ASQ - Team and Workplace Excellence Forum


January 1998

Articles

Have Faith In Your Future
Popcorn Discusses Consumer Trends, Effects on Business

Success Comes From Breaking New Ground - Not Plowing The Old

Taking It To The Public
Business Community Works With School Leaders to Turn a District Around

A Marriage Of Convenience
Unions, Management Team Up to Counter Takeover, Redesign Organization

The Baldrige Award: Winning Isn't Everything, Improving Is

Cutting Off Your Nose To Spite Your Face



Columns

Caring About Place
by Peter Block

People Powered Organizations
by Cathy Kramer


Features

Brief Cases
Business News Briefs

Views for a Change

Pageturners
Book Review

 

Cutting Off Your Nose To Spite Your Face
Balancing Processes and Customer Needs to Maximize Profits

You're rushing to the airport to catch your flight home. The car rental company requires that you fill up from a station within seven miles of the airport - or else they'll charge $3.99 a gallon to fill it for you. Lost, late at night and in unfamiliar territory, you curse such an insensitive policy and vow never to rent from the agency again.

True story? Yes, unfortunately. It's the product of finance-focused management out of balance, and customer-insensitive policies like this one should make your blood boil. Inconsiderate treatment of customer needs brings repeat business to a halt.

Don't Forget the Customer
Ultimately, financed-focused management can result in big revenue losses, according to David Saunders of ARBOR Inc., Baltimore, Md. and Brent Kedzierski of Blue Cross Blue Shield, Owings Mills, Md. Saunders and Kedzierski argue that, while financial return is essential, so is increased revenue. They provide a method for managing both aspects of a business by aligning customer goals with the financial goals of the company. The end result? Increased profits.
Staying competitive in the business world means continually integrating customer needs into business processes. According to Saunders and Kedzierski, this integration can be done by aligning customer satisfaction measures and internal process measures. They have developed a model for defining these measures, and diagrammed them to discover their hidden relationships.

"Finance-focused management was very common across America, especially in the late 1980s and early 90s, as management, intent on improving the bottom line, focused mainly on costs," Saunders recalls. He and Kedzierski propose a more balanced approach, agreeing that of course it's good to keep costs down, but not at the expense of growing revenues. In pursuit of balance, Customer-Focused Management, in which customer information drives the organization, lets executives look at customer data to grow revenues, and financial data to examine costs and review the bottom line.

Kedzierski believes, "fundamental to revenue growth is the alignment of customer data with process data," and that is where the new model comes in. It demonstrates how to align customer information, the voice of the customer (VOC), with company policy and procedure, the voice of the process (VOP), in concrete, company-wide steps, to make the most of data collected in the company's everyday operation.

Listen to the Customer
Alignment involves planning a VOC system, gathering VOC data, understanding that data and deploying it. In planning, questions to ask include: How much information does the company have and from where? How has it been attained and how is it relevant? Kedzierski illustrates, "The marketing department may have a rich source of data from the sales force; the service department can have valuable data from the complaint department; and executives have insights from site visits and personal interviews."

Once data is identified, collected and organized in a common format, it is placed into a table. On a single subject, points of view from the sales force, service department, executives, market researchers, media and others can be viewed in perspective to each other.

Listen to the Process
The next step is to define the voice of the process (VOP), or how the company establishes policies and procedures. The VOP uses the same four primary steps as the VOC: plan a VOP system; gather VOP data, understand and deploy that data. First, the company needs to establish what information is relevant regarding a specific process. For example, what are the resources required to support the process? What are the results? Where does variation occur and do opportunities exist to improve the process?

VOP data includes measures of variation such as overtime costs, trends and error rates. Charts, diagrams and other means of statistical analysis provide managers with guidance on when to take action and when to let a process run its course. Managers need to know the difference between common and special causes of variation, and the information gathering step of the VOP enables them to differentiate.

What Do You Hear?
Now that the business has a store of VOC and VOP information, the next step is to compare the data in an alignment table. This table allows managers to identify the degree of alignment between a process measure and a customer desire and provides a forum for decision-making dialogue between executives and process managers. The steps for constructing an alignment table include: recording the customer "wants" (derived from VOC process) on the vertical column, and the company's internal policies on the horizontal row.
To find out whether these two sets of data are in alignment, ask: Are the two dependent on each other? If not, disregard them - they don't work in the alignment table analysis. If they are dependent, what is the level of dependence, high, medium or low? Also ask, how do we measure the internal process? Is this in alignment with the customer wants? If not, VOP and VOC are misaligned.

Misalignment can cost the company in a number of areas, including sub-optimization, in which one department's maximization of a goal adversely affects another department's goals. Or, as productivity increases, customer service may decrease. Consider the car rental agency which lowered service costs by requiring a receipt from a gas station within seven miles of the airport - a great inconvenience that resulted in the customer going elsewhere for future business.
Misalignment should be a flag to the executive that revenue loss may occur and additional steps will be needed to improve alignment between the VOC and VOP. When the discord between voices is eliminated, the resulting harmony is music to the ears of the
customer - and the bottom line.

January '98 News for a Change | Email Editor

 



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