Best-practice complaint management

Academy ol Management Execuiive. 2002, Vol. 16, No. 4 Best-practice complaint management floberf /ohnsfon and Sandy Mebra Executive Summary This article reports the findings o/ the second phase of an ongoing research project into complaint management. The research was carried out in association with the Customer Service Network in the UK. The objective of this exploratory article is to discover what constitutes best-practice complaint management. The research took a grounded-theory approach based on rich case studies of the five outstanding United Kingdom service organizations identified in an earlier study. These organizations were a mix of public and private organizations and included a not-for-profit private health insurance company, a telephone banking operation, a chamber of commerce, a general hospital, and a High Street bank. As a result of the cross-case analysis, twelve insights into best complaint-management practice were identified including the need not only for speed of resolution but also a human touch, the need for closure not just fouow-ups, top-level involvement in complaints, the strategic use of complaints, a combination of decentralized and centralized tasks, and parallel systems for staff suggestions/complaints. Complaint Management and Service Recovery Managing complaints well and recovering customers, i.e., dealing with them after a service failure and (usually) a complaint, should be the cornerstone of an organization's customer-satisiaction strategy.' Recent empirically based research has demonstrated strong links between effective service recovery and not only customer satisfaction but also repurchase intentions, customer trust and commitment, and long-term relationships.^ Further, it has been shown that good recovery and complaint management have a positive impact on staff attitude and staff retention, process improvement and, arguably more importantly, on profit.^ Despite the importance of service recovery and its impact on customers, staff, and indeed the bottom line, most customers are dissatisfied with the way organizations handle their complaints and, worse still, few organizations learn from their mistakes and problems.'' 'Good' complaint-management practices seem to elude many organizations. Surprisingly, relatively little research has been conducted on service recovery and complaint processes. We know that customers, both internal and external, have expectations about the recovery process, such as acknowledgement, empathy, apology, and compensation.^ And we know that these expectations are in part based on such factors as the customer's attitude toward complaining, the magnitude of the service failure, prior experience, and attitude toward the supplier of service.^ But how should organizations design their processes to meet these expectations? Most customers are dissatisfied the way organizations handle their complaints. with Several authors have provided their views on the key elements of good practice.'' In summary, it would appear that 'good' complaint management has ten characteristics that fall into four categories: Complaint-Soliciting Culture Good service organizations take complaints seriously. Their cultures promote soiicidng, listening to, and resolving complaints fast. 145

146 Academy of Management Executive November Easily Understood and Accessed Complaint Procedures Procedures should be easy for the complainant and the staff to undeistand. Complainants should clearly understand what they should do to register a complaint, and staff should clearly understand what they should do to respond. Procedures should be easy for the complainant to access. This aspect is different from clarity of procedures. A procedure may be clearly expressed and readily understood, yet difficult for the complainant to access. Process Simplicity For the customer, a single point of contact should be sufficient to register the complaint and get the procedure for resolving the complaint underway. If possible, staff should be empowered to resolve the complaint. Customers do not want to hear, "I'll have to ask my manager and get back to you." No matter who responds to complaints, response should be rapid. During the resolution process, the complainant should be kept informed of progress toward resolving the complaint. Systematic FoUow-Up Organizations should have fo7iow-up procedures to check with customers to see if the resolution was satisfactory. Measurements of procedural effectiveness should assess whether the causes of complaints have been reduced, rather than simply whether the volume of complaints has been reduced. All data gathered during the process should be used to engineer out the problems and their causes. Managerial attention and focus on these key items can help organizations to seek out and respond quickly and appropriately to customer complaints. Equally important, by measuring these complaints systematically and designing procedures and measures that communicate the seriousness of complaints to all employees, the organization sends a strong message to employees and customers that it wants to know what problems are created, will follow-up on those problems, and wants customers to know that the problems will be solved and the factors that created the problems will be fixed. These characteristics of 'good' complaint management all contribute to a culture of concern over fixing problems and addressing complaints that distinguishes successful organizations from unsuccessful ones. Any service organization can benefit from assessing itself against these complaint-management practices recommended in the literature, to see if its own complaint-management processes can be improved. After searching the literature, we wanted to examine and evaluate the actual practices of "successful" service organizations in the United Kingdom to determine the extent to which they use these complaint-management practices. On the basis of our evaluation, we answer the question: What is best-piadice complaint management? Is implementation of the practices identified by prior research sufficient to make these best organizations the best, or do they engage in (or refrain from engaging in} other practices beyond the factors noted above that contribute importantly to their success? Selecting the Organizations 'Successful' organizations were identified in an earlier empirical benchmarking study which surveyed the customer service managers in 40 UK service organizations.^ The benchmarking questionnaire was both wide ranging and detailed, with around 200 questions {developed from the literature and pilot tested in three organizations) covering such dimensions of complaint management as: the complaint management process the culture and attitude of the organization toward complaints improvements driven by the complaint process improvements driven by staff satisfying customers who complain retaining customers who complain the financial benefits the retention and loyalty of complaint-handling staff the attitude of complaint-handling staff appraisal and reward of complaint-handling staff recruitment and training of complaint-handling staff

2002 Johnston and Mebia 147 The research developed and tested several scaled items, such as complaint-management processes, which were based on an unweighted index of the characteristics of 'good' complaint management listed earlier. Other items included customer satisfaction, customer retention, staff attitude, staff retention, process improvement, and financial performance.^ The study found significant correlations between the 'goodness' of the complaintmanagement process and customer satisfaction and retention, staff attitude and retention, process improvement, and the organization's financial performance. In order to identify the most 'successful' organizations in the study, each responding organization's scores for customer satisfaction, retention, process improvement, and financial performance were aggregated (unweighted) into a single index (referred to as business performance). Figure 1 shows each organization's position in terms of its complaint-management process and respective business performance. Despite this rather crude amalgamation of different outcomes of complaint management, an interesting correlation exists between business performance and complaint process of 0.81 (significant at a 1 percent level). Because we had neither time nor resources to study all organizations, we selected the top-scoring five organizations (circled in Figure 1) to study further as the benchmarks. These organizations were: Western Provident Association (WPA), Taunton (a not-for-profit private health insurance company) First Direct, Leeds (a telephone banking company) Milton Keynes Chamber of Commerce (an association to promote local commercial interests) Glan Clwyd District General Hospital, Rhyl (a general, public hospital) Barclays Bank (a High Street bank) It is interesting to note the mix of for-profit and not-for-profit organizations, and large and small organizations (from 50 to over 70,000 employees), in this selection. In order to explore how these successful organizations designed and managed complaint processes, balancing the need to satisfy customers with the need to use complaints to improve processes and financial performance, we took an interpretative, grounded theory approach.^ This case-based research has limitations in terms of generalizability but has the key benefit of allowing an investigation into a range of contextual variables." Interviewing the Managers Structured interviews were held with senior managers at each organization. Discussions were wide-ranging but specifically covered: The complaint process How did these organizations handle complaints once they were received? Also, given that there may be many more customers who are unhappy and do not complain, how did they ensure that as many dissatisfied customers as possible voiced their concerns and therefore gave the organizations a chance to recover them? Organizational cultuie Why did these organizations believe that complaint management was a key business priority or area of activity, and how did they reach that state of belief? Impiovements and learning How did the organizations learn from complaints, such that they could improve the delivery of their service and strong 5 - * * * weak 1 1 weak 5 strong Complaint processes Figure 1 Complaint Processes versus Overall Business Performance

148 Academy of Management Executive November prevent complaints of the same type from recurring in the future? Satisfaction of customers who complain How did the organizations know that they were truly satisfying a customer who complained and not merely assuming that, because they had replied to a complaint, the customer must automatically be happy? Retention of customers who complain How did the organizations know that those customers who complained were actually staying with them, including those that they believed were satisfied with the outcome of the complaint? Value of complaints How did the organizations place a value on complaint management, not just in terms of the cost associated with managing complaints but also on the potential benefits from improving service delivery and retaining more customers? The interviews were recorded, then transcribed, and additional information and reports were requested to triangulate the information provided. These five organizations were chosen because of their high average scores in overall business performance and complaint processes. In terms of complaint processes, they all scored an average of over 4, but were their scores consistently high across all the characteristics of 'good' complaint management? The answer is yes but with one exception. On having follow-up procedures, two organizations only scored themselves 1. Having follow-ups with customers was not, interestingly, related to the size of organizations: one of the poor scorers was one of the largest organizations in terms of both customers and turnover, and the other was one of the smallest. Managers at both organizations said this was an area they were working on and, in due course, they would expect their scores to be as high as in the other areas. How Leading Organizations Manage Complaints The structured discussions with senior managers provided twelve important insights about how these leading organizations managed complaints. These insights build on, and indeed go beyond, the characteristics of 'good' complaint management indicated earlier. Each of these additional points is described below with some examples from the organizations. The key learning points, or recommendations, are collected together in the concluding section. 1. Speed hut with a human face Each of the five organizations had processes that were designed to provide a speedy response to complaints. They all had very similar service standards in terms of acknowledging and replying to complaints. A common standard was to acknowledge within 24 hours and, within five working days after an investigation, provide a full reply with an explanation of the causes and details of actions to be taken. The need for a speedy response is recognized as vital if complaining customers are to be satisfied. In addition, all of the organizations made a point of calling the customers on the phone whenever possible. This was done not simply to provide a speedy acknowledgement of the complaint but importantly to give the organizations an opportunity to present a human face to the customer, to ensure that the complaint process was seen as being genuine and caring rather than routine and impersonal. The need for a speedy response is recognized as vital if complaining customers are to be satisfied. 2. Tease out complaints appropriately Managers at each organization were convinced that the complaints they received were the tip of the iceberg, and that for each complaint there were many more unhappy customers that they did not know about. The respondents were uniformly of the opinion that they needed to encourage customers to complain and to make it as easy as possible for them to do so, because this alone gave them the opportunity to convert unhappy customers into loyal ones. Customers were encouraged to complain and comment, and systems were put in place to make this as easy as possible. However the approach taken by each organization was quite different. Some of the organizations, such as WPA and Barclays Bank, relied on leaflets and posters informing customers that comments of any sort were welcome. These were readily available to their customers and well publicized in communications such as statements and annual reports as well as in branches and offices. First Direct, because of the telephone nature of their business, was of the opinion that a high percentage of unhappy customers would complain because of the ease of doing so (their estimate was that 80 per cent of their dissatisfied customers would complain). Glan Clwyd District General Hospital, on the other hand, found

2002 Johnston and Mehia 149 that their patients were oiten reluctant to complain because of fears about the implications for their treatment, however unfounded. To combat this reluctance, the hospital devised a separate system whereby patients could register their comments without being recorded as complainants. Staff also carried out regular ward visits to chat with patients in a non-intimidating or non-confrontational atmosphere, in order to try to 'tease out' complaints. Encouraging customer complaints and making it easy for customers to register their dissatisfaction also had the benefit of letting the organizations know quickly when something was going wrong. Barclays Bank and Glan Clwyd Hospital, for example, both provided tear-oif slips with their complaints leaflets so that customers did not have to try and find a piece of paper. The ward visits staff made allowed them to learn about processes that were going wrong in real time, and they could therefore try to fix them before the patient was discharged. 3. No-blame culture It is important to note that none of the organizations provided any form of financial reward to employees for encouraging complaints. Doing so was seen to be unnecessary, even running counter to their desire to make encouraging complaints a part of normal practice. Furthermore, one common feature of all the organizations was an acceptance that not only were mistakes inevitable but that they were also acceptable, except where repeated mistakes were being made. These 'no-blame' cultures encouraged staff to take initiatives to satisfy complaining customers and to look for solutions without first thinking about whether they might be punished for going outside their job descriptions {although there were limits as to what staff were allowed to suggest). If staff did exceed those limits, the approach taken, by First Direct for example, was to look for learning points afterward and to coach the mistakes out. One common feature of all the organizations was an acceptance that not only were mistakes inevitable but that they were also acceptable. 4. Create closure The organizations were well aware that customers sometimes felt that they were no longer involved once they had made their complaint and, further, that the complaint-handling processes themselves sometimes led to further dissatisfaction. Three of the organizations followed up on complaints, and the other two intended doing so in due course. The three better-performing organizations went beyond follow-ups and were determined to ensure closure. WPA, in particular, was very keen to ensure that once a complaint had gone through the process, the customer was contacted to try and determine how the person felt about both the outcome and the experience of the complaints process. By doing this WPA hoped to avoid falling into the trap of assuming that simply because the complaints procedure had been followed, then the customer must be happy with the outcome and the process. Closure, however, involved not only ensuring that the customer was satisfied (external closure) but that the organization had learned from the experience and had implemented changes to its business processes. Internal closure was ensured through feedback mechanisms involving senior managers, to check that agreed changes had been made to processes and systems. 5. Proactive top-level involvement Complaints were given a high profile with toplevel involvement in complaint management. This was not simply lip service and went well beyond voiced 'concern' and dealing with escalated complaints. In the case of WPA, a main board director with the title Director of Best Practice oversaw complaint management as part of his responsibilities. At WPA complaints were taken so seriously that every time a customer complained, a senior manager, and on occasion the Director himself, offered to visit that customer anywhere in the country. The purpose was not only to demonstrate how seriously they viewed the complaint itself but also to provide senior managers with the opportunity of learning as much as they could about why the organization failed to satisfy the customer. WPA could make this offer because they received very few complaints 156 in 1998 out of a customer base of over 500,000 and only a small proportion of those took up the offer of a visit. Senior managers at the other organizations involve themselves with complaints in different ways. At First Direct, for example, the CEO sits not in an office but at a desk in the corner of the bank's vast open plan call center in Leeds. He is not only willing and available to talk to staff members when they feel there is an issue to be resolved but is also available to talk to a customer if the tele-

150 Academy of Management Executive November phone banking representative considers it appropriate. 6. Complaints A strategic issue Complaint-management professionals in the casestudy organizations were involved in business meetings and decisions and had a direct input into strategic planning meetings. Barclays, for example, formally involved complaint-management professionals in their strategic planning sessions, so that their experiences of customer concerns could be incorporated into planning at the bank. At Glan Clwyd District General Hospital, issues raised by complaints were fed directly into the training of staff. All the organizations viewed complaints as not only a key contributor to operational improvement but also to the organization's longterm success. 7. A combination of centralized and decentralized complaint handling The five organizations had a mixture of centralized and decentralized approaches to complaint handling, though the allocation of specific tasks varied. Senior managers at WPA were of the opinion that individual business units should be responsible for dealing with their own complaints, though one director had overall responsibility for complaint management. The company did not factor in the time and effort required to manage complaints when scheduling workloads and deciding productivity levels, so if a business unit had to deal with a complaint, they either had to make the time during the working day or do it when scheduled work had been completed. In either case the complaint still had to be dealt with within prescribed service standards. The view at WPA was that this focused the minds of employees and encouraged them to try to avoid making mistakes in the first place. This sort of approach may not be desirable where an organization has a number of retail outlets, branches, or departments across many sites, in which case a central unit might be more desirable to ensure consistency across a wide geographic spread. Barclays Bank had a central complaints unit that dealt with all complaints addressed to the bank. If complaints were made at a branch, the branch manager attempted to resolve them because it would be nonsensical to instruct customers to write in to the head office without making an attempt to satisfy them first. However, even if the branch manager was successful in dealing with the complaint, information about the complaint and its resolution was sent to the head office. Whether responsibility for managing complaints was held centrally or was diversified across business units, a common feature at all the organizations was that the analysis of complaints in terms of numbers, types, and trends was performed at head-office level. 8. Focus on communication and improvement Complaints data at all the organizations were compiled centrally, and regular reports (at least monthly) were circulated and discussed not just by managers and executives but they also formed part of team briefings and were published in staff newsletters. All of the organizations were of the opinion that communicating complaint data was a good thing as it promoted awareness in staff of the problems and issues that were being faced and how the organizations were performing in tackling them. All of the organizations were of the opinion that communicating complaint data was a good thing. Another common feature was whether complaints were dealt with centrally or whether it was the responsibility of individual business units, departments, or branches to ensure that changes to processes specific to their areas were being identified and followed up, and that skills shortages were being identified and addressed. At WPA, specialist teams had been formed to aid this process by analyzing why processes went wrong and ensuring that they were fixed, with other teams providing coaching and training where necessary. At First Direct, project teams took charge of the changes to ensure that they were consistent and fitted with other business systems. At Barclays, the central unit was responsible for overseeing improvements and changes to processes, and departments and branches would be reported to senior management if no actions were forthcoming. 9. Internal complaints systems Staff were seen as a major source of improvement ideas. At First Direct, staff were expected to contribute suggestions as part of their role, and to facilitate their contributions the organization allowed time for staff to meet informally to discuss

2002 Johnston and Mehia 151 problems and issues that they were encountering, so that suggestions on how to tackle them and prevent reoccurrence could be made. WPA even encouraged internal complaints in the belief that poor service from one area of the business to another eventually manifests itself as poor service to customers. These internal complaints were treated in the same way as customer complaints; i.e., they were logged, tracked, analyzed, improvements were sought, and the same teams that coordinated changes as a result of customer complaints also took responsibility for them. WPA even encouraged internal complaints in the belief that poor service from one area of the business to another eventually manifests itself as poor service to customers. At the Milton Keynes Chamber of Commerce, the empowerment given to staff was such that they were allowed to change their own processes without seeking approval, provided that they satisfied the Chamber's auditing team. A formal review of processes took place regularly, as did formal audits, so any changes that were likely to cause problems for other business areas could be neutralized. However, when it came to deciding how to tackle particular tasks, the Chamber allowed its staff a large degree of freedom to decide how to act. JO. Surveys targeted on problems and resolution All five organizations carried out extensive work to determine whether customers were satisfied with the service they received, and WPA and Glan Clwyd District General Hospital specifically attempted to determine satisfaction levels with their complaints processes. The Milton Keynes Chamber of Commerce regularly surveyed its customers on all aspects of the service they had received, and as part of these surveys, questions were asked about whether customers had encountered problems and if so whether the problems had been resolved satisfactorily. Glan Clwyd Hospital specifically targeted patients who had complained and asked detailed questions about their experiences. WPA, on the other hand, attempted to talk to every complainant once the issue had been resolved and offered to visit each one at the end of the process, just as they did when the complaint was first received. First Direct and Barclays did not specifically ask customers who complained about their experiences, but as befits very large national institutions, they carried out regular customer-satisfaction surveys which included questions about their satisfaction with problem raising and resolution. Both of these organizations also made a point of contacting customers who had been particularly badly affected or treated. Barclays even empowered staff to send goodwill gestures such as flowers or wine if the member of staff felt this would help repair any damage done to the relationship with the customer. The three financial services organizations and the Chamber of Commerce attempted to talk to customers who informed them that they were closing accounts, canceling policies, or dropping memberships. 11. Focusing staff attention through knowledge of the benefits of complaints All the organizations involved in the research believed in the value of complaints as a means of learning about themselves, to improve customer satisfaction and retention and thereby derive financial benefits. At WPA, First Direct, and Barclays, perhaps unsurprisingly because all three are financial services organizations, the belief was that excellent service was becoming a 'given' because of competition and consumer choice, and that a new differentiator, service recovery, would give them an edge over competitors. The opportunity to convert a dissatisfied customer into a loyal advocate, and therefore reap the rewards of retention and referral, was quoted by all three as one of the basic reasons for managing complaints well. The organizations were all aware of the value of satisfying complainants because of the effect this had on customer retention and on the referral business that could be generated from converting dissatisfied customers into advocates. This awareness even applied to the hospital, although to a lesser degree, which competes to some extent with alternate healthcare providers in the area as well as private hospitals. First Direct estimated that 40 to 50 percent of its business was gained through referral, which is very high for the sector, and WPA came out on top of a survey by NOP, a market research organization, as the private health insurer most likely to be recommended by its customers. When it came to retaining customers who complain, WPA, as a mutual organization, found that it could make decisions that other companies owned by shareholders, or with limited and pressured budgets, might not be able to. It would not be

152 Academy of Management Executive November unknown for WPA to agree to pay a claim for medical expenses that the customer genuinely thought was allowable even if it was agreed that the company had no legal obligation to do so. In such cases the organization looked at the potential worth of retaining the customer over many years and the long-term benefit that such a decision would bring to the company. 12. Focusing senior manageinent attention through the costs and savings from complaints A good understanding of the costs (both financial in terms of staff costs, compensation, and goodwill costs ^as well as cost of time) associated with complaint management could be found at each of the five organizations. All of the organizations calculated how much complaints were costing them. They used this information in different ways. All of them undertook this analysis in order to forecast budgets and expenses. However, the Milton Keynes Chamber of Commerce also believed that showing such information to managers and staff was a good way of focusing their minds on the practical realities of not getting things right the first time. AU of the organizations calculated how much complaints were costing them. First Direct was attempting to go further than this by trying to formulate a measure of 'customer experience' which would help determine the lifetime value of their customers. They believed they if they could also determine by how much that 'customer experience' was either enhanced or degraded, depending on how well or badly a complaint was handled, then they could understand the lifetime value of a complaining customer. First Direct was convinced that a positive experience of complaining could greatly increase the customer's lifetime worth to the company, which therefore demonstrated the value of excellent complaint management not just in terms of customer satisfaction but also in longerterm profitability and loyalty. WPA was also convinced that a positive experience of complaining resulted in a customer who was much more loyal, much more likely to refer them to friends and family, and much more likely to be more profitable in the long term. First Direct was the only organization of the five that was formally attempting to link the costs associated with handling complaints and making improvements to potential savings in the future. They were doing this by attempting to determine how many future complaints of a specific type could be avoided if they took the necessary steps to correct a problem that was giving rise to those complaints at the moment. By simply multiplying the total cost of handling one of those complaints by the number of potential complaints of the same type that had been avoided in the future, they hoped to show how much money could be saved by learning from complaints and identifying and making improvements. From Good Practice to Best Practice Our objective was to try to discover what the best organizations are doing that might set them apart in terms of how they manage complaints. The findings from the top five organizations, identified in the earlier benchmarking study, suggest that the literature-based characteristics of 'good' complaint management, presented earlier, are not in themselves sufficient. As a result of this study, we would suggest that there are a number of additional ways in which organizations can achieve best-practice performance in complaints management: 1. It is well accepted that speed of response is vital. However, organizations should also use rapid responses as an opportunity to demonstiate the human face of the oiganization through personal contact rather than pro forma acknowledgments. 2. Many organizations already accept that complaints are the tip of the iceberg but are reluctant to look below the surface. It is critical that organizations not only encourage complaints but also choose apptopiiate methods of doing so. 3. Rewarding staff to encourage or collect complaints is not necessary but requires a 'nohlame' culture that accepts mistakes and makes complaints a normal but positive part of organizational life. 4. While many organizations recognize the value of follow-ups, ciosure is a different matter. Closure is concerned with the process and its outcomes for both the customer and the organization. Closure is the opportunity to ensure that the customer is, in fact, happy with the outcome and also that the organization has made changes, where appropriate, to its systems or procedures to ensure that the problem does not recur. 5. The need for top-level support of complaint management is not a surprising finding, but

2002 Johnston and Mehia 153 top-level proactive involvement in a variety of aspects of complaint management presents a challenge to many senior managers. Day-to-day support of and involvement in front-line issues not only demonstrates real concern to both staff and customers but provides the impetus to make changes that will make a difference. 6. Complaints are not always concerned with operational issues. Many of them expose crossfunctional and strategic issues that can be dealt with only at a senior organizational level. Information from complaints needs to be incorporated into strategic planning systems. 7. Excellent complaints management requires both a centralized and decentralized approach, though the allocation of tasks may vary. At the minimum, decentralized units should be used to collect information and deal with customers and problems where they can, and centralized departments/teams/individuals should be responsible for analysis of trends with overall responsibility for policies and overseeing improvements. 8. Reports of complaint issues and learning points need to be widely circulated throughout an organization. The first step in being able to use complaint data to drive improvement is having a common understanding of the issues and problems. 9. Customer complaints should not be the only source of information to help drive improvements. Employees should be used as a major source of ideas. Their suggestions, issues, and 'complaints' should be logged and tracked, indeed treated as seriously and systematically as customer complaints. 10. Satisfaction surveys should not shy away from directly seeking information about problems and their resolution. One might argue that obtaining such information is more important than collecting traditional satisfaction data. 11. The acid test that should be applied to all complaint-management systems is whether or not they result in action and lead to improvements for (he financial benefit of the organization (for example, through the reduction of costs and time spent dealing with problems) and for the benefit of customers (for example, by preventing dissatisfaction from recurring). Knowledge of these benefits provides the motivation for staff to deal with complaints in a positive manner. 12. Motivation for senior management should be provided by information about the financial costs and benefits of complaints, so it is important that organizations are able to develop means of assessing the financial impact of complaints and the value of improvements that should result from them. It is important to recognize that these organizations did not see complaints and complaint management in isolation but as part of a total approach to good management. Thus, best-practice complaint management involved not only the design of sound operational systems and procedures but was also concerned with cultural issues such as no-blame and openness, the integration of issues into training programs, motivational aspects, and the calculation and analysis of financial implications. These organizations did not see complaints and complaint management in isolation but as part of a total approach to good management. This exploratory and grounded study has a number of limitations. Aside from the small sample size, which is not inappropriate for this type of study, the main concern is that it only evaluated 'successful' organizations. In order to expand and validate our findings, it will also be appropriate to compare them to findings regarding less 'successful' organizations where the complaint processes did not possess the characteristics identified in the literature, in order to ascertain if the features identified above are applicable only to 'successful' organizations. In addition, this research has been concerned with the 'what': What is it that the successful organizations do that sets them apart? One direction for future research might be to study the 'how': How do the successful organizations go about developing an appropriate culture and ethos that support good complaint management? These successful organizations had 'no-blame' cultures which underpinned their ability to encourage, collect, and respond positively to complaints, coupled with an ethos of concern for improvement driven by an understanding of the costs and benefits of so doing. Acknowledgment The authors would like to thank Bruce Ranee, principal of the Customer Service Network, for his assistance in this research and ihe development of this paper. For more information visit www.customeinet.com.

154 Academy of Management Executive November Endnotes ' Tax, S. S., & Brown. S. W. 1998. Recovering and learning from service failure. Sloan Management Review, 40(1): 75-89. ^ See. for example. Halstead, D., & Page. T. I. 1992. The eifects of satisfaction and complaining behavior on consumer repurchase intentions. Journal oi Customer Satisfaction, Dissatisfaction and Complaining Behavior, 5: 1-11; Spreng R. A., Harrell, G. D., & Mackoy, R. D. 1995. Service recovery: Impact on satisfaction and intentions. Journal of Services Marketing, 9(1): 15-23; Brown. S. W.. Cowles, D. L.. & Tuten, T. 1996. Service recovery, its value and limitations as a retail strategy. /niernafionaj Journal of Service Industry Management, 7(5): 32-46; Tax, S. S., & Brown, S. W. 1998. Recovering and learning from service iailure. Sloan ManagemeT}t Review. 40(1): 75-89; Smith, A. K., & Bolton, R. N. 1998. An experimental investigation of customer reactions to service failure and recovery encounters: Paradox or peril? 7ournal of Service flesearch, 1(1): 65-81; Smith. A. K., Bolton, R. N., & Wagner, J. 1999. A model of customer satisfaction with service encounters involving failure and recovery. Journal of Marketing Research. 36(August): 356-372; and Andreassen, T. W. 2000. Antecedents to satisfaction with service recovery. European 7ournai of Marketing. 34: 156-175. ^ Johnston. R, 2001. Linking complaint management to profit. Internationa! Journal of Service Industry Management. 12(1): 60-69. ^ Tax, 8f Brown. 1998, op. cit. ^ See, for example, Bitner, M. J., Booms, B. H., & Tetreault, M. S. 1990. The service encounter: Diagnosing favorable and unfavorable incidents. Journal of Marketing, 54(Ianuary): 71-84; Singh, J. 1990. A typology of consumer dissatisfaction response styles. Journal of Retailing. 66(1): 57-98; Kelley, S. W., Hoifman, K. D.. & Davis, M. A. 1993. A typology of retail failures and recoveries. Journal of Retailing, 69(4): 429-452; Johnston, R. 1995. Service failure and recovery: Impact, attributes and process. Advances in Services Marketing and Managemeni: Researcii and Practice. 4: 211-228; Boshoff. C. R. 1997. An experimental study of service recovery options. /nfernationaj/ournaj of Service Industry Management. 8(2): 110-130; Johnston, R., & Fern, A. 1999. Service recovery strategies for single and double deviation scenarios. Tbe Service Industries Journal. 19(2): 69-82; and Bowen. D. E.. & Johnston, R. 1999. Internal service recovery: Developing a new construct, /nfernafionai Journal of Service Industry Management. 10(2): 118-131. ^Johnston, R. 1998. The effect of intensity of dissatisfaction on complaining behavior. Journal ol Consumer Satisfaction. Dissatisfaction and Complaining Behavior. 11: 69-77; Tax, S. S., Brown, S. W.. & Chandrashekaran, M. 1998. Customer evaluations of service complaint experiences: Implications for relationship marketing. Journal of Marketing. 62: 60-76; Smith & Bolton, op. cit.; and Smith, A. K,, Bolton, R. N.. & Wagner, J. 1999. A model of customer satisfaction with service encounters involving failure and recovery. Journal ol Marketing Research. 36(August): 356-372. ' See, for example. Hart. C. W. L., Heskett. J. L., & Sasser. W. E. 1990. The profitable art of service recovery. Harvard Business Review. 68(4): 148-156; Johnston, 1995, op. cit.; Barlow. ].. & Mailer, C. 1996. A complaint is a gilt. San Francisco: Berrett- Koehler; Boshoff, C. R. 1997. An experimental study of service recovery options. /n(erna(ional Journal of Service Industry Management. 8(2): 110-130; Van Ossel, G., & Stremersch, S. 1998. Complaint management. In Van Looey, B., Van Dierdonck. R., 8E Gemmel, P. Services management: An integrated approach. Financial Times Pitman Publishing: 171-196; Williams, T. 1996. Dealing with customer complaints. Aldershot: Gower; and Johnston, R., & Clark, G. 2001. Service operations management. Harlow, England: Prentice Hall. ^Johnston, 2001. op. cit. ^ Ibid, The respondent in each organization was typically the senior manager responsible ior the customer service department. These people were chosen because they would have an understanding of the organizational issues, such as the complaint process, staff recruitment, and training, as well as an understanding of the customer perspective, i.e.. levels oj customer satisfaction and retention, for example. The organizations were self-selected to take part in the study. The questions on which this paper is based used a 1-5 scale with descriptions associated with points 1, 3, and 5. with 1 representing poor practice and 5 good practice. Thirteen questions concerned the complaint process (covering the characteristics of good complaint management listed earlier). There were also four questions on customer satisfaction, five on retention, six on improvements, and five on financial performance, including lifetime values, profitability (for-protit organizations), switching, and referrals. The results in each area were aggregated (unweighted) to form an index. ' Glaser, B. G., & Strauss, A. L. 1967. The discovery of grounded theory. Chicago: Aldine. Grounded theory is an interpretative, hermeneutic, case-based approach to research which allows for an investigation of the many contextual variables. It is not based on a priori assumptions or hypotheses but derives explanations of social phenomena based on observations, deduction, and interpretation. While a grounded-theory approach is unsuitable ior drawing inferences to a larger population, the objective of such research is to use case studies for explanatory purposes and to generalize back to, and refine, theory, " Yin. R. K, 1994. Case study research: Design and method. 2'"^ ed. London: Sage. Robert Johnston is professor of operations management at Warwick Business School. His research interests include service design, service recovery, performance measurement, and service quality. He is the coauthor or editor of over 25 books and has contributed 28 chapters to other texts. He has published around 40 articles in referred journals and has written over 60 case studies and three computer-based simulations. Contact: bob.jdhnsfon@warwict,ac.ut. Sandy Mehra is mortgage risk manager at the Coventry Building Society, a mutual organization offering mortgages and savings products to nearly a million members. The Coventry is the UK's fifth-largest building society with assets approaching 7.5 billion (Sterling). His principal focus is in maintaining leading quality through policies, procedures, and systems. He received his MBA from Warwick Business School in 2000. Contact: smehra@ coven (rybuijdingsociety.co.ut.