The Hindu Business Line : Empowering the customer

Customers are now going to reassert themselves like never before because it’s their declining cash reserve that’s going to oxygenate companies struggling for breath.

V. K. Madhav Mohan

Make no mistake about it: the business paradigm has truly shifted. Greed has paradoxically caused the global financial system to implode. The winner takes all, win-lose paradigm has been taken to its logical, catastrophic conclusion.

From the debris a new world business order will rise. Central to this new business order is not technology as it used to be; instead business will now revert to the universal and proven principles of trust-based relationships.

Technology will now play a supporting role in augmenting trust and strengthening relationships. That is traditionally the way in which mankind has evolved and in a sense we will all necessarily have to go back to basics and re-learn the hard way to grow on a win-win basis.

All the pious affirmations thus far about the primacy of the customer have remained just that: pious affirmations. Loyalty programmes, customer service training and personalised approaches have all been effective…up to a point. The fundamental flaw in all the hitherto approaches to the customer is that they have all been based on the arm’s length premise that the customer is an external entity and so has to be dealt with as such. That’s what I call the gaijin (outsider, as foreigners are referred to in Japan) approach.

If that is the basis, it’s not difficult to understand the end result on the front lines of customer interaction.

Technology (CIM and other tools) have taken on a life of their own and converted customers into faceless numbers represented as records in a database.

Organisations today have lost their touch and feel about customers and have lapsed into the old “production” concept that saw so many American companies go bankrupt in the mid-20th century. This is going to prove fatal to many, many companies in India in the near future. Customers are now going to reassert themselves like never before because it’s their declining cash reserve that’s going to oxygenate companies struggling for breath.

Empowering the customer

This is the perfect time and opportunity to businesses to redesign their approach to customers from zero-base. The paradigm shift that is required is a move from a view that the customer is “external” to the view that the customer is the Empowerd Business Driver.

Everything the business accomplishes arises out of the customer’s cash.

Therefore he needs to be the primary influencer in the organisation. While every organisation talks about empowering employees, nobody has paid attention to empowering the customer.

Building a customer-centric organisation like never before can be accomplished by empowering the customer in the following radical ways:

Customers in the boardroom: Every company recognises the importance of its stakeholders by inducting them into the board of directors. Customers are the most important stakeholders in a company since they represent purchasing power contingent on satisfaction. Isn’t it therefore logical and mandatory for them to be given their rightful place on the board?

Their opinions, input and needs can then become vital to the board’s effective “checks and balances” approach that is so important for any company’s long-term sustainability.

Furthermore, the customer’s presence on the board is a powerful recognition of his importance to the company and so it sends the most electric of all messages into the innards of the organisation.

To operationalise this a Customer Council can be created; this council can then nominate one member to the board of directors. You cannot but pay heed to customers when they are represented on the board!

Compensation linked to customer satisfaction — CEO First: Linking compensation of employees to results turbo charges performance.

Ultimately, financial performance is the result of customer loyalty and satisfaction. So customers have to be targeted for complete attention and service.

In fact, more than anything else, the employee’s job is to satisfy the customer. This can only happen if the entire organisation engages with single-minded devotion to understanding customer needs, designing the relevant product-service combos and then delivering them in such a way that the customer is rapturously satisfied.

To ensure that the entire organisation is focused on this process the compensation structure needs to be linked directly with customer satisfaction.

Customer satisfaction audits (CSA) by third parties can provide objective and unbiased measures of customer satisfaction.

The CSA measure then becomes the most heavy “weight” in the calculation of results based on which the variable component of compensation is paid. As in everything else, the CSA link to compensation must begin with the CEO.

His compensation must be directly and unequivocally dependent on the level of customer satisfaction delivered by the organisation under his leadership. That will certainly galvanise the organisation into attaining realms of customer satisfaction that have hitherto remained the stuff of dreams.

Non-discretionary mechanism

The best way to improve customer satisfaction is to let the customer decide whether he is satisfied or not and then act in a way that immediately impacts the organisation. To do that we can implement a Non-Discretionary Mechanism (NDM) in which the customer decides whether he is satisfied or not; if he is not satisfied he can deduct, say, 5 per cent from the bill and pay the remaining 95 per cent, no questions asked.

It is important to understand that “non-discretionary” means that the company or its employees have no way of controlling or preventing the customer from deducting 5 per cent if he is not satisfied with the service. The only way to collect 100 per cent of the billed amount is to ensure that the customer is satisfied.

To make the connection with service even stronger, the company must deduct the total of all the 5 per cent lost due to deficient service from the variable compensation paid to employees.

That way customers can be sure that their needs will be satisfied every time! The concept of NDMs can then be replicated in all areas of the business with great results because they are automatic and need no monitoring.

Uncertainty and a track record of delivering customer dissatisfaction mandate effective empowerment of customers. That is the way to convert the present problems into profit.

TheLonelyCEO@gmail.com http://TheLonelyCEO.blogspot.com

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