Customer Focus comes also from the inside out.

The immediate assumption when we talk about “improving customer service” is that we refer to the activities of customer-facing team members who directly “serve” our external customers, clients, buyers, suppliers, guests, users, attendees, diners, students, patients, etc.

And in fairness, most service education is indeed intended for those who “face” customers – improving the quality of service for those who pay for our services.

UPservice specialist and guru Ron Kaufman recently published this blog entry which I fully endorse. Also, my strategic partner for customer service training, Ray Miller of www.thetrainingbank.com takes a similar stance in his best selling book That is Customer Focus which I recommend. (See also the ads for this on my website)

"But seeing service improvement as mostly a frontline, customer-facing issue will not foster the development of an uplifting service culture where all employees embrace the goal of constantly adding value for others. It is by creating this value – inside and outside the company – that firms compete and grow. Thus a key component of building service culture is working closely with those on the inside – all the internal service partners who work and interact with each other to provide an organization’s products and services.

When someone serves a customer, there is a necessary chain of people behind them that support what they do and how they do it. Any weak link could cause the service provided to break down. The folks in IT, HR, Finance, or Legal. Those on the plant floor, in Facilities or Operations. Even temporaries hired for projects or to fill-in for absent workers.

If the quality of their service on the inside is lacking, how can their colleagues facing customers and clients be expected to provide highest quality service? If Sales needs a custom order in a hurry, it cannot happen if Production has no motivation to serve. How can a new team member be motivated to exceed if HR does not onboard or orient them with an exceptional service experience? Why should retail clerks go out of their way to help if managers don’t go out of their way to help them?

If you seek to change the quality of perception of your organization’s customer service, focus on the inside, too.

If you manage an internal department, here is an exercise to pose to your team. Imagine the work of your group has been spun off – outsourced – and you have formed your own firm to provide the same services: HR, Finance, Legal, IT, Facilities, etc. All of a sudden, those who you were serving on the inside are now on the outside. Given the service you were providing, would they hire you back? Should they? What would you change about your service you were providing to be sure you got the job?

Does your work look different to you now? How is the quality of your service when perceived objectively – or competitively – from the outside? What level of service are you providing? What level have you been receiving? How can it be improved? Are there processes that are broken, or don’t yet exist, that would ensure you provide better service? Are your leaders encouraging internal service excellence? Are you and your colleagues delivering it?

And what about all the other departments that also provide internal service? Remember, as you improve your service to others, you will earn the trust and respect of your colleagues. You will inspire them, and you can ask for the same quality of service in return."

The Customer Experience-Loyalty Connection

Known key facts from previous Foster research are:

• While 56% of managers think they are customer-centric, only 12% of their customers agree.
• 81% of companies with strong capabilities and competencies for delivering customer experience excellence are outperforming their competition.
  

Now a new research report published by the Temkin Group, The Customer Experience-Loyalty Connection, finds a strong connection between improved customer experience and increased consumer loyalty-- leading to increased company revenue.

Based on a survey of 6,000 US consumers, Temkin Group found that consumers who have a good customer experience are more loyal to companies across all 12 industries included in the study: airlines, banks, credit card issuers, health plans, hotel chains, Internet service providers, insurance companies, investment firms, personal computer makers, retailers, TV service providers, and wireless carriers.

According to Bruce Temkin, author of the report and Managing Partner of Temkin Group, “Great customer experience isn’t just a nice thing to provide for customers; it’s a critical component for improving the bottom line by increasing customer loyalty.”

Key findings in the report include:

• A modest improvement in customer experience can generate a three-year revenue boost between $308 million for retailers and $179 million for health plans for every $1 billion in revenues. The study identifies the revenue levels for all 12 industries.
• Customer experience leaders have 10.8 percentage points more customers who are likely to recommend them compared to customer experience laggards.
• Customer experience leaders have 12.7 percentage points more customers willing to buy from them compared to customer experience laggards.
• Customer experience leaders have 14.1 percentage points fewer customers looking to switch away from them compared to customer experience laggards.

This report can be accessed from the Temkin Group website (www.temkingroup.com) or from a new Website called Temkin Ratings (www.temkinratings.com) where companies can download the detailed data from this research.

So you want to create a customer service culture... recruit for attitude first!

I often recommend to my clients that they only interview (and recruit) people who have "the right stuff between their ears". By that I mean that candidates will not even be interviewed if they do not first pass a hurdle that indicates they have an above average level of customer service aptitude and attitude.

In the realm of pre-employment testing there are proven and easy to administer tests available that will assist in this.

Not surprisingly I was delighted to read and in full support of this entry on the blog of UPlifting customer service guru, author and consultant Ron Kaufman.

Recruitment advertisements often emphasize the skills and experience required to apply for a job. This is understandable, but is also a mistake. Organizations should place more emphasis on recruiting the right attitudes during the hiring process. When you want to build an uplifting service culture, attitudes can be even more important than skills.

A great attitude accelerates an employee’s ability to contribute valuable results. A great attitude also has a multiplier effect, uplifting the moods and attitudes of every other member on your team.

One key component in a great attitude is “willingness”. Willingness means being pro-active and resourceful, finding ways to excel in different circumstances.

The three important elements include:

1. Willingness to Adapt

No organization operates in a static environment. The willingness to be flexible and adapt can be a strong impetus to achieving tangible and valuable results. When a person is highly skilled – but insists on doing things “the usual way” – using only those skills he is already comfortable using, this itself can become an obstacle.

The willingness to adapt is essential to meet continuous changes in technology competition, and customer expectations.

2. Willingness to Make Improvements

One part of good employee performance is the ability to make improvements over time. In a changing world, if an employee feels there is no need to make improvements in any aspect of his work, poor performance evaluations are sure to follow.

The willingness to make improvements also requires seeking feedback from colleagues and customers, asking for opportunities to do even better in the future. Asking “Is there anything I can do next time to make it even better for you?” is a powerful way to gain insight and ideas that lead to higher value performance and results.

3. Willingness to Listen

Candidates in an interview are often gauged on their ability to communicate, and their articulation is carefully evaluated when they speak. But listening skills are equally important – and for many service roles an even more important critera!

The best articulators may not necessarily be the best listeners. The willingness to actively listen to the concerns of customers and colleagues is crucial to deliver more valuable service. Only by listening carefully to what is being said – and unsaid – can a service provider appreciate the subtleties of each person’s preferences and priorities, customizing their service to deliver maximum value.

This value can be measured in tangible results including rankings and reputation, pricing and profitability, customer loyalty and employee satisfaction.

Attitude Contributes to Culture

When building an Uplifting Service Culture, recruitment for attitude is more important than prior existing skills. Skills can be taught, coached, developed and improved. Attitudes can change, too, but it takes a lot more effort.

It’s true that an Uplifting Service Culture can lift the spirit of everyone at work. But who do you want to hire next? Someone technically skilled who brings the mood down, or someone naturally up who makes your culture stronger?

The choice is yours. We recommend hiring for attitude first.

So you want a positive customer experience...

Positive customer experience doesn’t just happen after one transaction, sale, or service, but an initial bad customer experience will send a customer straight to your competition; never to look back at the wake. Therefore, we should be mindful that the total positive customer experience a customer appreciates is the result of an organization’s total structure, of all departments working together like a finely tuned machine.

When we think of a positive customer experience, we see it as a reflection of the very core values a company has and how that very same organization communicates those values – either through its quality of products or services. However, the experience begins with the senior executive and works its way through every department.

Remember that no organization rises above the level of its leadership.

Seven Signs of a Customer-Focused CEO

This was a very pertinent guest post on the Forbes blog from James Slavet of venture firm Greylock Partners. I remind readers that Leadership is a key driver of success and that no organization shall rise above the level of commitment of its leadership.

“A man without a smiling face must not open a shop.” – Chinese proverb

The next generation of great companies will be led by CEOs who are serious about great customer service. The quality of a company’s customer service matters as much as the quality of its code. Algorithms can fail, patents can expire, but a reputation for great service endures.

The fundamental trait of the ideal Silicon Valley start up has long been scalability. A ten-person team can build and deliver a product to ten million people, and that’s a beautiful thing. But there are times in business when you need to do things that do not scale—times when good, old-fashioned human touch is essential to address customers’ needs.

I see hundreds of new consumer Internet business presentations each year. A growing percentage of entrepreneurs are now adding “World Class Customer Service” as a bullet point in their investor presentations. It’s a buzzword of the times, perhaps inspired by the success stories of recently acquired companies such as Zappos and Diapers.com—strong businesses built on foundations of top-tier customer service. I’m hopeful that we will experience a generation of entrepreneurs who make customer service a priority. But great customer service requires more than a bullet point on a slide. It has to start with a deep understanding and commitment by the CEO.

The impact of customer service has been amplified in today’s environment. Businesses compete intensely for talent and customers, and positive and negative sentiment spread faster than ever before. Great customer service builds employee morale. Everyone wants to be proud of where they work and people are more engaged and productive if they work for a company that is committed to doing whatever it takes to consistently deliver an awesome experience for customers. Great customer service is critical for attracting repeat customers and building positive word of mouth and a respected brand.

When customer service is mishandled, the results can be tragic. Dave Carroll is a Canadian musician who decided to chronicle a real life experience of how his guitar was broken during a trip on United Airlines, and the subsequent reaction from the airline. United failed to accept responsibility and refused to pay for the damage to Carroll’s guitar.

Carroll’s resulting tribute song, “United Breaks Guitars,” became an instant hit on Youtube, and was viewed more than 10 million times. The reaction was so strong that Carroll ended up writing not one but two sequels. Trust me when I say you never, ever want your company to be named in the hook of one of this guy’s songs.

“You broke it and should fix it, you might as well admit it, I should have flown with someone else or gone by car, ‘cause United breaks guitars.”

Business Insider recently published a list of 20 companies with the best customer service (yes Zappos was #1). I’ve reflected on the common practices the CEOs of these companies share, as well as my own experiences working directly with CEOs in Greylock-backed companies, to develop this list of the seven signs.

Sign #1: You don’t need an advanced degree to get in touch with customer service

Most consumer Internet sites make it nearly impossible to get in touch with a live person to address a problem. The help section is buried many links deep if you can find it at all. The customer has to fill out a form or an email and he or she is given no sense of whether or when a response may be coming.

Customer service-focused companies make the path to help more accessible, and they give the customer a choice of how to interact and get help, whether by phone, Skype, chat or email.

Go ahead and type Diapers.com into your browser. You’ll find their phone number is listed clearly on the top right section of their home page and persistently throughout the site. Even better is the page below – they actually like receiving phone calls?

There’s a reason to like customer calls. As Tony Hsieh, founder of Zappos, wrote in his autobiographical book Delivering Happiness, only 5% of Zappos sales happen over the phone, but Zappos views each customer service contact as an opportunity to create a lasting positive memory with the customer.

“There have been few successful men who weren’t good at details. Don’t ignore details. Lick them.” William B. Given Jr.

Sign #2: An economically irrational obsession with details of the customer experience

Question: “What details of the customer experience are you most proud of?”

Companies that deliver a memorable customer experience usually have leaders who have an economically irrational obsession with the many composite details that make up the whole. Whenever you un-box a new Apple product, you can feel the way Steve Jobs must have personally obsessed about every beautiful detail, instead of trying to find the cheapest way to get it made. Customer-focused CEOs talk in intimate and loving detail about the specific product and experience choices that were made, and they will absolutely lose it when the details of the customer experience go awry.

“Economically irrational” decisions can turn out to be investments, when the company has the long term view in mind. I recently discussed this obsession with the customer experience with Bob Paquin, former SVP of Operations/IT at LL Bean and former COO at Blue Nile. Paquin told me about the time LL Bean was late on a canoe delivery and one of his team members strapped the canoe on the top of his car and travelled from company headquarters in Freeport, Me. to New Jersey to make a personal delivery to the customer, who was about to take off on a trip down the Delaware river.

From a business perspective “no questions asked” returns and “go the extra mile” service may seem costly and irrational. However it turns out not to be a prohibitive cost because very few customers take LL Bean up on their offers of never-ending product returns or employee-expedited delivery. Customers are just happy to know that if they wanted to, they could.

An obsession with small details extends beyond getting the basics right. The personality of the CEO, and the company, should come through in small but important touches. In a world of service level agreements, how can a company do something unexpected, quirky and memorable to make the customer smile? Whether it be a handwritten note to the company’s most loyal customers, or a gift to say thanks to a customer for a referral. The gift will have a more profound impact on the customer if it’s delivered as a thoughtful surprise thank you later, rather than as a “referral incentive” up front.

Sign #3: A personal groove with customers

Question: “How do you personally connect with your customers?”

Have you ever seen the show “Undercover Boss” on CBS? It captures the essence of what’s wrong with most of corporate America. Many CEOs are disconnected from the realities of the front line, where their employees interact with customers every day.

CEOs who are out on the front lines tend to have an special emotional connection with their customers –it’s a kinship, a bond, a love. It just feels different than a sterile company-to-customer interaction. Customer service-focused CEOs find lots of ways to interact directly with their customers and to nurture the relationship. They communicate and listen by blogging and tweeting, but they also find more direct ways to stay in touch.

Tim Westergren, the founder of Pandora, has built a deep groove with Pandora’s customers over the course of a decade. He personally answered all customer emails in the early years of the company. Now that Pandora has almost 50 million users, Tim can’t personally handle all of the customer email any more, but his customer-focused instincts ensure that Pandora still responds to every email that comes into the company with a personal response from a real live human. Tim also gets out from behind his keyboard by regularly organizing meet-ups where he travels to towns across the country to meet and directly connect with avid Pandora fans. Connecting directly and in-person with customers arms you with concrete stories that you can take back to your team to work on solving real problems.

Sign #4: The CEO channels the voice of the customer

Question: “Can you forward me a few of your recent all-company email updates?”

Many CEOs send out a regular email update to the whole company, perhaps once a month, as a way to share what’s on their mind and how things are going. It’s interesting to see what different CEOs choose to communicate in these emails. Some focus on the company’s strategy, creative marketing campaigns or financial performance. Customer-focused CEOs mostly write about the customer. They do this naturally—it’s what they really care about, and it’s also where they want their team to focus.

Redfin is an online real estate brokerage. Its CEO, Glenn Kelman, copies me and the rest of the company’s board of directors on his all-company email updates. Glenn is very focused on catching people doing good things and highlighting it when they do. His recent email included links to online videos of Redfin customer focus groups, followed by a quantitative report tracking Redfin’s Net Promoter Score (which captures the likelihood of Redfin’s customers to recommend the service to a friend). The next section of his email highlights quotes from customers sharing their experiences with Redfin’s agents.

Customer service-focused CEOs create a virtuous cycle by celebrating great stories from customers. Doing so inspires everyone in the company to do right by the customer. Glenn always seems to find quotes that are specific, interesting and energizing. A few recent gems:

“Sue is fantastic…I followed her on my scooter and didn’t feel judged at all!”

“It’s magnificent! I want to have sex with this Web site but I’m married!”

Of course, it feels good to be Sue or a member of the product team. Not only do you know that the customer deeply appreciates your work, but the CEO has broadcasted it to every one of your coworkers.

Sign #5: A “Moneyball” approach to service

Question: “How much do you invest each year in marketing? How much do you invest in customer service? Why?”

Marketing has been transformed over the past decade through the rise of the “Moneyball CMO”. It’s time that more companies took a Moneyball approach to customer service. Marketing investments aren’t made on faith today, but most customer service investments are, and that’s part of the problem. Marketing gets funded because there is an entire economy around measuring marketing’s impact on revenues. What if more companies did the same with customer service’s impact on revenues?

Contrary to popular belief, customer service is not a cost center like payroll processing or other non-strategic business functions. In those areas, the less spent, the better. Customer service should more properly be regarded as a strategic investment. If you’re building your business for the long term, you need to make the necessary investments to make your customer service great. Zappos CEO Tony Hsieh is quite eloquent on this topic. He says that companies should look at their customer service team as a form of marketing investment. Each customer contact is an opportunity to retain a customer, create positive word of mouth, and build the brand.

Most companies don’t give real consideration to the trade-offs of an incremental dollar spent on paid customer acquisition versus that same dollar spent on customer service. By not calculating this trade off, many are dramatically under-investing in customer service. Some internet companies would be better off cutting back on their lowest performing marketing programs and staffing up more fully on customer service. As Bob Paquin, the former COO of Blue Nile said to me “leaders who don’t invest in customer service are dealing in a false economy.”

A customer service-focused CEO challenges his marketing and customer service leaders to see who can produce the best ROI. Let’s consider the following scenario. Say the fully loaded cost of a customer service rep is $50,000 per year. So ten reps would cost $500,000. What are ten high-performing customer service reps worth as a marketing and brand building investment? If the average rep can positively impact 25 customers per day, that would be over 60,000 positive customer interactions generated by this ten-person team over the course of a year. If each positively impacted customer spread the word to just two friends, then that would be 180,000 positively impacted customers, at an average cost of less than $3 per customer. Is that a worthwhile investment, relative to what $500,000 in paid marketing might generate? I’d guess in many situations that answer would be yes.

It’s rare to see a CEO who includes customer service metrics prominently in his core operating performance dashboard, alongside revenue, margin and customer counts. What is the success rate of resolving customer issues on the first in-bound call? What is the average response time to incoming emails? How long is the average phone customer put on hold? The average call hold time for U.S. businesses in 9.5 minutes. Ouch. Many other interesting stats can be found at the Get Satisfaction blog.

Sign #6: More focused on measures of customer quality versus customer quantity

Question: “How do you measure customer engagement?”

Some companies focus more on pumping up top-line stats as opposed to solidifying the experience for their core existing customers. It’s very tempting for the CEO to focus his attention on user growth metrics. It feels good to talk about the biggest numbers possible.

Customer-focused leaders are inclined to focus their attention on metrics that capture customer quality, and that ultimately drive more enduring value for the business. They know that it costs six-to-seven times as much to acquire a new customer as it does to keep an existing one.

When I first met with CEO Doug Mack to discuss the One King’s Lane business, I noticed that he was far more focused on the number of transacting customers and repeat transacting customers than he was the aggregate number of email subscribers.

Sign #7: Customer satisfaction drives team pay, starting with the CEO

Question: “How is customer satisfaction factored into your team’s compensation?”

An increasing number of companies are now capturing the net promoter score of their customers as an indication of satisfaction and likelihood to recommend. That’s a good thing.

But it’s rare to see a company that actually makes customer satisfaction measures a core part of how employees get paid. Real estate agents who work for Redfin are paid a bonus for each home purchase or sale that they facilitate. However the dollar amount of this bonus is paid on a sliding scale that goes up or down based upon the customer’s net promoter score. Agents are not paid at all if the customer is unhappy—even if a transaction closes. This compensation structure gives Redfin’s agents more incentive to stay focused on what’s best for the customer. This contrasts with traditional real estate brokerages who pay on a pure commission basis; the more you pay for the home the more your broker gets paid, whether he did a great job or not. Redfin also tracks the aggregate net promoter score of their customers, and this score ranks alongside revenue and profitability as a core factor in annual compensation from the CEO on down.

We should all strive to build hyper-scalable businesses, but not at the expense of ensuring a great experience for the customer. It is exciting to see more CEOs promoting world class customer service as a point of differentiation for their businesses. Those CEOs who back up their claim through their daily practices as leaders will have the best chance of building the next generation of great and enduring companies.

*Disclosure: Greylock Partners is an investor in Pandora, Redfin and One Kings Lane, and James Slavet represents Greylock on the boards of Redfin and One Kings Lane.