Dealing with chaos

Not only do customers differ from employees, they also dramatically differ from one another.

A new book, ‘Uncommon Service’, lays down how leaders can successfully manage the two constituencies

If you run a service business, then your customers “work” for you in many of the same ways that your employees do. But these aren’t your average employees. They’re erratic, unskilled, and entitled. Their interests and your interests regularly diverge. Employees are contractually bound to work on behalf of the firm, but customers operate under no such constraints. Customers are looking out for number one, as they have every right to do.

On the plus side, of course, customer operators require no salary, benefits, or retirement contributions, and they show up precisely at the time service is required. They also have a level of insight into their individual tastes and quirks — insight that your employees won’t ever have, even after throwing a fortune at market research. These factors suggest that there’s a lot to be gained by empowering customers to play a greater role in meeting their own service needs.

Until recently, many executives saw a clear distinction between the people who produce goods and services, and the people who consume them — between the employees on the payroll and answerable to management, and the customers who exist somewhere outside the company’s boundaries and its direct control. These days, a growing number of firms are expanding the productive role of customers to reduce costs or improve service, or both, with the proliferation of self-service as the most visible example.

But to manage customers in an operating role, a firm needs new strategies, since it can’t rely on the same systems it uses for employees. Customers aren’t dependent on the company for their livelihoods. They haven’t signed a W-2 form and agreed to abide by certain rules and expectations in exchange for a weekly paycheck. As a result, powerful employee performance incentives such as career advancement and financial security are missing from the customer management tool kit. There’s also rarely a rigorous selection or training process, at least not one focused on operational fit, and so you often have to work with whoever shows up, regardless of skill level or attitude. Oh, and there’s typically a lot more of them. Customers outnumber employees by orders of magnitude in most companies.

To complicate matters further, not only are customers categorically different from employees, but customers can also be dramatically different from each other. This diversity dramatically increases the variability that is introduced onto the “factory floor” of service production. Variability of operating inputs (materials, processing time, worker skill) is public enemy number one in a manufacturing environment. It’s the barrier to the critical goal of 100 per cent utilization. But service managers are constantly being inundated with variability, in the form of customer-operators who are a little bit different from the last one who showed up — a little faster, slower, smarter, pickier, later, earlier, or more or less prepared to do the job. And every once in a while, through door number 2, comes a customer-operator who’s a whole lot different. It’s enough to make you crazy — and certainly enough to shrink your margins and ensure a mediocre service experience.

Here’s the basic message: if you’re in the service business, you essentially don’t know which people are on your team, when they’re showing up, and what they’re going to do once they get there. And so you need a plan for managing this uncertainty.

Managing the Chaos of Customers
In other words, variability is a fact of life with customer-operators. Here are the different forms it can take:

Arrival: Your customers don’t all want service at the same time or at times that are necessarily convenient for you. Grocery stores find themselves swamped during the evening rush hour, while the lines at Dunkin’ Donuts can extend for half a block at 8:00 a.m.

Request: Not everybody orders the same thing. Each client of an advertising agency is executing a unique marketing strategy, and vacationers at a resort want different amenities. Even customers of a single-service business like Jiffy Lube show up in different makes and models of cars.

Capability: Customers have different knowledge, skill, physical abilities, and resources, which means that some customers perform tasks easily while others need hand-holding. In a medical setting, the ability of a patient to describe symptoms can greatly affect the quality of care. But so can the person’s ability to negotiate the medical bureaucracy.

Effort: Customer-operators decide for themselves how much effort to invest in production tasks. Company controllers don’t always hand over well- organized files to independent auditors, and shoppers don’t always return their shopping carts to the store.

Preference: Even customers who want the same service may have very different definitions of quality. One diner appreciates the servers’ introducing themselves by name; another resents the presumption of intimacy. Some clients of a law firm might construe a top partner’s attention to detail as reflecting the importance of their case; others might complain that those expensive billable hours could be doled out more judiciously to less costly associates. Subjective preference adds a multiplier effect to all other forms of customer variability. Knowing which type of variability you’re dealing with can help you to manage it more effectively. Managing effort variability (often through incentives), for example, can differ markedly from managing capability variability (often through customer training initiatives).

You can manage customer chaos in essentially two ways: by reducing or accommodating it (see figure). Reduction tends to favor efficiency. Accommodation tends to favor service, which keeps the two approaches in constant tension. Classic reduction strategies are menus and reservations. Limit your customers’ options — a win for you, but a loss for your customers, who may be craving something off-menu that night and at some time other than 7:30 p.m. Accommodation, otherwise known as dealing, usually involves putting slack into the system and retaining a bench of experienced employees who can skillfully adapt to the chaos that customers bring with them. This approach is expensive. As a result, accommodation often hinges on getting customers to pay a premium, not always an option for your business.

But customer variability doesn't always force you into a stark trade-off between cost and quality. Self-service is the low-cost accommodation of choice in managing arrival and request variability. Self-service asks customers to deal with their own preferences on their own time line. It allows you to forgo complicated, inefficient labor scheduling and the deep (and expensive) bench of employees.

UNCOMMON SERVICE
AUTHORS: Frances Frei, Anne Morriss
PUBLISHER: Harvard Business Review Press
PRICE: $995
ISBN: 9781422133316.

Reprinted by permission of Harvard Business Review Press. Excerpted from Uncommon Service: How to Win By Putting Customers at the Core of Your Business. Copyright 2012 Frances Frei and Anne Morriss. All rights reserved.