Judging from a poll of 1,000 CE readers, the actions that differentiate companies that are improving from those that are not may not be well understood

September 1 1989 by Chief Executive

As we suspected, improving customer satisfaction is indeed a hot topic for today’s chief executive. We asked Lochridge & Company, a Boston-based management consulting company with considerable experience in this area, to analyze our survey results on what companies are actually doing in customer satisfaction-what’s working and what’s not.

The responses from 1,000 chief executives reflect a good cross-section of industry in the U.S. The sample was slightly skewed toward larger companies and toward the manufacturing sector, but we do not believe the bias was important enough to change our view of the results.

A more serious bias in the sample may be inherent in the attitude of those who did respond. These are clearly executives who think customer satisfaction is vital, and most believe they are doing a good job-relative to their competition-in this area. Over 90 percent of those companies with a mission statement (which was in fact about 90 percent of the sample) have customer satisfaction reflected in that mission statement. Over half of those who responded placed themselves in the top quartile of their industry in customer satisfaction performance, and the vast majority reported that they have improved over the past three years. Only one respondent actually rated his company in the bottom quartile of his industry and said it had gotten worse. (Honesty lives!)

Some of this may be human bias, but we also think it reflects a group of committed and interested executives. So what do they say? What works and what doesn’t? To answer these questions, we focused on comparing the group that says it has improved with the group that says it stayed the same or worsened. This look at the information proved more interesting than merely tabulating the results, comparing by size, or comparing by industry sector. From this review of the survey, four key messages concerning customer satisfaction emerge:

·               Use a variety of approaches;

·               Use formal, externally focused measurement systems;

·               Pay more attention; and

·               Don’t just train-change how you do business.

On the surface, both groups of companies seem to be trying the same palette of approaches to improving customer satisfaction. Differences appear more in the overall level of activity than in the use of any one approach (Figure 1). Improvers are 20 percent more likely to have customer satisfaction goals reflected in their mission statement. They are twice as likely to have increased spending in this area. They use more of the various approaches listed in the questionnaire, such as product quality improvements, employee incentives, and changes in organizational structure. They monitor more measures of performance in this area. Finally, they more actively use the various departments and functions within their company to accomplish their goals.

Companies that believe they have improved tend to be more active users of formal and externally oriented measurement systems than companies that have stayed the same (Figure 2). Among those that improved, 80 percent monitor customer complaints; over 50 percent use formal surveys of customers about satisfaction; almost 30 percent use focus groups of customers; and over 20 percent survey their distribution channel. By comparison, the companies that have stayed the same or worsened tend to make internally oriented measuring systems play a larger role. Among this group, the most popular approach is formal “climate” surveys of their own employees, which raises a question about the value of this particular strategy as a way to improve. While it is heavily used by everyone, it doesn’t seem to do much good.

Perhaps the most interesting question is what does make a difference. We expected some difference in what the improvers would recommend to others as the place to start, or the place to devote the most resources. In fact, there is little difference in the rank ordering of priorities. The most important place to start is increasing top management attention to customer satisfaction (Figure 3). The next most important area recommended is improving product quality, and this idea also received the highest number of votes for where to spend the most money. Third on the places-to-start list-and second on where to spend the most money-is customer satisfaction training for employees.

But these recommendations do not differentiate those who believe they have improved from those who have stayed the same or worsened. To understand this, we need to look more closely both at what activities companies from each group actually employed and the rating they gave each activity. Here we find some interesting and not so obvious results. Of all the activities tried and rated, changes in customer handling policies and procedures (Figure 4) is the most important differentiator between improvers and non-improvers.

Formal customer surveys and formal internal reporting of performance are second and third, respectively. Customer satisfaction training ranks fourth, top management action fifth, and actual change in organizational structure ranks sixth. The conclusion to all of this is clear: Chief executives, even of improving companies, too often underestimate the value and importance of (1) changing specific business procedures or processes and (2) formal reporting.

It appears that improving customer satisfaction requires a lot more than lip service by top management, or even employee training. To improve, you must explore ways to do better in the customers’ eyes and you must formally measure and report that improvement. In fact, the improved companies are 50 percent more likely to tie the measure to individual compensation, bonus, or advancement.

So lip service does not appear to work. Nor does short-term focus or much ballyhooed behavioral training. Although these may help, they must be followed by real changes in what you do, how you are organized, how your results are measured, and how people are motivated to make a substantial difference in your customer satisfaction performance.