Stakeholder Magazine - Sept. 2008

Creating value for customers, employees and shareholders

Emotional Experience at Build-A-Bear

Treating Customers Fairly FSA DEADLINE DECEMBER 2008

September 2008 £4.50

COMPANIES IN THIS ISSUE Build-A-Bear Boots Waterstones Mandarin Oriental Hotels Credit Suisse O2 Avis Irish Life MBNA Harley Davidson Superquinn

EUROPEAN CUSTOMER MANAGEMENT CONFERENCE UKCSI RESULTS EMPLOYEE ENGAGEMENT STAKEHOLDER ANALYSIS HALO EFFECT

The

F A C T O R L E A D E R S I N S AT I S F AC T I O N M E A S U R E M E N T

Customer Management Training Courses

Customer Satisfaction Surveys 1day £319 Customer insight starts with feedback from customers. This practical step by step course covers devising, implementing and analysing customer surveys, plus producing actionable insight.

Analysing & Reporting Customer Satisfaction Data 1day £374 Delegates at this hands on course analyse real data on laptops. Will save you vast amounts of time if your job involves analysing customer survey data.

London: Sept 30th, Dec 2nd Manchester: Oct 21st Bristol: Nov 18th Birmingham: Nov 19th

Manchester: Sept 30th. Nov 25th London: Oct 22nd, Dec 4th Birmingham: Oct 8th

Customer Emotions 1/2 day £175

Improving Customer Satisfaction 1day £319

Emotional engagement is the new mantra but must be understood from the customer’s perspective.

This intensive briefing exploring the difference between customers’ emotional and rational decision making and how to build this into your customer management.

This thought provoking course is full of ideas, techniques and case studies. You will learn how to sell customer satisfaction to senior management, how to involve colleagues, how to make customers notice your improvements and much more.

London: Dec 3rd

Manchester: Nov 20th London: Nov 26th

For more information or to book a place: Contact Ruth on 0845 293 9480 www.leadershipfactor.com

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Diary Dates

September 2008 22 Customer

Training courses and Conferences from the UK and America.

UKCSI. Stephen Hampshire and Robert Crawford report on the latest results.

8 Conference

28 Employee

Nigel Hill reports back on the ECMW Conference from London.

Mark McCall reveals the findings of new research on employee engagement across the UK.

12 Customer Uta Langley explains how Neuro Linguistic Programming (NLP) can help provide more memorable experiences for your customers.

13 Latest thinking

33 Latest thinking

The voice of the customer. What are the best ways of getting customer feedback and what on earth is Experience Immersion?

Rachel Allen looks at new techniques for deciding who your stakeholders are and how you should treat them.

18 Case Study

37 Fast Guide

Sarah Stainthorpe gets all emotional at Build-A-Bear workshop.

Treating Customers Fairly. High profile new campaign from the FSA.

In this issue...

VOLUME 5 ISSUE 2

38 Book Review The Halo Effect by Phil Rosenzweig.

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Treating Customers Fairly £175 Half day briefing This intensive half day briefing will address the FSA requirements and specify clear information systems to comply.

Dates and venues London Manchester Edinburgh

Deadline December 2008 Including: · Have measures in place · Demonstrate that you are treating customers fairly

The

F A C T O R L E A D E R S I N S AT I S F AC T I O N M E A S U R E M E N T

· Collecting customer feedback · Reliability of surveys · Establishing a suitable TCF measure · Demonstrating improvement · Producing actionable information to improve

For more information or to book a place: Contact Ruth on 0845 293 9480 www.leadershipfactor.com

October 14th November 11th November 27th

Nigel Hill editor

Outcomes or Experiences?

Do customers want outcomes or experiences? Is it the so-called physical aspects of the customer experience that make the difference or the emotional ones? In terms of emotional experiences they don’t come much stronger than Build-A-Bear Workshop. Interestingly, if you get it right, I don’t think they come much more profitable for the supplier either. In our cover article, Sarah Stainthorpe details the full customer experience at Build-A-Bear, emotion by emotion but then asks to what extent this customer experience blueprint is transferable to other organisations. The short answer is probably not much, but to give us a framework for considering the answer, Sarah introduces the Customer Experience Spectrum, which we will pursue in more detail in the next edition of Stakeholder Satisfaction.

This year’s ECMW Conference in London was highly stimulating as usual, and we review some of the main themes that emerged from the event. Of particular interest was the talk from Sue Needs of Boots, who explained how they had replaced their mystery shopping programme with an extensive customer satisfaction survey involving responses from over 20,000 customers every week. And as the latest UKCSI results show it’s paid off big time. Our review of the UKCSI results also explains why customer satisfaction across the UK has improved despite the credit crunch inspiring doom and gloom in the media.

There are obviously several ways of getting feedback from customers, sometimes collectively known as the ‘Voice of the Customer’. Our article of that name explores surveys, mystery shopping and a new kid on the block called ‘customer immersion’ or ‘experience immersion’. David McQuillan from Credit Suisse proved to be one of ECMW’s more entertaining speakers when he spoke about his attempts to get senior colleagues to immerse themselves in the customer experience, including the legal department trying to fill in its own account application forms (you can guess with what success) and directors spending a day in a wheelchair to understand the experience of disabled customers. You can’t knock empathy, but to what extent is it a new idea? Check out the Voice of the Customer to find out.

Two more stakeholder groups are covered in this issue. Rachel Allen looks at the much bigger picture of who your stakeholders are, and how to identify them.

She also introduced some new techniques for analysing just how important different stakeholders are to your organisation and how they should be treated.

Mark McCall reports on some exciting new employee engagement research conducted by YourSayPays, exploring the components of employee engagement and revealing just how engaged, or not, UK employees are. And do you think they’re more, or less engaged in the USA? Turn to Mark’s article to find out. In the next issue of Stakeholder Satisfaction we’re going to focus much more strongly on employee engagement and we’d be really pleased to hear from any of you who work for an organisation with a motivated workforce. If you have a good story to tell please email us on: info@stakeholdermagazine.com Best wishes Nigel Hill

Stakeholder Satisfaction is the magazine for people who want their organisation to deliver results to employees, customers and any other stakeholders as part of a coherent strategy to create value for shareholders. We publish serious articles designed to inform, stimulate debate and sometimes to provoke. We aim to be thought leaders in the field of managing relationships with all stakeholder groups.

Editor: Features Editor: Contributors

Nigel Hill Sarah Stainthorpe Robert Crawford Stephen Hampshire Rachel Allen Mark McCall Sarah Stainthorpe

Designer: Creative Director: Advertising: Editorial Director:

Rob Ward Rob Egan Daniel Hodgson Janet Hill

Printers of Stakeholder Satisfaction www.stakeholdermagazine.com info@stakeholdermagazine.com Stakeholder Satisfaction PO BOX 1426 Huddersfield HD1 9AW Tel: 0845 293 9480 NB: Stakeholder Satisfaction does not accept responsibility for omissions or errors. The points of view expressed in the articles by contributing writers and/or in advertisements included in this magazine do not necessarily represent those of the publisher.

Whilst every effort is made to ensure the accuracy of the information contained within this magazine, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrievable system or transmitted in any form or by any means without prior written consent of the publisher.

Copyright © STAKEHOLDER SATISFACTION 2008

ISSN 1749-088X www.stakeholdermagazine.com

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Diary Dates

National Customer Service Awards

Treating Customers Fairly

Gala Awards Ceremony 23rd September 2008 London www.customerserviceawards.com

14th October London 11th November Manchester 27th November Edinburgh www.leadershipfactor.com

Entries for 2008 are obviously closed now but organisations wishing to enter for 2009 should register on the website and sign up for the newsletter which will provide details of next year’s programme. Check out this year’s winners in the next edition of Stakeholder Satisfaction.

Advancing the Service Culture 30th September 2008 London 12th November 2008 London 18th September 2008 Manchester 12th May 2009 London www.leadershipfactor.com This is a highly motivational one-day training course to help organisations build a genuinely customer-focused culture.

Anybody who works in customer service will love it and come back to work brimming with ideas as well as a written action plan for implementing them. For more information contact Ruth on 0845 293 9480 or ruthcolleton@leadershipfactor.com

National Customer Service Week 6th – 12th October 2008 www.nationalcustomerserviceweek.com Organised by the Institute of Customer Service, National Customer Service Week is a week long celebration of customer service professionalism. Supported by a huge volume of PR and events around the country it provides a great opportunity to raise the profile of customer service generally and within organisations. As well as emphasising the importance of the customer service profession the ICS is very keen to highlight the celebratory aspect of the week as a good pretext for organisations to recognise and reward the contribution of their customer service staff. If you register your organisation as a participant in National Customer Service Week, the ICS will send you ideas for initiatives and activities you can implement as well as posters to promote them. There is even an NCSW shop where you can browse a huge range of promotional merchandise from T-shirts to badges, balloons and banners to pens and sticky notes and even stress balls for when the excitement all gets too much!

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Treating Customers Fairly is currently the FSA’s major customer initiative for financial services providers, who need to be able to demonstrate compliance with its six key principles as well as adhere to them in practice. According to the FSA many financial service companies are still falling well short of the FSA’s requirements as far as demonstrating compliance is concerned. This intensive half day briefing will explain everything providers need to know about gathering evidence from customers to demonstrate that customers feel they have been treated fairly and the six principles have been adhered to. Delegates will also learn how to collect information that will enable them to demonstrate measurable improvement over time to the FSA. See also the Fast Guide towards the back of this magazine and for more information contact Richard on 01484 467075 or richardkimber@leadershipfactor.com

Customer Satisfaction Surveys 30th September London 21st October Manchester 18th November Bristol 19th November Birmingham 2nd December London www.leadershipfactor.com This practical one-day training course explains how to monitor and measure the customer experience, as perceived by customers and how to use the data to pinpoint the best ways to improve customer satisfaction and loyalty. It will make sure that you ask the right questions, choose the most cost-effective type of survey for your organisation and produce statistically reliable results that can be tracked over time to monitor improvement.

For more information contact Ruth on 0845 293 9480 or ruthcolleton@leadershipfactor.com

Diary Dates

Complaints Management

Excellence in Customer Service

9th October Birmingham 25th November London www.leadershipfactor.com

Institute of Customer Service Annual Conference 21st – 22nd October 2008 Radisson-Edwardian, Heathrow www.theicsconference.com

This one day training course is ideal for people running an existing complaints management system or implementing a new one.

The course covers topics such as moving complaint handling up the organisation’s agenda, identifying service recovery opportunities, benchmarking complaint handling and ways of measuring performance on complaints resolution. For more information contact Ruth on 0845 293 9480 or ruthcolleton@leadershipfactor.com

North American Conference on Customer Management 16th – 19th November Disneyland Hotel, Anaheim, California www.iirusa.com/naccm The premier American customer management event, this year’s keynote speakers are Jo Torre, Manager of the LA Dodgers; Keith Ferrazzi, author of ‘Never Eat Alone’, Kevin Carroll, author of ‘Rules of the Red Rubber Ball’ and JoAnna Brandi, CEO and Publisher, The Customer Care Coach. The location looks pretty good too!

Analysing & Reporting Customer Satisfaction Data 8th October Birmingham 22nd October London 25th November Manchester www.leadershipfactor.com If it is part of your job to analyse your organisation’s customer satisfaction surveys, this one day training course will save you loads of time as well as educate you about some of the more technical aspects of the process such as calculating your results’ statistical reliability – and being able to explain it to your colleagues. A very hands-on course, you will analyse real data on a laptop using Microsoft Excel and take away templates, macros and formulae that will save you a lot of time as well as improve the professionalism of your output. For more information contact Stephen on 01484 467014 or stephenhampshire@leadershipfactor.com

The ICS annual conference seems to break attendance records every year and I’m sure this year will be no exception. Keynote speakers include Roger Martin Fagg from Henley Management College, Michelle Hey from First Direct and Kriss Akabusi. As well as breakout sessions, the conference includes an entertaining dinner on the evening of October 21st, a well supported exhibition of suppliers to the customer service industry and a great opportunity to network with your peers from other organisations.

Leaders in London December 3rd – 4th Central Hall Westminster Master-classes on 2nd & 5th December www.leadersinlondon.com The 2007 Leaders in London Conference was fully reported in Stakeholder Satisfaction, and this year’s event will be too. High profile speakers include prominent leaders such as Jack Welch, Rudy Giuliani and Carly Fiorina; authors Philip Kotler, Gary Hamel and Mark Penn and even chess maestro Garry Kasparov. There are also two highly stimulating optional master-classes starting with Dan Pink leading the innovation workshop on December 2nd. In this master-class Dan analyses evidence from around the world to reveal how the forces of Abundance, Asia, and Automation are nudging us into an era defined not by traditional "knowledge workers," but by creators and empathizers. Dan Pink is author of ‘Free Agent Nation’ (2001) and ‘A Whole New Mind’ (2005), and was a very stimulating speaker at this year’s European Customer Management Conference in London. On December 5th Daniel Goleman will be conducting a master-class on how to build a committed and motivated organisation that is able to cope with the ever changing environments in which we all work. Daniel Goleman is the world’s leading expert on emotional intelligence. His book on the subject has sold more than 5 million copies and has been translated into 30 languages.

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Conference

Much of this year’s conference focused on the customer experience, including a pre-event the day before the main conference entitled ‘The Customer Experience Summit’, which attracted delegates and speakers from around the world. I had lunch with four Croatians, an American, a Nigerian and a guy from Doncaster. The others couldn’t add much to the Doncaster Rovers – Huddersfield Town debate but luckily had plenty of interesting conversation of their own. Rather than write about each speaker sequentially I’ll highlight some of the interesting themes that emerged from the presentations.

HOW DOES YOUR BUSINESS CAUSE CUSTOMERS TO FEEL?

THE CUSTOMER EXPERIENCE THROUGH THE CUSTOMER’S EYES Not surprisingly, all the speakers stressed the need to understand the customer experience from the customer’s perspective. David McQuillan, Director of Experience Design at Credit Suisse uses the interesting term “Experience Immersion” to encapsulate his efforts to move Swiss bankers closer to the customer experience they are responsible for. First he identifies all the customer touchpoints then lists all the things customers might do (the experiences) at each touchpoint. The managers pick one experience from each touchpoint and first write down the experience they would expect as a customer in that situation. Next, they undergo their chosen experience - visit a branch, contact the call centre, find out how to make a complaint – or whatever it is. Finally they compare their ideal experience with reality! “Experience Immersion” included senior managers spending a day in a wheelchair to develop empathy with disabled customers and the legal department filling in the

new account application form they had designed and failing miserably! As the following speaker, American consultant Lou Carbone put it, ‘how does your business cause customers to feel?’

MEASUREMENT Much as he gets his managers involved in “Experience Immersion”, David McQuillan sees the essential foundation of delivering a good customer experience as a thorough understanding of how customers feel about it from their perspective, which can be reliably generated only from systematic customer research. Lou Carbone calls it moving companies from ‘make and sell’ to ‘sense and respond’ and pointed out that to be of value customer sensing systems must be rigorous and objective.

They are certainly that at Boots these days. Sue Needs, Head of Productivity at Boots explained to the Summit how for many years the company had relied on mystery shopping to provide customer experience metrics but decided to change to customer surveys for two reasons. The first and obvious one is

Lou Carbone ECMW May 2008

Nigel Hill info@stakeholdermagazine.com

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that customer surveys provide feedback from real customers, not mystery shoppers. The second was the lack of credibility that mystery shopping results had with store managers and staff – they always had good reasons, other than poor service, to explain away low scores. So in May 2007 Boots launched their Customer Care Measures involving 20,000 customers every week across 1,500 stores. The questions are focused on what’s important to customers, identified by preliminary exploratory research and they’ve come up with an innovative way to generate such a large sample size at reasonable cost. Each week randomly selected customers are given an

extra till receipt, which encourages them to take part in the customer care survey either by logging onto the website and completing a questionnaire or by calling a freephone number to be interviewed.

Staff are asked to explain the process to customers and encourage them to take part and there is a weekly prize draw of £1,000. Sue reported that the new system has provided robust measures at store level allowing them to identify what’s driving customer satisfaction, loyalty and sales, to implement changes and to measure the difference they’re making. The measures have gained much greater acceptance amongst store managers and they determine 50% of their bonus, and that of their staff. The customer care measures are going up and they’re being extended to a further 1,200 smaller stores.

For further information on the massive benefit Boots has derived from their more robust measurement system see the UKCSI results on page 22.

faction, customer satisfaction and financial performance. It’s working so far. In their “Great Place to Work” employee survey, Boots achieved its best score ever in 2007. But Sue wasn’t the only presenter driven by Service-Profit Chain principles. Mandarin Oriental Hotels’ Operations Director Europe, Liam Lambert, is totally convinced that employee satisfaction drives customer satisfaction, saying “we won’t get anywhere if our employees are not delighted.” According to Liam, the busiest restaurant in every hotel is the staff cafeteria, where the quality and choice of food is just as good as that offered to customers. Mandarin measures ‘colleague commitment’ for every department in every hotel. Liam emphasised the strong correlation across the company between their employee and customer satisfaction measures. If you’re ever going to Thailand, the hotel with the highest employee satisfaction and customer satisfaction is in Bangkok. He wouldn’t name it, but the hotel with the

lowest employee satisfaction also has the lowest customer satisfaction. He also pointed out that within hotels, departments with the lowest employee satisfaction also tended to get lower customer satisfaction scores for their area. The Service-Profit Chain at Waterstone’s is Colleague Satisfaction > Customer Experience > Customer Behaviour. Operations Director, David Rowntree told the conference that improvements to the first two had increased average transaction value by

One of Sue Needs’ reasons for wanting robust customer metrics was her belief in the linkage between employee satis-

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INTERNAL BENCHMARKING All the speakers from companies with multiple branches, stores or business units testified to the effectiveness of internal benchmarking for driving improvement in customer satisfaction.

Avis has an ‘over 80s’ club for branches with above target levels of customer satisfaction, but also celebrates the best improvers as well as those with the highest scores. Nobody likes being at the bottom of league tables, which is why it works so well, but the initial reaction of those at the bottom may not be to redouble their efforts to improve service but to challenge the process, question the data and devote effort to developing reasons why it’s more difficult to satisfy customers in their location, region or country.

CULTURAL DIFFERENCES

THE SERVICE PROFIT CHAIN

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5%. In an interesting example of Harvard’s ‘customer-employee satisfaction mirror’, he also pointed out that the new customer-focused environment at Waterstone’s has reduced staff turnover by 15%.

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Cultural differences across countries is an objection I’ve encountered at several Leadership Factor clients over the years.

The French always give low scores or the Germans are never satisfied. (Interestingly, across companies it’s always different countries whose populations are never satisfied!). Someone asked Liam Lambert from Mandarin Oriental Hotels this very question. His reply? “No excuses! The score is the score! The hotel or department with the lowest score just has to do whatever’s necessary to improve it!” In my experience, this no nonsense ‘the score is the score’ leadership from the top always works best. A few grumbles at first, then the culture soon evolves to one that focuses on actions to improve – especially if financial rewards are at stake. As they are at Boots.

Conference

REWARDS FOR CUSTOMER SATISFACTION Clearly the very large investment in measuring customer satisfaction at Boots has to demonstrate a business pay-off so the measures have become a key part of the stores’ scorecard.

League tables are never popular initially but have made a huge and positive business impact at Boots for three reasons:

care initiative at Boots, a decision was taken at the outset to close the ‘funding gap’ – retailers’ traditional policy of` employing slightly fewer staff than are really needed on the assumption that ‘productivity’ will take care of the rest.

And the commitment to survey 20,000 customers per week (and growing) is further evidence of a willingness to invest resources in improving customer satisfaction.

would you do for two weeks in Barbados if you didn’t have your Blackberry??) The advisor told the customer not to worry because he would sort the problem.

Shortly after the customer checked into his hotel the following day, room service arrived with a silver platter containing not only a new Blackberry but also a bottle of Champagne! And the customer focus is also paying off for O2. Like Boots they are top of their sector league table in the UKCSI.

· The robustness of the customer satisfaction measure quickly made it much more accepted by managers and staff than the mystery shopping it replaced. · An advantage of having a lot of business units is that benchmarking can be done against obvious peers; in Boots’ case groups of 30-40 stores of similar size, with the same type of customer base and in comparable locations. · Money is at stake – half of their bonus for store managers and staff.

And it’s a tough regime. Regardless of how high their customer satisfaction is, stores at the bottom of their league table don’t get any bonus. This prompted a typical question from the audience: “but what if you’re bottom and fantastic?”

And a great reply from Sue Needs “well if that’s the case some of your peers must be even more fantastic so there’s plenty of room for improvement!”

COMMITMENT FROM THE TOP It’s a very well worn cliché in the customer satisfaction world that the starting point is commitment from the top.

Without it you won’t get anywhere and virtually all CEOs claim that customers are absolutely crucial to the success of their organisation. So what’s the problem? According to many of the delegates struggling to improve customer service from middle management positions, CEOs simply don’t walk the talk when it comes to the crunch – especially when resources are at stake. Not so at Boots. As a key part of the customer

Cheryl Black, Customer Services Director at O2 explained that five years ago the Board was instrumental in the company’s strategic decision to differentiate itself in the mobile phone market on ‘how it feels to do business with us’. In common with Boots, an early decision was to invest in more front-line staff to ensure that the resources were in place to actually give the customers a better experience. The company’s customer satisfaction index is tracked at Board level and it has been ahead of its competitors for over two years now. As well as an overall customer satisfaction index, the company scores each important customer requirement so that it can drill down into problem areas in more detail and draw the right conclusions to take the necessary action. O2 has invested heavily in staff rewards, including an across the board bonus of £1,000 per employee last year for winning one million new customers and the same again this year if they stay ahead of competitors on the customer satisfaction index.

Strong internal communications leave staff in no doubt that their mission is to create a winning customer experience and that they are empowered to use their discretion to achieve it. And the message seems to be getting through.

Last year a front-line employee in the call centre was contacted by an important business customer who was very distressed because he had lost his Blackberry on the eve of departure for a two week holiday in Barbados. (Hardly surprising he was distressed. What

MINDSET Without the right mindset, an organisational culture that doesn’t just permit but positively encourages all employees to do what is necessary to deliver an unrivalled customer experience, it simply won’t happen. So where we’re finishing this article is really where it all starts.

Company mindset starts at the top of course but the key thing is convincing all middle managers and employees that the top really does mean it, that the real rewards in this company – promotion, pay rises, bonus or recognition – will come from going the extra mile for customers. You may remember the Stakeholder Satisfaction article about Irish Life (December 2006). To launch their “intouch” customer satisfaction drive, the CEO addressed a gathering of all staff in Dublin and, amongst other things, announced their suggestion scheme offering 100 prizes of 200 euros each for every great idea to improve customer service. And he walked the talk. Three employees who suggested ideas at the event were each given their reward on the spot. Now that’s the kind of thing that alters mindset! S For more on altering mindset, check out the “Advancing the Service Culture” training course at: www.leadershipfactor.com or call Ruth on: 0845 293 9480

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Customer

Using NLP to improve customer satisfaction Uta Langley, founder of 2 the point training, is an experienced trainer, facilitator and coach and has been working with groups for over 20 years. She has a record of success in initiating and carrying through a wide range of change management and management development projects involving all levels within an organisation. Uta has a background in international marketing and sales in the Automotive Industry. She has been working with a wide range of individuals and businesses from owner/managers of small businesses to senior executives in blue chip companies and public bodies.

Uta is also tutoring the Women into Enterprise course at the University of Bath.

Your staff and the way they interact with your customers make the difference between a fantastic and a disappointing customer experience.

Neuro Linguistic Programming (NLP) can help to shift the balance towards more outstanding and memorable experiences for your customers and therefore develop brand advocates, build customer loyalty and facilitate up selling opportunities.

“NLP is the art and science of excellence, derived from studying how top people in different fields obtain their outstanding results” (John Seymour). NLP explains how our mind works and how we can use this knowledge to change our behaviours if we want to achieve different results.

NLP has been used in business for many years to increase sales and enhance customer service through improved management skills and relationship building.

NLP can provide specific tools and techniques that can improve customer service.

1. Make qualitative outcomes more measurable NLP provides a goal setting process that makes qualitative goals and behavioural outcomes more measurable by defining sensory based evidence for success. This process will help define the qualitative experience you want your customers to have and will therefore enable you to measure if your staff deliver these experi-

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ences. Greater definition of the perceived more vague behavioural components will also make training, coaching and performance management easier as there is a shared understanding of the desired customer experience.

2. Model excellence Modelling excellence is one of the major contributions that NLP brings to business.

When modelling excellence we contrast the high performers with the mediocre on 6 levels from environmental factors to the way they think about the customer, themselves and the products or services.

Behaviour is strongly determined by our beliefs and attitudes and NLP based modelling can crystallise how outstanding performers think and act. Some of the components of outstanding performance will be talents that people will need to bring and that you need to recruit for. Other elements of the model of excellence can be used in training and coaching to develop existing staff so that more of them become outstanding performers. When modelling top performers in a High Street bank we specifically included top performers that remained in the business to identify what makes them stay in order to be able to adapt recruitment to reduce staff turnover.

The results of a modelling exercise can improve recruitment, decrease induction time and increase retention as well as performance when the findings are imple-

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mented across the business.

3. Train people to be flexible The most flexible person will generate more satisfied customers as they are able to respond to different moods and needs of a wider variety of customer than the staff members that rely on one style only.

NLP offers tools and techniques to train people to improve their ability to sense and identify customer moods and needs and to respond appropriately. NLP based training can access the often hidden components of beliefs and attitudes that make the difference between mediocre and outstanding performance. NLP based training aims to increase the staff members’ repertoire of responses so that they can be more flexible and adapt to what is needed to create more positive and profitable customer interactions. S For your FREE in-depth report on “Modelling Excellence”, please e-mail model@2thepointtraining.co.uk.

Uta Langley, 2 the point training.

T 01285 654344.

Uta Langley Founder of 2 the point training model@2thepointtraining.co.uk T 01285 654344

Latest thinking

hese days few company bosses would disagree with the words of Wal-Mart founder Sam Walton:

There is only one boss. The customer. And he can fire everyone in the company from the Chairman down, simply by spending money somewhere else.

So everybody’s interested in the Voice of the Customer but what exactly does it mean?

Sam Walton was very clear about the goal – customers spending money with Wal-Mart not its competitors. This is easy to monitor.

Supermarkets have daily sales figures, broken down into all relevant product categories and compared with the same day last week and last year. It tells them exactly how the business is performing. But not why.

Customers spending more money at WalMart, or at its competitors tells you how customers are behaving. The Voice of the Customer (VoC) tells you why.

Attitudes and behaviours

VoC is all about understanding customers’ attitudes – how they think and feel. People’s attitudes drive their behaviours. As far as customer management is concerned, intimate understanding of the attitudes that will drive customers’ future behaviours is the key to maximising customer loyalty and hence company revenue. It is usually the main differentiator between companies in highly competitive markets. So if VoC is that important, you presumably can’t get enough of it? Not true. The problem is not getting enough information about customers. The problem is getting the right information. This article will discuss some traditional and newer methods of understanding customers’ attitudes together with their value

in successfully predicting and managing customers’ future behaviours.

Surveys Readers of this magazine don’t really need any lectures on customer surveys, so let’s just summarise the key points.

To be effective in predicting customers’ future behaviour, survey questions must be based on what’s important to customers rather than what’s important or interesting to the organisation. This is based on the incontrovertible principle, going back to Adam Smith, that people seek to repeat pleasurable experiences and avoid unpleasant ones. To be valid predic-

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Latest thinking

tors of customers’ future behaviour you therefore have to base survey questions on the same criteria that your customers use to make decisions about repeating or not repeating experiences with your organisation.

The questions are therefore generated by conducting exploratory research with customers, usually through focus groups in consumer markets and depth interviews in B2B. To be a reliable indicator of customers’ future behaviour, rather than an unreliable, volatile one, the headline measure of company performance that you track must be a composite index derived from all the satisfaction questions rather than a single question such as overall satisfaction or willingness to recommend.

To improve customers’ attitudes about your organisation, and their desire to repeat customer experiences with it, your surveys must highlight the right action areas that will make the biggest difference to customers’ future behaviour. Known as PFIs (priorities for improvement), these should focus on a very small number of actionable areas where the organisation is falling

short of meeting customers’ requirements, i.e. not doing best what matters most to customers. Obviously, companies then have to take effective action to address customers’ unfavourable attitudes in those areas.

If these simple steps are followed, customer satisfaction and loyalty invariably improve.

Mystery shopping Some organisations view mystery shoppers as customer substitutes. True, they have to go through a typical customer journey. If they’re mystery shopping a hotel, they will stay overnight, eat dinner and breakfast and use any other facilities such as a health club. But are they the same as real customers? Of course they’re not. Professional mystery shoppers are exactly that. They are well trained to observe and record many aspects of the service delivery process and consequently provide highly detailed information that’s very useful to operational managers.

Examples might include whether the hotel receptionist was wearing a name badge, addressed the customer by name and provided clear directions to the room.

They can record waiting times at check-in and check-out as well as in the restaurant.

They can also make judgements on levels

of cleanliness or staff friendliness and helpfulness. Technology even permits surreptitious video recording of staff, though companies need to think carefully about the implications of this for organisational culture and values. So mystery shopping provides many practical benefits to operational managers for use in staff training, evaluation and recognition, but can’t provide understanding of how customers feel about the customer experience and the attitudes they are forming about the company.

Since a mystery shopper’s job is to make observations on companies’ customer service performance, they cease to be normal customers, becoming highly aware and often much more critical than typical customers. Whilst this is good for their role, it doesn’t provide an accurate reflection of how normal customers feel.

Tests have reported other inconsistencies with mystery shopping such as males and older people producing less accurate reports than females or younger ones1.

Our conference feature earlier in the magazine reported on the benefits Boots have gained from switching mystery shopping budget into customer surveys. The next case study illustrates some less predictable disadvantages of mystery shopping.

Smile school In their book “Loyalty Myths”, Keiningham et al use the experience of Safeway in America to illustrate the dangers of mys-

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Latest thinking

tery shopping2. They explain how Safeway based its strategy in the 1990s on delivering superior customer service and invested in an extensive mystery shopping programme to monitor employees’ performance in delivering it. Employees were expected to do things like thank customers by name, offer to carry their groceries to the car, smile and make eye contact: all very desirable customer service behaviours which should lead to customer satisfaction. And they did.

Throughout the 1990s Safeway’s customer satisfaction levels and financial returns were very high. However, in stark contrast to the teachings of the ServiceProfit Chain3, customer satisfaction and employee satisfaction were moving in opposite directions. This was because employees who failed to achieve a target mystery shopping score were sent for remedial training (called Smile School by the employees), and could be dismissed if their performance failed to improve.

Moreover, female employees’ feeling that the smiling and eye contact could send the wrong signals to some male shoppers was confirmed by an increase in the number of sexual harassment incidents committed by customers. This led to a number of charges filed against Safeway by the employees’ union and some individual female employees. In the end, the Service-Profit Chain wasn’t wrong. Poor employee morale adversely affected customer satisfaction and Safeway’s financial performance. According to the ACSI4, Safeway’s customer satisfaction levels rose substantially from 70% to a high of 78% by 2000 as a result of its focus on customer service. However, as problems with employees intensified, the customer satisfaction gains were virtually all lost,

Safeway’s score falling back to 71% by 2003.

on both sides of at least 1,700 doorways and woven into as many carpets. Not a low cost investment. When lean and mean

Mystery shopping summary In the European Union there are restrictions on the use of mystery shopping that prevent it being used for disciplinary purposes against individual employees. It is increasingly recognised by good employers that mystery shopping is best used for factual rather than judgemental aspects of service and to provide positive feedback and recognition to employees. Good companies also understand that it provides operational information rather than a reliable measure of how satisfied or dissatisfied customers feel.

Customer Immersion The newest buzzword on the block, customer immersion (sometimes called experience immersion) is designed to bring the VoC alive, thus moving managers closer to the customer experience for which they’re responsible. This means it can encompass virtually any technique that helps staff to ‘put themselves in the customer’s shoes’.

This could include simple things such as sitting behind the one-way mirror to view focus groups live, taking customer calls on a regular basis as advocated by Richard Branson or listening to recordings of customer calls in groups and discussing how the customer experience could be improved. With more investment, staff can be permanently reminded about seeing things from the customer’s point of view.

When MBNA Executives roamed around its headquarters in Wilmington, Delaware, they saw the phrase “Think of yourself as a customer” spelled out in gold capital letters

Bank of America acquired MBNA in a $35 billion take-over in 2005 a major culture clash was anticipated. In the event, Bank of America jettisoned some of MBNA’s more extravagant assets such as its extensive art collection, on-site golf course and large fleets of boats and private jets. However, not only did it adopt MBNA’s renowned customer-focused culture, keeping open all MBNA’s call centres whilst making savings by closing some of its own, it also put MBNA’s signature gold “Think of yourself as a customer” letters up on their own buildings’ walls.

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Latest thinking

As Phil Dourado explained in stakeholder Satisfaction in July 2005, Harley-Davidson executives are expected to ride with customers for 10 to 15 days each year. Now that is a customer immersion hardship! With a little more hard work, at the company’s centenary celebrations in Milwaukee, the job of Harley-Davidson’s VPs was to hand out brochures to visitors. One of the VPs calculated that over the three days he had spoken to over 10,000 customers.

In the December 2006 edition of Stakeholder Satisfaction Stephen Hampshire’s Irish Life case study profiled their cardboard cut-outs. Designed so that customer comments, good and bad, can be attached to them in speech bubbles, they bring the VoC right into the office. To maintain their impact there are several different designs, which are constantly moved around the building and the velcroed customer comments are regularly replaced. Boots also use comments generated from their customer satisfaction surveys to motivate staff. Their ‘Wow comments’, based on the ‘catch someone doing something right’ principle, are incredibly effective for recognition purposes. Some store managers have used them to set up ‘Boards of Fame’, ‘Wow Idols’ and other innovative ideas.

Also in the December 2006 Stakeholder Satisfaction, we explained that in addition to common methods such as formal market research, customer comment cards and instore customer service desks, Irish supermarket Superquinn has always implemented policies to ensure that its managers stay close to customers – in many cases quite literally. For example, founder Feargal Quinn would often walk round a store whilst holding a meeting. A great way of making store managers stay close to customers was to give them an open office within the store itself! All managers must put themselves into the customer’s shoes by doing their own shopping within the store – in particular, male managers cannot delegate the task to their partners, and they must work on the shop floor at least once a week. Superquinn also holds fortnightly customer panels with senior managers, including Feargal himself, regularly attending.

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A particularly interesting example comes from Credit Suisse, whose David McQuillen has the job title of Director, Experience Design. Earlier this year, David told the

liquidating the company, decided instead to hire a promising young executive from National Cash Register called Tom Watson. He proceeded to instil an almost messianic adherence to what he called his “three basic beliefs”: ‘Give full consideration to the individual employee’ ‘Spend a lot of time making customers happy’ ‘Go the last mile to do things right and seek superiority in all that we undertake.’

Having turned the corner and restored growth and profitability, Watson changed the company’s name to International Business Machines. And the rest is history.

The thing is, whether you call it Voice of the Customer, Customer Immersion, Wowing the Customer or pick something else from the plethora of buzzwords and jargon it’s about making sure that employees and their bosses are sufficiently motivated to genuinely try to do best what matters most to customers. Follow Tom’s advice and you won’t go far wrong! S

European Customer Management Conference how he uses his customer satisfaction survey results to identify the top 5 things that matter to customers at each touchpoint. He then asks executives to write down what they would expect the customer experience to look like for a specific touchpoint before walking in the customer’s shoes, undergoing the experience and reporting back on how it differs from their original assumptions. Managers have accompanied customers in branches, opened an account on the company’s website, made a telephone enquiry, applied for a credit card and even spent a day in a wheelchair to see how disabled-friendly the customer experience was.

References 1 Morrison, Colman and Preston (1997) “Mystery customer research: cognitive processes affecting accuracy”, Journal of the Market Research Society, 46 (4) 2 Keiningham, Vavra, Aksoy and Wallard (2005) “Loyalty Myths”, John Wiley & Sons, Hoboken, New Jersey 3 Heskett, Sasser and Schlesinger (1997) “The Service-Profit Chain”, Free Press, New York 4 www.theacsi.org

Move closer to customers and listen Customer immersion might be a 2008 buzzword, but as illustrated in this article, it’s not a new concept. Superquinn and MBNA were doing it 20 years ago and they weren’t the first. In 1914, the Computing, Tabulating and Recording Company, which was performing so poorly that its Board had seriously discussed

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Nigel Hill Editor, Stakeholder Satisfaction

email: info@stakeholdermagazine.com

YourSayPays

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More information For all enquiries please contact David Thomason on 01484 467007 or email davidthomason@leadershipfactor.com We’re happy to talk through the options available and how this could work for you.

YourSayPays

Case study

In the last issue of Stakeholder Satisfaction I presented the results of new research from the YourSayPays panel that shed new light on UK consumers’ views about emotional engagement with the organisations they deal with. If you missed this article go to: www.stakeholdermagazine.com The main conclusion was that customers are much more likely to become emotionally engaged when they have bad rather than good experiences with companies.

Negative emotions such as irritation, frustration, stress and anger were much more prevalent than positive ones such as happiness, pride, pleasure or excitement. In other words, if you give customers a bad experience their frustration or anger

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heightens their mental / emotional involvement but when they have a good experience they take it for granted, don’t think about it much and their mind moves swiftly on to other things. This doesn’t mean that it’s pointless giving customers a flawless experience. Far from it! When asked what makes them loyal to companies, it’s the cumulative effect of having lots of good experiences and no hassle that does the trick.

So does this mean that it’s completely pointless for any company to even try to stimulate positive emotions in its customers. Not necessarily. But only if you can co-create!!

Co-creation When explaining the differences between products and services, marketing textbooks highlight a few key factors such as services being intangible and heterogeneous – they’re all different, compared

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with mass-produced products that are all identical. However, for customer management, the most relevant characteristic of services is their inseparability. This refers to the fact that the production and consumption of most services are inseparable. If you have your hair cut, you have to be sitting there at the same time as the hairdresser is creating the product, which is why some people call this phenomenon co-creation. The hairdressing example is even better for building engagement since the customer and supplier design the product together as well as deliver it. Co-creation is a double-edged sword for service businesses. You can’t quality control the product after manufacture and make sure the faulty ones never go near a customer. Services have to get it right first time in clean and pleasant surroundings, with a smile and a good bedside manner. Co-creation fits some businesses like a glove, as you will know if you’ve ever taken a child to Build-A-Bear Workshop.

Case study

Build-A-Bear Build-A-Bear Workshop is often used in books and conference talks to illustrate the benefits of giving customers an emotional experience to drive engagement, recommendation and long-term loyalty.

Their mission statement says it all doesn’t it?

Our Mission At Build-A-Bear Workshop®, our mission is to bring the Teddy Bear to life. The Teddy Bear brings to mind warm thoughts about our childhood, about friendship, about trust and comfort, and also about love. Build-A-Bear Workshop embodies those thoughts in how we run our business everyday.

With over 50 locations around the UK now, you can try it for yourself but if you don’t have a child or can’t borrow one, here’s the step by step guide to the customer experience, in the words of BuildA-Bear Workshop’s own website, www.buildabear.co.uk. Oddly, costs seem to be in $ even though it’s the UK website.

At Choose Me, Guests are introduced to all the furry characters in the store and select one, which soon becomes their new friend. There are more than 30

varieties of stuffed animals including teddy bears, bunnies, dogs, kitties and more to make. Build-A-Bear Workshop stuffed animals are very affordable, ranging in price from $10- $25.

At Hear Me, Guests may select from several sound choices to place inside their stuffed animal to further personalize their new friend.

The sound chip is inserted safely inside the new friend during the stuffing process.

Guests can record their own 10-second Build-A-Sound® message for $8. Prerecorded sounds include giggles, growls, barks, meows and other animal sounds, as well as messages such as “I Love You” or songs like “Take Me Out To The Ballgame™”. Single sounds are $3, and a six-in-one sound is $5.

At Stitch Me, the last seam is neatly pulled shut, nearly completing each new best friend. Before stitching the furry friend, the master Bear Builder associate inserts a barcode, allowing it to hopefully be reunited with its owner if ever lost and returned to Build-A-Bear Workshop. Thousands of furry friends have been reunited through our exclusive Find-A-Bear® ID program.

Sarah Stainthorpe Research Manager: The Leadership Factor

email: sarahstainthorpe@leadershipfactor.com

At Stuff Me, with the help of master Bear Builder® associates, Guests fill the new friend with stuffing for just the right amount of huggability. A very special step that is unique to Build-A-Bear Workshop® also happens at this station.

Each Guest selects a small satin heart – a Build-A-Bear Workshop trademark, adds to it his or her own love and wishes, and carefully places it inside their new furry friend. This process brings the furry friendship to life.

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Case study

At Fluff Me, the Guest brushes the animal to make sure his or her new friend is well groomed and pawfectly huggable!

At Dress Me, Guests may dress their new friend in the beary latest furry fashions.

The bear apparel boutique features clothes and accessories for all occasions.

Outfits range from $5-$15 and accessories range from $1-$15. Build-A-Bear Workshop速 even has its own fashion expert mascot, Pawlette Coufur速, Fashion Advisor to the Furry Famous.

Guests then stop at the Name Me computer, where they answer several questions about their new furry friend, including the birth date and of course, its name.

This information is used to create their personalized birth certificate and enter their friend into the Find-A-Bear ID program.

Finally, Guests conclude their in-store bear-making experience at the Take Me Home station, where they receive their customized birth certificate and a special Stuff Fur Stuff速 club membership, a rewards program for our Guests. Each new furry friend is then placed in their very own Cub Condo速 carrying case, which is designed as a handy travel carrier and new home.

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Case study

Win-win The added value customer experience at Build-A-Bear Workshop is a real win-win situation, it adds value to company profits too. The add-ons are virtually endless.

Licensed merchandise includes Premier League football strips and Harley Davidson gear for boy bears plus the latest fashion brands for their lady friends.

And like fashions and football kits they’re changing all the time, affording a great opportunity for Bear Buck$ gift tokens each birthday. And while you’re at it you might as well use the company’s Build-AParty programme and hold your party there. And if it’s too far away for regular trips, no problem! You can continue your customer experience online at buildabearville.com where you can create your own online character, play games, earn points, chat with other bears etc.

Transferability?

Build-A-Bear Workshop is clearly the ultimate example of a company whose entire business model is based on emotional engagement. The big question is whether such a business model can be replicated.

At Disneyworld undoubtedly yes. Children + Families + Leisure + Special Occasion = Retail as Entertainment, and you simply will not find more fertile soil for customers who are looking for an experience not just an outcome. But what if you’re a call centre that customers call to change a direct debit? What feedback from hundreds of thousands of customers tells The Leadership Factor is that for this type of customer experience, the outcome and its efficient delivery are paramount in making customers feel so good about the experience that they are happy to keep on repeating it (stay loyal) and be willing to

recommend (although due to their intrinsic lack of interest in this type of experience they rarely do so proactively). Conversely, customers who defect and tell others (which they will do proactively), are almost invariably driven by an unacceptable or inefficiently managed outcome. They don’t defect because the call centre failed to deliver an emotional experience.

Start with what customers want The fundamental flaw in the emotional engagement concept as it is currently interpreted is that it’s inside-out. It starts with organisations thinking they should deliver an emotional experience (or being deluded into it by a consultant). But it breaks the fundamental rule of customer management – everything starts with the customer. And this is one of the weaknesses of the Net Promoter concept and the ‘willingness to recommend’ question generally. Yes, if you’re a good company delivering consistently flawless customer experiences they’ll be willing to recommend you but they often won’t proactively do so, because their relationship with you isn’t emotional and if you’re a bank, a utility, a local authority or a train company you’re living in cloud cuckoo land if you’ve been tricked into thinking it ever will be.

(Willingness to recommend has no business value if they don’t actually do it.) The way customers relate to organisations is based on what the customer wants, not on what the supplier wants. For most aspects of their time-pressured lives, customers simply want to deal with organisations that do what they’re supposed to, first time and efficiently. They just don’t want any kind of emotional engagement.

It’s no different to life itself. You don’t expect or want an emotional involvement when you’re doing the washing up, vacu-

uming the carpets or driving the kids to school. You just want those events to pass without breaking a glass, having to unclog the vacuum cleaner or call a summit conference to prevent World War III breaking out on the back seat. By contrast you expect and seek out emotional involvement in other aspects of your life – taking the partner of your dreams out to a restaurant, giving your kids a special treat or fulfilling a lifelong ambition to visit the Grand Canyon. If you’re Build-A-Bear Workshop, the basics of delivering good product and service are the Givens, and the Differentiators come from the emotional engagement. And it works because it’s what customers want in that component of their lives. If you supply electricity it won’t work because customers don’t want it.

The Customer Experience Spectrum In other words there’s a spectrum of emotional engagement and most companies are not at either end but somewhere in the middle. But where? The challenge for most companies is to be truly objective about where on the spectrum you are. We’d all like to be a cuddly Build-A-Bear type of business that sends customers away with a truly memorable experience, but you have to live in the real world. The real world of your customers. In the next edition of Stakeholder Satisfaction we’ll investigate the Customer Experience Spectrum. S

For more about emotional engagement and experiences versus outcomes, check out the half day Customer Emotions briefing at www.leadershipfactor.com or call Ruth on 0845 293 9480 for more details.

The Customer Experience Spectrum

Build-A-Bear

Utility

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THE NATIONAL MEASURE OF CUSTOMER SATISFACTION Wave 3 Results: Summer 2008

The Institute of Customer Service has released the results for the latest UK Customer Satisfaction Index (UKCSI) which is the National Measure of Customer Satisfaction with UK organisations.

It is based on a representative sample of 12,000 adults surveyed over the internet in May and June 2008, by The Leadership Factor on behalf of the ICS. (results available online at www.ukcsi.com)

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Robert Crawford Executive Director Institute of Customer Service

Stephen Hampshire Client Manager The Leadership Factor

www.instituteofcustomerservice.com

If you have any thoughts about this article you can contact Stephen at stephenhampshire@leadershipfactor.com

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Customer

The good news is that UK consumers are more satisfied, the UKCSI improving from 69 to 71. With the media full of talk about recession, credit crunch, inflation and falling house prices, some may find this surprising but customer satisfaction and loyalty should never be confused with consumer confidence. Regardless of how much confidence customers have about their future financial prospects, they know when they’ve had good and bad customer service. In fact, we’re not at all surprised that customer satisfaction has risen because organisations’ success in satisfying customers is usually based on the effort they make to consistently deliver a flawless customer experience. When economic times are challenging, it becomes more important to companies to keep existing customers so they try harder to deliver great customer service.

Which sectors are best?

The biggest gains were made by Local Government, Retail – non-food, Telecommunications and Transport. All other sectors improved somewhat except Utilities, which stayed the same and Food retailers, who fell by 1 point to 74. Food retailing is certainly competitive, so this seems to contradict our earlier point, but of course food and utilities have experienced the biggest price inflation along with massive media coverage about it.

Chart 1: UKCSI Results 71 69

79

Services

76 76

Retail - non-food 73

75

Automotive

74 74

Finance - insurers

Of course, some sectors are more competitive than others. The achievement of Local government in recording the biggest rise in customer satisfaction is a welcome sign of the advancing service culture in that sector. The fact that they remain bottom of the league table demonstrates that there’s still plenty of opportunity for further improvement!

74 73

Retail - food

74 73

Finance - banks

72 70

Leisure & Tourism

70 69

Transport

66

Why do customers like some sectors more than others?

The Services sector has extended its lead at the top of the table, demonstrating the power of personal relationships and the flexibility of small organisations to meet customer needs. If we look at the chart showing the best, average and worst scores for each customer requirement we can see which of the drivers of satisfaction are responsible for the success of companies in particular sectors.

Chart 2 (shown over the page) highlights how strong the Services sector is on customer service issues such as Being treated like a valued customer, Ease of doing business, Handling enquiries and Being kept informed. Not surprisingly, in view of the stronger personal relationships with customers in the Services sector they also out-perform other sectors on people factors such as Friendliness of staff,

67

Government

64 66

Telecommunications 63

63

Utilities

63 63

Local Government

July 08 January 08

58

0

10

20

30

Helpfulness of staff and Competence of staff. However the Services sector is not best across the board. Banks are best at Staff appearance whilst the Automotive sector portrays the best image from tangibles such as premises – a reflection of the effort and investment that these 2 sectors make to impress customers in these areas. Few would argue with Food retailers satisfying customers most on Complaint handling – after all, it’s usually a quick and painless process to solve any problems that do arise with supermarkets.

40

50

60

70

80

90

100

Customers’ favourite retailer changes One of the most striking changes in the results is that John Lewis has, for the first time, lost its position at the top of its sector league table. Hard work at Boots on customer focus over the past 12 months involving replacing their mystery shopping with a very large scale ongoing customer satisfaction survey (see article on page 8) has seen them overtake John Lewis as the nation’s favourite retailer. As Chart 3 shows, the top five retailers are all very

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Customer

Chart 2: Sector Strengths Finance - banks

Staff appearance

Telecoms Services

Helpfulness of staff

Utilities Services

Friendliness of staff

Local government Services

Competence of staff

Telecoms Services

Being treated as a valued customer

Local government Services

Continuity of staff

Telecoms Services

Speed of service

Local government Services

On time delivery/solution

Local government Services

Reputation of the organisation

Local government Retail - non-food

Product/service range

Local government Services

Quality of information/advice

Utilities Services

Handling of enquiries Best

Utilities Services

Being kept informed

Local government

Average

Services

Billing

Local government

Worst

Retail - non-food

Ease of doing business

Utilities Retail - non-food

Price/cost

Local government Retail - non-food

Product/service quality

Local government Automotive

The physical parts of the organisation

Utilities Retail - food

The final outcome of your complaint

Finance - insurers Retail - food

Complaint handling

Finance - insurers

1

2

3

4

5

6

7

8

9

10

good in terms of customer satisfaction, and together have a sizeable lead over the rest of the market. (Note that we name only the top performers in each sector.)

Direct, P&O, Waitrose and Marriott. The results for other sectors are freely available online at www.ukcsi.com.

As well as the non-food retailers shown below, other organisations with very high levels of customer satisfaction are the Fire Service and Ambulance Service, First

Drivers of satisfaction One way to understand the key drivers of satisfaction is to look at the correlation

Boots John Lewis HMV Lloyds Pharmacy Marks & Spencer Argos Comet Dorothy Perkins/Top Shop/Evans/Miss Selfridge Superdrug New Look SECTOR WORST

85 83 82 82 81 77 77 76

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Loyalty

75 75 66

50

Stakeholder September 2008

The chart highlights the fact that some of the things that make the biggest difference to how customers judge organisations are based on the personal, servicerelated or emotional aspects of the customer experience. Handling enquiries, Being treated as a valued customer and Quality of advice come into this category.

However, organisations should never under-estimate the impact of the fundamentals of the customer experience such as Product/service quality, Ease of Doing Business, On time delivery/solution, Being kept informed, Speed of service and Competence of staff. Mess up on these ‘givens’ and customers will punish you very heavily with their wallets and with negative word of mouth. One of the most damaging fallacies currently doing the rounds of customer management conferences and publications is that all focus should be on the experiential differentiators, especially the emotional ones since all organisations perform equally on the so-called givens. They emphatically do not, as evidenced by the UKCSI data and the many horror stories told by the quarter of a million customers annually surveyed for satisfaction and loyalty by The Leadership Factor.

Putting this together with the information from the detailed satisfaction scores, it is clear that the Services sector maintains its very good position by being good at the things that make a difference to customers. High overall satisfaction and loyalty comes from focusing on the key drivers.

Chart 3: Top retailers (non-food)

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between the way customers score individual questions and their overall satisfaction with a company. The stronger the correlation, the more impact that particular customer requirement makes on customers’ overall feelings about an organisation.

Chart 4 shows the list of customer requirements in order of the impact they make on customers’ overall views, which tends to be very consistent across all 12 sectors covered by the UKCSI.

60

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70

80

90

100

The relationship between customer satisfaction and loyalty remains very strong.

Customer

" It’s not a huge increase, it’s definitely a step in the right direction...

It shows that when times are tough companies and organisations realise they need to try harder to make life easier for the people they serve.

They’ve also got the message that when people have a finite amount of money they will be more careful to spend it where they are treated well. They’re much more inclined to factor in purchase decisions.

The only differentiator left in the UK business today is customer service. Products can be copied and costs matched, so service is the only aspect where companies can gain a distinctive Robert Crawford edge” ICS, Executive Director

Chart 4: Drivers of satisfaction Handling of enquiries Product/service quality Being treated as a valued customer Ease of doing business On time delivery/solution Quality of information/advice Being kept informed Speed of service Competence of staff Reputation of the organisation Helpfulness of staff Billing Continuity of staff Friendliness of staff Product/service range Price/cost The way the complaint was handled The physical parts of the organisation The final outcome of your complaint Staff appearance

0.80 0.80 0.79 0.78 0.78 0.77 0.76 0.75 0.75 0.75 0.74 0.72 0.72 0.70 0.69 0.68 0.66 0.63 0.57

0

.1

.2

.3

.4

.5

.6

.7

.8

.9

1

Sectors that have a wide gap between retention and recommendation (Government, Local Government, Utilities,

Telecommunications and Finance – banks) tend to have a large number of “hostages”. As well as Local Government, Government and Transport, where switching is often difficult or impossible, we can see sizeable gaps for Banking and Utilities, illustrating the extent to which high perceived switching barriers remain for many customers. This is a major threat to companies in those sectors since they will have to work much harder on customer satisfaction and loyalty in the future as customers become more informed and confident about the switching process.

The converse can be seen where there are small gaps between retention and recommendation in sectors such as Insurance, Automotive and Services.

Customers know there’s no problem switching in these sectors, so their loyalty is much more closely aligned with how they feel about the experience provided by the company.

Chart 5: Customer satisfaction pays

Chart 6: The 3Rs of loyalty

Individuals who are more satisfied with the service they receive are more loyal to the organisation. As chart 5 shows, organisations and sectors that deliver better service have a more loyal customer base. In the public sector customer loyalty obviously does not manifest itself in terms of staying or switching but does have a very strong word of mouth effect, as it does in competitive markets too.

The reasons for this difference are varied, but can be better understood if we look at the performance of the sectors in Chart 6, which shows the three components of the loyalty index—Retention, Recommendation and Intention to buy more products.

Switching barriers and hostages

85

Retail - non-food Retail - food

80

Leisure & tourism Transport

75 Loyalty

0.80

70

Government

65

Services Automotive

Finance - insurers Finance - banks

Telecommunications Local government Utilities

60 55 50

50

55

60

65 70 75 Satisfaction

80

85

Retail - non-food Retail - food Services Automotive Leisure & tourism Finance - insurers Transport Government Finance - banks Telecoms Local government Utilities 1 2 3 4 5 6 7 8 9 10 Recommendation

Repurchase

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Customer

Chart 7: Complaints index

Chart 9: Satisfaction with complaints process

64 60

Overall

Retail - non-food

71

Automotive

71

Retail - food

70

Services

68

Leisure and tourism

66

Transport

63

Finance - banks & building societies

61

Finance - insurers

61

Utilities

60

Local government

58

Telecommunications

26

Interestingly the picture here corresponds very well to an OFT report2 looking at the financial impact on customers of companies behaving unfairly. According to the OFT the sectors creating most problems were telecommunications, domestic power and banking, while those creating the biggest financial cost to consumers were insurers, home improvements and banking.

Our findings are broadly consistent. The sectors creating the most problems are Telecommunications, Government, Utilities and Finance – banks.

11%

Automotive

94%

5%

Services

93%

6%

Finance - insurers

93%

6%

Retail - non-food

91%

6%

Transport

86%

7%

Leisure and tourism

86%

9%

Retail - food

84%

11%

Local government

82%

14%

Finance - banks

82%

15%

Utilities

82%

15%

Government

81%

13%

Telecoms

74%

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Services

4.5 4.1

Finance - banks

4.4 3.9

Transport

4.2 3.9

Government

4.1 3.8

Utilities

4.3 3.5 3.9

Local government

3.0

Finance - insurers

3.1 2.8

Outcome Handling

However it should be noted that the Telecommunications and financial sectors are relatively better at dealing with complaints, whilst Utilities are much poorer (see Chart 9).

86%

30%

4.9 3.8

the first place, and its ability to successfully deal with any problems once they happen.

Overall

10% 20% No problem

5.0 4.7

0 1 2 3 4 5 6 7 8 9 10

Chart 8: Complaints by sector

0%

Leisure & tourism Telecomms

Problems and complaints The Complaints Index (shown in Chart 7) captures both an organisation’s success in terms of not giving customers a problem in

Automotive

4.9 4.8

10 20 30 40 50 60 70 80 90 100

0

In fact, recommendation can be seen as a good proxy for emotional attachment, and has been identified by Harvard1 as a key factor in companies’ ability to translate superior customer satisfaction into more profit. This comes through in the UKCSI results since the sectors with the highest score for recommendation, Services and both Retail sectors, have the highest levels of real loyalty in terms of customers choosing to stay and to spend more in the future.

5.5 5.0

Retail - non-food

July 08 January08

58

5.9 5.5

Retail - food

60

Government

4.6 4.0

Overall

40%

50% 60% Didn't complain

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Annoyance We also asked customers how annoyed they were by the problem they experienced. This also broadly supports the findings of the OFT report. Chart 10 shows that customers are most inconvenienced by problems with the financial and government sectors. S Chart 10: Impact of problems Finance (banks) Local government Government Finance (insurers) Transport Utilities Telecommunications Retail (non-food) Automotive Retail (food) Services Leisure and tourism 5

8.4 8.3 8.0 8.0 7.9 7.8 7.8 7.7 7.3 7.2 7.1 7.1

6

7

8

9

10

References 1. Heskett et al (2003) “The Value-Profit Chain” Free Press, New York

23% 70%

80%

90% 100% Complained

2. www.oft.gov.uk/news/press/2008/49-08

Employee Engagement "Engaged" employees work with enthusiasm and passion. They want to know the desired expectations for their role so they can meet and exceed them. They perform at consistently high levels. They want to use their talents and strengths at work every day. They have an intuitive connection to their company and will constantly endeavour to drive innovation and move their organisation forward.

OUR PEOPLE ARE OUR MOST IMPORTANT ASSET

“Indifferent" employees aren't necessarily negative or positive about their company. They take a wait-and-see attitude toward their job, their employer, and their co-workers. They hang back from becoming engaged, and they don't commit themselves. They go to work for the money and watch the clock.

"Disengaged" employees are "Consistently Against Virtually Everything." Not only are they unhappy at work; they're constantly acting out their unhappiness. Every day, actively disengaged workers undermine what their engaged co-workers accomplish.

- how often do we hear that said? Well if they really are that important then there is an obvious need to treat them accordingly and be confident that you are in fact doing just that.

Employee satisfaction surveys give employees an opportunity to communicate their views and opinions on a wide range of issues in total confidence. Importantly, they also allow management to build up an accurate picture of how employees perceive the organisation and help pinpoint problematic areas that cause dissatisfaction.

With that in mind, many companies already measure employee satisfaction and are attempting to improve it.

Traditional employee satisfaction measurement If you wish to measure employee satisfaction, you should allow the employees themselves to define the component elements of that satisfaction, the areas that they think are most important, rather than hoping that managers have a totally accurate view of employees’ priorities.

Typically, this can be completed at staff focus groups.

Mark McCall Client Manager The Leadership Factor markmccall@leadershipfactor.com

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Once you have established what is important you can check whether you are doing best what matters most to employees, via a staff survey of the entire workforce.

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In short they give management the information that they need to make decisions on how to improve staff morale.

Employee engagement However in recent years, employee engagement has become the new management mantra. Everybody wants it, but what exactly is it and can you actually measure it?

If you can measure it, should you measure employee engagement instead of satisfaction or is there a link between the two?

Well, lets start with what it is and explore why engagement has become that new 'must have' for H.R.

Employee

What is employee engagement?

Engagement is generally viewed as managing employees’ discretionary effort. In other words when an employee has a choice they will act in a way that is in the organisation's best interests. Therefore 'engaged' employees are fully involved in, and enthusiastic about their work and generally feel positive and passionate about their job.

In short, they are exactly the kind of employee that you want working for your company, and importantly are also exactly the kind of employee your competitors would like working for them.

It’s little wonder then that companies want to measure it, and explore what they need to do to keep their most engaged staff, and to increase engagement amongst other employees.

So can we measure levels of engagement?

Let’s first of all split employees into three groups 'engaged', 'indifferent' and 'disengaged', and try and define their behaviours.

As described in the box at the beginning of this article, it is engaged employees that are really striving to move the company forward, Indifferent employees who are just there for the money and Disengaged employees who take pleasure in undermining the endeavours of the rest.

In short, measuring levels of engagement, and identifying the key drivers of engagement will help give you the information you need to increase engagement and in turn increase your profit.

This makes the ratio of 'engaged' versus 'disengaged' employees a vital metric for companies to monitor.

In the USA, Gallup estimates that these 'disengaged' employees, the least productive workers, cost the American economy up to $350 billion per year in lost productivity.

They further point out that Increasing employee engagement will: · Benefit employee retention, · Decrease sickness/unauthorised absence levels · Increase productivity · Deliver a better customer experience.

However, it's not simple. We know that employees' engagement levels often deteriorate over time. Gallup's recent research in the USA suggests that only 29% of the U.S. workforce is 'engaged', 55% is 'indifferent', and 16% is 'disengaged', a net engagement index of only 13%.

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Employee

From our previous experience we know that the reasons why employees are 'engaged' or 'disengaged' are unique to each organisation. They will often include requirements such as staff empowerment, relationships with immediate managers and believing in senior management's vision.

Measuring employee engagement To further research and update our own knowledge The Leadership Factor decided to conduct a large scale nationwide survey using our own representative panel of employees, to investigate engagement

by Region/Industry/Gender/Job level etc.

Also, it would allow us to explore in much more detail what the key drivers of engagement are for each industry, and how employee satisfaction links and drives it forward.

7.53

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7.48

Time passes quickly when I perform my job

* I avoid working too hard

7.28

I get excited when I perform my job

6.89

I would encourage my friends and relatives to do business with my organisation

6.83

I often feel emotionally attached to my job

6.64

I would recommend my organisation to someone who seeks my advice about a job opportunity

6.57

* I avoid working overtime whenever possible

6.32 6.19

I am rarely distracted when performing my job

* I often think about other things when performing my job

5.87

Performing my job is so absorbing that I forget about everything else

5.85

I take work home to do

4.95

1 2 3 4 5 6 7 8 9 10 * For consistency across questions, scores for negatively biased questions have been reversed

· I would encourage my friends and relatives to do business with my organisation

Chart4: Engagement elements

Vocal engagement

Stakeholder September 2008

7.81

7.52

Similar to the research completed by the Chartered Institute of Personnel and Development in 2006 we believe that there are four key elements in measuring employee engagement.

Emotional Engagement · I really put my heart into my job · My own feelings are affected by how well I perform my job · I get excited when I perform my job · I often feel emotionally attached to my job

7.88

I stay until the job is done

I exert a lot of energy performing my job

Emotional engagement

We then used the following questions to measure these elements of employee engagement.

I really put my heart into my job

My own feelings are affected by how well I perform in my job

To achieve this, we required a sample of 2,000 employees split by region, gender and industry to complete a web survey with questions relating to engagement and satisfaction during June/July 2008.

· Emotional engagement: how emotionally involved people are at work · Cognitive engagement: how hard people focus while at work · Physical engagement: the willingness of staff to go the extra mile for their employer · Vocal engagement: the willingness to recommend their company

30

Chart 3: Individual Engagement questions

7.23

Physical engagement

Cognitive engagement 5

Scored on a ten point scale, the average scores for the above questions are shown in Chart 3. The composite scores for the 4 elements of engagement are shown in Chart 4.

6.83

6.72

6.53 6

7

8

9

10

Cognitive Engagement · Time passes quickly when I perform my job · I often think about other things when performing my job · I am rarely distracted when performing my job · Performing my job is so absorbing that I forget about everything else

Interestingly, vocal engagement, 'the likelihood to recommend' is one of the lower scoring elements. It is quite an eye opener for many businesses to see just how few people would strongly recommend their own company to buy from them (Scores for 9s and 10s) or as a place to work (same).

In the next 'Stakeholder Satisfaction', we will investigate in much further detail the overall engagement by sectors e.g. Part time v Full Time, Regional splits, management levels, demographics and industry, where there are some very real differences.

Physical Engagement · I stay until the job is done · I exert a lot of energy performing my job · I take work home to do · I avoid working overtime whenever possible · I avoid working too hard

So how does satisfaction fit in?

Vocal Engagement · I would recommend my organisation to someone who seeks my advice about a job opportunity

We asked our panel of 2,000 employees to rate their satisfaction with a list of key requirements, and to score the relative importance of those requirements.

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We now need to look at employee satisfaction, how it links to engagement and why it is still a key measure both in its own right and in giving us the information we need to drive engagement higher along with satisfaction.

Employee

Charts 5 & 6 show that UK employers are generally poor at satisfying employees on some important requirements. Low satisfaction with pay and benefits is not surprising but communication from senior managers and recognition of performance are much less costly to fix. In common with other surveys our results show that employees are generally most satisfied with their relationship with colleagues.

Chart 5: Importance Scores 8.72

Being treated fairly

8.42

Work/life balance

8.33

Pay and benefits

8.25

Recognition of your performance

8.14

Having the resources to do your job Your line manager listens to you

8.09

Relationship with colleagues

8.08

The most obvious thing that this information can be used for, is to increase the satisfaction of your most engaged employees (now that you can measure who they are). Remember, if you don't or can't, there will be other companies that will!

7.94

Relationshsip with your line manager

7.69

Communication from senior managers Training and development

7.66

Physical working environment

7.65

Promotion opportunities

7.15 5

6

7

8

9

10

Chart 6: Satisfaction scores Being treated fairly

6.89

Work/life balance

6.83

Pay and benefits

Typically in the past, it has been likely that a large part of companies' efforts have gone into trying to improve the satisfaction of 'disengaged' staff. If our definition of 'disengaged' staff is correct (Consistently Against Virtually Everything!) it would seem to be a waste of limited resource to do this. Better to fix your efforts on further motivating the engaged and moving the 'indifferent' into the top layer.

6.27

Recognition of your performance

6.46

Having the resources to do your job

7.01

Your line manager listens to you

7.05

Relationship with colleagues

7.82

Relationshsip with your line manager

7.27

Communication from senior managers

Splitting the results so that you can check satisfaction levels would give you the information that you need to ensure you are concentrating your efforts on your most important assets. Our own results show that, as expected, 'engaged' employees are also much more satisfied than others.

6.27

Training and development

6.39

Physical working environment

6.89

Promotion opportunities

5.37 5

6

7

8

9

10

Chart 7: Satisfaction by engagement

Next, you can link each specific requirement and see what is driving engagement the most. From Chart 7, we can see that nationally the biggest difference between 'engaged' employees and 'not engaged' employees is communication from senior management and recognition of performance.

How do employers build an engaged workforce?

Communication from Senior Managers Recognition of your performance

The first step is to measure employee satisfaction. Most large employers in both private and public sectors already conduct regular employee satisfaction surveys. This survey data can now be enhanced by measuring engagement levels to ensure that you focus your efforts on the people that are most important to you.

Pay and benefits Promotion opportunities Training and development Being treated fairly Your line manager listens to you Having the resources to do your job

We will look at some of the segmentation differences in the next edition of Stakeholder Satisfaction.

Physical working environment Relationship with your line manager Relationship with colleagues Work/life balance 1

2

3

Engaged

4

5

6

7

8

9

10

Not Engaged

For more about improving employee satisfaction and engagement check out the full day Improving Employee Satisfaction course at www.leadershipfactor.com or call Ruth for details on 0845 293 9480 S

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Latest thinking

The current focus on value-based activity promotes the importance of conducting business in a way that creates and increases value for all stakeholders (not just shareholders). However, this can be difficult to accomplish when the needs of stakeholders vary so widely. Furthermore, meeting the needs of one stakeholder group can be difficult enough never mind meeting the needs of multiple stakeholders. In order to satisfy stakeholders for any organisation or project efficiently and effectively, an organisation or project team needs to not just identify all relevant stakeholders (no mean feat in itself) but also to deal with them appropriately.

This article explores some basic techniques for identifying and deciding how to manage stakeholders. Before moving onto this it is useful to first consider who stakeholders are and why they are important.

Who are stakeholders?

Quite simply, a stakeholder is a person, or group, who affects or is affected by an organisation or project. So whilst the owners of a business are stakeholders so

are its customers, employees, suppliers, neighbours, interest groups, local community etc. Stakeholders exist at various levels – from organisational level right down to individual project level.

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Latest thinking

Why are stakeholders important?

The success of a strategy is measured by the extent to which stakeholder needs are met and stakeholders are satisfied.

Satisfying key stakeholder needs is vital for the short term and long term success of any business. For example, a business that does not meet customer needs will cease to exist in the long term, a government that does not satisfy the needs of its citizens will lose power eventually.

Why is stakeholder analysis important?

Stakeholder analysis is important because it acknowledges the existence of a range of stakeholders and recognises that some stakeholders are more important than others and the way they are treated needs to be adjusted accordingly. Stakeholder analysis provides a framework that will assist the organisation to develop strategies that will optimise support and reduce risk. In addition, stakeholder analysis can identify sources of influence as well as conflicts of interest.

Organisations and project teams need to decide how to prioritise their efforts in order to achieve objectives. In order to do this it is necessary to identify not only stakeholders but also ‘key’ stakeholders – that is, those stakeholders who are most affected by, or have most effect on the organisation or project and those who need to be engaged. This is where stakeholder analysis comes in.

As the world becomes smaller and new organisations consider the ‘world’ to be their marketplace, there is the potential for an increasing number of stakeholders to be affected by, or have an effect on, organisations and projects. Relationships are becoming increasingly complex and there is a growing need for transparency in business dealings (and motivations).

Organisations are required to be accountable for their actions and the pressure to demonstrate corporate social responsibility is strong. Stakeholder analysis affords a business the opportunity to explore the extensive stakeholder network and put the findings into context. Even as an

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awareness building exercise it is valuable.

There are numerous stakeholder analysis techniques but this article ‘starts at the beginning’ with basic stakeholder analysis before moving onto more sophisticated techniques such as the power versus interest grid.

How to identify your stakeholders?

Basic stakeholder analysis As described in Bryson (1995: 71-5), the simplest way to identify stakeholders is to hold workshops/focus groups with employees and employ brainstorming

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techniques. The aim of the groups is to come up with a list of stakeholders – be they individuals or groups. This is most effective if a combination of staff attend the sessions from various departments across the organisation, since it is vital to try and gather this information from as wide a range of viewpoints as possible to ensure the list is extensive. The comprehensive list needs to include all stakeholders regardless of whether their involvement is strong or weak, positive or negative, direct or indirect. Focus groups can be divided into smaller groups to work on this, before reconvening to discuss their

Latest thinking

dots as quick markers of performance.

The next step is to list what could be done quickly to satisfy each stakeholder before noting any longer term issues.

If practical (depending on the number of stakeholders and number of participants in the group), it is worth considering adding further detail such as how each stakeholder influences the organisation, what the organisation requires from the stakeholder and ranking the stakeholders based on their importance to the organisation.

It is worth bearing in mind that the list of stakeholders may be very long – it is not unusual for 100 plus stakeholders to be identified. Therefore, before embarking on this exercise, it is sensible to define, and agree the degree of detail that is going to be gathered. For instance, will it be ‘customers’ in general, by type or by name? Much will depend on the extent to which customers vary. Some businesses may have a wider range of customer types than others, each with unique requirements.

findings. In theory, there is no reason why face-to-face techniques or telephone interviews cannot also be used to gather this information.

There are a number of ways this information can be used but Bryson suggests that the groups write the name of each stakeholder at top of a sheet of paper. On each sheet, list the requirements and/or expectations of the stakeholder. Beside each requirement indicate, from the stakeholder’s point of view, how well you feel needs are being met. Bryson suggests using red, yellow or green sticky

In preparation for the next stage, the group need to write the name of each stakeholder on the top of a Post-It note.

(A large size Post-It works best). These notes are going to be used to create a Power versus Interest grid (see below).

Power versus interest grid Once the list of stakeholders has been compiled the next stage is to create a power versus interest grid (as recommended by Eden and Ackermann, 1998).

The purpose of the grid is to categorise the stakeholders in a way that provides

greater insight into the role they play and, accordingly, how they need to be treated.

Some stakeholders are more important than others. These key stakeholders are those who are most affected by and have most effect on the organisation or the project.

High

Subjects

Players

Crowd

Context Setters

Interest

Low Low

Power (Influence)

High

Source: Eden and Ackermann (1998) The pwer versus interest grid, considers the 1) Stakeholders’ interest in the project 2) Stakeholders’ power to affect the project

A practical way to compile the power versus interest grid is to create a giant grid on the wall using four sheets of flip chart paper. Alternatively, a wipe board or large flat surface can be used. Using the list of stakeholders created earlier, write the

name of each stakeholder on a Post-It note. There is no reason why this can’t be tackled by creating small working groups each writing labels for a handful of stakeholders. Once the labels are ready, the facilitator of the group guided by participants, needs to position each label in the relevant quadrant depending on the degree of interest and power the stakeholder possesses (high or low). The group, who can openly discuss positioning depending on their views, will decide the final position of the label within each quadrant.

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Latest thinking

Stakeholder Power

Subject

When deciding on the degree of power a stakeholder has over a project, the major considerations will be whether the stakeholder has the power to control decisions, facilitate implementation and/or affect the project negatively. It may be direct power (e.g. over budgets) or indirect power (e.g. ability to coerce or persuade others). The power a stakeholder holds may depend on formal hierarchy, authority of leadership, control of strategic resources, possession of specialist knowledge and/or negotiating position in relation to other stakeholders.

Subjects have an interest in the project, but little power. Subjects therefore constitute a risk. It is important that these stakeholders’ needs are identified and protected since, by definition, the project cannot be regarded a success if it fails to meet their needs. For instance, if the project is to design a range of women’s clothing, women themselves may have no power over the design process but if their needs are not taken into consideration they can prevent the project from being a success by failing to purchase the finished items.

Stakeholder Interest

Context Setter

For the purpose of stakeholder analysis, interest is not a measure of curiosity; it is the degree to which a project’s success depends on satisfying stakeholders’ needs and interests.

(For instance, a project designed to reduce the number of traffic accidents is, to a high degree, in the public’s interest.) The factors that might be taken into account when determining interest are the extent to which the problems of specific stakeholders are addressed or alleviated and the extent to which success is defined by meeting the stakeholders’ needs or expectations.

Context setters have power over the project but little direct interest. The interests of these stakeholders are not high priority for this project and they may therefore present significant risk to progress or implementation. A proactive approach to communication – whilst carefully managing and monitoring this group is advised.

In some cases, banks may be considered context setters. Whilst they may provide vital finance for a project, their interest in some cases is unlikely to extend beyond that. However, the power they yield is high – it is in their control whether the project goes ahead or not.

Power-Interest Quadrants

Crowd

Player

views should be considered when developing strategy. Seeing all stakeholders together on one chart is useful for identifying natural groupings and commonalities as well as stimulating discussion and debate amongst group participants.

Stakeholder Dynamics To extend the usefulness of the power versus interest grid, the next step is to consider the relationship between stakeholders and how they influence one another. Again, working within the group setting, discuss which relationships are important. Using a pencil, draw lines on the power versus interest grid, from one stakeholder to another, to suggest the lines of influence. Use an arrow to indicate the direction of influence. Again, use the resulting diagram as a catalyst for discussion. This chart will help indicate who the most influential stakeholders are and whom they influence.

Finally, stakeholders do not always behave (or react) as predicted and this can have an effect on their position on the grid.

Also, the economy is changing rapidly and, as a result, the shift in balance between stakeholder power and interest is also subject to change. It is wise to review the power versus interest grid periodically to ensure the focus remains relevant. S References:

Players have both interest in, and great power over the project. It is vital that the organisation develops good working relationships with the stakeholders in this quadrant. It may be appropriate to develop a partnership approach, this is especially important in the early stages of a project.

Examples of players are typically owners, shareholders, senior management etc.

Crowds have little power or interest in the project. These stakeholders are likely to require limited monitoring and evaluation.

The favoured strategy will be to keep them at arms length, at minimal resource cost to the project.

Bryson, J. (1995) Strategic Planning for Public and Nonprofit

The final position of the stakeholder on the grid indicates how the individual or group is best treated and the extent to which their

Eden, C. and Ackermann, F. (1998) Making Strategy:

Organizations (rev. edn), San Francisco, CA: Jossey-Bass.

Bryson, J., Cunningham, G. and Lokkesmoe, K. (2002) 'What to Do When Stakeholders Matter: Public Administration Review, 62:5

The Journey of Strategic Management,

London:

Sage Publications

Rachel Allen Client Manager The Leadership Factor If you have any thoughts about this article you can contact Rachel at: rachelallen@leadershipfactor.com

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Fast Guide

Treating Customers Fairly

In July 2006, the Financial Services Authority launched 'Treating Customers Fairly’ (TCF), outlining key requirements they aimed to achieve on consumers’ behalf with deadlines for compliance.

The six TCF outcomes are:

Outcome 1 - Consumers can be confident that they are dealing with firms where the fair treatment of customers is central to the corporate culture Outcome 2 - Products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and are targeted accordingly

Outcome 3 - Consumers are provided with clear information and kept appropriately informed before, during and after the point of sale

Outcome 4 - Where consumers receive advice, the advice is suitable and takes account of their circumstances

Outcome 5 - Consumers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect

against simply using existing measures as a proxy for TCF, with the following specific problems noted: · One overall index where the underlying questions were nothing to do with fairness · One overall satisfaction question that could not address all six outcomes · Ineffective questions that customers could not answer Failure to test clarity of information from the customer’s perspective rather than the organisation’s perspective of its design.

December deadline Fast approaching is The FSA’s December 2008 deadline when firms must: · Demonstrate that senior management have instilled a TCF culture · Have accurate measures of all 6 TCF outcomes and be acting on the results · Demonstrate through the measures that they are delivering fair outcomes · Have no serious failings whether seen through the measures or known directly to the FSA.

Checklist for compliance To meet the requirements we’ve created a simple checklist as a sound starting point: · Conduct exploratory research to understand customers’ perception of fair treatment in relation to your organisation. · Use information from exploratory research to develop a questionnaire with relevant, unambiguous questions · Ensure your scale provides enough discrimination to identify gaps in performance which allow you to effectively target actions to improve · Regularly measure the customer experience and collect sufficient data for robust analysis (minimum sample 200) · Establish a baseline of current performance on fair treatment as a benchmark for continuous improvement · Identify business areas that are failing to meet requirements. Look for root cause analysis. · Capture specific customer feedback that can be used to build a compelling case for change · Provide extensive feedback of the results within the organisation to demonstrate senior management commitment and build a TCF culture – further advanced by appropriate reward and recognition initiatives.

Outcome 6 - Consumers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint.

Problems with progress The FSA’s June 2008 report acknowledged the efforts of the financial services sector so far, but criticised the number of firms lagging behind. The FSA warned

Benefits of compliance In September 2009 the FSA plans to publish the extent to which companies are complying with TCF, so it makes sense now to get robust measures in place to demonstrate compliance. Moreover, as consumers become more vigilant with their money companies that can display superior performance on satisfaction and fairness will lead the day. S

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Book Review

Caplan

The Halo Effect Phil Rosenzweig

The halo effect is a cognitive bias that affects our judgements. We tend to evaluate people positively across the board or negatively across the board, rather than judging them accurately in different areas.

This is why we sometimes believe that rockstars have something interesting to say about climate change.

The halo effect is also a feature of satisfaction measurement—customers or employees tend to give mostly high scores or mostly low scores. This is not to say that customers are incapable of distinguishing between product quality and speed of service, but their overall perceptions do influence the way they score specific aspects of performance.

Rosenzweig’s book is targeted at a similar halo effect that afflicts the supposedly level-headed world of business scholarship. In a nutshell, he argues that many of the factors we see as leading to superior performance are actually judgements based on performance. In other words, if a company is doing well financially then we believe they are customer focused, have motivated employees, are making wise strategic choices, and so on.

The problem is that it is hard to measure these factors independently. Rosenzweig gives the example of Fortune’s Most Admired ratings—the scores for 8 different factors are very highly correlated, and research shows that financial performance is what determines many of the other perceptions.

“So many of the things that we— managers, journalists, professors, and consultants—commonly think

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contribute to company performance are often attributions based on performance.”

The halo effect is only one of a series of delusions lambasted by Rosenzweig, such as the classic of mistaking correlation for causation. Giving the example of employee engagement and company performance, he argues that proper research (tracking performance over time) shows that financial performance influences employee satisfaction more than the other way round.

Rosenzweig also criticises over-simple explanations—there are always variables that we can’t control. Often business authors claim they have the one secret to success; whether it’s customer loyalty, employee engagement, great leadership or structural change. Rosenzweig argues that all such factors have been shown to account for a total of 32% of difference in performance. Simple explanations are almost always wrong, however appealing.

Even more tellingly, he points out the fallacy of believing that improvements you make are all that matters—the delusion of absolute performance. He points out that Kmart failed not because they were inefficient, but because Wal-Mart got better, faster.

“Kmart got better in absolute terms and yet fell further behind at the same time—and the gap between the two retailers was growing ever wider.”

The Halo Effect is definitely a book I'll be keeping close at hand as an antidote to, well, pretty much all the other business books. Rosenzweig punctures the semantic games, business writers (and leaders)

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use to present stories in place of genuine analysis. These stories may be inspirational, and they definitely make us feel good, but they tell us very little about how to build a successful business. So what does?

Firstly acknowledge the uncertainty of choices—there are no guaranteed routes to success, and strategic decisions are inherently risky. “..competitive advantage demands calculated risks.”

Good management, then, is all about acknowledging uncertainty both in strategic choices and in measurement of key variables. But robust research is possible, and is preferable to anecdotes and stories however appealingly dressed up. Explicitly countering the halo effect and the other delusions identified by Rosenzweig is a good start for improving your understanding of your own business.

“Anyone who claims to have found laws of business physics either understands little about business, or little about physics, or both. S

The

F A C T O R L E A D E R S I N S AT I S F AC T I O N M E A S U R E M E N T

Complaints Management 1 day training course £324 A practical one day course that covers best practice in complaints management.

Suitable for improving an existing system or implementing a new one The day covers · Good and bad practice in complaint handling · Understanding the customer’s perspective · Using moments of truth to improve the customer experience · Monitoring complaint handling performance · Key drivers of customer satisfaction with the complaints process · Benchmarking your complaints management performance against the other UK organisations ...AND MUCH MORE

Dates October 9th November 25th February 5th 2009 February 26th 2009

Birmingham London Birmingham Manchester

For more information or to book a place: Contact Ruth on 0845 293 9480 ruthcolleton@leadershipfactor.com www.leadershipfactor.com

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