Issue 38, Sunday 8 April, 2001
Made in New Zealand - twice winners of the America's Cup
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"Americans are crazy, inventive, reckless, and brilliant; like Babe Ruth, they homer a lot and strike out a lot. Europeans, on the other hand, are highly skilled, deliberate, consensus-building, and plodding; they forgo rapid gains in exchange for security and social cohesion. Three years ago, when the Internet was white-hot, Europeans shouted, "We need to be more American!" Now they seem happier with their choice."

Thomas Stewart http://www.ecompany.com/barelymanaging


Award is a free fortnightly email magazine featuring the tools, techniques and best-practices that deliver high performance in the new economy
In this issue
WarmUp – up with the play? Are we ever!
Ten Minute MasterClass® – Ask "why" 5 times to get to root causes
Quick Study® – The all new customer service economy
ToolBox – On-line management library
NetWORK – Six Sigma in education, anyone?


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WarmUp® – up with the play
Are we up with the play, here in the Award office, or what!?
For the past few months we've been arguing that the Baldrige criteria (and all or any of the many and various derivative schemes – EFQM, all the international awards, and the myriad of private-label versions) are an excellent proxy for a balanced scorecard. The criteria ARE a balanced scorecard. Baldrige was there long before Kaplan and Norton and the Harvard Business School Press.
Well, they've caught up.
The March-April 2001 issue of HBSP's on-line (and pricey) Balanced Scorecard newsletter says this:

“In our last issue, Robert Kaplan demonstrated the compatibility of the BSC with two key performance measurement initiatives: shareholder value and activity-based costing. In Part II of his series, Kaplan and co-author Gaelle Lamotte show the merits of integrating quality programs with the BSC, focusing on two widely used models: the Baldrige National Quality Program and the European Foundation Quality Management Excellence Model. The unique strengths of the BSC (such as providing explicit causal linkages via strategy maps and pursuing breakthrough, not merely best practice, performance) can greatly augment the benefits of quality programs. Such programs likewise bolster measures—and in turn, performance—throughout every scorecard perspective.”

Up with the play? We're ahead of the curve.
And there's more. Your editor is a member of the editorial panel of an MCB Press journal called Measuring Business Excellence. Doing my duty as a member of the team, I submitted a short article a couple of weeks ago on measuring performance in not-for-profit and public sector organisations (English spelling folks – s not z), which emphasised the central role of HR.
Within days, up pops a trailer for the BSC newsletter with a pitch for a paper “on some of the latest thinking to emerge in the field of HR measurement, as presented at the January 2001 “HR Measurement 2001” conference in San Francisco. HR executives who struggle for accountability—and a role in strategy formulation and execution—ought to consider such approaches as return on investment and quantifying the links between employee intangibles (even employee health) and organizational performance. Such approaches, these leading thinkers suggest, have already delivered results at a number of leading companies”, the pitch said.
Ten Minute MasterClass® – Ask "why" 5 times to get to root causes “Ask 'why' five times” is one of those phrases that pops up in process quality discussions quite often, but how many of us know what it means – or use it in our day to day diagnostics? Cruising through some healthcare-related web pages (at the Institute for Healthcare Improvement, www.ihi.org) recently, we came across a nice little explanation …

The key to solving a problem is to first truly understand it. Often, we try to solve a problem before completely comprehending its cause, and the focus shifts too quickly from the problem to the solution. What we think is the cause, however, is sometimes just another symptom.
One way to identify the root cause of a problem is to ask "Why?" five times. When a problem presents itself, ask "Why did this happen?" Then, don't stop at the answer to this first question. Ask "Why?" again and again until you reach the root cause.
This exercise can be surprisingly insightful in helping you figure out what is really going on, and can help you avoid "quick fix" solutions. It is especially useful for tackling chronic problems that show up over and over again in a system.
The technique is attributed to Taiichi Ohno, father of the Toyota Production System, which revolutionized automobile manufacturing.

Here's are some examples of how to ask "Why?" five times:

Why has the machine stopped?
A fuse blew because of an overload.
Why was there an overload?
There wasn't enough lubrication for the bearings.
Why wasn't there enough lubrication?
The pump wasn't pumping enough.
Why wasn't lubricant being pumped?
The pump shaft was vibrating as a result of abrasion
Why was there abrasion?
There was no filter, allowing chips of material into the pump.

Why is the cylinder not operating smoothly?
The strainer is clogged.
Why is the strainer clogged?
The oil is dirty.
Why is the oil dirty?
The roof of the oil tank has a hole.
Why is there a hole in the roof?
There was a repair error during maintenance work.
Why was there an error during maintenance?
The welder was not trained well.

Why is a patient's intravenous run rate wrong?
The previous nurse didn't change the run rate.
Why didn't the previous nurse change the rate?
The doctor's order had gone to the pharmacy and the MAR was not updated.
Why wasn't the MAR updated?
The MAR is updated only once per day.
Why is the MAR updated only once per day?
The hospital has chosen to use oral instructions for updates that happen more frequently.
Why are oral instructions used?
The process was constructed a decade ago when medication orders changed less frequently due to longer lengths of stay. Upon further study, the hospital determines that 40-50% of its medications change every day.
Quick Study® – The All New Customer Service Economy
During these soft economic times, this week's Inc Magazine on-line trailer says (http://wwwrd.0mm.com/INC404007), small businesses are uniquely positioned to offer something that many lumbering giants can't: peerless customer service. Inc's April cover story by Susan Greco presents four ways that small companies are delivering cutting-edge customer service – on a budget.

Welcome to the new world of fanatical customer service, where even small companies never sleep and no request is too ridiculous. That intensity is evident among cutting-edge companies, and reinforced by a chorus of business consultants. Patricia Seybold, CEO of a Boston-based firm that bears her name, is one such. In her new book, The Customer Revolution, Seybold writes about businesses that are obsessed with every facet of customer service.
How widespread is that obsession? Good stats are hard to come by, but studies show that customers are demanding better service in general. And there are indications that some managers are responding. Roland Rust, a marketing professor at the University of Maryland and co-author of last year's Driving Customer Equity, says that companies increasingly see the link between customer service and "retention, loyalty, and increased sales."
The drive to revolutionize customer service at small businesses has led company leaders to blaze new paths. Among the most dramatic are the 24-7 clock, the human touch, real-time feedback, and proactive pursuit.

The 24-7 Clock
At online fish retail business FultonStreet.com, CEO Morfogen didn't have to agonize over whether the company should offer customer service 24 hours a day, seven days a week. For him the issue was never if he should do it but how. "E-tailing is 24 hours, so customer service should be 24 hours. Otherwise, it's like having a 7-Eleven store with no one at the counter from midnight to 7am," he says.

The Human Touch
ScriptSave's customers are health-insurance companies, such as BlueCross BlueShield of Florida, that provide prescription-drug benefits to their members. The insurance companies hire ScriptSave to explain members' prescription-drug benefits to them. Dial their 800 number during the day, Greco writes, and “a funny thing happens. An actual human being answers.”
Company CEO Charlie Horn says that when he describes his business to other entrepreneurs, their first question usually is, Why don't you just automate your phone system? The answer? The majority of ScriptSave's calls come from cardholders 65 or older and those customers require the kind of individual attention that a machine couldn't provide.
In four years the company has grown from 3 employees to 105, with sales of $13 million in 2000, up from $6.3 million the year before. The company is profitable and carries no debt. All the growth has been financed internally.
Today even something as simple as a customer's call to activate a new prescription-drug card is, quite deliberately, handled "live." Why go to the extra trouble? It's simple. Horn is looking for any excuse to chat with customers – or rather, his customers' customers.
So that the chat is effective, ScriptSave has to train its people well: all new hires get three weeks of training before they take their first call customer-service assistants spend another 60 hours a year in the classroom.
new hires learn the basics of phone etiquette and then move on to the demographics and other characteristics of the ScriptSave customer. For example, new workers attend a "senior sensitivity workshop" to help them deal with callers who might be hard of hearing or unable to read prescription labels.

Real-Time Feedback
Getting from users an instant snapshot of how a company is doing is a big breakthrough in customer service, says consultant Patricia Seybold. What companies can measure "in or near real time," she says, differs from the quality of data they can collect if they survey their customers once a year. That doesn't mean that every time customers call or send email, they should get a "little five-point questionnaire," adds Seybold, who recommends that companies start slowly by polling a percentage of their customers each week.
Moving service RMR does exactly that. Its real-time feedback from customers is the "most incredible quality-control tool," Bob Carbonell says. "It's live hot data. It gives us an opportunity to resolve issues that are festering."
Each day, RMR's managers receive the results of a two-page satisfaction survey that customers have completed on the Web. The old, paper version of the survey got a 15% response, says Carbonell. Shifting to the Web has boosted the rate more than threefold.
RMR's surveys go out at the conclusion of each move. The transferee receives an email message that is linked to the survey. He or she is asked to type in comments and answer 20 questions. Half pertain to RMR's service, half to the performance of the moving agent selected by RMR. If a mover or a truck driver has a string of low scores, RMR calls right away to correct the problem. Measured on its own 10-point scale, RMR's own customer-satisfaction rating stands at about 90%.

Proactive Pursuit
The possibility of finding out what customers think as they are thinking it is a revolutionary development. But nothing is more radical in the realm of customer service than what Bill Strauss is attempting to do. Strauss, CEO of Proflowers.com, an online florist based in San Diego, isn't satisfied with improving customer service to the nth degree. He wants to eliminate the need for it altogether.
Strauss is a former vice-president of customer support and operations at Intuit, the financial-software company known for its efforts to make software so intuitive that "customer support" is superfluous.
Before Strauss sold a single daisy, he scrutinized the workings of the company's customer service. After they placed an order, customers most often called simply to check on the order's status: Have the flowers been delivered? From the start, he had Proflowers gear up so it could send three automated email messages as an integral part of every transaction. The first message is now standard fare at many Web sites: the minute customers place an order, they receive a confirmation by email. When a delivery truck picks up the order from Proflowers, that information goes back to the company's web site, which spins out a second email update. But it's the third message that's the charm. The customer gets a message saying that the flowers were delivered, for instance, at 11am, signed for by Casey Jones. The third email all by itself "limits the number of calls we get. It's proactive," says Strauss. "It's one thing to just do a good job handling the calls that come in, but that's just reactive."
Strauss is a passionate advocate of proactive customer service, but he's hardly alone among CEOs who speak in those terms. Some use the buzzword tier zero, a fiercely proactive strategy. "If we can understand why customers are contacting us," says Strauss, "we can try to modify our web site, marketing efforts, and ordering process so that we don't give them a reason to call us."
Proactive pursuit may be a lovely theory (it's even alliterative), but is it really a brilliant, cost-effective tool? Strauss has impressive results. In the year ending June 30, 2000, his company had sales of $27 million, with telephone orders just 10% of sales. Two out of five customers who ordered on the web requested help either by email or by telephone. In 1998 the figure was more like four out of five.

Buzzwords to watch
Along with the intense customer-service initiatives at some companies, new buzzwords are emerging. Here are definitions of four new terms:
A contact-to-order ratio is the number of times a company's customers contact it before placing an order, compared with the number of orders a company receives. A zero ratio would mean that the ordering process works so smoothly that no customers feel compelled to call.
A contact center is a technologically sophisticated version of the traditional call center. But contact-center workers don't just answer phones. They also respond to customers' email messages and, in some cases, participate in live chat sessions with them over the web.
Customer-relationship management (CRM), refers broadly to all aspects of marketing, sales, and service that pertain to customers. More narrowly, it describes a software-based system that manages the information a business gathers about its customers. The data can include such things as customers' names and purchases and a list of goods the customers return.
Tier zero describes service that's proactive and so complete that it enables customers to solve their problems without requiring the assistance of a customer-service rep. Forrester Research, a technology-research firm, claims to have coined the term.
ToolBOX – Online Management Library
Andrew Risner (andrew@empowerment-at-work.com) dropped this gem into the UKHRD discussion list last week. We've only taken a quick look, but it seems the real McCoy. This what Andrew wrote:

Good news for everyone. Following on from recent discussions re: requests for help I discovered this great web site which, whilst USA biased has information on virtually every subject that has been talked about on these pages.
Have you ever wanted to have a comprehensive management library at your fingertips? Sure, everything is available via the web. Wouldn't you enjoy having the most popular management resources all in one place, arranged in an intuitive, user friendly style? Well here it is, your very own Free Management Library. http://www.managementhelp.org

Overall Goal The overall goal of the library is to provide leaders and managers (especially those with very limited resources) basic and practical information about business, management and organizations.

Basic and Practical Resources (the 20/80 rule) The focus of the library is, in particular, on the "20% of resources needed to address 80% of the challenges in business, management and organizations.
NetWORK – Six Sigma
We've had a call from a University of Singapore address for information on the use of six sigma in education. Any experience anywhere in the network? Call here (macalex1@xtra.co.nz) or direct to the inquirer (Chermaine) at jicklim@singnet.com.sg
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We'd like, as always, 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.

In recent issues
Competing for the future - Hamel is THE MAN, embrace innovation!
Women and leadership - for real progress ... give men the nappies
Quick case study/Jennifer White - on picking winning teams
tompeters! - new economy DNA. Flaky? Irresistable! The survival kit
Snapshots of the new economy - from Seybold to Subramanian
eStrategy - best, first, fastest, lastest ... just watch out for Wal-Mart
A better way - but don't try this at home
Gen II - who wants to be a CEO
>> Next issue April 19/20 (ish), 2001
>> Copyright © 2001, Macpherson Publishing
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>> Award and EDGE FIRST are trademarks of Macpherson Publishing
>> Contact us at macalex1@xtra.co.nz
>> Visit our web site at www.baldrigeplus.com

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