THE PURPOSE CONUNDRUM

For leaders in service organisations struggling with poor Net Promoter Scores (NPS), multiplying complaints, mounting regulatory pressures and disruptive incomers threatening their market share, ‘becoming more customer-focused’ seems like the obvious remedy. To this end, their usual first step is to appoint managers with customer-facing roles and large budgets to drive what they might call ‘client-centricity’.

Yet as if the challenges of meeting their own function’s arbitrary budgetary objectives and targets weren’t enough, the new structure now confronts them with the need for yet more internal meetings to implement and monitor customer initiatives at the behest of the fresh-minted customer directors. But hang on a minute. In the rush to implement solutions, no one seems to be asking why the organisation became un-customer-focused in the first place. Nor are they questioning whether building what is in effect a new function or sub-function, complete with budgets, strategies and projects, will solve the underlying problem.

The challenge of change

Herein lies the first challenge. If the organisation sees itself as basically successful – in the same position as, and no better and no worse than competitors – there is no compelling case for fundamental change. The leaders’ organisational worldview – basically that articulated 250 years ago by Adam Smith, based on division of labour and functionalisation to increase productivity, with attendant management “norms” of standardisation, specialisation, inspection and extrinsic motivation – remains intact. Part of this functionalised worldview is that operations and customer service are separate, so that there is one director for ops and another for customers. In this perspective customer service is a bolt-on to existing operations which assumes that problems such as poor NPS and rising complaints can be fixed by bringing more resources into play – someone taking responsibility for the customer, managers getting ‘back to the floor’, training the front line or doing stricter inspection.

Actually, the problem goes much deeper than that, to the very heart of management thinking. In today’s functionalised organisations, managers can’t see that the sub-optimisation of service that shows up in complaints and weak customer loyalty is inherent in the way the work is designed, and the way the work is designed reflects assumptions about purpose – what the organisation is there to do.

A question of worldview

Basically, organisations become un-customer-focused because they are torn between two different purposes – serving the customer and serving the shareholders. The problem with trying to serve two different purposes at the same time is that each has its own distinct worldview and its own set of action strategies for management. The balanced scorecard that often sits precariously in the middle between the two only compounds the difficulty by insisting that both are equally important. Why would one treat two differing compasses with equal priority in trying to reach to the same destination?

The prevalent worldview among managers today is that the purpose of the organisation – what it is there to do – is to make money for shareholders. Hence their primary purpose (compass) becomes to ‘deliver profits through increasing revenue and reducing costs’. With the latter hard-wired into personal objectives, promotion and personal wealth it is unsurprising that management ingenuity is focused on sales incentives and the rigorous control of operational costs, rather than on satisfying customers and their needs. Yet the relationship between the customer and the solution is naturally and crucially intimate. Focusing on managing the budget and meeting internal targets has the opposite effect to the one intended, causing existing customers to leave for other organisations that look after them better, and dissuading new customers from replacing them. Perversely, it drives organisations to become un-customer-focused.

Becoming really customer-focused

To create a customer-focused organisation – and to prevent it becoming un-customer-focused – it is necessary to abandon this worldview and replace it with different one.

In the alternative worldview, there is a systemic relationship between customers, the core work and the purpose of the system. There is no split between them. When the purpose is to deliver what matters to customers rather than what matters to shareholders, the organisation drives by a different compass. It focuses on delivering these outcomes and doing so by only doing the value work necessary to deliver what matters. In this way we ensure that our customers get what they want when they want it and, if we are ruthless about just doing the value work, costs fall as waste and failure are driven from the system. As customers talk well of us, more arrive. As a consequence of focusing on the customer, the brand, market share and profitability all improve.

Becoming customer-focused, then, isn’t a matter of adding a few customer-related initiatives to what is already being done. That is just an attempt to paper over the fatal flaw at the organisation’s heart – the confusion over purpose, over ends and means. To become more customer-focused, leaders have to change the worldview that, although not explicitly articulated, is implicit in the measures being used and currently governs how the system is configured and performs for the customer. The only way to change a worldview is the acquisition of knowledge. To acquire knowledge, leaders have first to be curious enough to ask why their organisation was not customer-focused in the first place.

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toby@vanguardconsult.co.uk

This article appears in Edition One of The Vanguard Periodical: The Vanguard Method in Financial Services. Download it here