Universal practices instill high performance
What makes some companies like Intel, Southwest, and Ritz-Carlton perennial performers? Is their secret charismatic leaders? Good timing? Grand vision? No. High performance isn’t about what organizations do, but how they do it. Customer Success teams can apply the same disciplines used by top-performing companies to dramatically increase results.
Jim Collins, author of Built to Last and Good to Great, says “dynasty” companies (those generating financial returns of at least 10x for 15 years or more) behave very differently than the rest. Unlike typical organizations, top performers are fanatically disciplined, empirically creative, and productively paranoid.1 Laser-focused and utterly relentless, they eliminate distractions and drive continuous improvement everywhere. Rather than follow industry experts or imitate others, top companies engineer their own breakthroughs using empirical evidence, observation and experimentation. And they remain hyper-vigilant, watching competitors intently and adjusting their strategies to thrive in a constantly shifting landscape.
High performing organizations like the ones Jim Collins describes depend on a set of interconnected, self-reinforcing management systems to instill their unique behaviors. Their management disciplines become embedded in the organization’s “operating system,” creating a culture of excellence in individual work areas and throughout the enterprise. The management systems they use are universally applicable, so Customer Success leaders can use them to realize similar benefits:
Sensory System
What it does: Methodically collects and interprets customer, market, competitive, regulatory, workforce, and technology trends to continually uncover new opportunities and threats.
Leading practices: Use quantitative and qualitative analysis extensively for market and product definition and performance monitoring. Implement internal and third-party “listening posts” in multiple channels. Increase relevance and salience by interpreting findings according to market segment. Systematically analyze, review and prioritize feedback for company business reviews, product roadmaps, and process improvements. Reduce “blind spots” by periodically challenging underlying assumptions and measurement techniques.
Application in Customer Success: Collect product usage, customer satisfaction, trouble ticket, and contact frequency statistics to generate health scores for specific customers and market segments. Utilize direct customer comments in CRM records and formal customer reviews for product and process deficiencies. Share discoveries via periodic, formal feedback sessions with development, sales, marketing, accounting, and operations leaders.
Planning and Review System
What it does: Inputs information, prioritizes actions, defines objectives, goals, strategies, tactics, and owners, and aligns financial and personnel resources to promote successful execution. Evaluates progress formally and periodically, holding people accountable, adjusting plans, and promoting learning.
Leading practices: Develop strategic (multi-year) plans that articulate long-term vision, objectives and goals, customer and market dynamics, competition, product and service roadmaps, value propositions, value delivery systems, staff development, risks, and financial pro-formas. Link strategic with annual plans and implement through product development and process improvement plans. Coordinate planning and review activities via calendars, and use scenario analysis to detect and quickly respond to environmental “triggers.” Involve all employees to build commitment for action.
Application in Customer Success: Participate in enterprise planning activities, share customer intelligence and help set functional objectives, goals, strategies and tactics. Prioritize, define, implement and track account management and marketing plans along with process improvement projects. Review progress monthly and quarterly.
People System
What it does: Defines jobs, employee knowledge and skill requirements, and facilitates screening, hiring, training, performance feedback, career development and overall organizational change.
Leading practices: Define short-term and long-term staffing and skills requirements as well as succession plans aligned with the strategic plan. Use structured screening, hiring, training, retention, and cultural indoctrination practices. Conduct both formal and informal performance reviews. Interpret quantitative job performance measures in proper statistical context. Collaborate to define and hold employees accountable for development plan execution.
Application in Customer Success: Craft position plans, metrics, knowledge and skill requirements, and development plans for CSMs to build stronger relationships, deliver onboarding, and uncover and advance sales opportunities. Characterize and use personality traits, in addition to education and past experience, to screen new hires. Give regular feedback, formally and informally, and avoid ranking.
Work System
What it does: Describes requirements and designs optimal workflows at a macro and micro level between customers, business partners, suppliers, company departments and work groups.
Leading practices: Map processes to identify critical handoffs, disconnects, metrics, and process improvement opportunities. Periodically redesign processes for enhanced speed, cost effectiveness and increased quality. Protect and develop core competencies to promote strategic advantages. Use partnership management and supply chain management techniques to influence change and improvement with third parties.
Application in Customer Success: Define the customer lifecycle linking onboarding, training, engagement, renewals, upselling and cross-selling activities using phone, e-mail, video, events, webinars, and social media contact as required. Define critical handoffs and feedback loops with sales, customer support, development, and accounting.
Metrics System
What it does: Focuses managers and teams on the critical few cause-and-effect relationships that keep processes under control and promote beneficial end results.
Leading practices: Deploy and manage daily operations across the enterprise via linked, balanced and aligned dashboards. List a critical few leading and lagging indicators in each dashboard to measure key business process performance, especially attributes driving competitive distinction and financial results. Calibrate dashboard signals using customer specifications or statistical process limits. Review periodically, take corrective action, and launch process improvement projects as signals dictate. Benchmark performance against competitors and “best in class” process references.
Application in Customer Success: Construct dashboards measuring outcomes (renewal rate, new revenue, etc.) and process factors leading to them (conformance to contact schedule, 30-day adoption %, etc.) as appropriate to the defined CSM role. Use a total of ten or fewer metrics, rolling up individual statistics into overall team performance. Set “red,” “yellow,” “green” action limits based on historical performance or goals articulated in the annual plan. Make dashboards visible in work areas, review and discuss performance with team members at least monthly.
Continuous Improvement System
What it does: Manages projects emphasizing customer focus, teamwork, and scientific methods to uncover root causes of problems, driving ongoing improvement in products, services and internal processes.
Leading practices: Execute cross-functional improvement projects using formal methods such as Lean Six Sigma, process simulations, and predictive analytics to maximize results. Choose projects based on financial or strategic impact, including major initiatives linked to annual and strategic plans. Increase effectiveness and customer value and reduce customer dissatisfaction, cycle times, and inefficiencies in all products and processes. In SaaS companies, diminish downstream bug detection, remediation, and customer churn costs through better upstream product definition, software development and validation processes.
Application in Customer Success: Implement formal methods to collect data and analyze processes to determine changes that increase customer retention and revenue and lower the Cost to Serve. Use statistical techniques such as logistic regression to study factors that impact customer churn, such as adoption rate, unresolved trouble tickets, or contact frequency. Design and execute experiments to test new ideas. Participate in company feedback loops to report software bugs and advocate for product and service enhancements.
Leadership System
What it does: Provides strategic direction, prioritizes actions, engages and inspires employees to perform at high levels, learn, and enact changes.
Leading practices: Articulate clearly and broadly communicate company mission, vision, values, goals and strategic plans. Engage the workforce and lead strategic change using formal processes. Model by example, recognize and reward high performance, and develop new leaders throughout the organization. Provide and receive performance feedback.
Application in Customer Success: Define the team’s purpose, goals and values. Understand and align with what motivates individual team members. Recognize and reward performance and hold people accountable. Incorporate leadership effectiveness feedback from superiors and employees in personal development plans.
When Customer Success leaders run their operations using the seven management systems above, their results rival the very best performers. Excellence becomes part of the culture, and customer churn, referrals and revenue relentlessly improve.
Excel-lens is a publication of Service Excellence Partners. We increase customer loyalty and business performance in the cloud computing industry. Contact us today.
Source:
1. J. Collins, M. T. Hansen, 2011. Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All.
You contact a company trying to get a problem solved and you find yourself passed between multiple departments. While people are sympathetic, their response is, “It’s not my job.” Despite multiple voice mails and e-mails, you get nowhere. Your issue has fallen into the company’s “white space,” the cracks between the boxes on the organization chart.
You’ve probably experienced white space issues inside your own organization, too. People perform departmental tasks smoothly, but there’s friction interacting with other groups. Processes don’t flow. Often things get “thrown over the wall,” there’s lots of finger-pointing, and it’s difficult to get things done.
Functional silo-ism first rears its ugly head when companies reach about 40 employees. At this threshold, companies must departmentalize to increase technical capabilities and bolster management’s span of control. But priorities slowly begin to shift. Soon pleasing the boss becomes more important than making customers happy. As the firm continues to grow, functional barriers get larger and more entrenched. Left unchecked, departmental relationships can become adversarial, paralyzing new product development, service delivery, customer acquisition, and customer care efforts.
Four tools that reduce silo-ism
Progressive companies deploy countermeasures to mitigate the effects of white space behavior. Top organizations combine the four management practices below to substantially diminish internal friction and dramatically increase performance.
1. Hoshin Kanri
What it is: Developed in the 1960’s at the Bridgestone Tire Company in Japan, hoshin kanri (literally translated “a bright, shiny needle”) is a rigorous, integrated system of planning, implementation, and review that points the way like a compass needle. Caterpillar, 3M, Toyota, Bosch and Danaher and many other leading companies use it.
How it works: Senior executives collaborate to prioritize common issues, and then decide on a single breakthrough. The objective is then decomposed into a smaller set of strategies, each featuring its own executive owner and performance measure. Leaders cascade the plan throughout the organization, finally defining implementation plans at lower levels. Formal hoshin reviews then roll up progress, allowing executives to eliminate barriers that crop up. The method’s closed-loop system promotes intense focus, relentless execution, and forward momentum.
Why it works: Unlike the common Management by Objectives (MBO) approach, hoshin aligns the organization around business, not functional, imperatives. Leaders pass these priorities down and reinforce them across the company. As a result, teams work towards enterprise-wide goals that transcend parochial concerns.
2. Process Mapping
What it is: A time-honored technique used to study workflows, process mapping reveals the “hidden factory” behind service work. Describing the process visually helps teams identify critical handoffs, gaps, rework loops, and queues. After pinpointing improvement areas, teams can then reduce errors, speed cycle times and reduce costs. Value Stream Mapping and Customer Journey Mapping are popular variations of the method.
How it works: Teams define process suppliers, inputs, outputs, customers, and requirements. Then they brainstorm tasks that must be completed to convert inputs into outputs, typically using Post-it® notes and butcher paper to record the workflow. Along the way, mapping participants identify improvement opportunities.
Why it works: Mapping allows people to see the systemic nature of business—everything is connected to everything else, and what happens in one area affects all others. People quickly realize that fast, efficient, customer-pleasing workflows trump choppy, disconnected vertical structures. Top organizations assign executives to lead cross-functional, key business processes, holding them accountable for optimizing teamwork across, rather than inside, department boundaries.
3. Enterprise Dashboards
What it is: The Japanese call an interlinked system of color-coded metrics nichijo kanri, or “daily control.” These displays help people at all levels manage the variables that lead to favorable business outcomes. Each manager’s dashboard typically monitors the key business process he or she oversees using 8-10 essential metrics that describe volume, time, cost, quality or other attributes.
How it works: Leaders define the critical few measures that really matter by analyzing company processes, economic models, and Value Propositions. They calibrate indicators by determining ranges of acceptable values based on stakeholder requirements, process capabilities and business goals. Managers then collect data act appropriately on the signal: “green” means everything is good, “yellow” means keep an eye on it, and “red” means take immediate action.
Why it works: With the right metrics, managers and teams focus on the most essential aspects of the job. They keep things under control and prevent downstream chaos. At top companies, executive dashboards reflect measures tied to cross-functional processes. When reward and recognition is tied to systemic improvement, managers and employees have greater incentives to work with other teams for mutual benefit.
4. Lean Six Sigma
What it is: Lean Six Sigma is the modern integration of two proven methods: lean production and six sigma quality. Lean (a technique pioneered by Toyota in the 1970s) emphasizes speed and helps identify and eliminate wasted time, motion, and raw materials. Six Sigma (a quality method named after an imperceptibly small error rate) aligns processes with customer needs and then reduces defects and excessive variation that causes dissatisfaction. Both have been used for years in manufacturing, and the combined approach is increasingly common in service environments.
How it works: Teams use formal methods to characterize process performance, estimate financial impact, uncover root causes of problems, design solutions, and implement changes. DMAIC (Define-Measure-Analyze-Improve-Control) or RIE (Rapid Improvement Events) provide teams with structure and statistical tools to effectively manage projects. Since teams make systemic improvements, results tend to be more dramatic and sustainable.
Why it works: Teams are often made of up representatives from all functions involved in the workflow. By working together towards common business goals, team members learn to appreciate the challenges people face in other functional areas. Besides creating more effective and efficient processes, a broader “systems view” and stronger interpersonal bonds between people promotes greater cooperation long after the project is complete.
White space problems are a natural part of organizational development. All companies deal with it in one way or another. Fortunately, proven tools and techniques can help young companies arrest its impact and promote scalable growth.
Three changes to your annual customer satisfaction survey can better focus your improvement initiatives
Many organizations conduct comprehensive customer satisfaction surveys this time of year in preparation for their annual planning exercises. Surveys aid decision making for process improvement initiatives and can also be used to test new product and service ideas. But most companies miss easy opportunities to gather valuable information along the way because they fail to do three things:
1. Ask segment identification questions.
Surveys typically ask customers for demographic information (age, gender, income, location) or company-specific information (products or services purchased, account size, salesperson) to categorize and compare responses. But these questions tend to be driven by whatever is easy to measure, not by what’s most essential to know. Asking respondents to identify themselves by market segments allows companies to align their products, services, and process improvements with the benefit of greater context.
For example, let’s say a travel company identified three distinct segments in their customer base: families vacationing on school holidays, seniors enjoying their retirements, and corporate group travelers celebrating successful sales years. While all may purchase travel services, each customer set values what the company does differently: holiday availability may be more important to families, while low travel cost may be more important to retirees. The company may also determine that some customer segments are more profitable than others or represent opportunities for growth. In this example, the company could ask, “Which statement best describes you?” and offer descriptions of the three segments.
When data are analyzed according to cleanly defined segments, suddenly results have far greater strategic impact. Prioritization becomes much easier when improvements can be traced to potential top-line revenue or bottom-line profit by customer segment.
2. Ask what’s important.
Many organizations use the same survey questions they’ve always used, which allows them to track customer satisfaction changes over time. This certainly makes sense, but doing so blindly eliminates the chance to verify what’s relevant. The Importance-Satisfaction (I-S) survey technique adds the question “How important is this to you?” along with a rating scale (e.g. 1= not at all important to 5 = extremely important) to track customers’ current and changing tastes. Collecting both importance and satisfaction provides a handy measurement of the gap between the two.
High-performing organizations periodically challenge their understanding of customer preferences. After receiving the prestigious Malcolm Baldrige National Quality Award a second time in 1999, Ritz-Carlton CEO Horst Schulze remarked:
“During our implementation of the Baldrige Criteria, I’ve learned that although the sparkle of the chandeliers is important, it is not the only priority of our guests. It doesn’t matter that the petunias are perfect if the valet dents your car or your bill is wrong. We’ve learned to make our customers’ priorities our priorities… We’ve shifted from looking ‘out’ from our own perspective to looking ‘in’ from the customer’s.” 1
Besides asking customers the right questions to determine areas of most concern, eliminating questions deemed unimportant allows organizations to make surveys shorter, which in turn increases survey response rates.
3. Analyze correctly.
Most companies use very basic calculations which can lead to the wrong conclusions. Managers typically compare average satisfaction scores from one period to the next or between one group and others. For example, if average satisfaction was 4.3 in 2012 and is 4.4 in 2013, managers often conclude satisfaction has improved 0.1. This may not be true—the determination has not accounted for experimental error, and the difference may actually be due to randomness. Student’s t or Analysis of Variance (ANOVA) is the correct approach when comparing sample means between two or more groups. Technically, if data are not normally distributed (most satisfaction data are skewed, not bell-curve shaped) or respondents select from a set of discrete ratings (e.g. categories 1-5 on a Likert Scale or 1-10 for Net Promoter Scores®), contingency tables with chi-square analysis then becomes the correct approach. To properly separate the “signal” from the “noise,” the analyst must calculate p-values to determine if differences between sample means are statistically significant.
Most executives want to understand cause-and-effect relationships and make predictions, not just make comparisons. For example, call center managers may want to know, “Which will have a greater impact on overall customer satisfaction: reducing call hold times or resolving issues on the first call?” In this case, analysts use multi-way cross-tabulation tables, but when evaluating four or more factors, the analyses are more elaborate (correspondence, classification trees, log-linear). The right methods can uncover a wide range of new insights, but managers should ask qualified statisticians for help.
Collecting customer feedback is a healthy first step for annual business planning. Adding segment identification, importance-satisfaction questions, and proper statistical analysis can then make a substantial impact on what is decided during business planning.
Excel-lens is a publication of Service Excellence Partners. Our unique approach helps founders at early stage companies better scale operations and manage growth. Contact us today.
Source:
- James Hunt, Elaine Landry, and Jay Rao, 2000. “Case Study: The Ritz-Carlton Hotel Company, 1992 and 1999 Malcolm Baldrige Quality Award Winner,” Journal of Innovative Management, Fall 2000. GOAL/QPC.
Net Promoter Score (NPS) is a registered trademark of Fred Reichheld, Bain & Company, and Satmetrix
Some companies never seem to have their act together. Others run like well-oiled machines. How does yours operate?
Organizational behaviors exist on a continuum. From most chaotic at the base to most disciplined at the apex, the maturity pyramid shows where companies tend to fall. It was conceived by quality guru Philip Crosby1 and later used in various forms by Hewlett-Packard,2 the Baldrige Performance Excellence Program,3 and others. Where does your organization fit?
- Firefighting. The organization is highly reactive, relying on heroics to get things done. Success depends on circumstances, individual strengths, and plenty of luck. Getting sales is the primary focus, and any customer who buys is considered valuable. While the environment may be very creative, there’s typically a lot of stress and finger-pointing, customers are often disappointed, and mistakes are frequently repeated. The company does little to no planning, except possibly annual budgeting, and has limited employee training.
- Control. The organization becomes more aware of processes and takes steps to ensure consistency and repeatability. Checklists, inspection points, and reviews begin to appear, and more often groups coordinate their work. Sales qualification gets better as the company understands some customers are more valuable than others. Some metrics are in place, and annual planning begins to include goals and key initiatives. Execution is spotty, but improving. The company considers employee training important and screens new hires.
- Continuous Improvement. The organization uses formal techniques to systematically improve products, services, and the processes that produce them. Managers and staff are mostly proactive, with the exception of dealing with the occasional hiccup. Metrics are aligned and used extensively, and planning includes a clear vision with short-term and long-term goals. The company successfully executes about half of its planned initiatives. Market segmentation begins to drive development, marketing and sales strategy, and offerings get consistently better. Training is structured and delivered enterprise-wide. Executives carefully construct and manage supply and distribution chains.
- Optimization. The organization’s plans and processes are well aligned and integrated, and potential risks are often identified and resolved in advance. Through a history of continuous improvement and targeted innovation, the company has developed “core competencies” that create competitive advantages and open up entirely new markets. Despite its size, the organization is customer-focused, agile, and routinely introduces successful products and services. Enterprise-wide change initiatives are executed effectively. The company plans and manages human capacity and capability over a multi-year horizon. Cross-functional teamwork is high and organizational learning is methodical and widespread.
- Leadership. A market-maker, the organization uniquely balances the "yin and yang" of creativity and discipline. The company experiments incessantly with breakthrough ideas, carefully evaluating the ones that work, and only then scales up and introduces them. Competitors struggle to keep up. The press lionizes the company’s methods as “best practices." Despite perennial successes, the company remains on guard against complacency. It quickly detects disruptive shifts in technology, world events, and competitive innovations and mounts strategic responses.
It’s probably no surprise that firefighting produces erratic outcomes. These companies tend to be new, small, or niche players, and they must fight to survive. Organizations with control orientations experience better success rates. Their customers are more often satisfied and buying again, and results are stable and predictable. These companies are “up-and-comers.” Firms doing a good job of continuous improvement are gaining ground, responding to market changes and becoming top competitors in their industries. Studies have shown that over a five-year period, these firms grow revenues and operating incomes twice as fast as those with control or firefighting behaviors.4 Companies optimizing performance are highly regarded and generally maintain top market positions. Examples include Boeing, IBM, Fed-Ex, and Toyota. Finally, a very small number of leading firms dominate their markets for fifteen years or more, producing at least ten times the return on shareholder equity than anyone else in the sector.5 They include Southwest Airlines, Intel, and Progressive Insurance.
Where do you see your organization? Be honest! Chances are you rank your company towards the lower end of the pyramid. That’s where the majority operate.
So what does it take to move up? As it is with individuals, healthy organizational behaviors are the result of good habits, born of discipline. When the right disciplines are combined into an effective strategic management system, excellence soon becomes a matter of habit. Along the way, greater discipline does not suppress creativity, but gives it necessary direction and boundaries. Senior leaders who progressively implement just enough structure at the right time, in the right place, and for the right reasons create beneficial habits and relentless progress.
Sources:
- Crosby, P., 1979. Quality is Free. New York: McGraw-Hill. ISBN 0-07-014512-1.
- Hewlett-Packard Process Consulting services, 1999.
- Baldrige Performance Excellence Program, 2013, 2013–2014 Criteria for Performance Excellence (Gaithersburg, MD: U.S. Department of Commerce, National Institute of Standards and Technology, http://www.nist.gov/baldrige/publications/business_nonprofit_criteria.cfm).
- Hendricks, K. and Singhal, V. March, 2000 “The Impact of Total Quality Management (TQM) on Financial Performance: Evidence from Quality Award Winners” DuPree College of Management, Georgia Institute of Technology
- Collins, J. and Hansen, M. T., 2011. Great by Choice: Uncertainty, Chaos and Luck—Why Some Thrive Despite Them All. Cumulative stock returns, dividends reinvested. Invest $10K on 12/31/1972 and hold until 12/31/2002. © CRSP, Center for Research in Security Prices, Booth School of Business, the University of Chicago.
