Building a maniacal customer-centric culture

Transcription

1 INTELLIGENT ENTERPRISE Building a maniacal customer-centric culture Tiger Tyagarajan, President and CEO, Genpact Client centricity is a stated core value of all enterprises. However, few organizations scientifically build processes to measure it, use it to direct incentives and rewards, and most importantly, leverage it to shape company culture. I call those that do so maniacally client focused organizations. The impact of such an approach is sustainable growth driven by stronger client penetration, a state in which client recommendations expand the frontline s reach and effectiveness, and a more engaged and stable workforce. Introduction Every enterprise in the world has client centricity at the core of how it defines itself. Processes are designed around clients, and all businesses state that the customer comes first. What differentiates some from others is the extent to which they focus on client centricity. Put differently, in moments of truth, what takes precedence in decision-making? Is it the client s needs or another set of considerations? The maniacally client focused organization will always choose what the client wants or what is optimal for the client, even if it hurts, and even if an alternative path would create more immediate value for the organization. A few crucial questions that we will explore in this paper are as follows: Why does this matter? Is there a demonstrable connection between customer loyalty and company growth? How do we measure loyalty? Are there biases in measurement systems and can we resolve them? How do we go beyond measurement? To foster the virtuous circle of satisfaction from loyalty to sustainable growth, how do we connect customer satisfaction to employee engagement? Is customer satisfaction enough? Customer satisfaction is defined as the number of customers, or percentage of total customers, whose reported experience with a firm, its products, or its services (ratings) exceeds specified satisfaction goals. 1 Is client satisfaction a central theme in our organization and does it lead to customer loyalty? 1 Paul W. Farris, Neil T. Bendle, Phillip E. Pfeifer, and David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc.

2 For any business, satisfied customers may act as a strong antecedent to loyal customers who usually stay with the organization, who sometimes expand the range of services they use, and who may even be willing to recommend the business to others, thereby providing a form of extremely effective and free marketing for the organization. Indeed, customer loyalty is widely seen as a key determinant of a firm s profitability, as discussed later in this paper. The corollary to being focused on client satisfaction and to making linkages to loyalty and growth is the necessity for a measurement system that enables a company to monitor loyalty. This focuses employees on the importance of fulfilling customer expectations and then exceeding them, as well as providing early warning signs of problems that could potentially affect profitability. However, an effective measurement system needs to differentiate between client satisfaction that just exists and that which is substantive and transitions into loyalty, actually motivating the behavior of clients. In other words, in measuring and obtaining ratings, are we actually receiving information that we can connect to substantive results such as company growth and increased revenue? In this context, a key measure related to client loyalty is willingness to recommend. First step: establishing a loyalty measurement system At its core, an effective loyalty measurement system needs to answer a simple question: will the client recommend your company to others? The Net Promoter Score SM (NPS) 2 is a customer-relationship metric that aims to provide a very clear answer to this by asking clients how likely they are to recommend a company or product/service to friends or colleagues. This is a significant step beyond asking if they are happy with their experience. It s not just about are you satisfied with what we do for you? but actually will you promote us and what we do for other organizations? In the NPS system, willingness to recommend is rated from 0 to 10, where 0 is highly unlikely to recommend and 10 is highly likely to recommend. Scores of 9 or 10 are viewed as promoter scores, 7 and 8 are passively satisfied scores, and 0 to 6 are detractor scores. NPS is then calculated as the percentage of promoters minus the percentage of detractors. Promoters are clients that are willing to stake their reputations to recommend the brand, and they only take this risk if they are enthusiastically Promoters are clients that are willing to stake their reputations to recommend the brand, and they only take this risk if they are enthusiastically loyal to the brand, the company and the product. loyal to the brand, the company and the product. 3 A passively satisfied client is happy with the services of the brand but sees an opportunity to do more. A small percentage of passively satisfied clients may sometimes act as promoters. A detractor is a client who is not satisfied with the service or the promise of the brand and will definitely not recommend it. As an example, Genpact has been using the NPS system since the late 1990s. We ask more than 4,000 people within client organizations twice each year whether they will recommend us and what we do, to other organizations. To get a holistic response, the survey is administered at the C-suite level as well as at the process owner level. The former provides us with a strategic view on the client relationship, guiding us as to what to focus on to meet their needs and strengthen the overall relationship. The process owner survey provides more operational insights, which help us stay alert and judge the health of operations on an ongoing basis. The score is lower at the C-suite level 100% of the time. This can be attributed to the fact that the senior-management expectation bar is set higher, and senior managers will always be looking for more results, efficiency, and innovation. It is also a more dynamic response based on the economic environment, industry challenges, and the fact that it is predominantly the bad news that travels up to the management level. In H1 2013, our first survey yielded scores of 64% NPS from process owners and 31% from senior level executives. The scores may vary from survey to survey, but are still indicative of a trend, since both scores have doubled over time and 64% is a historic high for us. Genpact has seen in the past that the process owner survey acts as a lead indicator for our C-suite results. Growth (indexed) Loyalty Leader Average Years Customer promoters drive real value: Buy more Stay longer Refer friends Provide feedback and ideas >2x CAGR Figure 1. Customer experiences translate into tangible business results 4 2 Net Promoter is a registered trademark of Satmetrix Systems, Inc., Bain & Company and Fred Reichheld. 3 Domenico Azzarello, Frédéric Debruyne, and Ludovica Mottura (2012). The Chemistry of Enthusiasm: How Engaged Employees Create Loyal Customers, Bain & Company. 4

3 Companies that achieve long-term profitable growth have NPS scores that are two times higher than the average company. On average, NPS leaders grow at more than twice the rate of competitors Beyond measurement: creating momentum and managing what you ve measured Bridging the gap between intention and action Consider the fact that businesses in our field are entering into long-term relationships, often for a range of services. Decisionmaking processes are lengthy and necessarily involve speaking to many people about whom they should partner with. Therefore, a set of clients willing to promote you and speak about you, reinforcing what you say about how you work, is very important, even invaluable. However, it is also important to consider that scores may not always mean what we think they mean. To create momentum for enterprise actions, one must understand what a high or low NPS means for the company. Why should we invest our energy into managing it? Can we link a higher NPS to company and revenue growth? It is imperative that a focus on customer loyalty be rooted in the belief that it is critical to the company s success and profitability. In fact, all of the values that guide how we work should be linked to profits and growth, because this means that programs will be far more effective than those based on the sentiment that it is the right thing to do. Corrective Action Predict Track Measure Insight Action Plan Implement Research shows a strong correlation between a company s growth rate and the percentage of its customers who are promoters. Reichheld suggests that the only path to profitable growth may lie in a company s ability to get its loyal customers to become, in effect, its marketing department. 5 Analysis by Bain & Company 6 has revealed that sustained value creators companies that achieve long-term profitable growth have NPS scores that are two times higher than the average company. On average, NPS leaders grow at more than twice the rate of competitors. Ensuring an effective customer loyalty program not only requires the right measurement science and method, such as NPS, but a holistic approach to embedding the system in the company, in order to achieve results that truly impact customers. The real issue then comes down to how to manage what you measure and how to predict and monitor the impact of corrective actions. What is needed is a continuous closed loop tracking system that makes sure that insight from the feedback received actually delivers impact to the client. This system ensures that the organization listens and acts on client feedback, monitors progress, and takes further corrective action on a continuous basis. Figure 2. Insight to impact - A continuous, closed loop tracking system Metric-driven models often inadequately account for individual relationships. Client relationships are between individuals and have often been developed over a long period of time. These sustained relationships can affect answers, leading to scores that are too high a sort of false positive, if you like. The consequence of this can be assessing clients as promoters based on their scores but discovering that when it comes to behavior, they do not actually act as promoters. This means that, as companies, we might not be getting the picture that is needed to drive improvements and, even worse, we might be creating complacency. It is critical to remember that the true score is not the score itself, and that it is the underlying behavior that is relevant. The entire hypothesis around NPS is that a person will actually do what they think and express that they will do, and that this will equal growth. However, companies must realize that most measurements reflect disposition and attitude as opposed to behavior. Put differently, NPS is an attitudinal measure of intention to recommend, 7 and does not in itself guarantee how a promoter may behave. 5 Fred Reichheld (2006) The Ultimate Question: Driving Good Profits and True Growth HBSP,

4 Given the potential gap between scores and promoter behavior, one way forward is to engage more with promoters. Promotion involves client referencing, but may also translate into things like how often a particular stakeholder mentions the partner in conversation or in social media, including in blogs, or even refers publicly to work produced by the partner, such as thought papers. These actions all contribute to creating greater awareness of the organization, which in turn helps to improve its recall factor. Encouraging promoters to undertake these actions necessitates a high level of continued engagement aimed at increasing their awareness and understanding of the company, and developing their confidence in the partner in its entirety. Achieving the requisite clarity on what s really happening on the ground may necessitate a self-driven revision in our scores, but it also prevents complacency. In addition, once companies know who their real promoters are, they know where to focus their attention, their appreciation, and their encouragement, and how to retain their actual promoters and coax the affectionate but inactive ones off the proverbial fence. Igniting a virtuous circle through employee engagement It is increasingly becoming clear that client loyalty is directly related to employee happiness, engagement, and enthusiasm. Recent research by Bain & Company reveals that engaged employees go the extra mile to deliver. Their enthusiasm rubs off on other employees and on customers. They provide better experiences for customers, they approach the job with energy which enhances productivity and come up with creative product, process and service improvements. They remain with their employer for longer tenures, which reduces turnover and its related costs. In turn, they create passionate customers who buy more, stay longer and tell their friends generating sustainable growth. 8 In fact, Bain & Company suggest that one of the most significant factors influencing customer advocacy on behalf of a particular company is the positive behavior and attitude of employees. Therefore, businesses like ours can benefit from asking how much time we spend concerned about staff satisfaction, levels of engagement, and enthusiasm. Do our employees love their work and work environment? Do they like it enough to stay? And just as we look at clients willingness to recommend, do our employees like the company enough to recommend it to others? Indeed, researchers suggest that just as the Net Promoter approach has strong descriptive and predictive power with customers, it works just as well in the realm of employee engagement 9 and may therefore be a useful tool for companies to use in terms of analyzing a pivotal source of customer advocacy. According to Bain & Company s research, 10 on the global level, employee NPS (willingness to recommend to others) is slightly negative in North America and significantly negative in Europe. It is clear that attaining high levels of employee engagement is not a simple matter, and requires deliberate operational and management decisions, such as: Creating a work culture that makes employees feel valued, provides opportunity for growth and a sense of affiliation, and rewards employee performance and initiative Changing performance metrics to emphasize customer satisfaction rather than time or cost Allowing employees a certain degree of autonomy in decisions relating to clients, and creating an environment wherein their individual contributions make direct contributions to changing the business outcomes for their customers Finally, we should be connecting customer loyalty to staff rewards. At Genpact, for example, NPS is one of the key metrics used in performance evaluation, which is further linked to compensation and reward decisions such as pay increments and bonuses for employees. In addition, the ability to understand the client agenda, craft solutions that create client impact, and build trust relationships with clients are key leadership competencies that are used to determine long-term leadership potential and promotions for our leaders. Bain & Company s promoter flywheel summarizes the market and organization dynamics involved: customer advocacy ( buy from them ) creates growth and opportunity, which in turn creates employee advocacy ( come work here ), resulting in enthusiasm, creativity, and consequently, excellence and trust that further reinforce customer advocacy and ignite the virtuous cycle. 8 Domenico Azzarello, Frédéric Debruyne, and Ludovica Mottura (2012). The Chemistry of Enthusiasm: How Engaged Employees Create Loyal Customers, Bain & Company. 9 Ibid. 10 Ibid.

5 Consolidating the solution: embedding customer centricity into company culture Culture isn t defined by nice sounding values and mission statements posted on the wall or website it is defined by the behaviors and principles being practiced every day, from the boardroom to the shop floor. 11 As mentioned above, a work culture that drives employee engagement and builds a sense of ownership amongst employees impacts customer relationships favorably. In addition, being able to adapt to and embrace the customer s culture, Client centricity needs to be a core value of any company s functioning, not just because it seems like the right thing to do but because it is integrally linked to growth and profitability, as well as to employee engagement and happiness and, ultimately, organizational sustainability. working as one virtual, extended organization, fosters trust, comfort, and longer-term business relationships. Indeed, culture is the overarching framework guiding companies. It s the way we do the things we do. It s about how you deal with situations, how you behave with each other, how you solve problems, including client problems, together, how you approach opportunities, how you accomplish trade-offs and how you take risks. If the way you do this, your culture, is a winning one, and is valued by clients, it becomes a differentiator and gives your company a competitive edge. More specifically, it gives you: Conclusion Client centricity needs to be a core value of any company s functioning, not just because it seems like the right thing to do but because it is integrally linked to growth and profitability, as well as to employee engagement and happiness and, ultimately, organizational sustainability. The NPS measure of willingness to recommend is relevant for both customers and employees. It provides them with a true north with regard to what they like and what they are ready to commit to. However, a measurement and explicit reward system alone may be too fragile to sustainably guide globally-distributed organizations. The key to sustainable client centricity resides in the ability to embed the ethos of the NPS or similar measurements into the company s culture, to the point where a single question can be answered univocally and positively: Do we at every point of time, at every crossroads, take the clients best interests into account and make the decisions that are best for them, and, in fact, focus maniacally on the customer? When this commitment is visible amongst employees who are passionate about it, it permeates the organization in a way that everyone can see and feel, shaping company culture, in terms of the way we do the things we do, even when explicit rules are not in place. And when this way is valued enough by customers and employees to prompt them to stay with us and recommend us to others, it is the key to sustainability, growth, and evolution. An edge with clients but also with staff, because as Culey points out, a dysfunctional culture can drive your best talent away; an exciting, supportive, and empowering one can attract and retain them. A defensible edge that is built on your history, your legacy, who you are, and how you got there, which means that it is very difficult to copy, at least when we are talking about a culture that runs deep and permeates the organization. This means it feels the same everywhere, and with everyone, no matter where you operate, who your employees are, or how young or old the organization is. Since global business relationships necessitate different cultures being able to work together everywhere, the value of this factor cannot be overestimated. 11 Sean Culey, Leadership and Culture: Part 1 The Case for Culture, The European Business Review.

6 About Genpact Genpact Limited (NYSE: G) is a global leader in transforming and running business processes and operations, including those that are complex and industry-specific. Our mission is to help clients become more competitive by making their enterprises more intelligent, meaning more adaptive, innovative, globally effective and connected to their own clients. Genpact stands for Generating Impact visible in better management of risk, regulations, costs and growth for hundreds of long-term clients including more than 100 of the Fortune Global 500. We offer an unbiased, agile combination of smarter processes, analytics and technology, which limits upfront investments and enhances future adaptability. We have 60,000+ employees in 24 countries with key management and corporate offices in New York City. Behind our single-minded passion for process and operational excellence is the Lean and Six Sigma heritage of a former General Electric division that has served GE businesses for more than 15 years. For more information, visit Follow Genpact on Twitter, Facebook and LinkedIn. Copyright Genpact All Rights Reserved. About the author Based in New York, Tiger has held a number of executive roles within Genpact since its inception, as well as at GE Capital. Prior to his appointment as Genpact s president and CEO in June 2011, Tiger served as chief operating officer and executive vice president of Sales, Marketing, and M&A. For more information, contact: tiger.tyagarajan@genpact.com