Let’s assume that you are a member of the leadership team for your organisation. Circumstances are such that you decide that your organisation needs to focus on customers and generate “total customer satisfaction” on the assumption that satisfied customers buy more of your stuff at higher prices thus generating higher profits. How would you go about it? What approach would you take?
The Default Organisational Change Approach: “Analyse-Think-Change”
The default, dominant – almost exclusive, approach has been labelled as “analyse-think-change” by John Kotter. What kind of results does this generate? Let’s explore this through the experience of David K. Hurst as recounted in his book The New Ecology of Leadership:
For the pilot program we decided to measure “on time delivery” as a proxy for customer satisfaction; that is, did the customer get the steel on the day we promised it? ….
We didn’t know whether to laugh or cry when the first measurement showed that ….. 53% of the step was delivered on time. Shocked, we decided to feature on-time delivery as a significant part of a new bonus system, allowing branch managers and their people to earn up to 25% of their bonus for on-time delivery.
What kind of results showed up? Did treating human beings as purely economic beings yield a step change in one-time delivery?
To our delight the results started to improve immediately, climbing quickly to 75% across the system, and some branches even headed into the 80-90% range.
It works, it is as simple as that! Sit in the executive suite, decide to become customer oriented, find a lever that represents customer orientation, measure it, bonus people on improving that measure, and soon you find that your organisation is customer oriented. If that is what you are finding in your organisational change / customer-centricity efforts then take a break from celebrating and listen some more:
We had hardly finished congratulating ourselves … when one of the senior team had a disturbing experience. While walking through a branch, he overheard a salesman on the phone to a customer. “We can’t get it to you on Tuesday,” said the salesman. “How about Friday?”……. The executive saw the salesman go back to the on-time delivery screen and record the new promised date as Friday ….….
Was this salesman just an isolated ‘rotten apple’? I say that where there is a so called ‘rotten apple’ there is a structure that generates rotten apples. Think back to the last post where I shared Robert Fritz’s insight: structure determines behaviour. Let’s listen to David K. Hurst again:
Further investigations revealed that the improvement in on-time delivery that had earned bonus for all was largely an illusion created by our people, who gamed the quirks in the measurement system. The actual delivery processes in the organisation remained unchanged, and the customers were seeing no difference in our performance. Our analyse-think-change approach had rendered the organisation mindless by focusing exclusively on outcomes and ignoring processes….
“See-Feel-Change”: A More Effective Approach to Organisational Change and “Total Customer Satisfaction”?
So what did David and his colleagues do? How did they go about orchestrating “total customer satisfaction” through “on-time delivery”? Let’s listen once more:
We realised that we had to dig deeper to get into the “habit systems,” the processes our people were using, by repeatedly asking why. The top seven reason for the late deliveries were instructive:
1. Salespeople promised the steel early so that they could get the order.
2. The credit department could not approve the credit in time.
3. The processing department couldn’t make the schedule.
4. The quality of the product was not up to standard.
5. We were unable to locate the product in our inventory.
6. The trucks were unable to deliver on schedule.
7. A third party (usually a steel mill) let us down.
Take a look, a deep look, at these reasons. What do you see? I see issues in the product, in the manufacturing of the product, in the management of the inventory, in sales, in finance, in logistics….. In short, just about every function in the organisation is involved in the work that has to come together in order to generate “total customer satisfaction”.
David and colleagues tackled the challenge because they had to – the survival of their employer was at stake:
We formed teams to look at each of these reasons and to search for the systemic causes behind them, drilling down into the bowels of the system. Reason 1 was no surprise ….. the disconnection between sales incentive schemes and factory production systems is a major obstacle to effective performance.
Reason 2 (credit delay) did surprise us -surely credit approval was a mechanical, by the numbers job,. How could it be a major source of delay? ….. investigation revealed that the problem lay with the large number of smaller orders. Now small orders were part of our overall strategy, and for years we had encouraged the taking of smaller orders… Margins on small orders were high, so, as far as we were concerned, the more we had the better.
…. another team working in the warehouse on reason 3 (production delay) found that the primary cause of production delay was the time spent waiting for cranes. After another investigation a team of warehouse people found that the main reason was …. small orders…….. Management was stunned – our small order strategy had been an article of faith throughout the corporation. Yet here it was creating a fundamentally unprofitable operation for systemic reasons that we had never understood.
There is a profound insight and truth here. And it is one that is neglected. It is this: organisational policies and leadership-management practices are the real source of most organisational dysfunction including a lack of attunement-responsiveness to customer needs. I say this as a statement of fact, not as blame. What does David K. Hurst say on the matter:
Now, the reader may feel that management must have been asleep at the switch to miss something as obvious as this. However, the logic of complex systems is neither obvious nor intuitive, and it becomes clear to us only in hindsight. Even then it was the people who worked in operations every day who had to point to us that the real cost drivers on the warehouse floor are finding and handling the product. It’s a common problem in large organisations. The people on the front lines have all the answers, but senior managers seldom ask them the questions, at least in a form … that they can understand.
How does David K.Hurst end his story? What does he conclude?
We had experienced the benefits of drilling deep down into operations, into the processes that produced the outcomes that we were trying to change. John Kotter calls this kind of change “see-feel-change”. That phrase neatly captures a sensual aspect of change – you see a truth and it changes how you feel – it is timely, specific, visceral feedback. Also, it’s compelling for other operators to see it because they can study the action required at the fine grained levels at which they are going to have to implant the changes in their own operations……. First, you go deep on a narrow front, and only after that do you go horizontally, rolling out a program in depth from unit to unit….. This perspective also suggest that huge benefit of pilot programs that develop working prototypes of how a proposed change will actually function….
What is my take? David is sharing and advocating the road less traveled. It is less travelled because it is not quick. It is not cheap. And it is not painless. Yet, it occurs to me that this is the road that has to be travelled to generate the insight-motivation-action that is needed to effect deep change in the behaviour of the organisation. And shift it towards generating-delivering “total customer satisfaction”.