Stakeholder Magazine - 2005 by TLF Research

Creating value for customers, employees and shareholders

Being good is good for business Traidcraft - PAGE 12 LATEST THINKING: NATURE’S THREADS - PAGE 16 EUROPEAN CONFERENCE ON CUSTOMER MANAGEMENT, 2005 - PAGE 20 RATING SCALES IN SATISFACTION RESEARCH - PAGE 22 TATTOO YOU: SUPER LOYALTY - PAGE 26 NORWICH UNION: TRANSFORMING ‘GOOD’ CUSTOMER SERVICE INTO ‘GREAT’ - PAGE 30

PLUS NEWS - PAGE 6 THE BALANCED SCORECARD - PAGE 8 BOOK REVIEW - PAGE 34 FAST GUIDE - PAGE 38

July 2005 VOLUME 2 ISSUE 3 £3.50

Customer Satisfaction Measurement

Improving Customer Satisfaction

A practical one day seminar that will take you step-by-step throuh the process of accurately measuring your customers’ satisfaction.

A practical one day seminar filled with ideas for getting the most from your satisfaction survey data and keeping the spotlight on improving your customers’ satisfaction.

The day covers

Questionnaire design Sampling Methodology Analysing & reporting Satisfaction Index Pitfalls to avoid

Involving senior management Feeding back results to customers & employees Generating ideas for action Tracking success Dates

Dates 9th August 2005 27th September 2005 4th October 2005 12th October 2005

Leeds Birmingham Bristol London

17th November 2005 22nd November 2005 9th February 2006 29th March 2006

Manchester London London Birmingham

Cost: £295 excl VAT

Over 4000 delegates have attended worldwide Presenters are also authors of leading books in the area of customer satisfaction & loyalty

mit i l e

c Pla

s ar

For more information and a detailed agenda: CALL RUTH COLLETON on

01484 467000 Visit the website

www.leadershipfactor.com

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

July 2005

News

26 Customer

Better customer relationships are number one priority for CEOs.

Tattoo You: Super Loyalty

8 The Balanced Scorecard Origins of the Balanced Scorecard

12 Charity

30 Case Study

The business case for social accounts

Transforming ‘good’ customer service into ‘great’

16 Latest Thinking

34 Book Review Edward Tufte, The Visual Display of Quantitative Information

20 Customer

38 Fast Guide

Ramsay Rocks... and other surprises from the European Conference on Customer Management, 2005.

Fast guide to Customer Service

In this issue...

VOLUME 2 ISSUE 3

Back Page 22 Latest Thinking

10/10

Diary Dates

2005

Rating Scales in Satisfaction Research

Stakeholder July2005

The SOCAP in Europe Annual Conference Find Inspiration for Your

Consumer Satisfaction Strategy

Monday 3rd & Tuesday 4th October 2005 The Tower of London - The New Armouries

This year’s SOCAPiE conference is all about helping companies establish a listening culture that promotes an excellent customer experience. Case studies will provide real world examples of building the case for customer care and measuring the success of customer strategies. There is plenty of opportunity to meet and speak with like minded people working in customer service. Keynote speakers include: Rachel Elnaugh Red Letter Days Founder Rachel Elnaugh will talk about how Red Letter Days have become the market leader in a £200 million pound gift industry, how they deliver outstanding customer service and develop new gift ideas for their customers each year. Martin Grant roadchef Martin is the Chief Executive of roadchef and will be talking about how roadchef aim to revolutionise motorway service areas across the UK by reversing many people’s previous experience of motorway service areas.

Other speakers include: Andrew McMillan Nigel Hill Derek Goodridge Stephen Parry Sue Firth Lesley Everett

John Lewis Plc The Leadership Factor Badger Software Author of “Sense and Respond” Business Psychologist and Behaviour Analyst Europe’s leading authority on Personal Branding

Annette Rowe Alan Asher Heather Atchison Michael Bland Peter Gillson Angie Court

Eaga Partnership Energywatch Red Lorry Yellow Lorry Communication Guru SFI International Avis Europe

Your investment of £675 (ex VAT) for members and £875 (ex VAT) for non-members includes access to all presentations, a two course lunch both days and an invitation to attend a special networking event in the Monday evening.

01438 310021 or

visit our website at www.socapineurope.org for further information Sponsorship and exhibiting opportunities available

Charlotte Sandy editor

Stakeholder focuses on the ways organisations can build a successful business by delivering value to a range of stakeholder groups. Does this mean that we are unrealistic about the necessities of doing business? We think not. Increasingly a traditionalist "hard-nosed" approach to business is looking dated and out of touch. Companies such as Traidcraft are showing sound financial results without exploiting people in the supply chain. On page 12 they discuss the benefits of social accounting and an ethical approach to business from their unique perspective. Stakeholder, of course, is concerned with recognising the needs of all Stakeholders. Even in businesses without the supply chain involved in Traidcraft's case it is crucial to make sure that employees, customers and other Stakeholders all have their needs met. Starting on page 8 in this issue we're going to discuss the Balanced Scorecard as a framework for managing by fact across a variety of key performance measures. Our case study this issue (page 30) is of a company that has taken the lessons of the Balanced Scorecard to heart, making customer loyalty the centre of its strategic plans. John Wilmott discusses how Norwich Union set about transforming the service customers experience through their call centres. This is something of a customer service issue, with more in a Fast Guide from Rachel Davies (page 38) and some leadingedge thinking from the European Conference on Customer Management on page 20 (including, somewhat surprisingly Gordon Ramsay!). Harley Davidson know all about the customer experience, though they may define it differently than most companies. On page 26 we take a look at the way they approach generating "super loyalty". Finally two articles this issue address thinking in terms of measuring and managing key areas. On page 22 Nigel Hill discusses the ins and outs of choosing the right scale for measuring satisfaction, while some more theoretical issues are the topic for "Nature's Threads" (page 16). This two part piece will focus on the state of play in thinking about cause and effect.

Stakeholder 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: Assistant Editor: Contributors

Charlotte Sandy Alison Howes Nigel Hill Stephen Hampshire Phil Dourado Phil Blackburn Rachel Davies Rob Ward Designer: Creative Director: Rob Egan Louise Martin Advertising: Editorial Director: Janet Hill

Printers of Stakeholder magazine www.stakeholdermagazine.com info@stakeholdermagazine.com Stakeholder Magazine PO BOX 1426 Huddersfield HD1 9AW Tel: 0870 240 7885 NB: Stakeholder does not accept responsibility for omissions or errors. The points of view expressed in the articles by attributing 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 ÂŠ STAKEHOLDER MAGAZINE 2004

Stakeholder July2005

News

news

Better customer relationships are number one priority for CEOs

price, the online browsing facility and the overall site experience.

Jet2.com The low cost airline TM

Senior executives are recognising the value of establishing improved relationships with their customer base. A recent survey by The Economist Intelligence Unit shows that over 90 per cent believe that this is a key factor in influencing business growth and achieving corporate goals. Raising customer satisfaction is now a strong focus for many firms, with an increased need to be responsive to customer demands. This includes providing better quality products and services at more competitive prices. The survey found that increased customer satisfaction was seen as more important than launching new products and developing other business initiatives.

scheduled carriers. Palmair and Jet2 are both small, low cost airlines and were rated highest in customer satisfaction after Singapore Airlines.

This study highlights the importance of Internet retailers improving the entire site experience and shows that they can gain considerable benefits in doing so, rather than just designing the site to attract customers looking for promotions and low prices.

Budget airlines have boomed in the past ten years and easyJet has seen a continued increased in passenger numbers in 2005. These findings come regardless of lowcost airlines offering minimal flexibility on bookings and no free meals. However, it appears that passengers are pleasantly surprised with low cost carriers and the budget airline trend has encouraged people to travel more often.

Customer service beats price in online retailing

Passengers more satisfied with low-cost airlines

A new study by ForeSee results has found that customers are more likely to return to sites offering better customer service than low prices.

Recent research by Holiday Which? has revealed that passengers are happier travelling with low-cost, no-frills airlines compared with the more traditional

The study looked at Internet retailersâ&#x20AC;&#x2122; sales and then examined customer satisfaction with their sites. Customers were surveyed on their satisfaction with

Stakeholder July2005

The results show that if customers are satisfied with all elements of the site experience, they are more likely to show long-term loyalty and spend increased amounts with that particular site.

Web-based customer support proves a winner for both companies and customers Firms such as easyJet are increasingly using web-based support to answer their customersâ&#x20AC;&#x2122; questions online. The advantages of this approach prove highly cost effective, with telephone and email support costing almost 7 times as much. It can also be a source of competitive advantage for companies as the type and level of support can be a huge differentiating factor for customers.

Best Practice Complaint Management one day seminar Understand the critical success factors necessary to ensuring an effective complaint and enquiry management system Identify immediate opportunities for improving your existing processes Hear best practice approaches to running a successful system

Dates 13th October 2005 Central London 14th November 2005 Manchester Places cost ÂŁ295 (exclusive of VAT).

mited

re li aces a

To receive a more detailed agenda or to book your place please call

01484 467000 www.leadershipfactor.com

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

Stakeholder July2005

Charity

Stakeholder July2005

Charity

Customer Focus at Fujitsu

Traidcraft began in a warehouse in central Newcastle with a hand-drawn catalogue featuring a small selection of jute products from Bangladesh. Today, it has grown into the UK’s leading fair trade organisation, with a turnover of more than £15 million and an international reputation for delivering practical help to small businesses across the developing world. Traidcraft’s trading company deals in hundreds of food, craft and textile products from thousands of producers in more than 30 developing countries, and lists Britain’s leading supermarkets among its customers. At the same time, its charity, Traidcraft Exchange, has won prestigious contracts from the British Government, the Community Fund and the EU to deliver vital small business development in some of the poorest countries in the world, while it is an increasingly influential voice in trade policy debates both in the UK and overseas. With awards for its development work and social accounting, as well as its mail order business, Traidcraft is working in many areas to fulfil its mission statement fighting poverty through trade. Throughout, it has sought not just to grow its own fair trade business, benefiting the limited number of supplier groups from the developing world with which it can trade, but to use its own experience of

making trade work for the poor by influencing wider corporate behaviour. “We recognise that world poverty can only be tackled if mainstream commercial enterprises change the ways in which they do business, to create sustainable opportunities for poor people to improve their livelihoods,” says chief executive Paul Chandler. “We seek to demonstrate, by running an effective and profitable enterprise, that it makes good business sense for others also to conduct their business in a fair and ethical manner.” Traidcraft’s recent performance shows that it is possible to make a decent return for shareholders without exploiting people elsewhere in the supply chain, and as more and more consumers show interest in fair and more ethical trading, getting a company’s social responsibility act in order will become increasingly important to gaining and sustaining customer loyalty. “We recognised from an early stage, however, that we couldn’t just encourage greater social responsibility by our own example, but needed to develop tools for measuring the non-financial impacts of business activities, which could then be adopted by other organisations,” says Paul Chandler.

“Directors and managers will generally behave in ways that deliver the targets against which they are measured and for which they can be held accountable. If you cannot measure and publish progress towards social objectives (or failure to make progress) managers will not have a sufficient incentive to strike a balance with more immediately obvious financial targets and objectives.” For this reason Traidcraft became a pioneer of social accounting in the UK, and it was the first plc to produce audited social accounts in the early 1990s. Since that time it has continued to work to embed social accounting principles in all its management processes, and has devoted resources to engaging with others active in the field and seeking to develop more robust methodologies. Whilst lacking the resources that some major companies now devote to social accounting, it continues to gain recognition for the quality of its social accounts, winning recent ACCA/ISEA awards outright or jointly with other organisations. In that capacity, Traidcraft consciously sets out to model and promote social accounting as a strategic activity in

Stakeholder July2005

Charity

achieving its mission. “Desirable though we might want it to be, we cannot expect all companies to adopt all the same social and environmental indicators and targets that Traidcraft sets itself as a fair trade organisation,” Paul Chandler adds. “Nevertheless, we believe there are valuable lessons and insights that can be drawn from our experience of fair trading and social accounting, and our engagement with wider debates in the field of corporate social responsibility.” Traidcraft’s social accounts are based on a step-by-step approach: Define social objectives and ethical values of the organisation Be clear about who are the stakeholders of the organisation Establish indicators by which performance against the objectives and values can be measured Measure performance against the indicators Gain the views of stakeholders about how they view the performance of the organisation Report all of the above in as balanced a manner as possible Submit the report to independent audit Publish the report Gain feedback from stakeholders on the report’s findings Stakeholders are those groups or individuals who affect, or are affected by, the organisation’s activities and they are defined by their relationship with Traidcraft. Some relationships are straight forward e.g. the central role of staff as stakeholders, relationships with UK

Stakeholder July2005

Charity

“We recognise that world poverty can only be tackled if mainstream commercial enterprises change the ways in which they do business, to create sustainable opportunities for poor people to improve their livelihoods.”

suppliers. Others are more complex - for instance funders covers both donors to the charity (private individuals, statutory bodies and Trusts) and shareholders who have subscribed for capital in the trading company. UK Customers encompasses Traidcraft’s close and long-standing relationships with its Fair Trader network, but also its dealing with fair trade retailers in the UK, mail order customers, supermarkets and mainstream distributors. Cafédirect plc, a company in which Traidcraft retains a 10% shareholding, is both a supplier of a finished product, and until recently a customer in respect of the tea sourcing services supplied by Traidcraft. Traidcraft’s relationships with its stakeholders overseas deserve special focus. Traidcraft exists to better the lives of farmers and artisans in the ‘third world’ by enabling them to sell (more) goods at fair trade prices. In that sense they are the “ultimate” stakeholders in the fair trade process. However, Traidcraft does not deal ‘directly’ with those ‘third world’ farmers and craftspeople from its Tyneside headquarters. It works through identified partners and local supplier groups (cooperatives or private companies) who themselves ensure that the trade is carried out on fair trade terms. A key challenge for Traidcraft in its social accounting methodology is to recognise the primacy of the stakeholder relationship with its overseas partners and suppliers as the organisations with whom it works to bring the benefits of fair trade to the poor. No less critical is the importance of developing viable measures of poverty impact that reflect Traidcraft’s success (or lack of it) in enabling families and individuals to achieve better livelihoods through those fair trade interventions. “Our commitment to work to continue to develop appropriate indicators of impact

is reflected in the body of our social accounts,” says finance director Tim Morgan, who leads Traidcraft’s social accounting processes. “In our analysis we recognise both principal stakeholders and other stakeholders. We classify within principal stakeholders those with whom - either by number or significance of transaction or both - Traidcraft has most dealings.” Many of those principal stakeholders are surveyed in each annual cycle of the social accounts. Others (eg UK suppliers) are surveyed less frequently because the relationship has less immediate impact upon the Traidcraft mission and values which form the backbone of its social accounts structure. Other stakeholders - e.g. faith communities and the business community - are significant in terms of Traidcraft’s policy and advocacy work and their views will continue to feature in further sets of accounts. Having published its social accounts annually in print form, Traidcraft took the decision five years ago to publish a web version as well. Now, the on-line set of accounts is the principal means of distribution, allowing a degree of interaction and interrogation of the data not possible with the hard-copy version. “We decided to publish on the web for three reasons,” says Tim Morgan. “We were finding that the cost of designing and publishing a full-colour report annually was absorbing up to a third of our total budget for social accounts. We wanted to be able to devote more of the budget to improved methodology and data collection. Publishing on the web significantly reduces this cost.

views expressed. Publishing on the web allows us to introduce each area of the report in summary, but then allows you, the reader, to drill down (if you choose) even to the level of each individual questionnaire response from each stakeholder group surveyed. “And finally, we recognise that there are two key aspects in our social accounts what we do and what stakeholders think of how we do it. We believe that presenting the accounts in a web format makes it much easier to navigate between these two aspects and follow links from one to the other. “The increased attention being paid to the social and environmental impacts of business practices is a development welcomed by Traidcraft but it believes strongly there needs to be a balanced public policy approach so the benefits of trade can be shared by all involved in global supply chains. “The growing interest in social accounting and corporate social responsibility could contribute to this area,” says Paul Chandler. “However, there are many pitfalls in the way they are being implemented and there is a real danger that if not managed properly, they will become discredited as a mere exercise in corporate window dressing. “We will continue to work with others to improve the impact of trade on poverty by working on corporate governance, better indicators of businesses’ impact on poverty and social accounting. Only in this way will the potential of trade to alleviate poverty be realised.” S

“Then there is a always a balance to be struck as to how much information to include in the social report, how to summarise stakeholder feedback whilst not losing the differences and contrasts in

Stakeholder July2005

Latest Thinking

We all have a stron g intuitive grasp of cause and effect an knowledge every da d an ability to spot y to make decision patterns, and we us s about the events about causes and e that around us. We also understand the m have the ability to ec ha nisms behind a re happen in new sit re ason lationship, allowin uations. Capturing g us to predict wh cause and effect in way we make thos at will mathematical mod e decisions has pr els and understand oved much more research, causal ing the difficult. Despite th models sit in a no e causal nature of -man’s land betw psychology and prac most een statistics, com tical business need pu ter science, philo s. So the first of a two pa how do we build ca so phy, rt article we look at usal thinking into bu some of the princip siness decisions? In les of causal reason ing.

What’s it all about? Causal reasoning. Sounds a bit off-putting doesn’t it? Perhaps not the sort of thing that you’d want to get involved with. Fair enough...but do you measure customer satisfaction? Employee satisfaction? Conduct any other research? Why? Most research questions, indeed most questions, are ultimately causal. We measure customer satisfaction because we believe it is caused by things we can control (product quality, service delivery etc) and because we believe it causes things we’re interested in but cannot directly control (loyalty, sales, profit etc). In doing so we have made at least two separate causal judgements: that what we do causes customers to be satisfied or dissatisfied, and that how customers feel causes their behaviour towards us. Similar judgements are at work with employee surveys and most other research. So we can’t get away from causal judgements - we’re making them anyway

Stakeholder July2005

so we might as well face up to what we’re doing. The other thing to notice is that causal reasoning doesn’t have to be scary, it can be very straightforward. One of the most admired causal studies ever conducted didn’t use any complicated computer models or new statistical

methods, because it was conducted in 1855. John Snow managed to demonstrate the causal link between polluted water supplies and cholera, capitalising on a natural experiment provided by the existence of different water companies.

Snow’s cholera study In 1854 there was a cholera outbreak in London. Two years earlier the Lambeth water company had moved its intake pipe upstream in order to get a purer source, but the Southwark and Vauxhall company left its intake pipe in relatively contaminated water. Water suppliers had been chosen by households pretty much at random, and in many cases even houses on the same street had different suppliers. Snow’s findings are powerfully convincing:

The following is the proportion of deaths to 10,000 houses, during the first seven weeks of the epidemic, in the population supplied by the Southwark and Vauxhall Company, in that supplied by the Lambeth Company, and in the rest of London.

Latest Thinking

Table IX. Number of

Deaths from

Deaths in each

houses

Cholera

10,000 houses

Southwark and Vauxhall Company

40,046

1,263

315

Lambeth Company

26,107

Rest of London

256,423

1,422

The mortality in the houses supplied by the Southwark and Vauxhall Company was therefore between eight and nine times as great as in the houses supplied by the Lambeth Company; and it will be remarked that the customers of the Lambeth Company continued to enjoy an immunity from cholera greater than the rest of London which is not mixed up as they are with the houses supplied by the Southwark and Vauxhall Company. [1]

Not only was it a compelling case for clean water supplies, but it also made a powerful argument in favour of the theory that cholera was propagated by a germ - at the time only one of several theories. The lesson to learn is that we should not be afraid to recognise the causal nature of our studies. There is no automatic

confident that if we take a kettle and heat it to 100oC, it will boil. We believe that heating the water to 100oC causes it to boil. Yet knowing that the cock crows every morning as the sun comes up would not lead us to believe that the cock crowing causes the sun to rise. Why not? If that seems like a silly question itâ&#x20AC;&#x2122;s because it is - to us. We humans clearly have an inbuilt ability to

t. Life is a perpetual instruction in cause and effec Ralph Waldo Emerson

necessity to adopt sophisticated techniques; causal theories can be tested and supported by the simplest of statistical techniques, like Snowâ&#x20AC;&#x2122;s, as long as the study is well designed and properly carried out. It is the study design, not the statistical techniques, that allows proper and meaningful conclusions to be reached. Weâ&#x20AC;&#x2122;ll return to causal research in part 2, but what about the judgements we make in everyday life?

Judging cause and effect Knowing that water always boils when we heat it to 100oC, we would be

determine relationships, cleverer than happen at the

cause and effect based on something the fact that two things same time.

The interesting thing is that no-one knows for sure how we do this. The philosopher David Hume pointed out that the basis for reasoning about all causal relations consists purely of sensory input (i.e. things we see, hear, feel, smell and taste) providing evidence of association. It follows, therefore, that some internal process makes a causal assumption about some associations based on information not contained in the sensory input itself. Hume proposed that causal relations are inferred from:

The spatial and temporal contiguity of the candidate cause and effect The two events happen close enough to each other in location and time. Interesting evidence about the time aspect is covered later on. The temporal priority of the cause Causes precede effects. Philosophers have struggled with this idea, but humans appear to use it to good effect. The constant conjunction between the cause and effect - Effects reliably follow when the cause happens, and do not tend to happen without the cause.

Stakeholder July2005

Latest Thinking

These rules would be enough to mirror our conclusions about boiling water and sunrise, but is that all there is to it? Probably not...but no-one has yet discovered all the rules. We make causal judgements all the time. I’m making a causal judgement when I assume that pressing keys on a keyboard will result in letters appearing on the screen, which will in turn lead to a fully laid out magazine article. The fact that these are judgements is proved by the fact that those assumptions are occasionally violated, notably if my computer was to decide to ditch its hard drive permanently. That knowledge also proves how good we are at learning from experience!

rules it uses fail. Mind Hacks, a book that approaches the features of the mind in exactly this way, gives an interesting example of causal judgements going wrong:

Make a pendulum, using whatever you have lying around...I’m using the cord from my camera with my keys as a weight. You’ll also need another small object; I’m using a large red bottle lid from a drink bottle.

Hold the pendulum up in front of you and set it swinging left and right. Now take the other object in your free hand and wave it around at the side of the pendulum. It doesn’t feel like anything special, does it? Now move the other object (in my case the bottle cap) in time with the pendulum, trying to keep it a fixed distance, say 5 inches, from the swinging weight. If you get the timing right, you should get the unmistakable impression that the object in your free hand is pulling In more formal terms we could the pendulum weight along and then pushing it back. This happens hypothesise a series of causal even though your body has connections that would look a bit like this: direct evidence that the two events are causally unrelated: the pendulum moves by itself and your own hand moves the Letters on Typing Thoughts unconnected object. Finished article screen

This kind of graph is called a Bayes Net, and is a very general way of capturing and modelling our understanding of causal relationships. Ovals represent events or variables, arrows represent a causal link from one to another. Another such net might be:

Smoking

Lung cancer

Which reflects a very different process. We make instant perceptual causal judgements about why, for instance, a plate smashes when it is dropped on the floor. We also go through a much more long-winded process of causal reasoning for effects that are not instantaneous, like smoking causing cancer. A good way to understand how the mind works is to see in what circumstances the

Stakeholder July2005

Notice that you don’t just see the two things as moving together. You get a feeling, manufactured by your perceptual system and delivered direct into consciousness, that one thing causes another.” [2]

Latest Thinking

"Nature uses only the longest threads to weave her patterns, so that each small piece of her fabric reveals the organization of the entire tapestry." Richard Feynman

A couple of key features of our brains are shown here. First causal reasoning and causal perceptions are separate things. We can know that one thing does not cause another, but our perceptual system makes its own causal judgements based on heuristics that are normally effective in the real world, and are probably similar to the ones proposed by Hume. As Hume suggested, timing seems to be key to the perception of causality (remember this perception is different from reasoning). If events are separated by more than 140 milliseconds (about 1/7th of a second) we tend to see them as separate, any less than that and we see a causal link. For an example of the importance of timing direct your browser to: http://www.stakeholdermagazine.com/mi chotte.html

Causal perceptions round-up 1. Probable causation can be indicated in a number of ways. One is sequence - in other words if something happens and something else happens immediately after it is likely that one thing caused the other. For example even a person with no experience of firearms would correctly assume that if I fire a gun at someone and they fall over that there is a causal relationship between the two. The nature of the relationship may be subject to misunderstanding but the relationship would be correctly identified.

to be a cause. This links neatly to the idea of probabilistic causation covered next time. In part 2 we’ll look in more pragmatic terms at the techniques that have been developed to assess and measure causal relationships, including their pitfalls and potential benefits. S

Bibliography [1] John Snow, On the Mode of Communication of Cholera, London 1855 [2] Tom Stafford & Matt Webb, “Mind Hacks: Tips and Tricks for Using Your Brain” Robert A Wilson & Frank C Keil (eds.), “The MIT Encyclopedia of the Cognitive Sciences” Clark Glymour, “The Mind’s Arrows”

2. The temporal one-way street for causation is something that is a difficulty for philosophers and quantum physicists, who want to understand why time flows in one direction, but is very useful for decision making and in practical causal modelling.

3. One of the interesting, and revealing, mistakes that humans are prone to making is that we don’t believe in coincidence. This is why we are so easily duped by phoney magicians, spiritualists and astrologers. The phrase post hoc ergo propter hoc or “after this therefore because of this “ is used when this logical fallacy creeps into more rarefied environments. Hume contended that we can never see cause and effect, but use inductive reasoning to deduce its existence from correlations. This is why we can sometimes be misled, just like statistical techniques. The old mantra that “correlation is not causation” is a valuable one in scrutinising judgments if not in making them. Is there a causal relationship between the two balls? It all depends on the timing.

Stephen Hampshire Development Manager The Leadership Factor If you have any thoughts about this article you can contact Stephen at: stephenhampshire@leadershipfactor.com

4. Humans also have an ability to learn. The more often an event is followed by a potential effect the more strongly it is seen

Stakeholder July2005

Customer

...and other surprises from the European Conference on Customer Management, 2005. Phil Dourado encountered a few surprises at this spring’s European Conference on Customer Management, organised by eCSW.com. He shared a few of them with Stakeholder Magazine. he first surprise was just how good fiery chef Gordon Ramsay is. Beneath the carefully-crafted media persona there’s a sharp business brain with a very clear idea of the importance of the customer. Ramsay’s keynote session was packed with celeb-watchers expecting (and getting) a few choice unprintable words. They were highly entertained But, running through all the anecdotes, you could also detect a strong customer-centred message.

Take this one, for example, showing the lengths to which Ramsay goes to make sure he stays ahead of the competition: “If there’s a buzz in our industry about a new restaurant opening anywhere in the world, there will be a booking made for a table for six within 48 hours of the restaurant opening,” said Ramsay. “Those six will be my staff - three waiters from front of house and three kitchen staff. They’ll be there to learn and to report back. That’s how we keep up with competitor innovation and stay abreast of what’s going on.” Ramsay also explained his fiery outbursts - the ones that aren’t just put on to play up to the cameras, that is: “If I seem abrasive it’s because I have to engrain in every member of staff that we are not more important than the customer. I am demanding perfection on behalf of the customer. Part of getting that message across is we insist that staff put themselves in the position of the customer. “I had a talented young chef who insisted on making impressive little towers out of his dishes - you know the way chefs make your food into an architectural statement. I asked him to keep them flat and simple on the plate. He was very reluctant to. “One lunch time I noticed him constructing a lamb cutlet tower of Pisatype thing on a plate, ready to send out to

Stakeholder July2005

the customer. I came up to him and said ‘Put on an apron that doesn’t have food stains on it and follow your food into the restaurant to see what happens.’ He wouldn’t. I, er, insisted. “So he creeps out as quietly as possible, not wanting to head out of his territory, and follows the food to the customer who had ordered the lamb. The customer immediately dismantles the tower so they can eat it. The young chef is crestfallen. But he gets it. The customer is there to enjoy the flavours, not marvel at an art form. From then on he always lays the lamb out flat on the plate. Because it’s about the customer, not about your precious work of art.”

Talking of food Another surprise at the European Conference came from the Swedish economist Kjell Nordström, who told us how BMW put just as much effort into the way their cars smell as Ramsay does into the way his food tastes. Yes, that’s right, they design the way their cars smell. Here’s a snippet of what Nordström said: “BMW’s chief designer, Christopher Bangle, was walking me around BMW’s main development centre. We walked into an enormous room full of car doors. It went on for ever, like an aircraft hangar, door after door after door. ‘This is the door room,’ said Chris Bangle. ‘I thought it might be, Chris,’ I said. ‘But why do you have a door room?’ ‘Our engineers here work on the sound of the car door,’ he said. ‘Our customers tell us the door has to shut with a certain ‘Thunk’ - a particular BMW ‘Thunk’. We have a number of people here, including two submarine engineers, working on building the right sound into the doors.’ “Then he took me into a laboratory. ‘And

here,’ he said, ‘we work on the smell of the car. Our customers tell us that an essential part of owning a BMW is the smell inside the car. It makes them feel good. So we work here on getting the smell just right.’ “ Wow. So, BMW even knows what it should smell like to please its customers.

The empty chair There was so much going on at the conference - including a one-day loyalty seminar this year- that there’s only room here for a taster of the learning, tips and inspiration that were flying around. I liked this anecdote, in particular, from Bill Price, Amazon’s first Customer Service VP, who now runs Driva Solutions. Bill called it The Empty Chair: “It’s our first staff meeting at Amazon: Twelve of us are crammed into a stuffy room. Yet, as the cramped room fills up, Jeff (Bezos) keeps his hand on the seat of the chair next to him so no-one can sit there. There we are jammed together and this seat is kept empty. As he starts the meeting Jeff says ‘I’m keeping this seat

Customer

empty for our customer. Everything we talk about in this meeting over the next hour has to be about the customer.’ “So, even if a subject started off not being about the customer - stock control policy or something - we had to bring it around to be about the customer before moving onto the next item. It was so powerful, I took the ‘empty seat’ idea back to my own team I also liked this other story from Bill about Amazon founder Jeff Bezos: “Every time Amazon launched a new store Jeff (founder Jeff Bezos) sat down with a couple of staff to construct an email from himself - jeff@amazon.com - telling existing customers about the new store. In 1999, when launching two new stores, Jeff insisted on adding a rider at the end: ‘Tell me what you think of these new stores.’ Eight million emails went out. He got one million emails back in the next 48 hours. “Over the next 18 months, we worked through them and all our subsequent launches came from those emails. About a third of them had said ‘Good stores, but what I really want from Amazon is...(jewellery or clothing etc.)’. Every customer who recommended a store that we eventually opened was remembered. And, we wrote to them when we did it: ‘Remember that store you asked for 18 months ago? Thanks for the suggestion. We’ve now opened it.’ “ Now, that’s what you call a customerobsessed CEO. Would that all company bosses were as determined to lead the capturing and wading through of the masses of input that customers give and use that to help shape the company. Most insightful and ‘business impactful’ moment of the conference? There were just too many to choose from. With a lineup that included Stephen Covey, Fred Reichheld, Ricardo Semler, Kjell Nordström, Pret a Manger’s Sinclair Beecham and others, the insights just came too thick and too fast. Louis

Gerstner, IBM’s turnaround chief, made it slightly easier since he banned all journalists from his session and only paying delegates could get in.

Conference funnies But I do have two candidates for funniest moment of the conference for you. The first came from the impromptu question and answer sessions that the organisers put on for the first time this year with the keynotes. In his ‘Off The Record With...’ session the maverick Brazilian entrepreneur Ricardo Semler was asked:

Q: Has anyone tried to copy your methods and got it wrong? “Yes”, said Ricardo. “The Amsterdam Police. They adopted one of the customer service programmes we developed at Semco (Semler’s group of companies in Brazil). Part of it involved canvassing customers and making changes in the way we operate in response to what the customers said. But their customers were criminals so it didn’t quite work - The customer requests were things like: “We should have 30 seconds to put a joint out before we are taken into a police station for questioning.” I’ll leave you with one of the other candidates for funniest moment, a letter to the Times spotted by Clive Humby, the man behind much of Tesco’s customer strategy which has them walking all over the competition. Clive used the letter to illustrate the importance of detailed segmentation instead of hitting customers with irrelevant messages that actually erode customer capital:

To: The Editor, Times of London Sir, I have received an insurance company leaflet which suggests that I could save £200 on my car insurance. The small print then explains: “All price savings comparisons included in this leaflet are based on a 44-year-old

Phil Dourado was a co-founder of eCSW.com, which puts on the European Conference on Customer Management, and which is now a division of IIR. He is also the coauthor of Seven Secrets of Inspired Leaders, published by Capstone, an imprint of John Wiley & Sons. It’s available on Amazon.co.uk and in all good book stores. female living in the Darlington area, with comprehensive cover and zero No Claims Discount, driving 12,999 miles per year in a 2002 Rover 25 1.4 litre model.” If she would like to get in touch with me I will pass the leaflet onto her. Yours, Mr D O R Mossman

SOURCE:: The Times letters page, January 19, 2005. Quoted by Clive Humby, a speaker at the European Conference on Customer Management. The European Conference is still, I’m pleased to report, the most impressive customer-themed conference this side of the Atlantic, even though it’s been taken over by IIR/ICBI instead of being run out my old offices in the little village of Bloxham, North Oxfordshire, where I live. If you missed it this time around, it’s back in the spring of 2006. If you can’t wait that long, some of the keynotes (Gerstner, Nordström, plus Clayton Christensen, author of the Innovator’s Dilemma, and Tom Peters, who wasn’t at the European Conference this year) are coming back to London in October for a related event, Leaders in London. More information on www.leadersinlondon.com S

Stakeholder July2005

Latest Thinking

Rating Scales in Customer Satisfaction Research 1. Interval versus ordinal scales It is not unusual in satisfaction research to see simple verbal scales, where each point on the scale is given a verbal description (e.g. 'strongly agree', 'agree' or 'very satisfied', 'satisfied' etc). The problem is that such scales have only ordinal properties. They give an order from good to bad or satisfied to dissatisfied without quantifying it. In other words, we know that 'strongly agree' is better than 'agree' but we don't know by how much. Nor do we know if the distance between 'strongly agree' and 'agree' is the same as the distance between 'agree' and 'neither agree nor disagree'. Therefore, verbal scales have to be analysed using a frequency distribution, which simply

Stakeholder July2005

involves counting how many respondents ticked each box. It is not statistically acceptable to use means and standard deviations, to develop indices or to apply most multivariate statistical techniques to establish the relationships between variables in the data set - a major weakness for understanding things like the drivers of satisfaction and loyalty. Interval scales use numbers to distinguish the points on the scale. They are suitable for most statistical techniques such as means, standard deviations, indices and correlations because they do permit valid inferences concerning the distance between the scale points. For example, we know that the distance between points 1 and 2 is the same as that

between points 3 and 4, 4 and 5 etc, so it is reasonable to conclude that a score of 4 represents twice the magnitude of a score of 2. For a scale to have interval properties it is important that only the end points are labelled; the labels (e.g. Very satisfied.......Very dissatisfied) simply serving as anchors to denote which end of the scale is good / bad, agree / disagree etc.

2. The meaning of words People often subjectively prefer verbal scales because they feel that they understand the meaning of each itemised point on the scale, and at the individual

Latest Thinking

level it is true that each person will assign a meaning that they understand to each point on the scale. By contrast, some people say that a numerical score doesn't appear to have a specific meaning - does one person's score of 7/10 refer to the same level of performance as another person's score of 7. Interestingly, tests have shown that collectively, people interpret words in a wider variety of ways than numbers. One person's 'satisfied' is not necessarily the same as another's. For international businesses the problem of consistent interpretation of verbal scales is hugely exacerbated by language and cultural differences. Any company conducting international research would be extremely unwise to consider anything other than a numerical rating scale.

3. Aggregating data from verbal scales Since it is not statistically acceptable to convert the points on a verbal scale into numbers and generate a mean score from those numbers, the only statistically valid method of analysing verbal scales is a frequency distribution. This leads organisations to report verbal scales on

the basis of "percentage satisfied" (i.e. those ticking the boxes above the mid point). This often masks changes in customer satisfaction caused by the mix of scores within the 'satisfied' and 'dissatisfied' categories. In fact, if results are reported in this way there is little point having more than 2 points on the scale satisfied and dissatisfied.

4. Number of points It is not practical to have many points on a verbal scale. Realistically, 7 points is the maximum. This is a considerable disadvantage since the differences between satisfaction survey results from one period to the next will often be very small. A wider scale enables the respondent to be more discriminating especially at the satisfied end of the scale, which is important since it is only the very satisfied who are likely to recommend and to remain loyal. Interval scales most commonly have 5, 7 or 10 points. More points yield greater variability, which is better for analytical purposes for two main reasons. First, scales with more points discriminate better between top and poor performers

so tend to have greater utility for management decision making and tracking. Second, it is easier to establish 'covariance' between two variables with greater dispersion (i.e. variance around their means). Covariance is critical to the development of robust multivariate dependence models such as identifying the drivers of employee commitment or customer loyalty, or establishing the relationship between employee satisfaction and customer satisfaction.

5. The danger of over-stating customer satisfaction Due to the 2 problems outlined above (narrower distribution of scores and aggregation of data), verbal scales almost invariably generate higher customer satisfaction scores than numerical scales, tempting organisations to adopt a dangerous level of complacency regarding their success in satisfying customers. From time to time, The Leadership Factor has to convert an aggregated customer satisfaction index from a verbal scale into the weighted Satisfaction IndexTM used by The Leadership Factor and generated by

Stakeholder July2005

Latest Thinking

a numerical scale. This is done by duplicating some questions using both scales in the same questionnaire or in separate surveys conducted simultaneously. Sample data below from 5 example tests shows how results from the two different scales compared:

% "satisfied" 5 point verbal scale 84.5% 78.6% 87.6% 90.3% 92.3%

This can lead to a dangerous level of complacency. In Example 5, the 92.3% produced by the 5 point verbal scale suggests that the company is doing well at satisfying its customers. In fact, plugging its Satisfaction IndexTM of 75.8% into The Leadership Factor's benchmarking database demonstrated that it was in the bottom half of the league table in its ability to satisfy customers! It is therefore hardly surprising that companies misleading themselves with unrealistically high levels of customer satisfaction from verbal scales complain that their 'satisfied' customers are often defecting. They then begin to question the point of customer satisfaction. What they should be questioning is their customer satisfaction measurement process. It's giving them a bum steer! Their customers are actually well below the levels of satisfaction that would generate loyalty. This was demonstrated by AT&T who, using verbal scales were regularly getting CSIs of 90%+ and bonusing staff on it, but in 1997 had doubts when some businesses began making major losses despite these apparently high levels of customer satisfaction. On investigation, they discovered that repeat purchase rates were substantially different for customers rating "excellent" compared with those rating "good". They also found that CSI scores of 95%+ were correlated with scores in the low 80s on their measure of "worth what paid for". (Source, Customer Service Management magazine case study). This is supported from a huge amount of

Stakeholder July2005

Satisfaction Index 10 point numerical scale 67.4% 65.3% 70.9% 74.4% 75.8%

measure based on a 10 point numerical scale is necessary to highlight this. Apostle 100% Zone of affection 80% Zone of indifference

Loyalty

Example 1 Example 2 Example 3 Example 4 Example 5

evidence collected over a 30 year period by Harvard Business School. They have found very strong correlations between customer satisfaction and loyalty, but only at high levels of satisfaction. Merely being satisfied isn't enough in today's competitive markets and a tougher

60%

40% Zone of defection 20%

Enemy 1

Satisfaction

6. Academic research For background reading, a widely respected general text that covers the subject of scales is: J.C. Nunally, "Psychometric Theory" (1978, pages 12-20), McGraw Hill. A more recent and more relevant treatment of the subject is found in: D.Wittink and L.Bayer, "The Measurement Imperative". Marketing Research, Volume 6, Part 4, pages 14-22, 1994. Wittink and Bayer took into account respondent issues such as simplicity and understandability as well as statistical considerations such as reliability (i.e. repeatability), power (detection of differences between groups or over time) and sensitivity (utility for improving customer satisfaction). Considering all factors they concluded that 10 point numerical rating scales are best for

measuring customer satisfaction. At the present time the leading academic centre of excellence for satisfaction measurement is the University of Michigan Business School, which, amongst other things, is responsible for the American Customer Satisfaction Index. The ACSI uses a 10 point numerical scale. We asked Michigan why they use this scale and received the following reply:

10/

"Our recommendations are based more on our experiences than any documented studies. But there are two articles that help directly or indirectly support the 10-point scales (see below). The first, by Ryan et al., compared 5 and 10 point scales to multi-item indices of 10-point scale. (Don't be deceived by the title.) The second shows how satisfaction and quality data distributions have a generalisable negative skewness (i.e., most of the observations are toward the high end of the scale). This is why, to me, it makes sense to have more than just 7 scale points. I hope this helps! Yours, Michaelâ&#x20AC;?

References: Ryan, Michael J., Thomas Buzas, and Venkatram Ramaswamy (1995), "Making Customer Satisfaction Measurement a Power Tool," Marketing Research, 7 (Summer), 11-16. Fornell, Claes (1995), "The Quality of Economic Output: Empirical Generalizations About Its Distribution and Association to Market Share," Marketing Science, 14 (Summer), G203G211." [Personal communication from Professor Michael Johnson of University of Michigan Business School, 12 September 2001] .

7. Distribution of data Picking up on Professor Johnson's point, it is true that satisfaction data tends to be skewed towards the high end of the scale, although skewness is exacerbated on 5 point scales. This merely reflects the fact that most customers and employees are

Latest Thinking

broadly satisfied rather than dissatisfied they wouldn't still be there if they weren't. What most companies are really measuring therefore is degrees of satisfaction. (It is interesting to note that situations where high levels of dissatisfaction do exist, typically when customers have no choice, do exhibit a much more normal distribution). Given that we are mainly measuring degrees of satisfaction and tracking small changes in that zone, it becomes very important to have sufficient discrimination at the satisfied end of the scale, and, for analytical purposes, a good distribution of scores.

/10

As illustrated by the charts below, whilst both 5 and 10 point scales exhibit a skewed distribution, data from the 10 point scale are more normally distributed and show more variance. It should also be noted that variance can

distribution with 5, 7 or 10 point scales and have little need for advanced analysis of the data since the problem areas that need addressing will be obvious. By contrast, choice of scale becomes much more critical for top performing companies for several reasons: 1. Companies with high levels of satisfaction need a very tough measure if they are to identify further opportunity for improvement. 2. Companies in this situation need to employ much more sophisticated statistical techniques that drill down into the data to uncover drivers of satisfaction or differences in satisfaction between groups of customers that may not previously have been considered. 3. In situations where there are multiple business units (e.g. branches, regions, stores, sites etc) it is very important to be able to discriminate between the better and poorer performing units. 10 point scale 120

100

Frequency

5 point scale 120

ANY COMPANY CONDUCTING INTERNATIONAL RESEARCH WOULD BE EXTREMELY UNWISE TO CONSIDER ANYTHING OTHER THAN A NUMERICAL SCALE.

10/10

Nigel Hill, The Leadership Factor

measures. 20 point scales have also been used. However, questions must be easy for respondents to understand in order to have a high level of confidence in the validity of the answers. People find it most easy to respond to 5 point verbal scales and 10 point numerical scales. This may be because giving (or receiving) a score out of 10 tends to be familiar to most people - whether it be from tests at school, from the reviews of footballers in newspapers and other real life experiences. Numerical scales with fewer or more than 10 are more difficult for people as are verbal scales with more than 5 points. S

0 1

Satisfaction

be affected on numerical scales by the labelling of the anchored end points. To illustrate, a 10 point scale with end points labelled 'dissatisfied' and 'satisfied' would represent a narrower range of views than end points labelled 'very dissatisfied' and 'very satisfied'. Even better would be end points labelled 'totally dissatisfied' and 'totally satisfied'.

8. Top performers and poor performers For poor performers with low levels of satisfaction, the choice of rating scale matters little. They will get a fairly normal

Satisfaction

For all the above reasons the greater variance yielded by 10 point numerical scales and the ability to employ advanced multivariate statistical techniques with good levels of predictive and explanatory power are extremely beneficial to high performing companies.

9. Ease of completion In the light of all the above arguments, it would be valid to ask the question, 'Why stop at 10 points?' From a data point of view it would be better to have even more points. Federal Express uses a 100 point scale to track 'micro-movements' in customer satisfaction in its frequent

Nigel Hill Managing Director The Leadership Factor www.leadershipfactor.com email: info@leadershipfactor.com

Stakeholder July2005

In an adapted e xtract from the ir new book, Seven Secrets o f Inspired Leade Phil Dourado a rs, nd Phil Blackbu rn examine how Harley Davidso n creats 'super loyalty'

sk a Harley-Davidson senior executive what they sell and you'll get the answer. And it's not motorbikes. "We sell to 43-year-old accountants the ability to dress in leather, ride through small towns and have people be afraid of them," says Harley-Davidson VP John Russell. Harley-Davidson executives love repeating this quote. It first appeared, to our knowledge, in the book Results-Based Leadership, by Ulrich, Zenger and Smallwood. John is the third HD senior executive we've heard use it, former CEO Richard Teerlink and John's predecessor Clyde Fessler being the other two. But, it's such a brilliant quote, it bears repeating.

Stakeholder July2005

Customer experiences have replaced products and services. And to lead the creation of customer experiences, you have to learn to walk in your customers' shoes, see the world through their eyes, breathe the same air. Or, in Harley's case, ride the same bikes. Our contention is that the creation of customer experiences of the Harley kind requires a new kind of leadership. Harley's customers, which range now from CEOs with midlife crises to a House of Commons librarian to computer programmers, professional women and the proverbial accountant, are still known to tattoo the company's logo onto their

skin, just as their more iconic and traditional customers, the Hell's Angels, do. We'll hear in a moment from Harley's European MD how leadership translates into that level of customer loyalty. But, first, some staggering figures: • $10,000 invested in Harley-Davidson in 1986 was worth $1.5 million in 2003. • Harley's turnover in 2003 was $4.6 billion. • At time of writing, profit is running at 25% of revenue. • In 2002 that profit was $1.166 billion. • Profit growth over the ten years 19932003 has been a compound annual rate of 26%.

Customer

Harley people use the phrases 'super loyalty' and 'ultra engagement' to explain their success. Here's Harley Davidson's European VP, John Russell, to explain what they mean:

did to create What Harly-Davidson 'super loyalty' through 'ultra engagement' "We don't actually 'create' loyalty. Our customers give us their loyalty. It's their choice. They choose to show they have a belief in us and in the way we run our business and processes. Most companies see 'brand' as some connectivity to a badge. Harley goes far beyond that. The customer experience is the brand. At Harley-Davidson, employees drive processes to create what we call 'Ultra Loyalty' or 'Super Engagement'. Employees are empowered to engage with customers on a day-to-day basis and constantly find out what they need to do to meet customer needs, then do it! People inside a company are capable of achieving the most extraordinary things for, say, their family and religion. The key to the concept of employees looking after customers is to unlock that. Some say 'It's OK for Harley: the product is so exciting.' But, these principles can be applied to any company producing anything: paint or nails; it doesn't matter. The knowledge you need is all in your front line. That is where the 'trust zone' with your customers is, not the absurdities of your management system. THEIR reality is real (your frontline). Most of the answers you need are in the passion and intellectual capital of the people who work with you. What I'd suggest is that you try this... Take three months and say to people 'Do what you think is right.' It's about liberating your people to do what's right for the customer.

Of course they will not always know the ramifications of what they want to do. This will force you to educate them in issues like profitability and the legal framework. You will find there are more opportunities to improve your business than to damage it by handing it over to the front line in this way. You will unlock a huge amount of customer insight. We did. If it fails the first time, understand why and do it again. You will need to adjust one or all of three things to get it to work: 1. The Staff themselves 2. The Brief you give them 3. The Environment in which they work â&#x20AC;&#x153;This isn't a pipe dream. It worked for us..."

Inspired Leaders Network member and Harley-Davidson Europe MD John Russell

Stakeholder July2005

Customer

There are two concepts behind how Harley does business.

hear is 'If you want to talk to a human being, press 1", says John Russell.

1. Act Small

Out of these two concepts come some clear questions for leaders. First, what really is your customer proposition? John puts it this way: "Life and work is stressful. Increasingly, people do not find work fulfilling enough. Our job is to offer freedom - an iconic, windswept and interesting spirit that is something very powerful in today's society. Our customer proposition isn't 'a bike'. We turn boring accountants into interesting people. Apologies to the accountants for the cheap shot..."

Large companies need to behave more like small companies. Leaders need to be more connected with their people and their customers than they currently are. Cynicism and functionalism, which you find in most large organizations, comes in reaction to the rules those companies breed.

2. Brands are Built From the Inside ...not from advertising campaigns. You can't expect to create a brand through advertising and the organisation to fall in behind. The brand comes through in everything you do, including, say, your call answering system. "Yes, we have one of those 'Press button 2 for this and 3 for that' systems, but the very first thing you

Then, how are you going to deliver on that proposition? Harley's starting point in answering this question is its customers. You have to revisit the company's roots to find the source of this enduring customercentred approach. There were 200 motorbike companies in the US in the

1920s. There was one left by the 1970s. The US bike industry's collapse thanks to its inability to match Japanese quality and prices has been well-documented. In the 1980s, the Harley turnaround began with a management buy out. The company could hardly pay the wages when the Harley Owners Group (HOG) was born. It was the worst of times. The company's new owners, its management, knew that its greatest asset was 300,000 customers. And that is where Harley was streets ahead of most other manufacturers. That's where its inspired leadership began. For most businesses, when times are tough, the last person they are thinking about is the customer. With Harley, the customer was where everything started from. Ten lessons in how to lead a customercentred organization come out of Harley's success from the 1980s onwards:

ssons Ten Leader's Le from Harley-Davidson 1. Connect people's work to the vision In 1983 the company's vision was 'We fulfil dreams'. Which means nothing without a business process. The company's leaders created o n e , which w a s

cascaded down so that everyone's work assignments were connected to how they fulfilled the vision. Much of the success of the process - designing out quality problems, for example - was down to training the workforce in manufacturing methods like Statistical Process Control and then giving them the authority to control quality themselves. The first four days at Harley for every new recruit are spent learning the business process. Meetings always come back to the process.

2. Deal complexity

with

the

'KISS' (keep it simple, stupid) is true in execution. But, it's not true when you're deciding what you need to do. Most organizations make decisions about what to do based on letting the interests of one

Stakeholder July2005

stakeholder win at the expense of another (stockholders over customers, for example). But, at Harley, their tradition is to refuse to make decisions that way. They have to reach a solution that benefits all stakeholders. So, it takes longer to reach solutions.

3. Research is no substitute for staying in touch Research will never give you a deep enough context compared to being in your customers' shoes. All Harley executives are expected to ride with customers 10-15 days a year. At the 100th anniversary celebration in Milwaukee, the job of the company VPs was to hand out brochures for three days from a booth. One of the VPs told us that he worked out he had spoken to 10,000 customers, anonymously, over the three days. The authority of a job title is a handicap to bosses who want to get at the truth of what's going on.

Customer

4. Trade-offs are the essence of strong brands & culture You have to make tough choices. Harley has 400 dealers in Europe, for example. It would be quick to grow through multifranchise dealers. But, they wouldn't be able to offer the Harley-Davidson expertise and in-store experience. The company also pays its dealers more margin than the competition. The premium is a longterm investment.

5. Let people behave like human beings Corporations generally don't. It's only when there's a crisis that people pull together because their interests are suddenly aligned behind survival. Harley has a genuinely flat hierarchy. The most junior person can tell the CEO he's wrong and be listened to with respect. People are aligned behind the company's goal and allowed to be themselves.

They are: Tell the truth Be fair Keep promises Respect the individual Encourage curiosity

7. Empowerment with accountability ...is possible. Most people will do the right thing if allowed to do so. You need rules, of course, such as Harley's rule that says 'If you are going to make decisions, make sure you are competent in that area - get training if you feel you are not. And communicate with everyone else.'

8. Belonging drives customer and staff satisfaction Knowing they are valued gives people self-confidence. Knowing they are trusted and share the values of the company gives a sense of belonging. Nothing builds satisfaction and loyalty like belonging.

6. Alignment & commitment

9. Hierarchy inhibits customer understanding

...come from strong values. Harley's five values have remained the same for over twenty years and are expressly designed to let people behave like human beings.

Hierarchy must not be allowed to distort your understanding of the customer. Harley had a recall issue with Buell, a Harley brand, a few years ago. Most

Harley's leaders insist that their success is down to a business process that allows people at the frontline and on the assembly line to take the lead on behalf of customers, rather than down to the simple fact that the company's bikes have always been, er, way cool. And the facts back this up.

boring your industry, you can inject a sense of 'wow' and buzz into it by taking the lead in re-designing your customer experience around a distinctive proposition. It can be as boring as nails or paint or PC maintenance. It's the theatre you construct around your business that creates the compelling story that attracts customers to you. We're not talking PR here. We're not talking advertising. We're talking a themed customer experience.

Yes, the company's bikes have been icons of cool since at least Dennis Hopper and Peter Fonda brought them to mainstream attention in Easy Rider, and probably long before that. But, it was only after the company set up customercentred business processes and gave control to people on the front line that its profits started to take off. And, John Russell is right: no matter how

It is in breaking with Taylorist principles of scientific management that run through most organisations as a hangover from last century, based on factory principles, that inspired leaders create and lead customeraligned organizations like Virgin & HarleyDavidson. In that sense, inspired leaders are post-industrial leaders. Are you? S

companies leave recalls to c u s t o m e r service and it's THIS ISNâ&#x20AC;&#x2122;T A seen as an PIPE DREAM. IT embarrassment. WORKED Harley issued FOR US... six recall John Russell, notices. John Harley-Davidson Europe Russell says: "One of our people came to us and said we should do more. Specifically, we should have a party for every customer who had had a problem with the recalled model. And we should do it at a race meeting. He would have been fired anywhere else. But, the hierarchy didn't get in the way. He was clearly right. He understood those customers. So, at every race meeting that season, we invited all Buell owners who had had a problem to join us for a party."

10. Hierarchy inhibits employee contribution Hierarchies act as a filter for the truth. Don't punish people for bad news. At Harley they say "Tell me true, tell me early".

About the Authors Phil Dourado left & Phil Blackburn help run The Inspired Leaders Network, founded by Phil Blackburn & Meenu Bachan. This article is an adapted extract from The Inspired Leaders Network's new book, which draws on the practices of eighty of the Network's 800-odd members. You can read free book extracts and find out more about the Network on this preview site: www.SevenSecretsOfInspiredLeaders.com

Stakeholder July2005

Case Study

With 13,000 employees and total annual premiums of almost £8 billion, Norwich Union Insurance is the second largest UK insurance company after Lloyds. JOHN WILLMOTT, Director of Customer Service, explains how Norwich Union is implementing a new technique to effect a paradigm shift in the quality of service it offers via its customer contact centres. t Norwich Union Insurance we have always believed, justifiably I think, that we offer a good level of service from our customer contact centres. But that’s no longer enough for our customers, for our partners or for ourselves. We want to offer a great level of service, not merely a good one.

Naturally a major part of our activity involves selling insurance direct to customers, however we also place a major commercial emphasis on providing services to partner organisations. My job as Director of Customer Service for our partners is to ensure that their customers enjoy a level of service that is much better than ‘merely good’.

We want our partners to regard us as absolutely the best insurer with which they could possibly do business. If this is to happen their own customers must think the same, and that is down to us. We need to ensure we impress those customers all the time, and that means the experiences we offer must be consistently outstanding. Norwich Union began working with partners early in its 200-year history. This business is now worth a quarter of our annual turnover. The precise nature of the relationship we have with our partners varies according to their requirements. In some cases we will take on the entire responsibility for a partner’s insurance offering and deliver that offering essentially as a turnkey service. For some partners our staff deal with their customers’ entire insurance requirement from sales to claims resolution as though we were the partner’s own staff. Other partners, especially those with high-profile brands, may prefer to retain control of their sales and branding but will make use of our expertise in managing the insurance product, again including handling claims. In practice, the second type of arrangement has become the most popular way by which we offer insurance

Stakeholder July2005

services to our partners. At its best, this arrangement gives customers the best of both worlds. Customers enjoy the peace of mind, security and square deal they associate with a brand they know and trust, while also benefiting from the longterm expertise, strong capitalisation and reliability that we can offer. But the entire arrangement cannot possibly be a successful one for the three parties concerned unless the quality of service provided is everything the customer could hope for. It’s my firm belief that while pricing can be important in winning customers, what really matters in keeping them is the quality of customer service. Our business objective is therefore to do everything we can to retain customers for our partners through the level of service we offer those customers. I now have decisive and measurable evidence that we have succeeded in achieving this.

The first step - looking at the theory of customer loyalty We began our new initiative by taking the advice of the service excellence consultancy Cape Consulting that we should get to know the work of the

Case Study

business thinker Frederick Reichheld, author of the best-selling books The Loyalty Effect and Loyalty Rules. Reichheld is unequivocal in his belief that customer loyalty should be the main focus for a business, not merely part of what it is about. In particular, Reichheld has ingeniously reduced his thinking to the proposition that the best and most reliable test of customer loyalty is simply the customer’s response to the question, would you recommend this organisation to a friend? Reichheld advocates measuring customers’ willingness to recommend on a scale of zero to ten. He has modelled the results against organisations’ sales growth and shown that companies having a significant surplus of promoters (enthusiastic recommenders, 9 or 10 on the scale) over detractors (those scoring below 7) substantially exceed in sales growth over competitors who do not have such a surplus. Reichheld is adamant that organisations must win from customers a strong enthusiasm for recommending. Mild enthusiasm, from Reichheld’s perspective, is worth very little as such customers will be very likely to migrate to a rival. After familiarising ourselves with Reichheld’s ideas, we concluded that if we wanted to transform our customer service we needed to take every step to improve the quality of the buying and customer service experiences that our partners were receiving from our contact centres.

The challenge that faced us Our problem was that we already offered a good level of customer service. When an organisation already believes itself to be good, there is a huge challenge involved in overcoming the status quo. People see no compelling reason to change what is already working perfectly well. Their mantra, not surprisingly, tends to be, “if it isn’t broken, don’t fix it.” But we knew that we had to strive to be ‘great’ rather than good. And so, starting with our call centre in Bishopbriggs, Scotland, we began working closely with call centre agents to develop an entirely new mindset as far as dealing with customers was concerned.

Our initial research Our work began with a programme of customer research in which we measured our ability to generate enthusiastic customers who would be ‘promoters’ according to Reichheld’s terminology. We then modelled our ability in this direction against Cape’s database of ‘Key Relationship Builders’ (KRBs) - which can be defined as clear, recognisable and distinctive practices that impress customers. The effect of KRBs is clear: they lead to customers enjoying the interaction with the organisation and, all being well, significantly increase the likelihood that a customer will become loyal. In particular, KRBs are designed to ensure that the customer:

Stakeholder July2005

Case Study

puts into action in a natural and authentic fashion. Authenticity is the key to the whole thing, since: A lack of authenticity is easy to detect in voice, tone and manner.

> feels he or she has sufficient time to think, without feeling rushed > feels appreciated as an individual > feels that dealing with the organisation is easy, convenient, efficient and enjoyable > feels the organisation genuinely cares about meeting his or her needs > feels he or she is getting a really good deal from the organisation.

Putting the research into action Having assimilated Cape’s take on how we might improve our level of customer service, we ‘looked in the mirror’ and had a good think about the nature of the service we provide. Our aim was to build momentum in our contact centres towards achieving their KRBs so that we could begin to create - in

Stakeholder July2005

Reichheld’s terms - promoters for our partners. Mindful of the need to maintain simplicity, we aligned the KRBs to a programme we already had underway to improve the quality of customer service experiences. That programme had defined the ends. We named our new programme - which started at our Bishopbriggs call centre ‘Care at the Heart’. The idea behind the Care at the Heart programme is that we set specific objectives for how we wanted our customers to feel when they dealt with us. We then identified what changes we could make in the ways we communicate with our customers in order to give them those feelings reliably and consistently. Like many others in the call centre industry, I believe that the biggest influence on the performance of call centre agents is their Team Leader. We created a programme that had the Team Leader teach their teams the KRBs of the Care at the Heart programme. This gave t h e programme an unprecedented level of credibility and additionally helped us ascertain the capabilities and commitment of the Team Leaders themselves. A great many stepped up to the mark in an inspiring and convincing way. Their enthusiasm was contagious in their teams. What does all this mean at the coalface where call centre agents deal with customers on the phone? It means that the telephone interaction between the call centre agent and the customer is guided by specific target behaviours the agent

Providing great service is often called ‘emotional labour’. An agent must want to deliver the KRBs. If they don’t want to put the behaviour into practice on a consistent basis, no sustained improvements are possible. If agents don’t enjoy the experience of talking to customers, their jobs can be very mundane indeed. A principal purpose of the programme is to help call centre agents realise that their jobs will actually become more interesting and more enjoyable if they put these practices into action.

Making progress The work itself consisted of three key phases: a diagnostic phase, an implementation phase and a business as usual phase. The ‘diagnostic’ phase posed the following key questions: Do we impress our customers through their service experiences? Do our people know how to impress customers? Do we support a high performing climate? How can we support our front line managers in driving improvements to customer experiences?

Our diagnostic processes now involve a range of tools. Quantitative measurement enabled us to assess customers’ service experience and derive Reichheld’s all-important ‘net promoter’ scores. This meant that we could identify performance gaps that must be closed, increasing the likelihood of creating promoters. Calls were assessed by call listening and our performance climate was measured relative to Cape’s database on such dimensions as:

Case Study

comfortably doing just enough to satisfy customers, but not enough to impress them.

Failure demand is down. Motivation is up. Our net promoter scores are up across the board.

Conclusion

Customer loyalty is absolutely central to our overall strategic development. In the insurance industry the cost of acquiring customers is very high. Retaining those we have is of crucial importance for us. I have no doubt that we can differentiate our products and services from those of our rivals by striving to offer a better level of customer service than they do. This enhanced customer service starts with how our call centre agents help customers.

The Care at the Heart programme has allowed us to effect a paradigm shift in how call centre agents do their job. It has been a major undertaking, and one which still requires constant vigilance. It has required a massive modification not only in how the agents see customers but in how they see themselves and their jobs. People do not change their behaviour overnight; they have to be repeatedly persuaded to change it, and given positive reasons to want to change it.

strategic clarity performance standards teamwork recognition and motivation responsibility and commitment

Lastly, given that we know our Team Manager population is the most influential on contact centre performance, Cape Consulting used an audit of coaching skills and practices to make recommendations to increase the effectiveness of this important group.

We did not simply replace a call script that was based essentially on making sales and limiting the call duration with one that was based on creating a comfortable and human relationship with the customer. Some aspects of the change did involve scripting the ‘new look’ way of dealing with customers and, because the agents were dealing with financial services, there were some necessary regulatory and technical aspects of the conversation that had to be included. However the general approach was to create a collaborative atmosphere within call centre agent teams where individual agents felt motivated to work together in the team to effect an enormous change for the better in how they dealt with customers.

At the ‘implementation’ phase Team Managers became even more involved at the heart of the process. They ran events for their teams which shared customers’ feedback and data. This allowed Team Managers to communicate to their call centre agents important discoveries about the agents’ current level of performance. Agents were shown that while they were good at what they did, there were many areas where they could make improvements.

Individual agents had opportunities to insert information into the conversation and to improvise where necessary in dealing with customers. The intervention was prescriptive in the sense that agents were urged to put into practice behaviours that work very well in achieving the objectives that had been set. But within this overarching strategy there was room for individual initiative and creativity.

Finally, there was the ‘business as usual’ phase in which we ‘rebooted’ our activities with the new working practices built in. These new practices, and the feedback processes that were a crucial element of them, were essential to our key task of instilling new behaviours. Again the difference was between knowing what to do and actually doing it. Implementation takes dogged effort and persistence to overcome those agents who were still

The response to the initiative from individual call centre agents at Bishopbriggs has been extremely inspiring and encouraging. Many people who work in call centres are young people starting their first job. Labour mobility within call centres is quite high, and in the past many agents have taken it for granted that their working lives would be rather boring and not very ‘human’. The hard facts are there too. Sales are up.

People do not change their behaviour overnight; they have to be repeatedly persuaded to change it, and given positive reasons to want to change it. Our overall impression about the work we have been doing is that it is a truly transforming initiative; not only transforming the quality of the customer relationship but also boosting the enjoyment call centre agents find in their work. However, when we first met with Cape Consulting, they emphasised that the commercial benefits of their work were what really mattered. As someone with a tough and demanding commercial agenda I wholeheartedly accept and endorse this fundamental point. The proof of the pudding has been in the eating, and we have found this initiative to be a highly effective one for us. We are currently extending the initiative to cover all our Partnership customer contact centres. S

Contacts: John Willmott. Norwich Union Tel: 01603 843542 E: willmoj@norwich-union.co.uk

Press information: James Essinger, Da Vinci Public Relations Tel: 01227 472874 jamesessinger@davincipr.com

Stakeholder July2005

Book Review

Edward Tufte, The Visual Display of Quantitative Information

W IE

V E

Graphics Press - http://www.edwardtufte.com

If a picture is worth a thousand words, how many should a chart be worth? A good one can summarise thousands of data points and highlight a causal relationship; poor ones can obscure a few simple numbers with meaningless “chartjunk”, adding nothing but confusion and irritation. The Visual Display of Quantitative Information, one of Amazon’s books of the century, is essential reading for designers, analysts, and managers who want to produce better graphs.

Rescuing data graphics from the artists When most people think of graphing statistics, if they think of it at all, what comes to mind is probably How to Lie With Statistics. But the problem is far deeper than deliberate deceit. The use of data graphics as a gimmick to hold the attention of readers assumed to be too dull-witted to understand numbers has led to a triumph of style (or fluff) over substance. Too many graphics are either patronisingly simplistic, drowning in decoration or downright misleading. Edward Tufte is on a mission to set that right, starting with a couple of rules: If the statistics are boring then you’ve got the wrong numbers You should respect the intelligence of your audience

Most bad graphics don’t set out to mislead. For example any graph purporting to show a change in price that charts actual as opposed to “real” cost is always misleading, even though it reflects the original numbers perfectly well. Accurate graphing takes thought and experience as well as integrity, which is why it should be a task for those who can combine an aesthetic touch with some statistical and analytical expertise. Tufte has a knack for firing the enthusiasm of those who read his work. His style is witty and engaging, occasionally becoming acerbic when discussing a particularly bad example. Of one truly monstrous 3D graphic from the pages of American Education he comments: “five

Stakeholder July2005

colors report, almost by happenstance, only five pieces of data....This may well be the worst graphic ever to find its way into print.” It certainly is hideous, but dating from the 1970s it seems in retrospect only a warning of what was to come with the advent of desktop computing and Chart Wizards.

The good, the bad and the ugly Tufte raids his considerable library of rare books to illustrate good and bad design. The reminder that ideas such as the bar chart, time series and scatter plot were inventions rather than solutions handed

Book Review

Playfair Bar chart Exports and Imports of Scotland to and from different parts for one Year from Christmas 1780 to Christmas 1781 10 20 30 40 50 60 70 80 90 100 110

130

150

170

200

220

240

260

280

L300,000

Names of places 0 0

Jersey &c Ireland Poland Isle of Man Greenland Prussia Portugal Holland Sweden Guernsey Germany Denmark and Norway Flanders West Indies America Russia Ireland

0 0

The Upright divisions are Ten thousand Pounds each. The Black Lines are Exports the Ribbed lines Imports.

Tufte on PowerPoint Tufte hates PowerPoint. Not the software itself, but its use for unsuitable material, the presentation style it encourages and the patterns of thought it cements. To quote a recent essay: “At a minimum, a presentation format should do no harm. Yet the PowerPoint style routinely disrupts, dominates, and trivializes content. Thus PowerPoint presentations too often resemble a school play - very loud, very slow, and very simple.” He expands the point in a pamphlet The Cognitive Style of PowerPoint, an excerpt from his forthcoming Beautiful Evidence. In brief he feels that PowerPoint is a sales tool, incapable of sufficient resolution to present meaningful statistical data and forcing a linear style that hampers our ability to see patterns and relationships. In addition the bullet-point style tends to trivialise and simplify rather than illuminate. It is revealing, and terrifying, that both Tufte and Richard Feynman saw a direct link between NASA’s use of bullet-style thinking and the two shuttle disasters. The Columbia Accident Investigation Board agreed - PowerPoint is inadequate for technical communication.

down from on high is a salutary one that should prompt us to ask if things can be made better. The example above may be the first bar chart? Playfair was unconvinced, but the idea has stood the test of time The choice of graph really does matter. Before the scatter plot how was it possible to examine the relationship between two variables? Fundamentally it wasn’t. The use of the right chart could make a significant difference to your analysis, particularly with complex multivariate data. Tufte provides examples of good practice ranging from Galileo to 3D computer

Stakeholder July2005

Book Review

W IE

V E

Edward Tufte, The Visual Display of Quantitative Information

Graphics Press - http://www.edwardtufte.com

Figurative Map of the successive losses in men of the French Army in the Russian campaign 1812 - 1813. 100.000

7.1 12

.000

o rob

Vialuma

Minsk

Studienska

Bobr

00 37.0

00 24.0

Orcha 00 20.0

Molodechno

26 .00 0

Smorgoni

Smolensk

30.000

0 50.00

Ber ezin

12.000

8.000

4.000

10.000

Niemen

14.000

Vilna

Kovno

Common Leagues of France (Map of Fezensac) 0 5 10 15 20 25

-11.

- 26. December 7

- 20. November 26 - 24. December 1 - 30. December 6

Moghilev

GRAPHIC TABLE of the temperature in degrees of the Réaumur thermometer below zero The Cassacks pass the frozen Nitmen at a gallop

Maloyaroslavets

55.0

Tarutino

96.000

Vitebsk

0 87.00

33.000

Gjat

Mojaisk

175

0 422.00

Niemen R

Polotsk

Glubokoe

0 .00 60

400.000

22.000

MOSCOW

00 0.0 10

6.000

Ma skv e

00 0.0 10

Drawn up by M.Minard, Inspector General of Bridges and Roads in retirement. Lavis, November 20, 1869

The numbers of men present are represented by the widths of the coloured tones at a rate of one millimeter for every ten thousand men; they are further written across the tones. The red designates the men who enter into Russia, the black those who leave it. - The information which has served to draw up the map has been extracted from-the works of M M Chiers, of Ségur, of Fezensac, of Chambray and the unpublised diary of Jacob, the pharmacist of the army since October 28th. In order to better judge with the eye the diminution of the army, I have assumed that the troops of Jerome and of Marshal Davousl who had been detached at Minsk and Mogbilev and have rejoined around Orcha and Vitebsk, had always marched with the army.

- 9. November 9

R 0 October 18 Rain October 24 -10

C 0

F 0

-13

-10

-20

-25

-13

-30

-38

-36

- 21. November 14

Minard: The 1812 campaign (translated)

Sparklines

visualisations, some of which are truly inspirational. It is revealing that the very best data graphics are often one-offs; works of art that bring to life a specific set of data. Minard’s 1869 map above narrates Napoleon’s disastrous 1812 campaign: Combining chart, map and time-series it chronicles the terrible losses of the French army in the diminishing width of the line showing advance and retreat. According to Tufte it “may well be the best statistical graphic ever drawn.” It certainly has a stark power that would be difficult to match in words. Tufte does not just lay down principles and show examples of good and bad practice. Perhaps the most useful sections of the book are those in which he

Stakeholder July2005

elaborates some of his ideas for redesigning standard graphs step by step. This takes the work from the realm of theory to practical application, and some of his suggestions are enormously valuable, deserving wide adoption. His latest innovation, the sparkline (to be featured in the forthcoming Beautiful Evidence) is already gathering considerable momentum, and may be the first of his suggestions to reach the mainstream. His main aim in making changes is to maximise the “data-ink ratio”. Any mark on the paper should add to the information contained, if it does not then it can be erased. A good example is the overbearing grid that dominates so many charts. Sometimes a light grid may help when looking up specific data, but a

Tufte describes sparklines as “dataintense, design-simple, word-sized graphics”. The neat part is that they can fit into a flow of text naturally, appearing at the appropriate point to illustrate an argument. They contain nothing but data - no axes and little labelling, but they still manage to tell a clear and rich story. This one CSI 84.2, for example, shows the trend of customer satisfaction over the last 15 months. With the addition of a grey stripe to indicate the normal range it also becomes a tool to spot “out of bounds” values . This is especially useful when glancing at a range of figures simultaneously. What could be more appropriate for a strategic “dashboard” that is high on information and clarity but low on gimmicks? Customer satisfaction 84 Employee satisfaction 76 Brand evaluation

Share price

320

Book Review

Biography As a professor in the fields of statistics and graphic design, Tufte has reinvented a field by bringing the two together. For too long graphics have been the exclusive preserve of artists with no understanding of statistics. Tufte’s aim is too foster a discipline that can combine the talents of the artist and the statistician. Tufte is the worlds leading expert on the effective visual presentation of statistical information, and his books have become instant classics. A hallmark of his approach is that his books are self published because he wasn’t satisfied that anyone else would take the necessary care in laying out and printing them. The results are works of art in themselves, elegantly typeset and well bound. Bibliography Visual Explanations Envisioning Information The Visual Display of Quantitative Information Beautiful Evidence. (forthcoming) http://www.edwardtufte.com

heavy grid just gets in the way.

Rules for effective graphing Tufte’s approach boils down to one simple rule - graphs should free up numbers to speak for themselves, not obfuscate or decorate for the sake of it. Some key principles: Above all else show the data Maximise the data-ink ratio Erase non-data-ink Erase redundant data-ink Revise and edit

asinine pictures, but by facilitating comparisons and highlighting relationships. Simple tables and pie charts don’t do this well, but intelligently designed tables, time series and multivariate data plots are all capable of revealing new and interesting truths.

A good measure of graphical excellence is data density, almost precisely a measure of how many words the chart is worth. If the data density is lower than a table, then the chances are a table would be better.

Does it really matter? Perhaps you’re thinking that this is a diatribe that we can afford to dismiss. The way data is presented surely can’t make all that much difference? I would argue that it is hard to overestimate the importance of this area. The point is that bad graphics can not only be made to lie, but frequently mislead or hide information inadvertently because of poor design, and this has daily consequences for the decisions we make. Is the way you present data really important? Yes, if you’re talking about data on cancer death rates. Yes, if you’re talking about the key information relating to the safety of a NASA shuttle mission. Yes, if you’re talking about any data that matters at all. And if doesn’t, then why are you graphing it in the first place? S

Before and after Tufte redesigns a population graph

Charts that explain Tufte points out that the best charts are those which reveal something that could not easily be seen in the data alone. Simple data are often best shown in the most simple way - a table. Pie charts, by this rationale, are rarely a good use of ink. Of course tables present a typographic challenge that is worthy of a book in itself, and are often just as poorly produced as the average graph! The point is that numbers can best be made interesting not by turning them into

Stakeholder July2005

Fast Guide

Fast guide to Customer Service

Providing excellent Customer Service Peel back the layers and you will discover that at the heart of any successful business lies its customers - cosseted, consulted, listened to, respected and appreciated. They are the leaders, the catalysts for future development. As Sir Terry Leahy, Chief Executive, Tesco once remarked, “We follow the customer, if they change, we change.” Quality customer service is critical - it is the differentiator between business success and mediocrity even failure. Four steps to excellent customer service:

1. See an individual in every customer Remember that customers are individuals who, in this age of automated phone services, often crave and invariably appreciate some personal attention - the human touch.

If you listen actively and use their name you will be perceived as being polite and courteous, you will be delivering confidence, showing respect and in turn earning their respect, thus building a strong relationship that fosters loyalty, a vital factor in customer retention.

interaction is an opportunity to impress not disappoint. Keeping the customer informed pays dividends. If you say you are going to get back to them - you must. Keeping promises and commitments is an essential element of first class customer service.

2. Welcome complaints 4. Be proactive A complaint is precious. It is free, the best and often the only feedback you will get. It provides you with a golden opportunity to identify and address crucial aspects of your business that are not meeting your customers‘ expectations. If handled swiftly, personally and professionally a business can recover extremely well even transforming complainants into walking advertisements for itself and its products.

3. View every interaction as a moment of truth Respond as quickly as possible to all communications, whether faceto-face, on the telephone, e-mail or letter. Remember that every

Customer service begins with a positive attitude. Say what you can do, not what you can’t. Smile and enjoy what you are doing. Contact a customer and ask if everything is OK and if there is anything else they require. Every one of us can make a difference and legendary customer service means going that extra mile and delivering those ‘little extras’. In an increasingly frantic world where time often eludes us it is well worth remembering that good customer service costs far less than bad customer service. S Written by Rachel Davies of Peak Performance Training, providers of inspirational training to employees at all organisational levels. Telephone: 01455 213683 Email: rachel.peakperformance@tinyonline.co.uk

Stakeholder July2005

One-day

management workshops £175.00

A series of 6 dynamic workshops designed to provide participants with the latest tools and techniques for successfully managing people.

Seminar Leadership

Date

Communicating Effectively

1st November 2005

Performance Motivation

15th November 2005

Working with ‘Difficult’ People

15th November 2005

Personal Power & Effectiveness

13th December 2005

Working Successfully as a Team

16th November 2005

18th October 2005

To receive a detailed agenda of the courses above call now on: 01565 724200 JPD Group Ltd. The Station House Plumley Knutsford WA16 9RX Tel: 01565 724200 Fax: 01565 723800 Email: train@jpd.co.uk

Stakeholder July2005

Value Profit Chain

September ICS Customer Service Forum 2 September 2005 - North East 7 September 2005 - London & Wales Meeting for all Council, Corporate, Associate, Business and Regional members of the Institute of Customer Service. For more information visit www.instituteofcustomerservice.com

National Direct Marketing Show 13-15 September 2005 NEC, Birmingham Provides the opportunity to access the latest innovations in Direct Marketing and network with industry peers. The event has a free seminar programme and features over 50 leading suppliers. For more information visit www.ndmshow.co.uk Annual Coaching at Work Conference 13-14 September 2005 London Find out about the latest developments in managing coaching, improving organisational performance and maximising employee potential. Hear practical case studies and learn from top coaching gurus. For more information visit www.cipd.co.uk Customer Satisfaction Measurement Seminar 27 September 2005 Birmingham This one day seminar takes delegates step-by-step through the process of using customer surveys to accurately measure customer satisfaction. Includes instruction on relevant research techniques, group exercises and opportunities to ask questions relating to your own organisation’s customer satisfaction measurement practices.

Demonstrates the latest products and services in the call centre industry. Features hundreds of call centre suppliers to liase with, seminars, call centre conference and lots of free advice. For more information visit www.callcentre-expo.co.uk Tel: 020 8977 5705

October SOCAP in Europe Annual Conference 2005 2-4 October 2005 Central London SOCAP’s Annual Conference 2005 features speakers from around the world sharing their expertise and some leading examples of best practice in consumer affairs. For more information visit www.socapineurope.org National Customer Service Week 4-10 October 2005 - ICS Take this opportunity to try something new to improve your customer service. Fantastic chance to make everyone aware that you’re a customer focused business. Customer Satisfaction Measurement Seminar 4 October 2005 - Bristol 12 October 2005 - London 19 October 2005 - Leeds This one day seminar takes delegates step-by-step through the process of using customer surveys to accurately measure customer satisfaction. Includes instruction on relevant research techniques, group exercises and opportunities to ask questions relating to your own organisation’s customer satisfaction measurement practices. Tel: 01484 467000 www.leadershipfactor.com

Tel: 01484 467000 www.leadershipfactor.com

Stakeholder July2005 40 STAKEHOLDERMarch2004

Facilitating Focus Groups 5 October 2005 - London Enables delegates to prepare for and run a professional focus group. Includes: inviting participants, designing a discussion guide, dealing with the unexpected on the day and analysing the results. www.leadershipfactor.com Tel: 01484 467000 Questionnaire Design 6 October 2005 - London Questionnaire design is perhaps the most crucial part of effective survey research, and yet it is often poorly executed producing inaccurate and inactionable data as a result. This one day seminar offers delegates guidelines and tips based on the hard won dayto-day experience of a research agency. www.leadershipfactor.com Tel: 01484 467000 People Mean Business: CIPD Annual Conference & Exhibition 2005 26-28 October 2005 Harrogate This is the must-attend event for all people-management professionals. It is the event to keep you informed on all that’s new in latest employment developments. For more information visit www.cipd.co.uk

November Improving Customer Satisfaction 17 November 2005 - Manchester This one day seminar is practical for those who want to make sure that they are getting the most from their customer satisfaction survey results. The seminar then examines in detail the strategies that work to improve your customer satisfaction and keep it in the spotlight between surveys. Tel: 01484 467000 www.leadershipfactor.co.uk

2005

Diary Dates

Tel: 01206 571716

Call Centre Expo 2005 28-29 September 2005 Birmingham

The Balanced Scorecard

Article 1: The Beginnings Origins of the Balanced Scorecard The following extract from Kaplan and Norton’s seminal book on the subject1 explain the authors’ involvement in the early development of the balanced scorecard: “The origins of balanced scorecard can be traced back to 1990 when the Nolan Norton Institute, the research arm of KPMG, sponsored a one-year multicompany study, “Measuring Performance in the Organization of the Future.” The study was motivated by a belief that existing performance measurement approaches, primarily relying on financial accounting measures, were becoming obsolete. The study participants believed that reliance on summary financial-performance measures were hindering organizations’ abilities to create future economic value. David Norton, CEO of Nolan Norton, served as the study leader and Robert Kaplan as an academic consultant. Representatives from a dozen companies, manufacturing and service, heavy industry and hightech, met bi-monthly throughout 1990 to develop a new performance-measurement model. “Early in the project, we examined recent case studies of innovative performance-

Stakeholder July2005

measurement systems. One, Analog Devices, described an approach for measuring rates of progress in continuous improvement activities. The company was using a newly created “Corporate Scorecard” that contained, in addition to several traditional financial measures, performance measures relating to customer delivery times, quality and cycle times of manufacturing processes, and effectiveness of new product developments. Art Schneiderman, then vice president of quality improvement and productivity at Analog Devices, came to one meeting to share his company’s experiences with the scorecard and the participants soon focused on this multidimensional scorecard as offering an ideal starting point for achieving their objectives. “The group discussions led to an expansion of the scorecard to what we labeled a “Balanced Scorecard,” organized around four distinct perspectives - financial, customer, internal,

and innovation and learning. The name reflected the balance provided between short and long-term objectives, between financial and nonfinancial measures, between lagging and leading indicators, and between external and internal performance perspectives. Several participants experimented with building prototype Balanced Scorecards at pilot sites in their companies. They reported back to the study group on the acceptance, the barriers, and the opportunities of the Balanced Scorecard. The conclusion of the study, in December 1990, documented the feasibility and the benefits from such a balanced measurement system.” As implied above, the first Balanced Scorecard was created in 1987 at Analog Devices, a medium sized semiconductor company2. Kaplan and Norton wrote their Harvard Business Review articles on Balanced Scorecard in 19923 and 19934 and their book in 19961. Subsequently it has become very popular with for-profit

The Balanced Scorecard

and not-for profit organisations and it has spawned awards, such as Malcolm Baldrige in America and EFQM/Business Excellence in Europe, a whole army of consultants and a Balanced Scorecard Institute, which is a useful reference site5.

Balanced Scorecard overview

they are inadequate for guiding and managing the implementation of a company’s strategy. The Balanced Scorecard brings together the financial measures of past performance (the rear view mirror) with the ‘drivers’ of future performance - lead indicators such as employee satisfaction, customer satisfaction and process quality.

The Balanced Scorecard was devised by Kaplan and Norton as “the instrumentation that managers need to navigate to success” by assisting an organisation to translate its strategy into a comprehensive set of measures, through which its performance can be managed.

In their original HBR article Kaplan and Norton recommended basing the Scorecard on four areas: financial performance customer knowledge internal business processes learning and growth

Focusing the whole organisation on the few key things needed to create breakthrough performance. Helping to integrate various corporate programs, such as quality, re-engineering, and customer service initiatives. Breaking down strategic measures to local levels so that unit managers, operators, and employees can see what’s required at their level to roll into excellent performance overall.

Management by Fact You can’t improve what you don’t measure. If the idea of Balanced Scorecard is to highlight key business drivers as the metrics that managers most need to watch, processes must be designed to collect information that enable the metrics to be monitored clearly and objectively. Decision makers can thus examine the outcomes of all the key processes and track the results to guide the implementation of strategy and provide feedback throughout the organisation on progress towards achieving its objectives. S In the next issue of Stakeholder, we will start to examine the application of the Balanced Scorecard in specific organisations. References 1. Kaplan and Norton: “The Balanced Scorecard: Measures that Drive Performance”, Harvard Business Review Jan-Feb 1992. 2. For a very comprehensive history of balanced scorecard at Analog Devices see www.schneiderman.com 3. Kaplan and Norton: “Putting the Balanced Scorecard to Work”, Harvard Business Review Sept-Oct 1993. 4. Kaplan and Norton: “The Balanced Scorecard”, Harvard Business School Press, 1996. 5. The Balanced Scorecard Institute: www.balancedscorecard.org

The Scorecard brings together financial, customer, internal process and people into one performance monitoring system. It enables managers to understand the linkages between these areas and helps them focus their efforts. Traditionally, most organisations monitored financial and business results measures. Whilst these are crucial, they only tell the story of past events. Alone,

Diagram 1 above They emphasised that as well as allowing the monitoring of present performance, they key benefit of the balanced scorecard is capturing information about how well the organisation is positioned to perform in the future. Kaplan and Norton also cited the following benefits of using the balanced scorecard:

Stakeholder July2005