Reduce Costs AND Improve Customer Satisfaction

There is a direct correlation between the size of the bureaucracy involved in fixing a problem, the length of time it takes to fix the problem, and the expense of fixing the problem — both in direct costs and customer retention.

An example that demonstrates these points occurred within the call center of a major credit card company. While on site, we discovered that their policy for handling telemarketing disputed insurance charges was to allow the CSR to cancel the policy and refund 60 days payments if the customer challenged the charges [90 day refund if the customer was very upset].

If the customer is still not pacified by the above, the following procedure kicks in:
The CSR completes a form with all the customer information — name, address, phone, credit card number, date of disputed telemarketing call
The CSR then forwards the form to the telemarketing division
The telemarketing department traces the call until the actual recording of the call is found
A copy of the call is tape recorded
The tape of the call is sent back to the CSR
The CSR analyzes the tape
If the CSR determines that the customer’s dispute is valid, a full refund is recommended to a supervisor
Upon the supervisor’s review and approval, the refund is made
If the CSR determines that the customer was ‘wrong’, the tape is transcribed
The CSR writes a letter to the customer disallowing the rebate and includes the transcription

The insurance charge in question was less that $10 per month. Since the CSR was already authorized to refund up to three months of payments, the dispute was only over the remaining three months’ payments. The cost of researching this $30 dispute was approximately $150. In addition, the call center was short staffed and falling behind on customer calls [the reason we were hired].

The call center spent approximately $150 [direct cost] resolving a $30 dispute that in most denial cases resulted in the customer canceling their credit card [customer retention expense]. Meanwhile the short staffed call center was missing additional opportunities to service new customers — another customer retention expense.

Before smirking, "tusk-tusking", sighing, or whatever you do when you encounter but another example of dysfunctional organizational policies or procedures, pause and reflect on your organization’s policies and procedures. Start with decisions that require management approval for insignificant monetary amounts. Check the ones that require multiple approval signatures. Look for decisions that are always approved, yet require management’s signature. We’ve found such policies in human resources, field service, customer service, shipping, accounting, and manufacturing. [OK, pause over, you may read on.]

Common Sense Managers prevent such waste and customer dissatisfaction in their organizations by:

Authorizing and training their people to resolve customer problems without management intervention
Including their people in designing customer and user friendly policies and procedures

These two steps reduce costs while improving customer satisfaction.

1. Authorizing and training your people

It takes more than a wave of a magic authorization wand to get people to take initiative in making decisions. Most people are conditioned to look for and follow rules. Effectively authorizing them to make decisions requires several management actions.

Train your people — explain and demonstrate:

The potential for cost savings and increased customer satisfaction from receiving immediate solutions.
How the new employee decision process will work and how management will still be informed of decisions
How management will review all decisions, but not punish any employee for making a "reasonable" customer driven decision

Establish parameters — define, by discussing in practical language, what "reasonable" means. Use examples of recent customer interactions. Identify several "reasonable" solutions for each. The nature and size of your organization’s transactions will determine what is "reasonable". Start conservatively and increase your definition of "reasonable" with experience. This will increase the comfort of both your people and your executives.
Rule of Thumb: We’ve observed that people tend to think in money relative to their current financial situation. People earning $25,000 think that giving a customer a $10 rebate is significant. Executives earning over $100,000 are more likely to be comfortable giving a $1,000 rebate. The lower the level within the organization in which the decision is made, the lower the amount that will likely be rebated.
Support and positively reinforce employee decision making — Review employee decisions and strongly reinforce the decisions that fix the customer’s problem immediately - at a "reasonable" cost. Point out the benefits to the organization in cost savings and customer loyalty and retention. Be patient and consistently supportive.
Joe Rabhan was managing a Hilton property when one of his front counter people ‘comped’ a disgruntled customer to three nights lodging. Joe was concerned with the size of the employee’s decision, but said nothing. He felt if he questioned the decision that this employee [and the other front desk people] would revert to asking permission.

While waiting for an appropriate time to discuss and review "reasonable" decisions, the customer called him. The customer was a convention planner and was testing Joe’s hotel to see how they handled dissatisfied customers. As a result of the employee’s timely decision, the customer booked a 75 room convention!

2. Including your people in designing customer and user friendly procedures

Authorizing your people to make customer driven decisions is not just about giving rebates. It’s also about challenging your organization’s policies and procedures.

The people within your organization that best know which policies and procedures disrupt timely and cost effective customer treatment are the people who administer them on a daily basis. Therefore, get these people directly involved in:

Reviewing all policies and procedures that effect customers
Identifying the most cumbersome policies and procedures
Recommending changes to these
Testing their recommendations
Revising the new policies and procedures as needed
Continuously looking for new and better ways to produce seamless customer service.

Challenge your policies and procedures by having your people run current policies and procedures through the following filter:

Does this policy [procedure, work process] make it easier or more difficult for our people to take care of our customers?

Prepare to be amazed with all the dysfunctional policies, procedures, and practices that your people uncover in their search. Prepare to be amazed with all the potential costs savings they will generate. Finally, prepare to be amazed with the enthusiasm they will display in improving their organization’s customer performance.
Carneal Smith, Service Director for HWP Group of Companies, Bermuda, felt that HWP could improve its customer service — especially its completed service call levels. Instead of closing his office door and designing a new approach, he opened the door and included his service technicians in designing the new approach. The end result in his words:

HWP’s Technicians Incentive Program was designed with and by the technicians. They created a program that produced a win for the customer, the company, and themselves. They voluntarily took a base pay cut for the opportunity to be paid for their individual and team success. Now they can almost double their salary. Within the first two weeks the lowest producing technician doubled his completed service calls – a one hundred percent improvement!

While researching the information for this article, I checked to see how Carneal’s two year old procedure was working. I was delighted to find that they are currently reviewing and updating it. As you are reading this sentence they are in the process of doing step six: Continuously looking for new and better ways to produce seamless customer service.

By including his people, Carneal improves critical service levels, employee satisfaction, reduces service call costs, AND improves customer satisfaction. Similar results are available to any leader who treats employees as they treat their most precious customers and asks: How can we do better?

Sierra-At-Tahoe Ski Resort’s General Manager, John Rice, both authorized and included Sierra’s people in designing their Make The Customer Right program.

Sierra-At-Tahoe Ski Resort profits from its empowerment efforts. To improve customer service, John eliminated his Customer Service department. To improve service?!? Yes. John replaced it with the Make The Guest Right program. The program sanctioned every person to handle any customer complaint directly. The people do whatever it takes to make the customer ‘right’. They have the authority to provide soft dollars - a free lunch, a future discount, a free lift ticket, or whatever they deem appropriate to the situation, except for cash. Sierra-At-Tahoe spent $11,000 in Make The Customer Right give backs [a $21,000 savings over the old Customer Service department concept] AND got raves from customers. The program is a hit with employees and a home run with customers. The customer raves are based on being listened to immediately and having their problem handled immediately.

Reduce Costs AND Improve Customer Satisfaction - [1850 words]