Issue 25, Wednesday 9 August, 2000
Made in New Zealand - twice winners of the America's Cup
Subscribe/unsubscribe - bottom of the page


"If you're not ready to be enterprise- and industry-reinvention evangelists, then do yourself and everyone else a favor: Get out of your job"



Award is a free fortnightly email magazine with the tools, techniques and best-practice models that deliver high performance in the new economy
In this issue
Interactivity - is it a plane, is it a bird ...
Customer Relationship Management - from primer to industrial strength
Help - know any 'Baldrige' constructors?
Sixty second snapshots
- Accountability
- Six Sigma
- Continuous improvement

New member? Here are all the back issues - and here are our web resources - one of the world's best completely free Baldrige Award and organisational excellence web sites. AOL customers (and others who can't access web-page emails) here's the on-line version at our web site. Click here to send us an email.
Interactivity
If you've been to our web site recently, you'll have seen the ballyhoo about a new … well, new what, exactly? ... a forum, a dialogue, a virtual meeting, a content briefing … Whatever it is, it will be outcome-focused, time-limited, and our finger prints will be all over it. So let's make a start:

Statement: Customer Relationship Management has got nothing to do with improving customer relationships – it's all about smarter ways to rip of customers. Comment?

Or, hey, suggest another topic.

Recipe: one subject, worried to death for two weeks. Questions, answers, suggestions, references, alternative viewpoints and whatever can be culled or capture from the literature and the e-stream ... There will be a conclusion. You'll hear all about it. But just in case, keep an eye on the web page.
Thanks
A week or so ago, we took a liberty with your inbox and mailed a request for help for our Fire Chief mate – who's applying for a Fellowship to study volunteerism and governance. Your collective generosity has been amazing, heart-warming, and frankly overwhelming. We'll respond to every one, but it'll take some time. Thank you all.
Aside
Don't you really love positive affirmation!
Advertisement
No it's not. Well, it almost is. We'd like to remind you about EDGE FIRST, our companion eZine dedicated to leaders and leadership - a fortnightly serving of provocative thinking about what it means to be a leader, and the tools, techniques and best-practices that drive leadership improvement. If you haven't seen it, click here for a complimentary issue.
Customer relationship management
Quality is what your customers tell you it is, right? A one-way street, with you sitting stalled in the middle of the road. Or maybe not. All customers are not created equal. It's a safe bet that you've got a few you'd rather do without. Sometimes, it even makes sense to pay someone to take them off your hands.

So perhaps Mikel J Harry's definition of quality is better “Quality is a state in which value entitlement is realised for the customer and provider in every aspect of the business relationship.” Certainly makes it more of a two-way thoroughfare.

But what if, like two-times Baldrige winner Solectron, you've only got 120 customers, and they're the basis of a $7b business? Every single relationship is critical – to both parties.

'Manage!' Obsess, more like.

And what if the relationships that matter are not with customers, as normally understood, but with clients, patients, or even partners? What about the people at Boeing's Long Beach CA plant that build the 'worlds' best moving van,' the C17 Globemaster III, and who only have one customer – the US Air Force?

Or, let's say, the relationship is coercive. We 'buy' the protection of the police, and we don't have much choice about paying for the public services – roads, drains, fresh water – that our city council provides. Who's the customer? And who should invest the most (and why should they) in managing such relationships?

One way or another, managing the relationship is something that anyone with customers – however defined – should think about. So happens it dominated our incoming, these past couple of weeks. So here are the big ideas, in our customary small(ish) package:
CRM – a primer
Tim Lee featured recently on a CRMGuru.com discussion list with a post titled “Do You Have Customer Relationships in Your Heart?”

”So far, Lee began, “ I haven't seen any solid theory about Customer Relationship Management.” The 'sizzle' may be close to 1-to-1 marketing. Go for the beef, though, and you'll find it's about market segmentation and segment targeting. Talk in bottom line terms, and you'll likely conclude it's about customer satisfaction.

But applying CRM processes does not guarantee you'll have satisfied customers, just as your loyalty program doesn't guarantee any loyalty. It may drive the statistics in the right direction (or it may not, more later), but at what cost?

It's not hard, Lee says, to set up sophisticated programs to attract and retain customers. But sustainable competitive advantage can't be bought. Look at the airline industry – up to its chin in frequent flyer miles-entitled customers, knee-deep in complaints about service quality. Is business grown that way sustainable? Perhaps we are too loyal to our loyalty programs to understand how to make our customers happy, he says. You're not in business to buy loyalty, you're in business to satisfy customer needs. Customer satisfaction is a business tool, not a business goal.

Trouble is, he says (he takes a while to get there, this is a severe summary) the current marketing fashion is going in the wrong direction – by trying to cynically leverage customer relationships to make money.

Don't believe me? he asks, look at these typical CRM 'rules':
Rule 1: Charge loyal customers higher prices (loyal means price insensitive)
Rule 2: Only discount to customers that are otherwise likely to switch
Rule 3: Don't offer current customers your special promotions.

What's a typical response to these rules? You're being exploited, right? Still likely to be satisfied? Managed, sure, but not satisfied. And let's not start on what loyalty really means in those circumstances. Remove the inducement, and where are you going? Somewhere else.

”If you believe in God (we happen to call our customers 'God'),” says Lee, “you will go to Heaven. If you don't believe in God, visiting a church (implementing a CRM system) won't help you get to Heaven.”

Resource
Interested in a slight but relevant diversion? Try this article at the CEO Refresher

CRM – industrial-strength
From 'push' to 'pull' – changing the paradigm for Customer Relationship Management

In his August 2000 newsletter, John Seddon of Vanguard Consulting
says ... look at call centres. Supposed to be a strategic weapon in the competition for excellence in customer service, right at the heart of Customer Relationship Management. Are they? Are they hell!

Customers are peed off about having to make choices from interactive voice response systems that don't answer their questions. Irritated at having to hang on forever. Fed up with endlessly repeating simple requests. The result isn't strategic advantage, but strategic fumbling – driving customers elsewhere.

The design is wrong, Seddon says. Call centres are run on 'push' or 'top-down' principles. Traffic volumes are sized using average call length stats, translated into service standards (time to answer a call, average handling time) and used to set the budget. Managers ask 'how many people do I need to meet the standards?' and 'how do I get them to do it?' Problem! It's not about people. The capability of a call centre is governed by the way work works – how it is designed.

Seddon's solution – systems thinking. “When the call centre is understood as a system,” he says, “the potential for improving performance becomes vivid and realisable. Moreover, when managers learn to think and work this way, their part in the sub-optimisation becomes apparent.”

How is 'systems' thinking different? Here's a summary:

(Old) mass production thinking vs (New) systems thinking
Perspective
Top-down vs Outside-in
Design
Functional specialisation vs Demand, value and flow
Decision-making
Separated from work vs Integrated with work
Measures
Budget, activity, productivity, standards vs Purpose, capability
Attitude to customers
Contractual vs What matters
Motivation of people
Extrinsic (incentives) vs Intrinsic (pride)


Customer-driven design – understanding demand
Seddon says the purpose of any commercial organisation is to get and keep customers, and how customers relate to an organisation depends on their transactions with it. If the call centre is the transaction, then surely it's important to understand why customers call in – from their point of view – and what happens when they do. If you understand demand, he says, you're on the way to understanding what matters most to the customer – value.

Just do the value work and service improves, relationships are built, costs fall; and an alarming volume of 'failure demand' – demand caused by the failure to do something right for the customer – becomes apparent. Sometimes as much as 75% of total volume. It's expensive to put right, and damages the relationship.

How does a 'pull'-minded manager solve this problem? It's tempting to say 'by allocating the costs where they belong' – to the production unit that got things wrong in the first place. But no, says Seddon – the costs should be eradicated, not just re-allocated. How? Well, before we get to the right answer, here's three common, but wrong, answers:
(1) Apply some IT. In call centres, IT systems usually govern work procedures, count work done, and provide data about volumes and activity. These data become the levers of bad management – volume is used to allocate resources, activity is used to manage people, often in inappropriate ways. It's not about systems, it's about customer value
(2) Manage the resources. Moving people around according to the work may seem to be logical. But managers themselves cause many of the work 'backlogs'. To 'hose' resource at backlogs just 'lumps' up the work flow. Work becomes more unpredictable, there are more errors and waste – the purpose often becomes 'bust the backlog' which is not the same as 'do the value work'
(3) Manage the people. 'Motivating' them with prizes and the like. Wrong again. Extrinsic 'motivation', when linked specifically to a task – 'do this to get that' – causes people to focus on 'getting that' rather than 'doing this' and their work quality suffers. Even worse, 'incentives' de-value the task; the intrinsic value of doing the work is lost.

From 'push' to 'pull' – changing the paradigm for CRM
Mass production thinking leads to 'push'. Managers have to 'make budgets', workers have to 'work to procedures'.

In traditional mass production organisations, the relationship with customers driven by production capabilities is 'push' ('we make it, you sell it'). As a result, it's often troubled.

But to design call centres from a systems perspective is to think 'pull' rather than 'push'. The focus is on the nature of customer demand, its predictability and variation, and on designing optimal responses. 'Pull' thinking is about managing flow. It goes beyond the creation of product or service, helps people look at every transaction between the organisation and the customer from the customers' point of view.

If organisations grasp the 'pull' nettle, the paradigm will have truly changed, Seddon says. Doubts? Look to the evidence. The Toyota system – the exemplar of 'pull' methods – forty years old and still counting. Service organisations in the UK that are learning to work this way are building confidence fast, reinforced by the fast benefits of removing waste.

The call centre is the place to start
Understanding demand, value and flow from the customers' point of view – in a call centre or elsewhere – always creates a compelling case for change and, moreover, provides the means to make an immediate start on improvement, Seddon says. Early gains – achieved in weeks – build managers' confidence. They discover for themselves the limitations of the old ways and attack the 'causes of costs' with vim and vigour. Their roles change to managing the system – understanding and improving how well the work flows, end to end, to fulfil the customers' expressed value. The consequence is always improved service, improved efficiency and improved morale – first steps on the journey to genuine Customer Relationship Management; customers love to deal with organisations from which they can 'pull value' – what else would they want?

John Seddon is the managing director of Vanguard Education. He is an occupational psychologist, author and consultant. John describes his work as a combination of systems thinking – how the work works, with intervention theory – how to change it.

Read more in “In Pursuit of Quality: The Case Against ISO 9000”, Seddon, J 1997, Oak Tree Press. “The Vanguard Guide to Transforming Call Centre Operations”, Seddon, J et al, 1999, Vanguard Publications. Editorial, Holder and Fairlie, Interactive Marketing Vol. 1 No. 3, 2000. “The Toyota Production System”, Ohno, T, 1988, Productivity Press.
Resources
APQC benchmarking exercise reveals how organizations capture, manage, and integrate attitudinal and behavioural customer information to better communicate with and market to their customers - now available. Download the executive summary. See what else APQC offers on customer relationships

e-CRM: the right way, by Maria Seminerio, July 23, 2000
Anne Grim is not normally one to butt into someone else's personal business. But as the senior vice president and general manager of American Express Co's Customer Information Management group, it is her job to get personal with her company's customers. For the past several years, Grim's group has been responsible for customer relationship management across all of American Express' business units, including the major ones - credit card, financial and travel services. Read the full story (and see if you can spot some of John Seddon's relationship failures).

On The Front Line is an e-newsletter on Customer Relationship Management.

To retain permission you've got to keep your customers happy. And keeping your customers happy is, in large part, a factor of how effective you are at providing superior customer service.

Moving from Phone Support to Web Support and Intelligent Dialogues. Help Is On The Way. Interacting with online support systems has become as annoying as being trapped in telephone support systems that seem hell-bent on keeping you from talking to an actual person.

Customer Relationship Management Discussion Group, CRM.Talk is a free email discussion group for Customer Relationship Management.
Help
Casey Rackaway, Director, Marketing and Education Services, Excellence in Missouri Foundation, emailed to tell us that "a Missouri-based construction management company is looking for other construction companies that are currently using the Baldrige Criteria in order to do some performance-based benchmarking.

"None of us at the Missouri Quality Award office is aware of any such organization, so I was wondering if you know of any construction companies using Baldrige," she wrote. "The company is more in the commercial building side of construction, for what that's worth. We are working with them to help them learn how they may benchmark outside their industry ... if there are any companies out there willing to share information, that would be quite helpful."
Sixty second snapshots
We start, a day or two before publication, with far more information than we can ever use. This time the file topped out at 63 pages – 21,000 words. Heaps of good stuff goes west. Seems a shame, so we're going to try something new – the sixty-second snapshot. A brutally short summary of material too valuable to junk. With – where it makes sense – links to the source(s). Tell us what you think.

(1) Workplace accountability From the Deming Electronic Network. Pick up the whole 'accountability' string here. What's Deming? Click back there and find out.

Martin Stankard, wrote, "A recipient of the Massachusetts Excellence Award [a state level Baby Baldrige] used a very simple approach that is a nice illustration of accountability in line with Deming's philosophy." 

The firm - Pioneering Services, is a mutual fund back office
The work - complex legal transactions, large sums of money, costly consequences if done wrong
The old approach - before improvement – the most senior and capable employees inspected the work of everyone else
The new, 'Deming,' approach:
  • Set up skill training to ensure that everyone knows the right way
  • Designate peer reviews to certify employee competence
  • Measure and displaying quality of the whole department's output using statistical sampling methods
  • Each worker has two output baskets. One for work that the employee believed conformed to quality – only inspected if statistically sampled (a tiny percentage of workflow). Second basket for 100% inspection
  • All new workers use the inspection basket for all output until certified. Certified workers decided themselves which work was to be inspected. Certain extremely high dollar transactions are automatically put into the inspection basket
Outcomes - inspection almost ceased. Inspectors now do productive work. Quality measured at the departmental level rose to previously unheard of heights. Productivity doubled over the reported period.

(2) Six Sigma - an insider's view In his latest newsletter, iconoclast John Seddon wrote “I have listened to two presentations by Six Sigma consultants and my impression of Six Sigma is that it is 'Quality training on steroids'

Six Sigma plays to the current management paradigm, it suits 'command and control,' and “that's why it's doomed.” World class performance, Seddon says, begins with world class thinking, and that's not be achieved through training interventions.

To emphasise his point, Seddon quotes a friend's email:
“I was talking to a lady engineer yesterday who used to work for XX (an organisation well known for promoting Six Sigma) and still has friends there. She told me that many XX employees HATE Six-Sigma because:
1. It targets cost reduction exclusively and more and more cost reduction, year on year, is being demanded from all departments. If you sack a member of your staff this year the saving goes into your pot and you must therefore further increase your cost reduction next year
2. It is elitist. Only 'specialists' (Black and Green Belts can do it)
3. These specialists run around saying 'Look at all this training that I have received.' Other staff respond with, 'How much of it have you actually used?'

If you're involved in training – in any capacity – you owe it to yourself to be familiar with Seddon's views. They're challenging.

(3) Continuous improvement - updates!
From a Harvard Business School Publishing mailing list:  www.conquercomplacency.com, "a site selling ideas for continuous improvement."
Best manufacturing practices, “and an extensive collection of continuous improvement practices and programs.”
Quality and continuous improvement at Pratt & Whitney Canada – “an unusually detailed look at the company's continuous improvement process.”
Interested in hiring a coach?
Give us a call. We'd love to talk to you about it! Or any other proposals. Here's Malcolm Macpherson's resume.
Next issue of this eZine 22/23 August. Reader contributions warmly received!

Copyright © 2000, Macpherson Publishing
All rights reserved. But if you found this eZine useful we strongly encourage you to email it intact to a business associate, friend or acquaintance. Award and EDGE FIRST are trademarks of Macpherson Publishing. Contact us at macalex1@xtra.co.nz; visit our web site at www.baldrigeplus.com
Subscribe Unsubscribe