regime, requiring suppliers to report incidents where a person has or may have suffered death, serious injury or illness associated with consumer goods or product-related services. Speaking at a seminar on the new product safety requirements, Australian Competition and Consumer Commission (ACCC) deputy chairperson, Peter Kell, said while regulators often become aware of very high-profile incidents caused by products or services, there may be many others which do not come to its attention. “Mandatory reporting has been introduced to address this information gap, which allows relevant regulators to act more quickly on emerging product safety issues,” Kell said.
When to report Under the new obligations, a supplier, whether it is a body corporate or individual, will be required to report to the Commonwealth regulator – the ACCC – when several triggers occur: • a consumer good or product-related service has been supplied; and • the supplier has become aware of the death, serious injury or illness of a person which is or may have been related to the supply of consumer goods or product-related services; and • the supplier, or another person of whom the supplier is aware, must also consider that the death, serious injury or illness was caused by the use or foreseeable misuse of consumer goods. Kell said “foreseeable misuse” is a new term being applied under the ACL, which means that even if a product is misused, if that use was “reasonably foreseeable”, it is regarded as appropriate grounds for action by the ACCC, such as issuing a ban or recall. Where these three triggers occur, the reporting obligation kicks in, and a supplier must report within two days, which includes public holidays and weekends (but excludes the day on which they were made aware). The reporting requirement applies to all suppliers in the supply chain for the product or product-related service in question, so one party who becomes aware cannot assume others will notify the ACCC. Suppliers who fail to report within the two-day timeframe 8 | December 2010 | Consumer Directions
could be subject to serious penalties, with fines of up to $3,330 for individuals and $16,650 for corporates for failure to comply. This has clear implications for reporting procedures within organisations. According to Blake Dawson partner Graydon Dowd and graduate Morgan Spain, writing in ‘Product Liability Update: Mandatory reporting regime – new reporting obligations for product incidents (25 November 2010)’, “The ACCC has advised organisations to put in place internal policies, processes and procedures that will allow information to be received, assessed and reported within the two-day timeframe. “Suppliers need to implement appropriate internal systems prior to 1 January 2011 to enable them to comply with the new regime. This will require a system that records all information received by any person within an organisation relating to a death, serious injury or illness caused by consumer goods or product-related services. Suppliers should also ensure that they have appropriately trained staff who can assess and quickly process information regarding an incident.”
Becoming aware A supplier will be regarded as ‘becoming aware’ of an issue if they receive a direct report from one of a variety of sources – such as a consumer, non-government organisation, supplier, a resupplier, repairer or insurer of consumer goods, or through receipt of an expert report, test reports or other scientific information. However Kell emphasised that suppliers are not expected to actively seek out issues. “I want to clarify that it is not a requirement that you implement processes to proactively make yourself aware of any problems. You are also not required to respond to anything raised in the general press, unless this flows through to a direct report,” Kell said.
Making a report If the obligation to report has been triggered, suppliers must report the incident to the ACCC online via a prescribed notice available from the Product Safety Australia website. The notice must include details such as: • the goods or product-related service to which the incident relates; • when and where the goods were manufactured and
supplied;
• the circumstances surrounding the death, injury or illness; • the nature of the injury or illness suffered; and • any action taken by the supplier in related to the goods or
product-related services. Importantly, a report of an incident will not be considered an admission by a supplier of liability relating to either the goods or services, or to the death, serious injury or illness. Reports will also be kept confidential and information will not be disclosed without the permission of the supplier, except where disclosure of the information is in the public interest, or it needs to be disclosed to State and Territory Ministers and regulators. Kell also shared some tips for ensuring compliance with the new regime. • Be aware of any safety requirements relating to products you supply. • Have a compliance program in place. “This is the bread and butter to ensure you provide safe products to the market.” • Where relevant, conduct product testing. • Implement internal processes to ensure that if you or one of your staff become aware that a product you supply has caused death, illness or injury, you are able to notify the ACCC within two days. “We are very keen to try and assist business to understand their obligations and to understand the implications and the way in which the new law will work,” he said. More information can be found at: www.productsafety.gov.au and www.recalls.gov.au.
How is serious injury or illness defined? Given the stringent requirements for reporting, the definition of “serious injury or illness” is of critical importance for organisations when establishing when they should report to the ACCC.
The ACCC’s definition is: “Serious injury or illness is defined to mean an acute physical injury or illness requiring medical or surgical treatment by or under the supervision of a qualified doctor or nurse. The medical or surgical treatment can be provided in a hospital or clinic, or in a similar place such as a regional or rural clinic, where in the circumstances, hospitalisation cannot occur.” At the ACCC product safety seminar, concerns were raised over whether minor irritations, such as a skin rash, for which a doctor may be consulted, could therefore reasonably be regarded as “serious” for the purposes of reporting. Kell said a supplier’s judgement would need to be applied in these cases. “We can’t provide a nice neat line unfortunately, but we would advise suppliers to err on the side of caution,” he said, adding that this may be an area that would be reviewed once the regime was in operation.
Forum to discuss international complaint handling standards review Standards Australia will be holding a forum on Wednesday 9 March 2011 to discuss with stakeholders whether Australia should support and be engaged in the review of ISO 10002 Quality management – Customer satisfaction – Guidelines for complaints handling in organizations. The forum will also examine whether there is benefit in involvement with the review of ISO 10001, dealing with codes of conduct, and also ISO 10003, dealing with dispute resolution external to organisations. Standards Australia will consider approving the formation of a national mirror committee if the forum demonstrates that there is wide stakeholder support, adequate resourcing and a demonstrable net benefit to Australia. The three standards are conceptually linked. Together, they form a comprehensive approach for all phases of managing customer complaints. The standards are an attempt to distil international best practice in codes of conduct, complaints handling and external dispute resolution. Codes of conduct are essentially customer-oriented statements about the quality of an organisation’s products, services and activities. By communicating such statements to customers in advance of transactions, organisations decrease the likelihood of problems because there is less potential for confusion regarding what the customer will receive and what the consequences will be, should there be a quality problem. Internal complaint handling is the process within an organisation for addressing issues of concern to consumers. Complaints that are appropriately and expeditiously addressed by an organisation are likely to maintain or enhance customer satisfaction. External dispute resolution processes are designed to address complaints that, for whatever reason, cannot be resolved through internal processes. As with complaints handling, a properly resolved dispute can maintain or enhance customer satisfaction and provide important feedback to improve quality. SOCAP Australia recognises that these standards are important to a large cross-section of our membership and our member Bill Dee and president Jane Pires have been involved with Standards Australia for the initial discussions. SOCAP Australia supports the upcoming review and the forum will provide an opportunity for us to provide input into the decision about participation at an international level. If anyone would like to discuss this further or share ideas, please email Jane Pires at president@socap.org.au or Amanda Blesing via socap@socap.org.au. Further updates on this important issue will be provided via our email newsletter, Consumer Directions and on the SOCAP website. www.socap.org.au
Member profile
Introducing Simon Spruyt Simon Spruyt, manager – Consumer Enquiry Centre (acting), National Foods, has recently joined SOCAP Australia, and spoke to us about his experience so far. CD: How long have you been with National Foods? SS: I’ve been with National Foods since 2007, working within our Consumer Enquiry Centre. CD: Could you tell us about your role? SS: My role involves managing the daily operations of our Consumer Enquiry Centre – ensuring that our consumers’ feedback, enquiries and complaints are dealt with in a timely and professional manner and providing my team with strategic direction, support and the tools to accomplish this.
I benefit from regular catch-ups with other members and the regular communications that SOCAP provides are also welcome reading.
CD: Why did you decide to join SOCAP Australia? SS: My manager is a member of SOCAP and they suggested that I consider joining and also participate in some workshops SOCAP offered as these could benefit me in my role. I attended the ‘From Rage to Reason’ workshop in April and gained a great deal of value from it, and that made the decision for me to join easy!
CD: What advice would you give to newcomers to the industry? SS: Learn as much as you can! You should take the time to learn about the company you are working for and their brands and to spend time learning about the wider FMCG sector and in particular the categories where your business operates. I also suggest people take the time to network both within their own business and also with professionals within the sector they operate, as well as the wider consumer affairs industry.
CD: What have you gained from your membership so far? SS: Becoming a member of SOCAP has allowed me to network with people who perform similar consumer-related roles to myself and has provided me with the opportunity to share ideas and learn from other organisations.
CD: What do you like to do when you’re not working? SS: I’m currently in the process of building a new house, so furnishing and gardening (or at least researching) keeps me occupied. I tend to see a lot of live shows (concerts, theatre) and it’s a great way to relax if I’ve had a challenging week at work.
SOCAP farewells Eliza Smith SOCAP Australia is sad to say farewell to our very own Eliza Smith, who is resigning to travel to distant climes and experience great adventures. The SOCAP office will not be the same without Eliza's friendly disposition and wonderful approach to helping members. Her last day will be on Friday 21 January so if you wish to say goodbye to her, please contact the SOCAP office before then.
Want your entire team to experience the benefits of being a member of SOCAP Australia, including great networking, discounts for all training and events, and access to best practice information? Fantastic new corporate membership options are now available Platinum
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(up to 100 members)
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Contact the SOCAP office on 03 8687 9060 or socap@socap.org.au 10 | December 2010 | Consumer Directions
ombudsman schemes
Industry Ombudsman schemes 20 years on World benchmark or industry captured? By Bill Dee, Simon Smith and John Wood This is an edited version of an article which first appeared in the Alternative Law Journal, Vol 34: 3 2009 (183-188). 1 July 2009 was the twentieth anniversary of the start of the first industry Ombudsman in Australia. Twenty years on, industry Ombudsman schemes proliferate. There is the Financial Ombudsman Service (‘FOS’), embracing Ombudsman services for banking, general insurance, and a myriad of investment products. There is the Telecommunications Industry Ombudsman (‘TIO’) covering consumers of landlines, mobiles and the internet, and there are ‘second generation’ utilities Ombudsman such as the Public Transport Ombudsman and the Energy and Water Ombudsman in Victoria. These private justice schemes have been embraced by government as a low-cost way (for government) to provide consumers with access to dispute resolution outside the legal systems. They have been accepted by industry that recognised the likely alternative was a rigorous, possibly intrusive, government system. But what is the quality of such schemes, how are they funded and supervised, are they impartial and have they improved the quality of decision-making within industry sectors? This article will explore these issues by reference to FOS and the TIO with a view to stimulating closer examination of the schemes and their future direction.
Current scene In 2009 the industry Ombudsman scene in Australia was dominated by two organisations, the FOS and the TIO. It is a measure of the growing prominence of the EDR phenomenon that there is now an international standard (ISO 10003: 2007) that provides guidance on how to operate, maintain and improve an effective EDR. It emphasises transparency, accessibility, capacity, fairness, timeliness and continual improvement.1 The following analysis draws upon that standard.
Governance In the traditional civil justice system there are checks and balances in place that maintain public confidence in the independence, fairness and accessibility of the legal system. Pivotal is the appointment of independent decision-makers (judges) by an Attorney-General answerable to the Parliament. In turn, the quality of decision-making is buttressed by an open court system, established rules of evidence, independent bar and an appeal system. Inevitably, a self-regulated EDR system will compromise on important aspects of these elements as it strives to reconcile consumer accessibility and costeffectiveness. This has seen the EDR schemes develop their own governance structures, most often a company limited by guarantee that is effectively controlled and funded by the industry sector.
In the early days, the Boards were chaired by eminent Australians. Since then, the Chairs have tended to be drawn from sources sympathetic to their industry. It is important that the Chairs of the Board are independent so that there is no perception that they are aligned with one of the major stakeholders. Similarly change at the top on a regular basis allows for fresh ideas and change. For ‘balance’, the practice of the schemes has been to match industry appointments to the Board with up to four Directors said to represent the interests of consumers. The process for doing this is not particularly transparent. ISO 10003: 2007 states as a guiding principle that sufficient information about the dispute resolution process, the provider and its performance should be disclosed to complainants, organisations and the public. Although less obvious with the TIO, over the last decade in the financial services EDRs, these paid directors have been largely drawn from people who have recently held/or hold senior executive positions in consumer organisations. No doubt these appointments bring a level of expertise but they do raise serious issues of perception of conflict of interest and place board confidentiality constraints upon those directors in their parallel public roles as consumer advocates. The key appointment for all EDR schemes is that of Principal Ombudsman. Only recently have the schemes adopted formal positions on Ombudsman renewal, setting an upper limit of seven years’ continuous service, no doubt with a view to minimising real and perceived concerns about ‘capture’ by the sector.2 It has been rather honoured in the breach. Both schemes have/had Ombudsmen whose terms exceed 10 years. Further, unlike government Ombudsmen who have freedom to publicly report and comment on a wide remit of activity, industry Ombudsman do not. For example, the Banking Ombudsman is specifically precluded from providing ‘information about financial services providers or financial services’. This needs to be compared with the transparency advice in Annex I clause I.4 of ISO 10003 which suggests that in appropriate circumstances, the text of individual dispute resolution results can be published without names if all parties agree. Finally, the schemes lack the important external review Continued on page 12 www.socap.org.au
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mechanisms that buttress the independence of the traditional legal. In lieu, regulators such as the Australian Securities and Investments Commission (ASIC) require an independent ‘review’ every three years. Typically the Terms of Reference are set, and the Reviewer appointed (and paid), by the schemes themselves after consultation with the regulator. Such a ‘light touch’ review process inevitably raises questions about its rigour, visibility and accessibility and how perceived and real conflicts of interest are managed.
Terms of Reference and caseloads It is important to note that although the main focus of industry Ombudsman schemes is to resolve consumer disputes, they do not have the full jurisdiction and range of remedies that courts do. Their remits are narrower and typically limited to service, fees and claims disputes. As noted above, issues of policy and matters such as complaints about product pricing, advertising and governance are commonly excluded. They cannot fine, they cannot issue injunctions and their ability to award unliquidated compensation is circumscribed. This is less of a challenge with banks and insurers that are small in number and linear in construction but more problematic in the investment and telecommunication sectors where smaller, less cohesive operators abound. Analysis of the caseloads is difficult. Terminology used and processes followed do not easily compare. Within Annual Reports, data is not always easily reconciled. Nor is it independently audited. Accessibility is a key criterion in assessing an effective EDR. With their national remit, this is a problem for the schemes. The tyranny of distance emphasises their remote, ‘on the papers’ only bias. Thus it is not surprising that the telephone dominates as the means of initial consumer access. What is surprising is how relatively few calls the Banking Ombudsman receives, whilst the number the TIO receives is clearly unsustainable. It is difficult to believe that these calls are just simple enquiries from consumers seeking general guidance about a concern. Even if they are, it would indicate a major failure of the industry dispute resolution system at the company where such information should be provided. Either way, the lack of accessible data from the companies themselves makes it hard to properly analyse. Then there is the changing nature of consumer access. Here, the emerging swing to email as a preferred access channel can only compound the access challenge and introduce other management issues. The schemes will need to be smart about how they manage this. There are also significant differences in caseloads. For example, of concern is that the Annual Report from 2007/08 21.1 per cent of presenting complaints were ruled as outside the Banking Ombudsman Terms of Reference. The two other financial services schemes are silent on how many matters fall outside their Terms of Reference. This raises serious questions of unmet need. A point of distinction between industry and government Ombudsman is the ability of the former to make determinations whereas the latter can only, as a last resort, make recommendations to Parliament. It is surprising therefore how relatively few determinations are made. In the year 2007/08, the Banking Ombudsman reported none and the TIO only a handful. 12 | December 2010 | Consumer Directions
In both sectors, one would have thought there might be more intractable disputes that required a decision-maker to bring finality. This raises a quality issue. The criterion of timeliness is a further measure of an effective EDR. The TIO is coy on disclosing this information. It would most likely reflect the pressure of an unsustainable caseload. Interestingly, 2007/08 figures show the Banking Ombudsman closed half its caseload in under two months. This probably reflects the tight control on what is accepted in the first place. Missing from all this data is information on the time complaints have taken to work their way through from the company-based Internal Dispute Resolution (IDR) service where complaints must go before being eligible to progress to EDR. It is likely to have been considerable. Full transparency on this data, indeed all IDR data, would enable an informed assessment of the health and quality of complaint handling through EDR schemes. To our knowledge, only AAMI Insurance publishes its IDR and EDR results as part of public commitments made through the AAMI Customer Charter process.3 It is a measure of the industry influence over the schemes that after 20 years of operation there is so little transparency on corporate complaint handling performance.4 However, this changed in 2010 when ASIC introduced new guidelines relating to EDR schemes in the financial service sector. In particular the EDR will be required to publish statistics about the number of complaints received and resolved against individual EDR scheme members. Again, it is noted that this change is not an initiative of the schemes but one forced by the regulator.5 Finally, the schemes differ in their approach to systemic issues identified through their unique insights into market behaviour. This reporting obligation, placed first on the financial services scheme in 1999, should be a pivotal weapon in controlling burgeoning caseloads.6 Surprisingly, the schemes uncovered few issues during 2007/08 given the presence of the Global Financial Crisis and dynamics of the telecommunications sector. There were only 51 systemic issues identified in the caseload in Banking and seven in Telecommunications. FOS does not ‘name’ the banks involved and it appears that ASIC does not insist. However, the TIO does ‘name’ but there appears to be little enforcement followup by the regulator, the Australian Communications and Media Authority (ACMA). These matters pose questions about the rigour of the systemic reporting process and the effectiveness of the regulators in monitoring the work of the EDRs.
ADR approaches Although the schemes differ in the way they describe the ADR process they follow, there is commonality on the basics that distinguish them from the court system. Broadly, they follow a three-tiered approach. It begins with an initial assessment to determine whether the complaint is eligible and in particular that it has been through the IDR process. Complaints that are not disposed of at this stage progress to conciliation, usually conducted by letter and telephone between consumer and the company to scheme timetables. Finally, complaints remaining unresolved are seamlessly elevated to an Ombudsman for final determination. The determination is binding on the company if accepted by the consumer.7 It is difficult to make a full assessment on the quality of this
process. Significantly, in 20 years, there has been little academic scrutiny of the schemes. This reflects the varied nature of the accessible data and the lack of determinations and written Reasons for Decision. However, as the schemes pre-empt review by courts there is virtually no court scrutiny.8 Nor is there a standing mechanism that can review the schemes processes on a regular basis. As a result, what has developed is a process remote from consumers and emphasises the process over the substance. That inevitably has a bias toward the literate and technology savvy middle class. It may well be cheaper not to hold hearings but it raises questions about whether denying consumers a ‘day in court’ may eventually erode public confidence in the schemes. Further, the schemes do not appear to conduct or publish regular qualitative polling testing consumer perceptions on the justice they receive from the schemes.9 Finally, the dominance of the EDR schemes in the national civil justice arena and the ‘hands off’ supervision they enjoy from federal regulators has resulted in a failure of the small claims jurisdictions of the Magistrates courts/tribunals and Consumer Affairs agencies to develop. Both systems could learn from each other but have failed to do so. Government systems could benefit from linking the tiers of information/assessment and conciliation, currently offered by consumer affairs agencies, with seamless elevation to a (tribunal) decision-maker. These are currently separate. This would help address the sustainability issue being faced by the TIO and would introduce needed decentralisation. It would also add the rigour of the more transparent and accountable government system to the resolution of such disputes. In respect of the industry schemes, it is suggested that it is now time to bring them back under tighter statutory remit as in Britain. This would introduce greater transparency and accountability. As in Britain there is no reason why the industry funding formula could not be improved.
The cost A traditional argument used in support of EDR schemes is that they are cheaper than the legal system. Whether EDRs are in fact cheaper is more difficult to establish. It is understood that industry funds their schemes in two ways. There is an annual levy on each company based on their size and a second, ‘user pays’ levy, based on that company’s caseload at EDR. It is of concern that no scheme publicly discloses this latter formula. It is a tiered fee that increases the further the dispute travels in the EDR process and always means that a scheme is playing ‘catch-up’ as it seeks to adequately resource rising caseloads. Most probably, the higher a matter goes, the greater the temptation a company will ‘roll over’ for fiscal reasons rather than case merit. In the absence of an appeal process to act as a quality monitoring mechanism, there must be reservations about the quality of this resolution process. This is not to say that commercial commonsense has not always been part of any dispute resolution process. However, in the legal system it is more transparent. Access to this data would be one way to objectively test the quality of the resolution data. Of course any discussion of the cost-effectiveness of EDR schemes needs to recognise that it is really also a discussion about cost-shifting. Instead of the taxpayer meeting the cost of the legal system, it is moved to the consumer of products.
Companies simply fold the EDR cost into their prices. Advocates of a competitive market would argue that this is how it should be as it provides an incentive for businesses to keep their prices competitive by encouraging quality products that customers don’t complain about. If only that were so, but it does not take account of those companies that simply see the industry scheme as a cheap outsource of their complaints management! One thing is clear: the cost of the schemes is a small impost for the multibillion dollar sectors they service.
Conclusion: the way forward Twenty years on, industry Ombudsman schemes are now an established part of the civil dispute resolution framework in Australia. It seems fair to say that they have lifted industry dispute resolution standards. That was not hard as the base was low. Prior to the coming of the industry schemes, the main dispute resolution trail for consumers was the court system, one rarely travelled. The requirement that all companies in the sectors discussed now have in place an accessible IDR has inevitably forced cultural change, just as has the ‘review’ offered by the EDRs. As we have argued in this article, the disappointing thing is that after a promising start the schemes can be said to have stalled and cannot be described as world best practice. It is now time for next steps forward, although it is important to note that industry schemes are not suitable for all sectors. Bill Dee (compliance@ozemail.com.au) is director, Compliance and Complaints Advisory Services and the architect of many Australian compliance programs. Simon Smith (naylorsmith@gmail.com) was the first director of the SIO Consumer Appeals Centre (SIOCAC), 1989-1992. He is now a legal and insurance historian. John Wood (baljurda@ ozemail.com.au) is principal, Baljurda Comprehensive Consulting Pty Ltd and was Commonwealth Deputy Ombudsman, 1994-2000.
References 1. International Organization for Standardization, Quality Management: Customer Satisfaction-Guidelines for External Customer Dispute Resolution (2007) <iso.org/ iso/iso_catalogue/catalogue_tc/catalogue_detail.htm?csnumber=38449> at 30 April 2009. (ISO). 2. See Financial Ombudsman Service, Banking and Finance Terms of Reference (2008) [15.1] <fos.org.au/centric/home_page/about_us/terms_of_reference.jsp> at 17 April 2009. 3. For material on the current Terms of Reference Project see Financial Ombudsman Service, Terms of Reference<fos.org.au/centric/home_page/about_us/terms_of_ reference.jsp> at 17 April 2009. 4. See for example AAMI, Working Together: AAMI Customer Charter Annual Report 2007-2008 (2008) <aami.com.au/company-information/news-centre/charterreports.aspx> at 18 April 2009. See also Simon Smith, ‘Customer Charters:The Next Dimension in Consumer Protection’ (1997) 22 Alternative Law Journal 138. 5. See International Organization for Standardization, Annex I, ISO 10003: 2007 for guidance on the issue of transparency. 6. See further Australian Securities and Investments Commission, ASIC Improves Dispute Resolution Schemes (2009) <asic.gov.au/asic/asic.nsf/byheadline/0988AD+ASIC+improves+dispute+resolution+schemes> at 20 June 2009. 7. See Australian Securities and Investments Commission, Policy Statement 139: Approval of External Resolution Schemes (1999) [139.62] <fics.asn.au/RG_139. pdf> at 15 July 2009. 8. The courts have declined invitations to review Ombudsman decisions. For example see: Citipower Pty Ltd v Electricity Industry Ombudsman (Vic) Ltd & Anor [1999] VSC 275 (Unreported, Warren J, 5 August 1999). 9. The Financial Ombudsman Service in the UK does conduct and publish qualitative polling results. See Financial Ombudsman Service, Annual Review 2007/08 <financial-ombudsman.org.uk/publications/ar08/who.html#ar4> at 30 April 2009.
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Customer value
‘Outside in’ strategy for the C-suite: put your customers ahead of your capabilities Toyota and Dell both did it for a while but then stopped. American Express, Cisco, GE and Tesco, among others, all kept at it, and have continued to reap the benefits. ‘It’ refers to the adoption of an ‘outside in’ strategy that calls on companies to start with their market when they design their strategy, rather than limit themselves by asking what they can do with existing resources. According to Wharton marketing professor George Day, firms that adopt an ‘inside out’ approach are handicapped in keeping up with their customers and ahead of their competitors. Day and Christine Moorman from the Fuqua School of Business at Duke University describe their approach in a new book called Strategy from the Outside In: Profiting from Customer Value. In this interview, Day explains the ‘outside in’ strategy. Q: Can you briefly describe ‘outside in’ strategy as opposed to ‘inside out’ strategy?
new competitors, so an ‘inside out’ myopia ends up making you vulnerable.
George Day: Companies that have adopted an ‘outside in’ strategy are those with a focus on creating and keeping customers by delivering superior customer value. They do that by standing in the customer’s shoes and viewing everything the company does through the customer’s eyes. Think of customer value as the lens on the strategy. ‘Inside out’ thinking, on the other hand, begins by asking, “What are we good at? What are our capabilities and products? How can we use our resources more efficiently?” It’s a resource-based view of the firm that is inherently limiting because it means the company is slow to respond to major changes in the market. In our book, we look at a number of companies that began with an ‘outside in’ lens but then became myopic, falling into ‘inside out’ hubris. Strategies are especially stressed during a recession, when companies must align their cost base with rapidly shrinking revenues in order to protect earnings. The management team focuses almost entirely on internal processes – improving productivity, downsizing and so forth. This response is appropriate when your goal is to drive short-run earnings. But if it becomes the predominant point of view on strategy, you are highly vulnerable to shifts in the market, new technologies, new channels or the entrance of
Q: Your book cites the British supermarket chain Tesco as an example of a company that has profited from an ‘outside in’ strategy. Can you give us more detail about Tesco?
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GD: Tesco started moving to this strategy in 1995 when it began to look at everything it did from the perspective of customers. Every question that came up about operations, human resources, finance and retailing was answered through the lens of whether the firm’s target customers would see value – in the form of better prices for staple items, for example, or shorter lines or even cleaner restrooms. The company also focused on making the customer an asset by doing things like stocking its stores with products that reflected the tastes of shoppers in a particular area. In one case, shoppers who bought diapers at a Tesco store received coupons by mail not only for baby wipes and toys, but also for beer. Tesco’s analysis had shown that new fathers bought more beer at retail because the arrival of a newborn tended to curb their pub hours. Another example of Tesco’s emphasis on the customer: when the company entered the US market in 2007, members of its UK staff lived with 60 American families to learn about their habits and preferences. They discovered,
for example, that Americans like to buy prepared meals at a grocery store more often than Europeans. Finally, Tesco was quick to recognise an opportunity in the market for retail financial services in the UK, especially after customers became increasingly distrustful of big banks that accepted bailouts during the recent financial crisis. Taking advantage of its huge transactional database, Tesco started offering credit cards and then moved up to bank accounts and mortgages. They have now become a significant player in financial products – all because they know much more about their customers than the banks do. Q: A lot of companies say they focus on customers and drive strategy from the perspective of the market – that is, from the ‘outside in’. But in the book, you say that this is “shockingly uncommon”. Why is it so uncommon if it sounds, in some ways, like such an obvious approach? GD: Good question. Why do companies become inward looking? Many that at one time had been ‘outside in’ become ‘inside out’ mainly because they get positive reinforcement in the short run. If you focus on improving efficiency, you get results – for a while. That’s what happens in a recession. A second reason: strategy theorists argue that resources exist to be used and the task of managers is to improve and fully exploit then. This is certainly a worthwhile aim but, on its own, it is an inherently limiting and unbalanced approach. Toyota is an example of a company that began to focus on the wrong metrics. It became obsessed, not with what the customer needed, but with beating General Motors and becoming big. The company became too internally focused, tried to grow way too fast and lost sight of quality. It became too much of a “how fast can we drive this growth” approach. As we know, they ran into quality problems. Q: What sorts of pressures are top executives, including CEOs, under that may keep them from focusing on an ‘outside in’ strategy? GD: Without strong leadership, internal concerns are likely to take precedence. Executives have to worry about next year’s budget; they have to get their products made; they have to outsource and so forth. These issues are crucial and must be dealt with, but if they take precedence, you lose perspective. Such attitudes have been especially manifest in the last two years. A lot of companies were worrying about survival. And yet by simply hunkering down, cutting R&D, slowing innovation and no longer experimenting, these companies are putting their survival at risk even more. Q: Does an ‘outside in’ strategy rely more on gathering and analysing data than an ‘inside out’ strategy? GD: It’s a question of insight. We don’t talk about data. We talk about market insights – understanding the changing needs of customers and drawing out actionable ideas. You
In order to prosper, you have to look at the world from the ‘outside in’ – constantly experimenting to learn how your market will respond to various initiatives.
have to be out there living with them. An effective CMO [chief marketing officer] and CEO will make sure the whole management team is immersed in the market as opposed to talking to each other in the C-suite. They will be gathering deep insights into competitors. We have never seen good companies get bogged down in the MBA affliction called ‘analysis paralysis’ because they know what they are looking for. Yes, companies are still swamped in a data tsunami. But they are much more adaptive. They are doing more experimentation and finding out what works. Everyone is scrambling, but the ‘outside in’ companies have an edge. Q: How do you measure how well you have implemented an ‘outside in’ strategy? GD: Your channels may be your best litmus test. First and foremost, are you continually being surprised by bad results, or the entrance of a new competitor, or a new product category opening up that you weren’t even aware was on the horizon? The reason ‘outside in’ performs so well is that it is much more active as opposed to reactive. An example is Dell, which was a great ‘outside in’ adherent early on. It really understood its corporate market. Going way back to the early days of Dell in the 1970s, Michael Dell had a visceral connection with his market. He saw the need for competitively priced, reliable equipment based on the Wintel [Windows/Intel] platform. Because Dell didn’t have much proprietary technology of its own, the company invested heavily in supply chain management. They understood that what their big corporate customers wanted was individually configured computers that could be delivered to dozens, if not hundreds, of sites. The second litmus test is, do you know who your customers are and what value you are delivering to them? Again, Dell is an example, this time of a company that didn’t adapt. As Dell began to get more serious competition from Asia, and as other people figured out what made Dell’s supply chain so effective, Dell started to lose its price edge. The company had to continue to go down the price curve but it no longer had much of a cost advantage. So Dell Continued on page 16 www.socap.org.au
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did two things. First, it cut back on customer support and service, which meant their customer satisfaction ratings at one point plummeted. Second, they were so focused on streamlining the supply chain – investing in [quality control program] Six Sigma, supply chain coordination efficiencies, and so on – that they focused inwardly way too much. Then, three to four years ago, a big shift occurred with the flattening out of the corporate PC market and the arrival of PCs and laptops being purchased from Apple stores, Best Buy and other retail outlets – all places that offer companies a closer connection to their customer. Dell had made a conscious decision not to have a retail presence. Also, it lost contact with this growing market of individuals and small businesses that wanted a more personalised laptop experience, which Dell simply couldn’t deliver on. Finally, Dell’s supply chain was more difficult to manage once consumers started demanding various colour combinations and different configuration choices. The third litmus test is, what is the role of marketing in this organisation? Is the marketing function viewed as credible? Are market insights and foresight driving the results of the organisation? At Cisco, for example, CEO John Chambers saw his company through the eyes of his customers. He was getting a lot of feedback from them about the arrival of Voice-over Internet Protocol (VoIP) – which wasn’t good news for Cisco because this new technology would make some of the company’s products obsolete. But Chambers realised he had to meet the needs of his customers, so in 2003, Cisco purchased a VoIP business in what has turned out to be an extremely profitable acquisition. Q: How has the internet and the rise of social networking changed the ways companies market their goods and services, and how do these new online tools favor your ‘outside in’ strategy? GD: In the last decade, we have seen a tremendous proliferation in the number of channels: markets are splintering and companies can reach finer and finer segments with tailored offerings. They have much more pricing flexibility. You layer social media and social networking on top of that, and you can then enter into an increasingly direct dialogue with your customers. So many more media are available as ways to reach customers. The net effect is that it is much more difficult to navigate through this complex market environment. In order to prosper, you have to look at the world from the ‘outside in’ – constantly experimenting to learn how your market will respond to various initiatives. This is not about prediction. Prediction says we will forecast in advance where things will go. Today’s marketplace is much too dynamic. It’s necessary to see patterns sooner and respond to them adaptively. Q: The subtitle of your book is Profiting from Customer Value. Can you talk a little more about who this customer is? GD: In many markets, the distinction is made between 16 | December 2010 | Consumer Directions
consumers – you and me, the final buyer – and customers, which would be channels and channel intermediaries. We chose not to worry about that distinction but to go with the more generic term “customers”, which includes both. It can refer to anyone who is making a choice based upon comparative value propositions. The customer buys the expectation of benefits. They are going to patronise the company that delivers the best package of benefits at the most reasonable total cost. Trader Joe’s is a case in point. It is very imaginative in the ways it meets customers’ needs. For example, it works hard to create the image of a small community-related store rather than a vast impersonal chain. So the staff runs around in Hawaiian shirts, they are very friendly and they chat about products in the store that they have tried. The stores also listen to customers’ complaints about store items that they have bought and liked in the past but that are no longer stocked. If enough people complain about a product’s absence, the store will bring it back in. Finally, Trader Joe’s sends out a newsletter to customers with recipes, tips and news, and they make it fun to read. In B2B markets, customers win by getting better solutions and by absorbing less risk. A successful company will offer solutions that help the customer make money. GE Wind Power is an example. GE entered this industry in 2003 after buying the remnants of the Enron wind power business. It was a small operation but it gave GE the chance to learn about, and gain insight into, the wind power market. The biggest market at the time was Germany, mainly because the German government provided very substantial subsidies. The market back then was very fragmented, and the belief was that you had to have different sizes of wind power turbines to meet different property specifications. The industry had essentially lost sight of the market. Companies never looked at the world through the customer lens and figured out that reliability – the percentage of time the machinery is working – and efficiency – the ability to convert the wind into energy – were the real keys to making money. So GE Wind Power invested in understanding customer requirements, and based on that, decided to challenge the whole industry model. They built only one size of wind turbine, but they made it extremely reliable. Plus the company used its existing expertise in jet engine turbines to make the most efficient rotors anybody has. The key story here is that GE’s insights into their customers gave them a strong sense of where to put their R&D dollars. Subsequent to that, they offered a service guarantee that their turbines would be working 98 per cent of the time. An ‘outside in’ strategy means looking at the world as a positive sum game. A lot of the strategy literature, especially the competitive forces approach, is all about intensity of competition. The world is seen as a zero sum game, that is, “If the customer has more power, we lose.” That’s not a good mindset. It doesn’t help. You need to go into a collaborative conversation with the customer. This is an edited version of an article which first appeared on Knowledge@Australian School of Business, knowledge.asb.unsw.edu.au.
research
Disability and accessibility How much thought does your organisation give to how accessible your complaints handling system is for people with disabilities? Disability advocates and public sector organisations argue that much more could be done in this area. Freya Purnell reports. The very issue of the definition of disability can be a vexed one. Commonwealth and state legislation differs, with some state legislation excluding mental illness as a type of disability. However many agencies, such as Consumer Affairs Victoria, work from the definition outlined in the Commonwealth Disability Discrimination Act 1992, which is much broader. “The reason we came to include mental illness is because there is a significant proportion of Australians experiencing issues with mental health. We want to ensure that our services are accessible to them and that our method of delivery doesn’t exacerbate existing issues that they might be experiencing,” says Giselle Gelman, senior project officer in the Community Engagement Branch of CAV. Also included in the Commonwealth definition of disability is: • Acquired brain injury; • Intellectual disability; • Cognitive disability; • Vision impairment and blindness; • Hearing impairment and deafness; • Physical disability. While not necessarily classed as disability, when considering access issues people who are culturally and linguistically diverse, who are frail aged or who have low literacy levels also have specific needs. Gelman cautions that even when looking at the needs of these groups of people, they are not homogenous – within the category of hearing vision impairment, for example, the needs of people with this type of disability may vary widely. Problem definition is therefore key.
Providing access to all So why is providing access to complaints handling for people for disabilities important? While consumers with disabilities may experience the normal range of consumer detriment issues, there are other areas where they may also be more vulnerable – either because they rely to a greater extent on aides and equipment or personal care services in their daily life, where problems may seriously impact on their ability to live comfortably, or because they are less able to navigate complaints handling systems when something does go wrong. Anthony Kolmus, capacity development manager, Office of the Disability Services Commissioner, says, “For a variety of reasons and to varying degrees, they are possibly going to find it more difficult to make a complaint than most other people, depending on the nature of their disability.”
“If an organisation is interested in all of their customers having equal access to expressing a concern about the service they receive, then they need to figure out how they can hear from those customers who may not be able to access their standard complaint system,” Kolmus says.
Providing a range of options for complaints handling The diverse nature of disability also presents challenges when looking specifically at providing access to complaints handling systems. What will work for a consumer who is deaf, will not necessarily work for someone with an acquired brain injury. So for organisations looking to make their complaints handling system accessible for people with a disability, using a matrix to come up with communication options for each type of disability can make the process easier, according to Gelman. For example, for sight-impaired people, having information available in an audio format as well as Braille can be helpful. People who are deaf or have a hearing or speech impairment can use the National Relay Service, but complaints systems must be geared to be able to take complaints from a third party in this case. The Office of the Disability Services Commissioner is looking into how Skype can be used for Auslan users. Other disabilities are more difficult to cater for. “If you have an intellectual disability, I would say most complaints systems are probably pretty much inaccessible, both in terms of how they are written, as well as the support the person might need to work through the process of elaborating on exactly what their complaint is,” Kolmus said. Denise West, manager of Scope’s Communication Resource Centre, says people with speech impairments often have Continued on page 18 www.socap.org.au
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particularly difficulty navigating phone-based complaints handling systems. “If people are non-verbal or they use a voice communication aide, often when they go to make a complaint, the person who initially takes the call can think it’s a crank call and hang up on them because of the nature of the voice output aide. We have also had experience with a number of people with disabilities who are unable to get through to the correct person or are put on hold for a long period of time and they can’t sustain that. They often have to physically go into offices to make a complaint, which if you don’t drive and are relying on taxis becomes costly,” West says. With around 47 per cent of the Australian population experiencing literacy issues, this is another large group that requires special consideration. “In our community a lot of people have difficulty with highlevel literacy, so providing information around how to make complaints in a variety of formats, including plain language or translations in Easy English, which is simple text supported by images, would be helpful,” West says.
Choosing the right options For organisations looking to improve their complaints systems for people with a disability, considering accessibility and relevance is key. “Accessibility meaning that people of all abilities are able to participate, and relevance, meaning people can get something of value for them,” Gelman says. As well as providing options to lodge complaints over the phone, in writing or in person, websites, for example, could be made more accessible by using Easy English and HTML or Word, rather than just PDF, to make information readable for people using a screen reader. Kolmus says organisations need to advertise exactly what the various options are for people who have a disability and who need to make a complaint. Flexibility is also important – a ‘one size fits all’ approach will not work for people with diverse disabilities, and some lateral solutions might be needed. “For example, some people simply find it easier to have discussions face-to-face rather than trying to convey a message over the phone. This is particularly so for people with an intellectual disability, they struggle to pick up a lot of the cues you and I would pick up, so having to make a complaint over the phone or in writing is much more difficult for them,” Kolmus says. Gelman recommends working proactively with the community by engaging with the disability sector to seek their feedback on what would help make complaints systems more accessible, and how they might be able to help consumers with disabilities through the complaint process if the need arises. “The main thing is to ask groups representing people with a disability what they think and to ask them before you get started. Having an active form of consultation is much more effective,” Gelman says.
For more information For organisations looking to find more information about how to 18 | December 2010 | Consumer Directions
make their complaints handling systems accessible to people with disabilities, there is a range of advocacy groups they can get in contact with, such as Communication Rights Australia, Validate, or Scope Victoria. Consumer Affairs Victoria also has information about complaints or customer services rights in accessible formats and offer translations in Easy English, available from its website at www.consumer.vic.gov.au. Our thanks to the Office of the Disability Services Commissioner for their assistance with this article. SOCAP Australia is currently developing a Forum on this topic for early 2011.
The UK experience This year, the Equality Act became law in the UK, bringing together several pieces of existing legislation relating to different aspects of equality, such as gender, race and disability, to simplify and harmonise the legislative framework. Michelle Valentine from Disability Forward Limited spoke at a SOCAP Europe event on ‘Dealing with Disabled Customers’, and says under the new law, private sector companies must make reasonable adjustments to practices and premises so they are accessible to people with disabilities. She said in the context of a complaints system, companies at a minimum are expected to: 1. Ensure that there is more than one way to complain. 2. Ensure that information about how to complain is easily and quickly available in different formats (that is, people do not have to specifically request information in other formats such as large print or Braille). 3. Ensure there is continuity of contact when making a complaint. 4. Ensure that the complaint system allows people with disabilities to complain about anything that a nondisabled person might complain about, but that they can also complain that they feel that their legal rights have not been properly addressed by the company. 5. Ensure that any complaints monitoring system always records whether a person has a disability or not (if they are willing to disclose this), so that companies can conduct data analysis on whether people with certain types of disabilities are not being well served by the company’s processes. 6. Do ‘mystery shopping’ on the complaints process with people with disabilities to see if it works in practice. Public bodies also need to consider: 1. Involving people with disabilities in the design of complaints processes. 2. Ensuring third party contractors also meet the legal duties required if the public body was delivering the service directly. Valentine says the Equality and Human Rights Commission will issue Statutory Codes of Practice for service providers to follow, and these should cover complaints systems, but they have not yet been published. “It is an area that consumer organisations really need to give a lot more attention to.”
international
Complaint resolution, social media and efficiency: US benchmarking study highlights In 2009, SOCAP International partnered with Customer Operations Performance Centre Inc (COPC Inc) to develop a survey methodology to capture benchmarking data for contact centres in the customer care industry. At SOCAP International’s 2010 Annual Conference, COPC Inc chairman and founder, Cliff Moore, provided an overview of the findings of the 2010 study, as well as insights based on COPC Inc’s global benchmarks and best practices, which are based on over 1200 operational audits. Elizabeth Kelleher reports. The COPC Inc and SOCAP 2010 Multi-industry Benchmarking Study surveyed 44 companies from seven different industries, and this year included a strong focus on social media and how it is utilised by participating organisations. Industries covered in the study included food and beverage (32 per cent), automotive (20 per cent), household and personal care (14 per cent), retail (14 per cent), healthcare (11 per cent), and travel and hospitality (7 per cent), with 60 per cent of the entities generating more than $100 million in annual revenue. Asked how important social media was to their business, 57 per cent of organisations surveyed said it was very important, with most of these entities already undertaking activities in this area, while 20 per cent said it was relatively important and 23 per cent said it had low importance. According to COPC Inc, the survey found that 60 per cent of the business emphasis of social media among respondents lies with pre-sales, marketing and PR activity, with 40 per cent in post-sales consumer care. When it came to defining what purpose social media served, 34 per cent of respondents said it was important for gauging consumer attitudes; over a third said it was useful for building brand awareness; 17 per cent found it useful for supporting a marketing and public relations strategy; 21 per cent said it was used to generate sales and 6 per cent identified it as a new channel of communication. A massive 80 per cent of organisations surveyed said they monitored social media, representing a 30 per cent increase from the 2009 benchmarking data. The majority of respondents conduct social media monitoring in-house, although 34 per cent reported engaging a third party for monitoring and reporting. Three-quarters of the respondents said they use social media to monitor brand mentions and comments, while 16 per cent use it to “proactively reach out to customers on a specific subject matter”. Only 9 per cent said they used social media to respond to customer comments. Only 20 per cent of organisations had measures and performance targets in place, indicating that traditional return on investment measures are not being applied to social media investments. According to COPC Inc’s global benchmarks, high-
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performing organisations – that is, those achieving high levels of customer satisfaction – are filtering the social media data using monitoring tools to provide more relevant and realistic results which can inform decision-making and overall business strategy. Significantly, the data suggests that successful organisations use social media channels at all stages in the customer lifecycle, from attracting a new customer to building long-term loyalty and retention. The study also examined other areas such as first contact resolution (FCR) and agent efficiency. While the benchmarking study states that high-performing organisations strictly manage FCR and issue resolution, only 32 per cent of respondents said they tracked FCR. Sixty-two per cent of organisations surveyed said they tracked the average time to close complaints, but 70 per cent of entities did not track how long it takes other departments to action or resolve complaints. In the area of measurement of customer satisfaction, the study found that while 77 per cent of organisations do actively track customer satisfaction, only 47 per cent collect and report data monthly. COPC Inc’s benchmarks recommend that organisations, at a minimum, should report customer satisfaction performance on a monthly basis so that appropriate action can be taken in a timely fashion. When it comes to managing agents, 86 per cent of entities use call quality as the management criteria, 70 per cent manage on adherence, 67 per cent on efficiency, 63 per cent on attendance, 60 per cent on absenteeism, 53 per cent on customer satisfaction, and 21 per cent on FCR. Eighty per cent of organisations reported that they track efficiency down to the agent level, with 97 per cent managing agents on average handle time, while 69 per cent track agent utilisation/occupancy. For more information on the 2010 Multi-industry Benchmarking Study, please contact Cliff Moore, chairman, COPC Inc on +1 512 225 0544 or cmoore@copc. com or Ian Aitchison, CEO, COPC Asia Pacific Inc on 0423 021 291. www.socap.org.au
SOCAP Australia presents
Complaints Handling Workshops For managers, supervisors, team leaders and staff in a service recovery environment Full and half day workshops
Limited workshops scheduled for 2011
Root Cause Analysis
For workshops on these topics in-house or in other locations please contact us directly.
Full day management level workshop
Multiple booking and distance discounts are available.
For details and bookings go to www.socap.org.au, email socap@socap.org.au or contact us on 03 8687 9060. Early booking recommended.
An integrated approach to complaints management Sydney: 17 February 2011 Melbourne: 3 March 2011
A Complaint is a Gift Complaint handling 101
Full day entry level workshop Melbourne: 10 March 2011 Sydney: 30 March 2011
From Rage to Reason Strategies for handling and defusing anger
Full day workshop â&#x20AC;&#x201C; suitable all levels Sydney: 31 March 2011 Melbourne: 7 April 2011
inspiring members to be the best in consumer affairs