Craig Cina

Achieving service excellence is a formidable challenge but not an insurmountable one. There is something you can do to meet this challenge. Service excellence can become a reality for your organization if you follow the five-step approach described in this article. These five steps can also lead to bottom-line rewards.

INTRODUCTION

A new service economy has emerged in America. The blast furnaces of yesterday have given way to the golden arches of today. Services now employ seven out of ten Americans. Yet service performance remains poor. A study conducted by National Family Opinion for the Consumer Research Center of the Conference Board asked consumers in 6,000 households to assess their satisfaction with about forty products arid services. Consumers were satisfied with the value they received from products but were dissatisfied with their experiences with services. The poor services referred to included repair work of all kinds, as well as services from banks, credit card companies, doctors, dentists, lawyers, and hospitals. Studies on these types of outcomes abound.

Furthermore, many who complain about receiving poor service elsewhere are not taking care of business in their own back yard. A story about a seminar this author attended several months ago will bring this point to life. All the attendees were asked to rate their company on customer service. Amazingly, the vast majority of them rated their companies as very good. This finding is interesting for two reasons: First, it's human nature to complain about someone else's service while looking favorably at our own. We may not have taken the time to ask how our own customers feel about our service relative to the competition. Second, if we all think we are very good at customer service, then we are all average. If we don't regularly ask our customers how we are performing relative to the competition on the key dimensions of service, then what we think may be off target.

This dichotomy runs in the face of rising customer expectations and increasingly intense competition. Today's superb service is tomorrow's basic service. Faced with this challenge, companies increasingly are discovering that the key to long-term competitive advantage lies in continuously improving customer satisfaction through service quality, on both a perceived and an actual basis. This fact has been well-documented, perhaps most convincingly by the Cambridge, Massachusetts based Strategic Planning Institute. They found that better performers on perceived service quality were able to charge about 9 percent more for their service; also they grew twice as fast as other companies. Most important, superior service performers received substantial bottom-line rewards. The top half in service, as seen by the customer, experienced a 12 percent return on sales while the rest obtained a paltry 1 percent.

The case for seeking service excellence is virtually irrefutable. Superb service has always paid. We need to strive not only to meet customer expectations but to exceed them. But knowing that you need to improve is one thing; actually creating superior service is a little more difficult.

FIVE STEPS TO SERVICE EXCELLENCE

There are specific things that can be done to improve service quality. Table I lists these five steps that will lead to service excellence. We will consider each in more detail, using Yellow Freight System as an illustration.

Step One: Know Your Moments A Truth

In your Customers' eyes, at the point of customer contact, your employees are the company. Thus, service quality is defined by your customers but created by your own employees. These customer contacts are called a company's moments of truth; episodes in which the customer comes into contact with any aspect of the organization and forms an impression of the quality of the service. Since service industries, as well as other types of industries, encounter so many personal interactions with customers, it makes sense to get a handle on where they are occurring and who is responsible for managing these moments of truth.

Yellow Freight System was not initially aware of the magnitude of its customer contacts. It felt that the idea of customer satisfaction and service quality had great merit but didn't clearly see in a tangible way how it applied to the company.

The first thing Yellow did was document where its moments of truth were occurring. It developed a service blueprint that clearly displayed all its customer encounters, from the first visible contact to the final delivery of the service. By looking at the service as a life cycle, Yellow identified all the interactions, processes, and functions involved; and all the points at which failure and success can influence the customers' view of the company. Table 2 gives a condensed version of that blueprint. Creating the blueprint required extensive conversations with sales, operations, and support groups to ensure that and every possible moment of truth was captured. You can expect your blueprint to get complex but you'll also find it to be a valuable learning experience.

At this juncture, Yellow knew where its moments of truth were occurring and who was responsible for those contacts. It now wanted to know the frequency of those contacts to see what it was up against.

Step Two: Inventory Your Moments of Truth

Taking an inventory of your moments of truth can be one of the most important steps toward creating service excellence. The large number of customer contacts is bound to catch management's attention. Here's what Yellow did.

First, it knew from step one all the possible moments of truth associated with each customer transaction and who the key customer contact was.

Second, it surveyed, at selected terminals, those employees who came in contact with the customer.

Third, it asked each key contact person to keep a log of the frequency and nature of their interactions with customers.

Finally, it extrapolated the results from this subsample across job categories arid over time to derive a system total.

This survey provided the number of Yellow's moments of truth by job category and by nature of contact.

The results were eye opening. Yellow discovered that it experienced 152,800 moments of truth each day. That's nearly four customer contacts per second in a typical ten-hour day. The front-line people such as drivers, dispatchers. and office staff accounted for nearly 80 percent of those contacts. Those people sometimes do not receive the training, recognition, and attention their job deserves, so it became apparent that this aspect of the business deserved greater attention. The results from this step were convincing and really turned the tide toward implementing a customer satisfaction initiative.

Yellow now knew where, how often, and with whom its moments of truth were occurring. In order to focus its resources effectively, it needed to know which contacts were the most important and how it performed on them versus the competition.

Yellow's Service Blueprint

Step Three: Assess Importance and Performance of Each Contact

Assessing the importance and performance at each moment of truth requires taking a look at satisfaction from a customer's point of view. Successful service companies know what is going on in the customers' mind and they use this knowledge to their own benefit as well as that of the customers. They gain this knowledge through customer research.

Since Yellow didn't have a clear understanding of what drove service quality with its customers, it started by conducting focus groups. In-depth interviews could accomplish the same objectives, but Yellow felt that the interaction effects gained by a focus group setting would be beneficial.

The moderator's guide for consumer focus groups should contain the following key areas for discussion.

Comparison of existing service providers -- the similarities, differences, and perceptions.

Identification of what is expected from the service providers -- referred to as minimum requirements -- and what is meaningfully unique -- those value-addeds that differentiate.

Determination of the critical moments of truth.

Descriptions of customers bad and good experiences with the service and how well the service providers responded to the bad service.

Identification of the key factors in customers' selection of providers.

The focus groups provided Yellow with a wealth of information and key moments of truth and some ideas on what drives service quality and customer satisfaction. However, since the outcomes of focus groups are based on small sample sizes, the results were used not for decision-making, but rather for developing a customer questionnaire.

With the company armed with sound qualitative data, the next step was to answer the key customer satisfaction issues quantitatively. The following is an idea of what should be included in such a questionnaire.

Determine usage levels and preferences among customers.

Determine the importance of each key moment of truth as defined in the focus groups.

Discover how your company's service performance compares to that of the competition on these key moments of truth.

Measure the Customers' overall satisfaction with your company's service quality relative to the competition.

Determine whether the customer has increased, remained the same, or decreased their business with you over the last six months. This information can be correlated with your service quality scores to see how tightly service quality ties to changes in revenue performance.

As a side note, you may want to ask your front-line personnel to take the same customer satisfaction study. Ideally, front-line employees' perceptions of what is important to the customer should match the customers' perceptions. If they don't, you must motivate those employees to embrace the customers' point of view. Knowing these differences upfront can be instrumental in the design of an insightful customer satisfaction program that emphasizes what is important and identifies what beliefs need to be modified.

Yellow learned several interesting things from its research efforts. First, you may be surprised to find that your company doesn't satisfy its customers as well as you thought. British Airways provides an example. It felt its customers were satisfied with the service, but its customer research findings tempered that belief. Only 20 percent of its customers rated the airline better than the competition -- a relatively small base of brand-loyal customers. On the other hand, a sizable 80 percent of its customers rated British Airways no better than the competition. These customers are candidates to switch to other carriers. The point is not to single out British Airways -- it has made great strides in improvement -- but to show that customer perceptions of your service performance may be different from your own beliefs. This fact held true at Yellow. Without this knowledge, you may not be able to establish a sense of urgency for improvement nor understand which challenges to tackle first.

Second, paralleling the PIM's findings mentioned earlier, Yellow learned that its quality of service tied directly to revenues. If the customers rated the company high on quality of service, they were more likely to have increased business with the company.

Third, consistently performing as promised and being upfront and honest in customer communications were recurring themes. These results parallel some of the work done by Leonard Berry and his associates at Texas A&M.

Although these conclusions are not earth-shattering, they do shed light on what needs to be done to achieve service excellence.

While recognizing that perceived service quality was extremely important, Yellow also recognized that it had to get a better handle on its actual performance. In a transactions marketplace, achieving superior perceived service quality is dependent upon a combination of day-in and day-out performance and effective customer communications. At this point, Yellow knew only its perceived service quality -- that from the customers' point of view.

Actual performance can be effectively measured by a technique called competitive benchmarking. This is a tool for rigorously measuring one's performance versus the "best in-class" companies, using the analysis to meet and surpass the "best-in-class" companies. Unlike traditional customer satisfaction studies, competitive benchmarking results are based on actual performance data rather than on customers' perceptions of performance. Thus it gives a real life" portrayal of the competitive situation. Xerox and Ford are two leaders in this area.

You will gain valuable insight by knowing the relationship between perceptions and reality on your key moments of truth. Table 3 shows a matrix for comparing perceptions against reality on the critical factors for success. This is called the competitive opportunities matrix because it puts performance in the competitive arena and indicates what type of opportunities present themselves according to a company's position in the matrix on a specific moment of truth.

For example, let's assume that you want to measure how fast you and your competitors fill an order on an actual and perceived basis. If your order fulfillment scores falls into the "Critical Area for Improvement" quadrant, not only is your actual speed subpar to the competition, but also your customers perceive that it is subpar. In this case, you need to improve actual fulfillment speed and to enhance the image of your speed through advertising, public relations, performance guarantees, and better leveraging of employee interactions.

The "Leverage Your Moment of Truth" quadrant indicates that your actual fulfillment speed is superior to the competition and also your customers feel that it is. This situation presents a golden opportunity to capitalize on your achieved success by properly communicating this competitive advantage to the marketplace.

If your order fulfillment score falls into the "Manage Your Perception Better" area, then although your actual fulfillment speed is superior to that of the competition, your customers do not perceive this superiority. In this case, you need to step up your external communications and prove to the customer that you do indeed command an edge in performance.

Finally, the "Manage Your Performance Better" quadrant indicates a unique situation in which customers feel that you are better than you actually are. If image is the name of the game in your market, you may be safe. But if it isn't and your competitors make this factor an issue, your customers may soon find out that you are like all the rest.

Relying on customer perceptions exclusively can lead to misdirected tactics. The intangibility of services makes knowing the relationship between your perceived and actual performance very important. Looking at both perceived and actual performance yields greater insight into available opportunities and provides you with a complete picture of your competitive position.

Now that you know understand the customer and your marketplace, it's time to start converting research into reality by establishing a service management discipline.

Step Four: Establish a Service Management Discipline

First you need to get management buy-in. You should have already captured their interest through sharing the customer research results with them. Then you'll want to form a cross-disciplinary steering committee, whose main purpose is to create a service strategy and preliminary action plan. Yellow's committee covered all bases with a total of five members from marketing, sales, operations, and human resources. The committee developed the services strategy and plan which was then presented to senior management for approval.

The service strategy and plan should set forth clear targets and objectives. It's your vision of what type of service organization you want to become. Without a unified sense of direction, good service will simply not happen. An effective strategy provides the common mission that managers and front-line employees need to unite their actions and to produce a distinguishably better service. Service strategy should be translated into specific. measurable terms -- for example, we will provide superior service performance by answering the phone on or before the second ring, reducing our order to delivery time by one day, and so forth. Also remember that using the term "superior" implies being better than the rest on at least one factor of performance. That means you need to develop your strategy in the context of the competition environment and in light of your customer research findings. Your service strategy, upon implementation, should differentiate you from others.

Ultimately the strategy must receive the commitment and endorsement of the chief executive officer, even though he or she may not be actively involved on a day-to-day basis. Then the attention must be turned to the employee. Getting employee buy-in is relatively straightforward. Here's what you can do to get it.

Start with a senior management kick-off. A personalized letter from the president or the company is a nice touch.

Next, communicate the findings and the service strategy to the employees. Yellow used testimonials from both customers and employees stating the importance of customer satisfaction and how it comes about. The testimonials were videotaped and used in conjunction with live presentations to all 28,000 employees. Having both their customers and peers tout the importance of customer satisfaction was more compelling to the employees than using a general office spokesperson.

Finally, don't forget about your internal customers. Although only front-line employees come into direct contact with the customer, the performance of employees who serve those front-line employees can make the difference. Their importance to customer satisfaction must be stressed. It's a teamwork effort -- everyone counts.

Step Five: Implement Your Action Plan

Once cross-disciplinary management endorsement and employee buy-in are obtained, it's time to implement the action plan.

First, all employees will require customer satisfaction training starting with the front line. The employees must be shown what the traditional practice has been and what needs to be changed. If additional resources are necessary to improve employee performance, they must be identified and accommodated upfront.

Second, customer satisfaction must become an integral part of an employee's job model. Standards of performance must be set, communicated, and accepted by employees.

Third, employees must be empowered to fix service failures at the point of occurrence. This does not mean that front-line employees are free to do as they choose, but they must be given the freedom to act within reasonable, predetermined guidelines. For instance, an employee may be empowered to make amends of a service failure up to $100, after which approval is necessary. In addition, recovery systems for the most commonly occurring service failures should be managed in a preplanned, systematic fashion. Customers don't expect service to be perfect, but they do expect a company to be responsive in resolving problems. Good responsive service doesn't just happen -- it is set forth in carefully prepared performance systems.

Fourth, employee performance must be measured through the eyes of the customer. A statistically valid measurement and feedback system will provide the employees with a report-card on their performance. It also clearly demonstrates management's commitment to service quality and indicates what the company values most. The customer satisfaction study mentioned previously will effectively serve as the basis for the ongoing measurement and feedback system. This measurement and feedback system is important because it helps keep management's focus on the customer satisfaction program.

Fifth, employees must be recognized and rewarded for exemplary customer service. Employee recognition has the power to inspire people and conveys a powerful message regarding what is valued. As the old clich� goes, "the actions you reward are the actions you get." Such recognition also answers the familiar question. "What's in it for me?" A good reward and recognition program is one of the key sustaining elements of service excellence.

Finally, tell your customers what you're doing to improve their service quality. Many times customers do not know what they're receiving for their money unless they're reminded. Provide customers with tangible evidence of your service quality through customer testimonials, service guarantees, winning service awards, and performance reports. 'These are good ways to shape perceptions as well as to reinforce your customers' wisdom of choosing you as their service provider.

Accomplishing all five steps to service excellence is no easy task. Yellow has been working at them for several years and it still has many opportunities for improvement. The initiative requires perseverance and dedication but the results are well worth the effort.

Conclusion

Customer satisfaction is much more than smile training or attitude change. It requires hard work, and commitment from all ranks. The keys to a winning, long-lasting customer satisfaction program are (1) listening on a regular basis to what your customers have to say, (2) training and empowering your employees to meet those needs, and (3] measuring and rewarding their efforts toward agreed-upon standards of performance. A commitment to service quality without a commitment to standards, measurement, and rewards will likely result in a short-lived effort.

It can all be summed up quite simply: If you take good care of your employees, they will take good care of your customers. And, if your customers are treated right, they will come back again and again.