Nair says: If you depersonalise products, services and the people you work with, don t expect customer service.

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1 Corporate responsibility and customer service disconnect This article by Rajesh Chhabara appears in the October 2009 issue of the Ethical Corporation magazine. Should we expect superior customer service from companies that have good corporate responsibility reputations? Not necessarily, if customer satisfaction surveys are any indication. Disturbingly, many companies that hog the limelight in corporate responsibility rankings and conferences are often at the wrong end of customer satisfaction indices. Chandran Nair, a founder of Hong Kong-based thinktank the Global Institute for Tomorrow, and a regular contributor to Ethical Corporation, says: There is no relationship between corporate responsibility and customer service, though many of us would like to think there is. He says the reason is that corporate responsibility is cosmetic and superficial in most companies, being a function run by public relations departments. There is an industry of CR that has created a myth that corporate responsibility is at the core of company behaviour. How is it then that companies manage to make it to corporate responsibility rankings even though they may be overlooking customers, a key constituency of stakeholders? Peter Lacy, sustainability practice head for Europe, Africa and Latin America at management consulting firm Accenture, says: It s a symptom of the fact that we are not measuring the right things around corporate responsibility. He says most corporate responsibility performance metrics have nothing to do with real corporate responsibility issues in terms of alignment with business, corporate strategy and service delivery that will also include customer service. I would not therefore expect any correlation between high corporate responsibility ranking and customer satisfaction. Lacy believes that only those companies that get corporate responsibility right from a business perspective can be expected to drive customer service and corporate responsibility as aligned agendas. Unhappy employees, unhappy customers Observers point out that people-to-people relationships are the most important dimension of customer satisfaction, particularly in the case of consumer-facing businesses such as highstreet banking, telecommunications, utilities and retail. And companies that don t get their corporate responsibility right often undermine the value of high employee morale.

2 If employees are treated well, if they are driving policies that they agree with, if you have stories that employees are proud of, that will play out in terms of the interaction they have with customers on a daily basis, Lacy says. Indeed, some of the common complaints customers mention in surveys include rude behaviour of employees, uncaring attitude and inefficiency of the staff in dealing with problems. Several studies have concluded that there is a direct link between employee satisfaction and customer satisfaction. Employees can strongly contribute to an organisation s success by having a customer-centric approach in their work and in their work-related interactions. However, they are more likely to do so if they are satisfied with their job, concluded a 2005 study paper by Star Guide Research in the US. In a 1997 study, human resources consulting firm Development Dimensions International found evidence of a circular relationship between employee satisfaction and retention, customer satisfaction and loyalty, and increases in company profitability. Securing employees commitment and loyalty, therefore, is key to customer satisfaction. A combination of active engagement and healthy human resource policies and practices can boost employee satisfaction. Nair says that though many companies boast of employee inclusion and empowerment, most of them have no ability to implement this as they are too focused on meeting narrow goals of profitability. And some companies may be too big to provide personalised customer service. This has also led to technology replacing conventional people-to-people contact as companies have started relying on automated customer relationship management systems. One of the frequent complaints customers have shared during surveys is about automated answering systems that keep them away from an actual person. Lacy says companies should be very careful and selective in deploying technology. Technology has become a barrier to people-to-people interaction. An overuse of technology can actually negatively impact business over time through high customer turnover, while people-to-people contact can reduce that. Nair says: If you depersonalise products, services and the people you work with, don t expect customer service. Companies can outsource customer service to reduce cost. For example, for a UK-based company, it is cheaper to have a contractor in Bangalore to answer the call than appointing someone locally. This is a fundamental crisis of this business model, Nair says. He says companies are pushing away the true cost of doing business. The true cost of doing business is that you invest in people and you bring people in to work from within.

3 Bad outsourcing An increasing trend of outsourcing customer service to offshore call centres may have also added to the erosion of customer service and employee morale. One corporate responsibility commentator says: How can you expect loyalty from the people at the other end of the line who have no relationship with the company? Another commentator, who also wants to be anonymous, says: Badly managed outsourcing and offshoring can be a real problem because you lose that connectivity with the customer in the local context. But he says that well-managed outsourcing and offshoring, where companies can still maintain a strong control of the way in which customer service is being run and is not just transactional, can improve efficiency. While observers think there is a disconnect between corporate responsibility and customer service which is also reinforced by survey results companies themselves consider customer service an integral part of their corporate responsibility commitment. BT s president of group public and government affairs, Larry Stone, says: At BT, customer service is a business and strategic priority, and we aim to be the very best as it is essential for maintaining a long-term, mutually rewarding relationship with our customers in a competitive environment. Stone mentions BT s corporate score card that measures customer service and links executive pay with performance. He also points to the company s first time right programme and employee engagement policies to improve customer service. He adds: CR and service combine over time to help corporate reputation. It s also the right thing to do. He says that the One Poll survey is just one of many and that BT is not swayed by such rankings. BT does not believe that such surveys are a fair reflection of what our customers feel about the service we provide. Our own extensive surveys reveal far greater levels of satisfaction, especially for customers who make calls with us. Caroline Dewing, senior manager of communications strategy at Vodafone, another company that appeared on the One Poll s worst service providers list, says Vodafone UK made some organisational changes to customer services teams this year. While these changes were taking effect, some customers may have experienced longer delays than normal when they called for support, she says. We acknowledge this and have apologised to all our customers who found it hard to contact us. Helen Ireland, account director at Planet 2050, the corporate responsibility consulting arm of PR firm Weber Shandwick UK, says that a good CR reputation comes from companies engaging with stakeholders, including customers, and not only saying what they will do but acting on it. It s a shame if poor customer service is what the business is known for rather than good CR practice.

4 Interestingly, almost every company that produces annual corporate responsibility reports includes a section explaining how it cares for customers. We need to dig beneath these claims, says Mark Goyder of Tomorrow s Company. He says a responsible company should be able to demonstrate how it arrives at customer service targets, the extent to which it uses stakeholder feedback, how it reviews and realigns the targets and how it measures achievements. Nair is more sceptical. He says: Sustainability reports have become cosmetic exercises taken over by corporate communications departments. Many of the things they say in the report they have no way to verify. And they have no way to integrate it into their daily business. Responsibility s role One question, then, is what role corporate responsibility teams are playing in the customer service process. Peter Lacy says there is much more opportunity for the corporate responsibility team to be relevant to customers and relevant to the business units that deal with customers. He says: They need to be focused on understanding the relationship between responsibility and core business drivers. He adds that they need to understand the relationship between company policies and employee satisfaction, the relationship between employee satisfaction and customer satisfaction, and the relationship between customer satisfaction and revenue and profitability to drive a focused corporate responsibility agenda. Corporate responsibility teams have no power. Saying that corporate responsibility people have any powers is a fundamental intellectual dishonesty that permeates the CSR industry, Nair says. Even very large companies with millions of customers and thousands of employees usually have only four or five people in the corporate responsibility team. How can they have any real impact across the organisation? Nair also argues that many companies just don t care. They don t care because there is enough mindless consumption to keep them buoyant. Many people who buy things also don t care about customer service. He also says that some companies are selective in offering service. If you are an airline s first class passenger, you get service. But if you are flying economy class then they don t care. Clearly, companies need to rethink how they approach customer service in a way that reflects their commitment to corporate responsibility. Claiming corporate responsibility credentials while ignoring customers can eventually damage reputation and credibility. Leading companies, poor performers In the UK, the telecommunications giant BT was named as the nation s worst customer service provider in a survey conducted by online market research firm One Poll this summer.

5 The survey, based on responses from 5,000 people, ranked the10 worst companies in terms of customer service in the UK. Other companies with significant corporate responsibility reputations making the worst 10 list included Vodafone, HSBC and Barclays. BT ranks in the Dow Jones Sustainability World Index as a global leader in telecommunications sector, and Barclays, HSBC and Vodafone also feature in the index. In the US, companies with relatively good reputations for corporate responsibility and sustainability such as Gap, Levi s, HP, Wal-Mart, Citigroup and b>ge were in the bottom half of the American Customer Satisfaction Index 2008 in their respective industry categories. The index is produced by the University of Michigan s Ross school of business. While HP, Citigroup and GE rank in the Dow Jones Sustainability World Index, Gap has a spot in the Dow Jones Sustainability North America Index. Levi s is known for supply chain responsibility initiatives and Wal-Mart has recently set significant new standards in climate change and sustainability. Companies making the top ranks in the American Customer Satisfaction Index include names that are not known for loud corporate responsibility claims. These include clothing chains Jones Apparel and VF Corporation, discount stores Nordstrom and Kohl s, retailers Barnes & Noble and Costco, the bank Wachovia, washing machine maker Whirlpool, technology giant Apple and supermarket Publix. Citigroup, AT&T, HP, Compaq and HSBC found themselves in the bottom half of another US ranking in 2008, the Customer Experience Index, produced by Forrester s Research. Barnes & Noble was ranked the best in the list of 114 companies researched, and retail peers Kohl s, JC Penney, Target, Borders, Costco, Sam s Club were also among the top 10. Citigroup and HSBC also landed a place in the Customer Service Hall of Shame 2009, a survey conducted by online news portal MSN Money with research firm Zogby International that ranks the 10 worst companies. The survey also identifies the 10 best companies. USAA an insurance company ranks first. Nordstrom, Publix, Apple and Costco also appear on this list. There is a small number of companies that are admired for both corporate responsibility and customer service. Examples in the UK include John Lewis, Waitrose, Marks & Spencer and Alliance Boots, which made it to the top 10 performing companies in the latest UK Customer Satisfaction Index published in July 2009, produced by the Institute of Customer Service.