Following up on an earlier post, the question of what really “fuels” dissatisfaction has been a hard one to answer because it is both multidimensional (I.e. There is no single source of discontent) and unique to the individual customer. That notwithstanding, I do believe that the answer does revolve around one single category of emotions: that being FEAR and UNCERTAINTY.

Come on, really? Many customers are customers of simple products. Not all purchases are big purchases like houses, cars, or other things that will stick you with really long term regrets. Most daily purchases- you gas transaction, payment of a utility or cell bill, a hotel reservation, and the like, are obviously too simple to drive the emotions of fear and uncertainty, right?

To the contrary, I believe fear and uncertainty emanates from many sources, not the least of which is being “surprised” in a way that has negative consequences. How many of you have gone through the angst associated with the uncertainty of data charges from your cell phone company? Or wondering if you identity will be compromised from an online purchase? Or if you electric bill for this month will bust your budget? Or if your credit card will exceed it’s limit and embarrass you among a group of close friends or family? Even something as simple as the uncertainty of missing an airport connection, can often create hours of angst rendering any exceptional service you receive before, during or after a flight pointless. Why? Because for most of us, worrying about something important will end up distracting anything within close proximity to it. Outside of a small handful of us who can compartmentalize emotions, most things outside of what’s urgent and important for us takes a backseat until what’s important gets resolved.

Some companies seem to get this, although I wonder how much much of what we see in this area is deliberate rather than simply random or haphazard success. Nevertheless, you more than likely have seen some examples of how uncertainty can be effectively minimized, if not overtly managed. Some simple examples include:

– airlines who announce connecting gates while still in the air
– unlimited calling and data plans
-leveled payment plans from electric and gas utilities
– notification of hold times and queue lengths

The proliferation of SMS alerts for everything from bank balances and data usage to first class airline upgrades and flight delays all help customers avoid surprises. Still, I wonder if some companies are just doing these things for technology sake rather than from a genuine understanding of customer mindset and motivating forces. In fact, most of this can be done without any technology intervention.

I am reminded of when united airlines used to (maybe they still do) allow customers to tune their in seat audio to the atc frequency so that they could monitor the flight. One of the reasons I liked that was you could hear about turbulence being reported by other pilots in advance of the bumps, as well as all the requests by your pilot for faster routing, smoother altitudes, as well as any unexpected delays. In fact, even now, when I am on an airplane that is going through turbulence more than a few minutes, I start wondering if the pilot is actually working as hard as the united pilots did to find the smoother air. Of course they probably are, but at least with united I knew. And that made the uncertainty go away.

Here’s another more recent example, and perhaps my favorite so far. The other day I ran into an electric utility that alerted (actually they reminded) customers to the fact that the summer months were approaching and bills would be spiking…thus opening up an opportunity to convert customers to both a leveled payment plan (same amount every month) and direct debit option, thus minimizing or eliminating the elements of uncertainty and surprise from the customer interaction. More importantly for the utility, it had the dual benefit of saving enormous amounts of money by minimizing transaction costs, eliminating a huge volume of inbound calls to the call center related to hi bill issues (high bill complaints are the highest duration and highest cost type of call for utility companies, in which 50+ percent of the time, the call actually results with the customer concluding the bill was similar in magnitude to the same time last year.. Can you think of many cases in which being proven wrong leads to a positive and happy state of mind?

I think the implications of adopting this “avoid the surprise” philosophy could be very large in terms of taking customer satisfaction to a new level. But it does require some fundamental changes in everything from how we view customer behavior, to how we design our offerings, and most importantly, how we define, measure and manage our success in this domain.

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First of all, my apologies for not having written in a long long time. Funny how the things that we enjoy the most take a back seat to the urgent priorities of the day (or in this case months) that are sometimes far less fun or rewarding. The good news is that there have been lots of interesting client experiences over the past several months, and hence lots of good fodder to expound on in the weeks and months ahead…assuming I can manage to carve out the hour or so a week it takes to get them down on paper.

Top of mind for me right now, is what companies are doing (or more importantly NOT doing) to drive good customer service. I think this stems from both a failure to understand what really makes a customer tick, and the associated failure to measure it, and ultimately manage it. As a backdrop, I’d ask us to all think about the work “tick”. For most, the words “what makes a customer tick?) translates into the things that really “drive” or “motivate”them to buy something, or just feel good about your product or service. But today I want to focus on a more literal interpretation of the word “tick”. I’m thinking something like the ticking of a timer- like a clock winding down to 0…at which point things go “boom”…which in today’s economy more quickly translates into a lost relationship, a lost sale, or a lost client. In my judgement, today’s customer is much more focused on extracting maximum value from the services they have ALREADY bought or paid for, much more so than (or at least long before) they will entertain buying something else from you.

So with that as the backdrop, I think we’d all be a lot better served by taking another, perhaps closer, look at the drivers of DISSATISFACTION as our primary way of driving customer value. Putting the drivers of dissatisfaction ahead of focusing on all the bells, whistles, and other sources of delighting the customer, will get you farther because if you can’t avoid the dissatisfaction, then all of the rest is a moot point. Of course, most of you understand that, right?…and have already put in place measures to prevent a customer from getting to the point of dissatisfaction. All of you probably measure things like how fast we answer calls, how many are abandoned, how many issues are resolved in the first contact, etc., and through doing those things you minimize the likelihood of a customer being dissatisfied, or at least staying dissatisfied, right? Not so fast.

Another perspective is that by the time a customer calls, the clock is ALREADY ticking, and whatever is done DURING the customer call is often occurring AFTER the clock has wound down to almost zero. For many of you, the picture may in fact look like this: the customer gets through without being dropped, bounces out of the automated call system in quick order, talks to a rep (who “resolves the call”), ending with the customer ostensibly satisfied because they didn’t call back or give a bad score on the automated survey, right? Of course there is another interpretation…which is the customer was already quite ticked when they called in, at which point they immediately concluded (based on the first 3 choices form the IVR) that he wouldn’t get anywhere with that route, bounced out of the IVR, ran into an unhelpful rep, and politely left the call without taking a survey, and left more upset than when he started. Call me cynical, but if that was a ticking time bomb to start with, chances are it went boom within minutes of the call ending, and did so with all of the measures and indicators pointing to the opposite, and the company thinking they have a happy customer whose ultimate dissatisfaction has been averted.

I submit that companies who score well on the traditional metrics of CSAT are giving themselves a false sense of security and are probably missing the core elements of customer perspectives…those that largely revolve around lingering sources of discomfort that are hard to express, not to mention measure or quantify. If we can get our arms around this, we have a much higher likelihood of eliminating perhaps our single biggest blindspot in generating customer value and ultimately leapfrogging the competition.

The next few posts will focus on some of these up front drivers are, as well as the kinds of things we need to be measuring in this space. Fortunately, this is an area where many of you are not behind the pack, because there is nobody really leading the pack. In the past several months, I’ve worked with some of the self proclaimed “best” companies (those who perform well on the conventional indicators) and have interacted as a customer (as many of you have) with the “big names” in customer service with less than adequate results and a time bomb in my gut that is still ticking long after the “polite” ending of the call to the company.

I think we would all be better served by making the following key priorities in our drive to maximize customer sat.

1. Redefine the drivers of customer satisfaction, and dissatisfaction (the things that start the countdown on the time bomb)

2. Seriously rethink what we measure and track, and the baseline against which we evaluate success (my hunch is we will throw out a lot of what we measure today)

3. Correct the upfront flaws in the design of our offerings and processes so that dissatisfaction in minimized and we all have a more solid base on which to build on in the years ahead

-b

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A lot is written about benchmarking as a vehicle for identifying best practices. Clearly the two are related, but sometimes too much weight is given to the connection.

The temptation is to look to high performing companies, make a laundry list of what they are doing, and then go try to emulate that. The presumption being that most of what they are doing qualifies as “best practice”. In reality, what is often taking place at leading companies is a mix of three things:

1. Basic or core operating practices (“blocking and tackling”) that are simply executed at a level better than most

2. An effective “operating model” within which these practices reside

3. True “best practices”, of the innovative and breakthrough variety

The first two categories are clearly important, and in some cases more important than the latter, because without those foundational aspects, all the best practices in the world will yield little incremental value. But assuming those are in place, true “best practices” are clearly the next place to look for innovation. The challenge is knowing what to look for.

When you invest in activities geared toward identifying these types of best practices (conferences, benchmarking studies, consulting projects, etc), its important to have a set of standards on which to base your return on that investment. For a best practice to pass the “innovation” test, it must deliver some level of insight that goes beyond just doing the same things better. I offer the following as a checklist for assessing whether a specific practice passes this type of sniff test:

1.Is it definable?
Best practices are not general philosophies (e.g.- “better management of risk”), but rather specific changes to process, technology, organization, policy, or operating protocol. And it refers to a specific “change” from current state, typically involving something you will either add (start doing) or subtract (stop doing) . Sometimes its a new process or technology all together. But defining it requires being specific.

2. Is it unique?
Is this a practice you are likely to find most everywhere you go, just implemented at different levels of effectiveness? There is nothing wrong with focusing on better execution/ implementation or core business practices as a driver of performance, but you are better off calling it what it it- an implementation breakdown- rather than disguising the issue as failure to have a particular practice or policy that the organization knows is already in place in some way, shape or form. Otherwise, you’ll be met with “this is just more of the same”.

2. Is it breakthrough?
Does the change in practice or policy create a step level change in result of a business process. Generally I look for a 10 times payback in a relatively short horizon, and at least a 50% change in current performance level to the affected business process. But these standards can vary from company to company. But we are not talking 1 or 2 %- but something of material significance. A small standard business case worksheet can help your employees do their own internal “sniff test” before consuming your time in analyzing the myriad of small ticket changes.

3. Leading edge or “bleeding edge”?
Often, it is our temptation to look at the coolest technology or system and proclaim it to be a best practice. Most of these are untested at best, and looking for “test dummies” to try themselves out on. Find companies that have implemented it, look at the business cases they used to justify it, and then look at how much of that actually materialized.

4. Is it actionable?
My test for “actionable” is usually that it can be adopted (fully implemented) inside of a 1-3 year timeframe. Otherwise, you’re adding new R&D into the pipeline. R&D is fine, but don’t let theoretical or speculative projects clutter up your best practices pipeline. Focus on things that you can quickly assign ownership to, and things you can get on with rather quickly.

5. Can I attach value?
Most importantly, can you attach dollars and a specific budget location to the achievement of implementation? And will someone “sign up” for that commitment? e.g. If I implement xyz, how many bodies go away, or how much money will i save, and when? If you cant answer those questions, we’re probably not talking about a credible “best practice”.

Look- there is nothing wrong with focusing on doing the basics better. Or having a better operating philosophy or business model. You need those elements to run the business. But when we talk about BEST practices, we are generally talking about doing something unique and different. And without that component to business improvement, its unlikely that you will get to or remain at a leading edge level of performance.

So make sure you have true best practices in your pipeline, and use these tests to make sure they pass the proverbial “sniff test”.

–

Nearly every CFO I’ve spoken with lately acknowledges taking a very different posture with respect to spending and investing. Most have radically slashed O&M budgets and have cut deeply into their CapEx plans to accommodate today’s anemic growth levels. All companies, however, would admit to taking a more conservative posture with respect to any spending that looks even the least bit discretionary.

So where does (or should) EPM investment fall in this mix? Does it belong in the same category as infrastructure investments that are of obvious high benefit but long term in nature? Should it be viewed as

“nice to have”, to be done in periods of excess profits and reinvestment? Or is it something more critical to the companies ability to generate value, or more importantly, manage risk in the environment we find ourselves sitting in

For those pondering the same questions, here are a few of my perspectives on why EPM should not only stay on the priority list, but perhaps rise to the very top in terms of executive time and mindspace.

1. Value Realization from EXISTING projects-
For years, all of our companies have had improvement initiative after improvement initiative, program after program, project after project. We’ve all seen the value cases, and we’ve all become used to seeing many of these projects receive accolades for being completed on time and under budget, only to generate a fraction of the promised value/ savings promised. Putting the right EPM process in place will immediately force project sponsors to tie improvement initiatives to clear impacts on your KPI’s. Once that is done, and you can see the landscape of what is really generating value, you are now in a position to defer (or kill) projects that are not accretive to immediate returns, and start “ringing the cash register” on the the ones that do. Sure, this will have generate long and sustained impact on the culture and a new way of thinking across the enterprise. But it is something that is not too difficult to do with the right process and tools, and something that can and will have immediate and significant impact.

2. Compliance with today’s risk/ performance controls-
Starting with SOxley and today’s new transparency mandates, and looking forward at IFRS requirements, CFO’s and other Company Officers will be on the proverbial “hot seat” for the forseeable future. Unfortunately, the seat only gets “hotter” with further declines and more market uncertainty, just at a time when the cost of adding new controls becomes unbearable. Finding new and less costly ways to achieve compliance is paramount in resolving this inherent conflict.

3. Lowering Administrative Costs-
The cost of management and budget reporting is increasing at a record pace, which is believed by many to be unsustainable. Furthermore, the manual manner through which much of this is coordinated, has decreased the reliability of the information produced. While “cloud” computing has a sexy new connotation today, most CFO’sand CIO’s would agree that without a clear architecture, the current web of worksheets, source systems and partial BI layers is unsustainable. EPM focus will begin to clear up this picture by quickly establishing the right architecture (and foundation) on which this will ultimately sit.

Those are three of potentially many arguements for moving faster and moving NOW on EPM as a strategic thrust of the business in 2009. But even more compelling reinforcement for this assertion comes from some recently published benchmarks. According to a recent study on the value of performance management, world class EPM companies are consistently generating 2.4 times the equity returns of peer companies, a potential lifeboat for a company facing tougher and tougher economic times. These same companies have 20-30 less volitility in profits, and more significant operating returns overall.

But here’s the kicker for why you want to do this now rather than later. The very same companies that are achieving the above gains, are also  doing so at roughly 1/2 the cost for performance reporting and performance management business functions. And they are radically reducing budget complexity and improving information access to end users rather than traditional reporting middle-men. And another nice benefit- a 40% higher reliability in forcasting. Best of all is that when this is in place, the company becomes better able to model and forecast more dynamically, a practice where speed and flexibility are life saving in down/ unpredictible markets.

EPM investments are sometimes significant depending on the end state you want to achieve and your relative starting point. And while the EPM journey of best practice companies can take between 4 and 7 years to achieve full scale competence, results can begin materializing in months. In fact, many would say the first 6-12 months are most vital in creating awareness and a catalyst for real cultural change, with sizable gains occuring all along the way.

Bottom line: EPM can and will add immediate value, mitigate current risks, and save on adminiatrative and budgeting cost in coming years. Starting the EPM journey during a dark time like this may not be the most intuitive answer you want to hear. But starting a journey at night is sometimes the best answer.

Lately, it seems that Enterprise Performance Management (EPM as it is now referred) is getting a lot of press in the global network of business professionals and is quickly becoming a heavily used “buzz phrase” in IT and Operating circles. But let’s face it – neither Performance Management nor its new sexier relative EPM, really represents anything fundamentally new or earth shattering. Or does it?

For starters, let’s acknowledge that in any management discipline, the number of “official definitions” often exceeds the number of practitioners that dominate the implementation space for the associated services. One might conclude that I am merely a lone voice among many with some strong views on what EPM really means. But those of you who know me, know that won’t stop me from wading in with my not-so-humble view of the world…certainly not in a discipline where I’ve spent the better part of 20 years.

With that caveat in mind, let me say that what EPM means to the discipline of Performance Measurement is similar in magnitude to what Information Technology meant to the evolution of Data Processing, and what Enterprise Risk Management meant to the age old function of corporate “insurance buying.” However, it is likely that at the outset of each of these journeys, the practitioners thought that the distinction was much more subtle than it ended up being. In fact, in both of these areas, the end state has evolved well past what anyone would have envisioned only a few years ago.

With that as a backdrop, let’s do a little bit of retrospection and “crystal balling” on the evolution of EPM, from its origins in performance measurement, to the pervasive impact that it can have on business results. For many of us, the Performance Management journey began with some basic steps to raise awareness of what was important to measure, and took strides to measure it. Some still struggle with these very basics. Others have taken this to a broader level of transparency and accountability, integrating these values into all company processes. Others have pushed the envelope and taken EPM to what we call a “pervasive” level in the business, characterized by a universal cultural receptivity to the values of accountability, transparency and “line of sight” integration with day to day business processes.

In the end though, there are three fundamental factors that influence a company’s ability to move along this continuum, and it is these factors that should dominate the agendas of companies desiring EPM excellence:

1. Uniformity and Consistency of Approach
The problem at most companies is NOT the lack of KPI’s, or the failure to provide reports, or the lack of a balanced scorecard or even a corporate dashboard. I have yet to work for a client that didn’t have each of these core attributes in place at some level of the business. The problem is that these pieces of the puzzle remain scattered across various levels and layers of the business. With the exception of a corporate dashboard or balanced scorecard which likely exists at the Enterprise level (at least covering the top output measures), the application of the process is often heavily inconsistent between business units, and especially at lower levels of the business where the results of measurement are much more actionable. The good news here is that most of the important “parts” of the process already exist. But without the integration of the components into a cohesive architecture, you are unlikely to get any of the possible enterprise synergies demonstrated by more advanced EPM companies. EXPECT TO SPEND 15-20% OF YOUR EFFORT HERE!

2. Cultural Competence
For many, the words “culture” and “competence” in the same breath show up like “oil and water.” But it is important to highlight the need for both. Clearly, leaders in EPM space have a “data driven” culture – a fact-based process for measuring, validating, analyzing, improving and controlling key parts of business. But having a process is one thing, and being able to execute is another. I like to say that leaders go through a process of development for any major new skill or behavior – starting with awareness, and progressing through openness, acceptance, competence, and mastery. Any organization right of Stage 3 EPM will point to its Leadership as their reason for success. And it’s not just what they say and what they declare, but often the ability of leadership (which often extends 2-3 layers down to the top 100-300 managers) to demonstrate the behaviors required of a performance driven operating model. EXPECT TO SPEND THE VAST MAJORITY OF YOUR EFFORT HERE – 50-60%.

3. Emphasize the CAPTURE of Value
Ok – before you say it or think it, I acknowledge this sounds pretty basic. Who DOESN’T do this – right? Well before you go too far down that path, how often does your organization ask its project managers and sponsors to account for the VALUE produced by their investments? I’m not talking about if the project was done on time or on budget, but rather if the investment produced the outcome that was projected during its cost/benefit analysis and justification stage. Surprisingly, less than 10% of our clients do this to the level of their own satisfaction. This is by far the greatest value of an EPM process and should be the #1 measure of your future EPM success as a company. In my eyes, it is what distinguishes EPM from our traditional roots of performance measurement and tracking. Linking measures to what we do on a day to day basis, and then retrospectively assessing our day actions against those measures is the essence of the “closed loop” EPM process that we espouse so often. EXPECT TO SPEND 30-40% OF YOUR EFFORT HERE.

Maybe these factors seem simple or trite on the surface. Or maybe they represent challenges that have been elusive in the past. But no matter how elusive, trite or otherwise mundane they appear to be, they represent the biggest roadblocks in the type of EPM journey I laid out at the outset of this post.

You may also find it odd that nowhere on the above list appears the words technology, and conventional terms like dashboard and scorecard only appear in passing. In a way, that should amplify the point (particularly to those in the IT client and vendor community) that EPM is NOT about the technology, much like Risk Management is not about buying insurance and IT is no longer about just Data Processing. EPM has become a central part of MANAGING STRATEGY inside of a closed-loop framework of objectives, measures, investments and implementation.