What is an organization performing when it asks questions such as why was customer revenue so high

Reprint: R1007L

The notion that companies must go above and beyond in their customer service activities is so entrenched that managers rarely examine it. But a study of more than 75,000 people interacting with contact-center representatives or using self-service channels found that over-the-top efforts make little difference: All customers really want is a simple, quick solution to their problem.

The Corporate Executive Board’s Dixon and colleagues describe five loyalty-building tactics that every company should adopt: Reduce the need for repeat calls by anticipating and dealing with related downstream issues; arm reps to address the emotional side of customer interactions; minimize the need for customers to switch service channels; elicit and use feedback from disgruntled or struggling customers; and focus on problem solving, not speed.

The authors also introduce the Customer Effort Score and show that it is a better predictor of loyalty than customer satisfaction measures or the Net Promoter Score. And they make available to readers a related diagnostic tool, the Customer Effort Audit. They conclude that we are reaching a tipping point that may presage the end of the telephone as the main channel for service interactions—and that managers therefore have an opportunity to rebuild their service organizations and put reducing customer effort firmly at the core, where it belongs.

Conventional wisdom holds that to increase loyalty, companies must “delight” customers by exceeding service expectations. A large-scale study of contact-center and self-service interactions, however, finds that what customers really want (but rarely get) is just a satisfactory solution to their service issue.

Reps should focus on reducing the effort customers must make. Doing so increases the likelihood that they will return to the company, increase the amount they spend there, and speak positively (and not negatively) about it—in other words, that they’ll become more loyal.

To meet customers’ expectations, reps should anticipate and head off the need for follow-up calls, address the emotional side of interactions, minimize the need for customers to switch service channels, listen to and learn from disgruntled customers, and focus on problem solving, not speed.

The idea that companies must “delight” their customers has become so entrenched that managers rarely examine it. But ask yourself this: How often does someone patronize a company specifically because of its over-the-top service? You can probably think of a few examples, such as the traveler who makes a point of returning to a hotel that has a particularly attentive staff. But you probably can’t come up with many.

A version of this article appeared in the July–August 2010 issue of Harvard Business Review.

What makes a balanced scorecard special? Four characteristics stand out:

1. It is a top-down reflection of the company’s mission and strategy. By contrast, the measures most companies track are bottom-up: deriving from local activities or ad hoc processes, they are often irrelevant to the overall strategy.

2. It is forward-looking. It addresses current and future success. Traditional financial measures describe how the company performed during the last reporting period—without indicating how managers can improve performance during the next.

3. It integrates external and internal measures. This helps managers see where they have made trade-offs between performance measures in the past, and helps ensure that future success on one measure does not come at the expense of another.

4. It helps you focus. Many companies track more measures than they can possibly use. But a balanced scorecard requires managers to reach agreement on only those measures that are most critical to the success of the company’s strategy. Fifteen to twenty distinct measures are usually enough, each measure custom-designed for the unit to which it applies.

The Idea in Practice

Linking measurements to strategy is the heart of a successful scorecard development process. The three key questions to ask here:

1. If we succeed with our vision and strategy, how will we look different

• to our shareholders and customers?

• in terms of our internal processes?

• in terms of our ability to innovate and grow?

2. What are the critical success factors in each of the four scorecard perspectives?

3. What are the key measurements that will tell us whether we’re addressing those success factors as planned?

The balanced scorecard also brings an organizational focus to the variety of local change programs under way in a company at any given time. As the benchmark against which all new projects are evaluated, the scorecard functions as more than just a measurement system. In the words of FMC Corp. executive Larry Brady, it becomes “the cornerstone of the way you run the business,” that is, “the core of the management system” itself. Example: 

Rockwater, an underwater engineering and construction firm, crafted a five-pronged strategy: to provide services that surpassed customers’ expectations and needs; to achieve high levels of customer satisfaction; to make continuous improvements in safety, equipment reliability, responsiveness, and cost effectiveness; to recruit and retain high-quality employees; and to realize shareholder expectations. Using the balanced scorecard, Rockwater’s senior management translated this strategy into tangible goals and actions.

• The financial measures they chose included return-on-capital employed and cash flow, because shareholders had indicated a preference for short-term results.

• Customer measures focused on those clients most interested in a high value-added relationship.

• The company introduced new benchmarks that emphasized the integration of key internal processes. It also added a safety index as a means of controlling indirect costs associated with accidents.

• Learning and growth targets emphasized the percentage of revenue coming from new services and the rate of improvement of safety and rework measures.