X-Ray your Organization: How to Conduct a Customer Centric Health Check

In today's competitive marketplaces businesses that survive and grow are those who are truly customer-focused. How healthy is your organisation? If you were able to take an X-ray or a scan to your organisation, what would you find? Weak or broken bones? Cancerous tumors? Build-up of toxic deposits? Lack of nourishment and intake deficiencies? Unhealthy fat?

Research by Gallup shows that disengaged staff deliver poorer levels of customer satisfaction than those that are truly engaged. Wouldn't it be good to have the ability to bore into your organisation, strip away the superficial and spot problems and opportunities at an early stage? In this article, we will examine how to carry out an organisational health check to tackle issues long before they become serious or fatal. In particular, we will look at:

• The nature of organisational health.
• Why maintaining a customer fit organisation is difficult.
• How to spot symptoms early.
• Frameworks for diagnosing organisational health and fitness.

We just didn't realize how much trouble we were in- is a common managerial complaint for companies in difficulty. Railtrack, Marconi, and Parmalat are examples which encountered near-fatal health problems. We could list many more, where after the event outsiders sat in judgement on apparent management blindness. And we are not just talking about financial health. At Railtrack, for example, it took a major accident to cause a fundamental review; at the time of the court findings on the Hatfield disaster the successor company Network Rail's chairman said: 'In the three years that (Network Rail) has been in-charge of the nation's railway infrastructure, it has made sweeping changes to its priorities, to the company structure, and to its people and processes'.

This points fundamentally to a necessity to equip managers to understand how to identify what is wrong and right with an organisation and how best to take the initiative in putting in place the required remedial action to help the organisation be more customer-focused.

We will examine strategic health management and implementation skills, how to translate a company's health check into tangible aspects of responsibility and accountability to drive towards a truly customer-centric organisation.

1 Network Rail Press Notice September 2005

Best practice is to adopt a context sensitive and strategic approach to health management, using carefully chosen tools of analysis in order to discover how customer focused your business is.

This strategic approach to monitoring health inevitably requires attention to organisational culture, individuals and groups, attitudes and behaviours as well as the development of measures and review processes to make improvement stick.

Why Diagnosis May Not work

Giving a sound diagnosis and taking the right medicine is far from straightforward: there are many complex factors affecting an organisation, how it will progress and what will be the outcome. Perhaps the greatest difficulty centres on conducting an honest and insightful analysis and then getting buy-in to doing something about it.

The problem is that when managers are part of an organisation, they can fail to see the 'glue that binds it'. This is the culture they are in and which they contribute to creating. Many problems are simply not seen and acted upon, and, if they are, they fizzle out. Disappointing results from health improvement initiatives can often be tracked back to unaware and unskilled management. This has a number of causes:

Taken-for-granted wisdom

British Airways and other established carriers learnt to their cost that budget airlines could take away their business by working to new rules. Direct Line started a revolution in the insurance industry on a similar basis. The message: take absolutely nothing for granted.

The elephant in the room

Familiarity can cause other problems. Very apparent issues can be overlooked because they have been around for so long.

Lack of honesty

A culture of lack of honesty or of punishing failure can lead to cover-ups

Bullying authority

Organizations which encourage bullying or intimidation may find new suggestions stifled or problems suppressed.

Fear

A climate of fear or insecurity will lead to a drawing in of individuals anxious to protect themselves above all else.

Tunnel vision

If you don't look, you won't find. Looking only at the financials will, in the end cause problems as they are too restrictive. A balanced set of measures, such as the Balanced Scorecard, help to make key indicators visible.

Leave it to Experts

It is common to leave external consultants to carry out this type of review, in the same way that you would go to a doctor. But self-healing, using facilitators as necessary, is much more effective since you can use the diagnostic skills on a regular basis, with far more insider knowledge. To undertake an internal audit of your organization's health, you must have access to relevant inputs of information.

Managing your own organizational health for the good of the customer

Get the information

We suggest the following:

• Find out employees 'concerns' periodic employee surveys are a useful measure of this
• Speak to targeted customers using a structured format
• Review or undertake customer research
• Hold stakeholder focus groups
• Find out what you can learn from your competitors
• Mystery shop your own and compare it with competitor organizations
• Examine what all your measures tell you: regularly consider the implications of what customer, employee, process and improvement measures are telling you

We worked with one organisation in the automotive industry to undertake a customer health check. By holding a series of employee, customer and dealer focus groups, it soon became clear that there were some parts of the business that were weak or broken. Managers did not appreciate the extent to which these problems were hindering the successful retention of customers to the brand.

There are a number of tools you can use to surface issues and scan your organization. We have found that one of these, the Seven S Framework, developed by consultants Mckinsey, is a wide-ranging and valuable tool. We have also suggested two other useful tools.

Toolkit One: Seven S Framework

The Seven Ss is a valuable holistic health diagnostic. It looks at seven critical overlapping areas of an organization:

1 Structure
2 Strategy
3 Shared values
4 Style
5 Staff
6 Skills
7 Systems

1. Structure

Organizational structure gets tampered with at frequent intervals, often with little benefit to the customer. In many cases it is like moving the water round whilst the iceberg sits underneath, undisturbed and dangerous. There are many permutations of structure that an organization can adopt:

• Centralised
• Decentralised
• Hierarchical
• Flat
• Team based
• Virtual

Each has its pros and cons. For example many layers of hierarchy can block a leader's access to customers and vice versa.  Middle managers may 'filter' reality and present leaders with the picture of customer satisfaction which they wish them to see.  On the other hand, visible, active customer champions can help an organization by being its eyes and ears.

2. Strategy

The strategy of an organization shapes its structure and its long term well-being.  We emphasize the leader's role in not just devising the strategy, but in communicating it to everyone in meaningful terms, then monitoring and measuring its outcome.  What senior managers do is critical and what they really believe about customers shows in their behaviour.

3. Shared values

Shared values rarely come under scrutiny, but they should because time may have eroded their usefulness in serving the customer. Ask yourself if the real emphasis has become making money at all costs' Staff relationships- Customers'

Many businesses espouse organisational values but do people really live them? First Direct is a good example of an organisation that recruits its employees against a clear set of organisational values.

It is important to clarify if the emphasis needs to shift. Regular information channels may offer this information. Examples of organizations measuring expectations, values and practices include:

• FedEx has developed nine Service Quality Indicators, all tied to customer expectations.  This promotes an all-round health.

• Barclays Bank bases its rewards to managers on comprehensive feedback from colleagues, staff and customers

4. Style

We believe that a customer focused leadership style is one which is very active in satisfying and supporting employees and customers. Sometimes this is called a Servant-Leader, the leader very clear that the needs of others come first and directly, not through second-hand, filtered reports. Herb Kelleher at Southwest Airlines, Carl Sewell at Sewell Village Cadillac are examples of leaders with a genuine customer obsession which has enlivened and enriched their employees, their customers and the businesses.

One acid test of how removed your senior people may be from customers is who replies when a customer writes to the CEO? Remoteness frequently leads managers to rarely see the customer face-to-face. This can mean that management decisions are far from customer-friendly, such as rules and regulations that work well for the organization but not the customer.

BUPA is an organization which knows that the success of its increased customer-focused efforts rests on careful attention to its employees. It has successfully developed its performance management systems to link the attainment of customer satisfaction, individual and team performance.

5. Staff

The quality of an organization rests on its people. A qualitative and quantitative profile can be revealing. What is the age and experience profile? What are their expectations? Do they vary from group to group? How well are these expectations being met? How proud and motivated are they by your brand and all that it stands for?

6. Skills

Customer orientated organizations such as the department store Nordstrom in the US emphasize the attitude and interpersonal skills needed to interact effectively with customers.  It is generally now accepted that a key criteria of good managers is their ability to relate to others. Yet too many managers are promoted on the basis of their technical rather than interpersonal qualities. To what extent is this true within your organisation?

7. Systems

The systems which organizations use to interact with their customers need to be designed with the customer in mind.  An example of part of one internal audit looked at the HR systems for customer orientation, reviewing:

• Recruitment of new staff
• Measurement of performance
• Planning career development
• Reward of customer-orientated behaviour

Burrell of Enterprise Rentacar, the largest car rental company in the world, said:

"Customer satisfaction won't be taken seriously in your business until you tie it into your promotion and reward system. We struggled to put our satisfaction index - known as the ESQI scores - at the heart of our business until one year when a high-performing executive, whose division was outstanding in revenue, profits and all other scores, but whose ESQI scores were relatively poor, was passed over for promotion. We promote from within, so that failure to promote caused shockwaves around the organisation. It's only when people's career and their compensation depends on it that you will put customer satisfaction scores as the cornerstone of your business model.2

Toolkit Two: Cultural Audit

Culture and change often appear together, yet there is frequently insufficient insight into how to change an organization's culture to become more customer-friendly, partly because it is so elusive. Management psychologist Edgar Schein described culture as a phenomenon that surrounds us all. In order to understand an organization the wise leader needs to have a means to see clearly how the customer fits into:

• Groups norms, standards and values
• Rules of the Game, formal and informal rules which apply to parts or all of the organization

One way to understand culture is to use an analytical map.  Gary   Neilson and Bruce Pastrnack3 call their map, DNA, to explain the personality of different organizations.

Like DNA in a body, organizational DNA is a series of interlocking aspects of the organization which make up the body and soul of that organization.

They see this organizational DNA made up of decision making, information flows, motivators and rewards, and structure. The analysis of DNA is best considered individually and then discussed with groups of managers.  Which profile does your company best fit? The authors distinguish unhealthy profiles, which their surveys suggest are in the majority, and healthy profiles. These serve the customer well.

2 European Conference on Customer Management 2006
3 Results: Keep What's Good, Fix What's Wrong, and Unlock Great Performance, Capstone 2006

Unhealthy profiles

• The Passive-Aggressive Organisation seems obedient, but aggression and difference of opinion is buried and works against getting things done for the customer.
• The Over-managed Organisation has too many layers for today?s needs, and its preoccupations become internal, not external.
• The Outgrown Organisation represents 'tight clothes' in a growing, changing body, where central controls and outdated ways of operating do not match today's needs and consequently customers get left behind.
• The Fits and Starts Organisation dissipates its considerable talent and energy as it pulls in lots of directions, getting results haphazardly by throwing disproportionate and disruptive effort into getting things done.

Healthy Profiles

• The Just-in-Time Organisation is 'can-do' and agile, but rather inconsistent in performance. Keeping a constant eye on its goals it is often responsive to customer need. However, it runs the risk of firing off in wrong directions and burning people out, but when it does succeed, it does so well.
• The Military Precision Organisation is a master of processes, measurement and control and takes pride in heavy-handedly managing the details of execution and delivery. This works very well until new or different needs emerge and the response then seems clumsy or inappropriate.
• The Resilient Organisation maintains flexibility and restless energy as it keeps its objectives in view, riding through any problems, and responding to customers' changing needs with confidence and agility.

How do you change an unhealthy to a healthy profile? The first step is a precise and honest discussion. The second is a detailed and step-by-step plan to systematically go through the components of the organisation and start to change all conflicting parts of it which point away from the customer. For example, are you rewarding cost control and profitability and ignoring customer satisfaction?

Toolkit three: Customers' Expectations

It is vital to include stakeholders, particularly customers' views, in a full health check that an organization undertakes.

In announcing M & S's recent improved results Stuart Rose, Chief Executive, explained the company's turn-around. He said that the business needed to better listen to its customers to launch the process of regeneration. It needed to better understand that customers were looking for quality and value and take steps accordingly.

The Performance Prism puts stakeholders at the heart of a customer and business strategy on the basis that organizations develop strategies to deliver value to stakeholders. The Performance Prism provides a structure that encourages managers to answer five inter-related questions when reviewing organizational performance:

- Stakeholder satisfaction - who are the stakeholders and what do they want and need?

- Strategies - what strategies do we need to deliver value to stakeholders?

- Processes - what processes do we require to deliver these strategies?

- Capabilities - what capabilities do we require to execute these processes?

- Stakeholder contribution - what do we want and need from our stakeholders to enable all of the above to happen?

The answers to these questions help form a solid action plan.

At express delivery company DHL UK, the executive team set out to improve its business by revamping its business performance measurement. In a series of facilitated workshops, the team identified the wants and needs of its stakeholders, and how each contributed to the success of the business. They developed a set of questions structured around the Performance Prism and anchored them to what made the business perform successfully. To answer these questions, performance measures were identified which would provide the necessary data.

The next stage was to extend and develop a culture of regular performance review, with all operations and sales managers structuring their local performance reviews in the same way. The result has been to make the business sharper - health checks are more consistent, deeper and more searching than the previous finance-based system.

Health Check Action

Please answer the following questions, based on the Seven S Framework. We have put a personal focus in here, but it will tell you a lot about the context in which you operate. Add your own questions in addition.

Structure

Have you reviewed your organisational structure specifically for its customer orientation?

Where do customer-facing employees sit in the hierarchy?

How internally customer-focused are your business support functions?

Strategy

Honestly rate customer contact against your other priorities: financial; shareholders; regulatory external; internal stakeholders. How would you rank these, in order?

1.
2.
3.
4.
5.

What is the gap between your organisation's intended service strategy and how you really deal with the customer?

Shared Values

What is really important in your organisation?

What should be important?

When did you last speak to a customer?  

Did you implement what you learnt?       

Style

What messages does your leadership style send to the customer and the rest of the organization?

What feedback have you to support this?

How do you support and strengthen your staff?s abilities to deal successfully with customers?

Staff

How do you know what problems your people encounter when dealing with customers?

When did you last update this knowledge?

Skills

What skills development have you had in the past 12 months to better serve the customer?

Are your skills in giving and receiving feedback up to scratch?

Do you use them regularly?

Are you willing to tackle your colleagues about difficult issues which impede customer service?

Systems

Are the systems you operate likely to encourage customer satisfaction?

Are reward and motivation systems linked up correctly with this aim?

Step three - take action based on this analysis.

Step four - review progress in the actions you have chosen.

Summary

It is often said that if you don't understand and manage your business, it will manage you. The same could be said of tracking of monitoring the health of the organization. Once ill-health sets in, failure to pick up problems and opportunities at an early stage could be disastrous for you and the customer.

Steve Macaulay and Sarah Cook.  Steve is a Learning Development Executive at Cranfield School of Management.  Sarah is Managing Director of customer and leadership development specialists, The Stairway Consultancy Ltd.  Steve can be contacted on 01234 741122, Sarah on 01628 526535, or via email s.macaulay@cranfield.ac.uk, or sarah@thestairway.co.uk

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