Category Archives: Management
Why is it that I prefer not to business with a customer-centric business? Allow me to share my answer by referring to the UK grocery market. Which supermarket chain was applauded, by many, for its customer-centred way of doing business? Tesco. What was held responsible for fuelling this customer-centred way of doing business? The Tesco Club Card. Through this loyalty card, Tesco captured and made effective use of customer shopping data to grow revenues and optimise profits. In the process Tesco came from nowhere to became the world’s second largest retailer.
Where is Tesco today? Here is what The Economist said back in July 2014:
… on July 21st Tesco abruptly announced that Mr Clarke would be leaving his job, apparently prompted by a warning that profits in the first half of 2014 would come in “below expectations”. In June Tesco revealed a drop in same-store sales that Mr Clarke admitted was the retailer’s worst performance in 40 years….
Recession taught middle-class shoppers that discounters like Aldi and Lidl were cheap but not nasty; they spent some of the money they saved at higher-end grocers, such as Waitrose and Marks & Spencer……
Tesco is faring badly. Its sales dropped by nearly 2% in the year to June while those of its closest rivals, Asda (which is owned by Walmart) and Sainsbury’s, rose by 3% or better. Despite his exertions, Mr Clarke failed to persuade consumers that Tesco offers better value than the discounters or quality to match the upmarket merchants.
Is this as bad as it gets? No. Here is what the Guardian newspaper stated in on the 22nd of September this year:
Tesco has suspended the head of its UK business and called in independent accountants and lawyers to investigate after discovering that its guidance to the City overstated expected first-half profits by about £250m….
Tesco shares fell almost 8% on Monday morning to an 11-year low of 212p, making them the biggest faller in the FTSE 100 index and wiping £1.5bn off the retailer’s market value. More than £6bn has been wiped off share value since 21 July, when the previous chief executive, Phil Clark, was ousted.
Why is it that Tesco is in such deep trouble? I say that Tesco has arrived at where it is at due to its customer-centric way of doing business. What do I mean by this? I mean that the Tops got fixated into harnessing the data yielded by the Club Card to get customers to part with more of their money in Tesco stores.
Was this done by offering customers superior products as in higher quality products? No. The products were middle of the road yet ways were found of selling these at higher prices through clever marketing and merchandising.
Was this done by providing superior customer service in the stores? No. Tesco cut back on the number of people working in the stores so it was not unusual for the customer to find that there was nobody around to help when help was needed or find long queues at the checkout tills.
Was this done through a superior shopping experience? No. Management chose not to invest in the stores or the shopping experience in the stores. As a result the stores become less and less attractive over time.
I prefer not to do business with a customer-centric business because the management of such a business is more likely to be focussed on extracting value from their customer base through a variety of clever manoeuvres than earning its keep through superior products (Apple, Waitrose), superior service (John Lewis, Zappos), low prices (Lidl, Aldi), or a combination of service and low price (Amazon).
If you are a customer and your supplier is touting customer-obsession then you might want to think about whether that is a good thing. Is the obsession with providing you with a superior product, superior value, and/or experience? Or is it an obsession with with finding clever ways of getting you to buy more, pay more for what you buy, and get less in return? You might want to keep in mind that which many remind me of: business is not altruistic.
On Tops And Their Struggle With Customer Experience and Employee Engagement
Have you noticed that the folks who occupy the seats of power (‘Tops’) in organisational life struggle with ‘Customer Experience’ and ‘Employee Engagement’? By that I am not pointing at the talk. Nor am I pointing at conceptual-intellectual understanding. I am pointing at walking the path: ‘showing up and travelling in the world’ in a way that creates a context which calls forth the actions that cultivate meaningful relationships with customers and employees.
Why do Tops, in particular, struggle to embrace-embody that which it takes for an organisation to create-design-deliver the kind of experiences that call forth meaningful relationships with their customers, and their employees? In asking this question I wish to rule out the domains of psychology or morality. What interests me is structural factors: the underlying ‘structures’ that shape human behaviour pretty much irrespective of morality and personality.
What is your answer? Hold that answer. Let’s first turn our attention to considerateness – the quality/state of being considerate.
What Is It To Be Considerate?
Language always leaves clues. So what does the English language suggest? Let’s take a look at the definition:
careful not to inconvenience or harm others.
“she was unfailingly kind and considerate”
If you haven’t done so then I urge to look up each of the synonyms to get a rounded feel for the phenomena under discussion. Notice, what we are talking about here is a genuine concern for the wellbeing of others – our fellow human beings. A working alongside-with others as opposed to over-against others. Cooperation and accommodation and not domination or indifference. What is the basis of considerateness? Is it not fellow-feeling? That you are human just like me and are worth of the same kind of consideration that I ask for, demand, for myself?
Considerateness: The Glue Of Long Term Relationships?
It occurs to me that the way of showing up and travelling in the world that we have named considerate is the access to cultivating relationships. And, importantly, keeping these relationships in existence over the long-term. It also occurs to me that this way of being-in-the-world is central to human centred design. And that includes experience design: Customer Experience, and Employee Experience.
Now back to the Tops. If you are a Top then what kind of situation do you automatically find yourself in? Let’s ask this question differently: What is the privilege that goes with being at the top, a Top? Is it not that as a Top you fully expect others to be considerate to you and your needs? Others that surround you and serve you show up and travel in a manner that is considerate of your status-needs-wishes-preferences. Is it not true that you are accustomed to be treated with considerateness by just about everybody that you encounter?
As a Top how do you treat others? Is it not that the default way of showing up and travelling in the world, as a Top, is that of inconsiderateness towards others:
thoughtlessly causing hurt or inconvenience to others.
“it’s inconsiderate of her to go away without telling us”“it’s inconsiderate of her to go away without telling us”Synonyms: thoughtless, unthinking, insensitive, selfish, self-centred, self-seeking, unsympathetic, uncaring, unthoughtful, unconcerned, heedless, unmindful,
What I’m pointing out here is structural-situational factor. One that calls forth a certain mode of being in the world. In no way am I making a moral-value judgement. Nor am I making reference to psychology or personality types. What happens when you are a Top for long enough? You lose touch with the anyone, the everyman. So your ability to listen to and respond with considerateness to the needs of others withers – even if it was there to start with. Yet this very considerateness is essential to being attuned to the needs-wishes-preferences of customers and employees. And responded sensitively and on a timely basis so as to generate gratitude, engagement, and loyalty.
Special Treatment: Words Of Wisdom From James A. Autry:
I wish to end this conversation by sharing words of wisdom with you
I think I started maturing as a manager when I discovered that one of the oldest principles of organisational management was hogwash. That principle is stated in many ways, but the military guys used to put it best: “Nobody gets special treatment around here.” …. In the military, they might also say, “If we do this for you, Lieutenant Autry, we’ll have to do it for everyone.” I used to want to say, “No, sir, you could do it just for me.”
What I realise now is that the professed aversion to special treatment was all delusion anyway; people in every organisation ….. get special treatment all the time…… much of it has tilted towards “in” groups…. that kind of “special treatment” is favouritism and discrimination.
But there’s another kind of special treatment …… a manager’s willingness to bend the rules to accommodate every person’s specialness…. Some people do good work but are slow; some do fast work but are sloppy. Some are morning people; some do better in the afternoon. Some have children that cause schedule problems; some have elderly parents. Some need a lot of attention and affirmation; some want to be left alone to do their work. Some respond more to money, less to praise; some thrive on praise…… some are very bright; some are slow….. Some are men; some are women.
Who in the world could believe that all those special needs could be accommodated without special treatment? But it takes a lot of management courage to provide that special treatment…..
I’ve made exceptions to corporate rules to help get an employee’s family through the nightmare of overwhelming financial and emotional distress. I’ve made similar exceptions for employees needing assistance to recover from substance abuse…..
The road of special treatment is not without peril, and it makes day-to-day management much trickier and more time consuming. You must consider the impact on the group, the legal risks, and the questions of equity and justice, in addition to the record and commitment of the person involved. Then if at all possible, decide in favour of special treatment…….
When someone complains, just say, “Everyone gets special treatment around here.”
- James Autry, Love and Profit, The Art of Caring Leadership
I leave you to ponder considerateness and special treatment. It occurs to me that they are intertwined: being considerate involves providing special treatment when special treatment is called for – by the customer, by the employee. What gets in the way of being considerate and providing special treatment? It makes the life of those in management harder. And ultimately, once you get beyond the rhetoric, the organisation is designed so as to be considerate to the needs of the Tops – not customers, not employees.
This conversation follows on from where the previous conversation left off. Specifically, I intend to share with you the theory behind the shaping the work context approach to changes organisational behaviour. And the limitations of using the traditional tools: hard and soft. Let’s begin.
It occurs to me that the fundamental assumption is that human behaviour is always functional. Which is to say that there is correlation between the human behaviour that occurs in a work context and how that work context shows up for the human beings who find themselves there in that context. Put differently, there is an ongoing dance between context and behaviour: each is influenced by the other on an ongoing basis. From this flows the following ‘advice’ from the authors of Six Simple Rules:
1. Human Beings As Purposeful Actors Making Use Of Resources And Dealing With Constraints
Human behaviour can be understood in terms of three elements. First, the goal/s, the towards-which the human being ‘moves’. Second, the resources-tools that are at hand to help ‘move’ towards the goal. Third, that which shows up as an obstacles-hindrance. Collectively, these three elements in their unity (as one) constitute the work context as lived-experienced. Here is what the authors say:
Understanding what people do and why they do what they do is so utterly fundamental that it is our simple rule. Before you, as a manager, do anything to solve a performance problem, you can save yourself a lot of time and money by first applying this rule.
2. Understand How The Organisational Elements Affect-Shape The Work Context
Do organisational structures, processes, procedures, and systems matter? Do they affect-shape human behaviour? Yes, they do affect behaviour and performance. But not in the simplistic way that most of us assume. According to the authors (bolding is my work):
Their impact depends on how they combine with each other to shape the goals, resources and constraints to which people adjust their behaviours.
If you do any cooking you will get that the impact that any one ingredient has depends on the other ingredients that constitute the recipe. If you manage stocks you will understand that it is not the risk of the individual stock that primarily matters – it is the impact of that stock on the risk profile of your portfolio. Hopefully you get the idea.
3. Be Wary of Taking The Hard (Scientific Management) And Soft (Human Relations) Approaches To Improving Organisational Performance
Let’s consider each of these approaches to understand why it is that the authors advise caution in automatically and mindlessly adopting one or both of these approaches as the silver bullet for dealing with organisational challenges.
The Hard Approach And Its Limitations
Why is there is much emphasis in the hard approach on clarity – clearly specifying the rules of the game, the roles and responsibilities of the actors, the boundaries, the rewards and punishments….? Is it because the hard approach takes it for granted that performance is a direct consequence of what people are instructed and rewarded-punished for doing? Let’s listen to the authors:
Structure defines the role, processes instruct how to perform it, and incentives motivate the right per on in the right role to do it. From this perspective, if there is a performance problem, then it must be because some key organisational element is missing or not detailed enough. So companies jump straight from identifying a performance problem to deploying new structures, processes or systems to resolve it. This error dumps a first layer of complicatedness into the organisation.
Let’s make this real by revisiting InterLodge. What did management do at the beginning? Did it not resort to restructuring and reengineering without actually looking into the work context that shaped behaviour? And when management did look at the front line what did it conclude?
Receptionists were not selling rooms to latecomers. They were not engaging the customers in a way that made customers satisfied. They were not charging the right room rate.
If you focus on what your people are not doing does this help you understand what it is that they are doing and what leads them to do what they do? Clearly not. So the authors advise the following (bolding is my work):
Performance is what it is, because people do what they do, not because of what they don’t do. People do what they do precisely because of the organisational elements already in place (not because of the ones that are missing)……
The authors go on to provide what I consider the most valuable and most neglected insight into human behaviour in organisational contexts (bolding is my work):
Organisational elements do not combine with each other in the abstract, based on their supposed intrinsic pros and cons.…. It is only by considering the work context, and their effect in this context, the organisational elements can be appropriately analysed and designed. The effect …….. depends on how people deal with these elements as resources or constraints.
What did the receptionists do with the “guest engagement” skills that they honed during the mandated training course? They used these skills as a resource. But a resource for what? A resource for their goal: avoiding stressful encounters with angry customers:
… they used their skills not to meet the target price point but to proactively offer rebates and refunds. What’s more, their new skills combined with their clarified roles in an unexpected way that also provided new resources to the receptionists……: some receptionists used their newfound interaction skills to explain clearly to guests that their responsibilities stopped at the front desk and did not include back-office activities…
Now you know why I am not a fan of worshipping at the altar of lean, six sigma, process and reengineering. And in the world of consulting, the anal retentive fixation on methodology. I learned the hard way: spending years doing it and seeing the meagre and often counterproductive results.
The Soft Approach And Its Limitations
As this post is already long I recommend that you get hold of a copy of the Six Rules for a fuller-deeper picture. For my part I leave you with the following:
…. the soft approach views performance as a by-product of good interpersonal relationships. But this view confuses people getting along with genuinely productive cooperation. Real cooperation is not fun and games….. it always involved adjustment costs.
Indeed, the better the feelings among individuals in a group, the more people are likely to avoid straining the relationship by bearing adjustments costs themselves or by imposing them on others …. So they will avoid cooperation and make third parties bear the consequences, or they will compensate with extra resources to remove interdependencies… the extra resources teak the form of …. excess inventory stocks, time delays, interfaces and committees, and customer requirements unmet….
Here I draw your attention to the never ending challenge that almost every large organisation has in getting just the folks in marketing (advertising, website, email, direct…) to work together – cooperate. Or the bigger challenge of getting the folks in marketing, sales and service to cooperate to generate a joined up and attractive customer experience.
If you wish to learn more but do not wish to read the book then I recommend the following TED Talk by one of the authors of the Six Simple Rules:
Recap: Where We Are At
If you took part in the previous conversation you will have a good grasp of the work context that led to the receptionists running to-fro from the front desks to the problem rooms, seeking to keep rooms in reserve so that they were in a position to placate angry customers by moving them to a different-better room, and using their newly acquired guest engagement skills to negotiate with customers – offering them refunds, room rate reductions and/or vouchers.
What Is The Core Challenge Here?
So I ask you what needs to happen for InterLodge to generate its desired outcomes: higher occupancy rates, higher price points per room, higher levels of customer satisfaction, and ultimately a higher share price? Let’s make this question simpler, what is the challenge here? Have a go, formulate an answer to that question.
Isn’t the challenge to shift the work context so that it calls forth, naturally and by default, the kind of behaviour that will result in guest rooms being fit for guests, leading to happy customers, leading to less rooms being kept aside by receptionists and no need for the receptionists to offer discounts-refunds on the room rates?
Now look further-deeper, go into the heart of the matter. Venture into territory that few venture into: think! Keep peeling the onion.
What is the core challenge when it comes to doing that which needs to be done in order to craft-deliver the kind of customer experience (end to end) that causes happy customers? Isn’t it cooperation? Cooperation between all the organisational actors who directly-indirectly influence the customer experience. Is it not your experience that the bigger the organisation, the higher the importance of cooperation, and the lower the likelihood of finding genuine cooperation?
What Steps Did InterLodge Take To Shift-Shape The Work Context?
According to the authors of the Six Simple Rules, InterLodge took the following three steps:
- Did away with the organisational elements that were useless and/or counterproductive. For example, they did away with the financial incentives which were supposed to motivate the receptionists to improve room occupancy. And they stopped the soft skills “guest engagement” training program.
Made managerial promotion dependent on having worked in multiple functions. Why? To encourage and ensure that managers had a lived-experiential understanding of the work of each function and how it related to the work of other functions.
Changed the work context so that cooperation was called forth between Housekeeping, Maintenance and the Front Desk (receptionists).
Let’s dive into point 3 shifting the work context to cause cooperation as the default behaviour. Imagine that is your challenge. What specific action/s would you take to shift the work context and call forth cooperation between Housekeeping, Maintenance, and the Front Desk (receptionists)?
What Actions Did InterLodge Take To Generate Cooperation Between The Multiple Actors?
Before I share the answer with you, I invite you to listen to the authors of Six Simple Rules:
Their [receptionists] work put them in the closest contact with customers, and they were the most directly penalised when customers were unhappy. They had an interest in cooperation but had not way to influence the behaviour of other groups – specifically, the housekeeping and maintenance staff.
So the clue is there: find a way to directly expose the housekeepers and maintenance staff to the wrath of unhappy customer/s. Did management pursue this option? No. Why? Because the did not find a practical way to expose these folks to the wrath of the customer. The customer was most likely to be angry in the evening when s/her checked into or returned to her room. And this is exactly when the housekeepers and maintenance were not at work.
What did InterLodge do? Management give the receptionists a say in the performance evaluation of the folks in housekeeping and maintenance. Did it work? Yes. Why? Because the Receptionists had a say and their say mattered. This is how the authors put it (bolding is my work):
In the past, it had always been enough for these employees [housekeeping, maintenance] to fulfill the criteria and meet the targets of their individual function. Now, people in the the two back office functions were also being evaluated on how effectively they cooperated with each other and with the receptionists, and it was the opinion of the receptionists themselves that carried special weight…. After all, their careers and the possibility of promotion were on the line.
Was it as simple as that. Not quite, this change had to work in conjunction with the other big change:
When this change in how personnel in back-office functions were evaluated was combined with the new cross-functional rotation of managers (which gave managers more of an appreciation for the interdependencies among the various functions), the nature of work changed rapidly at the hotel.
How exactly did the nature of the work change? By this expression the authors are pointing out, in particular, how the way the folks in housekeeping and maintenance ‘showed up and travelled’. Let’s listen once more to the authors:
The housekeepers checked the equipment in the rooms when they cleaned and let the maintenance groups know immediately when something needed attention. What’s more, the two back office functions were a lot more responsive when someone from reception would call asking for help to resolve a customer problem.
What Results Showed Up At InterLodge?
According to the authors:
… InterLodge hotel business unit’s gross margin increased by 20 percent within eighteen months. The rapid improvement in margins allowed the company to … nearly triple it [stock price] in just two years.
If you want to understand the logic behind this then I recommend buying-reading the Six Simple Rules.
What Is The Core Insight-Lesson For Those Working On Customer Experience And Customer-Centricity?
The core insight-lesson is spelt out rather pithily and it is one with which I am in full agreement. The lesson is so obvious and yet neglected. Why? Because it involves taking the “road less travelled”. What is this central insight-lesson:
To achieve customer-centricity make the organisation listen to those who listen to customers. Changing interaction patterns among functions is much more powerful than creating a dedicated customer-centricity function.
There you have it. The challenge of customer-centricity is that of disrupting, shifting, and shaping interaction patters so that transformed work context calls forth the requisite degree of co-operation from-across-amongst all organisational actors which directly and/or indirectly affect the customer experience. And the authors have shared how this was done at InterLodge. And they give other examples in their book, which is well worth reading.
Enough for today. In the next and last part of this conversation I will lay out for you (and comment upon) the sociological theory behind tools for shaping the work context. And why it is that the standard-commonplace approaches (hard, soft, hard+soft) to organisational change and customer-centricity do not work. Like they did not work for InterLodge.
Thanks for listening, I hope you got value out of the conversation.
Imagine that you are the CEO of InterLodge. You face a big problem: your share price has been falling for some time. You need to do something to deal with the issues of high costs and low profitability. You find that the occupancy rate and the average price point per room are too low. And the surveys suggest that Interlodge’s customer satisfaction levels are well below where they should be.
Over to you. What are you going to do about this? What approach will you take? What levers will you use to address the issues?
What Did The Top Management Team Do?
The management team did what most management teams do? It restructured and reengineered. Specifically:
- It created a shared service initiative to serve groups of hotels by region. Why? To cut costs and drive up quality.
It redefined roles & responsibilities of hotel employees. Why? To improve productivity and focus resources on driving up quality.
It rolled out a new computerised yield management system. Why? To improve the occupancy rate.
Did the desired outcomes show up? No. The authors of Six Simple Rules state:
A year later, none of these changes had produced any of the improvements the management team sought …… The share price continued to slide.
What Did Top Management Do Next?
Top management took a bold step. InterLodge’s management committed, via a public announcement, to doubling its share price within three years. Why did management do this? Clearly to support-boost the share price and at the same time to energize the hotel employees. Did it work? The authors say that it had a powerful effect on InterLodge employees. The opposite of what management intended: terrified rather than energised. Why?
Because these hotel managers were expected to increase occupancy rates, raise the average price point, and improve customer satisfaction whilst working within the parameters set by the centralised yield management system, the shared services offer, the organisational design and staffing levels set by the centre.
So the hotel managers acted on the one measure that they felt they could make an impact on: customer satisfaction levels. They acted on the hotel receptionists. Why? Because they came to the conclusion that: the hotel receptionists were young and didn’t care about doing a good job; they lacked the right customer handling skills; and they were not selling rooms to travellers who arrived late in the day even when rooms were available.
So what did the hotel management do? Three things. One, they clarified roles, processes and scorecards. Two, they put the receptionists through a soft skills training course to improve their communication and guest engagement. Third, they set up an incentive plan to motivate the receptionists to sell more rooms and increase the occupancy rate.
Did it work? Here’s what the authors of Six Simple Rules say:
Six months later, however, the problems remained. In fact things had gotten worse. The occupancy rate had dropped further. Average price point was down. Customer surveys showed lower levels of satisfaction. Receptionist turnover had risen.
So what did management do next? It looks like they hired a bunch of smart consultants. What did these smart consultants do.
First, Seek To Understand The Work Context At The Concrete (Lived-Experienced) Level
The consultants sought to understand the work context of the receptionists at InterLodge. Please note that the work context is not the objective situation. By work context I am pointing at the work-context as experienced-lived. How does one get to terms with the work context? In this case, the consultant spend a month observing and talking with receptionists at various hotels. What did the consultants uncover?
- The most difficult, most unpleasant, part of the job for the receptionists was dealing with angry customers;
The receptionists had to deal with angry customers on their own – by the time customer’s rang down to complain the maintenance folks had gone home; and
The maids cleaning the rooms were best placed to spot problems and alert maintenance. Yet, they did not do so due to the silo based performance metrics to which they were held accountable – productivity in cleaning rooms.
What is the insight that eventually hit the consultants? Here it is in their words:
the goal of the receptionists was not to earn a financial incentive by improving the occupancy rate. No, the goal of the receptionists was to avoid the unpleasantness of dealing with unhappy customers.
How did the receptionists deal with the situation that they found themselves in?
- The younger receptionist sought to fix the problem themselves. This meant they found themselves running back and forth between their front desk and the problem rooms. This behaviour didn’t work for the customers who arrived at the front desk and found nobody there. And so had to wait.
They kept rooms in reserve so that they could placate customers. Why? Because even if the new room wasn’t so much better, angry customers appreciated the receptionist who went out of his/her way to help.
They adjusted the room rate downwards. The customer harnessed their new found guest engagement skills to negotiate a refund, rebate, or voucher to deal with angry customers.
What Can We Learn From This Understanding of The Work Context?
The authors have something powerful to say and I urge you to listen, really listen:
… the young receptionists were forced to bear the adjustment cost caused by the behaviour of the back-office functions [Housekeeping, Maintenance]. They had little choice in the matter, somehow, they had to deal with the angry customers. The adjustment costs they suffered were simultaneously financial (they didn’t achieve their bonus), emotional (they were blamed by both managers and customers), and professional (at a certain point they would become so burned out that they would quit….).
But customers were also bearing adjustment costs in the form of poor hotel experience. And of course, so were the shareholders in the form of declining returns….
Receptionists could never fully compensate for what the back-office functions [Housekeeping, Maintenance] could have achieved had they been cooperating with each other…
Once the management team took time to understand the context of the work in its hotels, it came to realise that the problem was not that the receptionists were badly trained, or had some psychological issue or attitude problem, or needed more incentives. Rather, their behaviours were rational solutions to the problems they faced.
What actions did the InterLodge management take to shift-shape-transform the work context? And what kind of results showed up? I will share these with you in the next post.