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If This Is a Service Economy, Why Am I Still on Hold?

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By Frances Frei & Anne Morriss

The article is an excerpt from Uncommon Service: How to Win by Putting Customers at the Core of Your Business, by Frances Frei and Anne Morriss.  (Harvard Business Review Press 2012)

We live and work in a service economy. In 1950, industrial workers represented the single largest employment sector in any developed country. Today, 80 percent of jobs are in service, and service represents 80 percent of the U.S. gross national product.

We cherish good service. In survey after survey, it’s an enormous differentiator in our experience as consumers. Companies that deliver service excellence get a disproportionate share of our income, and our loyalty to them is often difficult to shake. In researching this book, we encountered more than a few people who were brought to tears as they recalled an empathetic insurance provider or an airline experience that made them feel human, despite their screaming infant or lost luggage.

We find deep meaning in the act of serving. We’ve been devising ways to take care of each other–and celebrating the results–since the human story was first documented. Developmental psychologists tell us that a willingness to help strangers is a trait that most people exhibit at as young an age as eighteen months. It’s an almost universal impulse to serve, one that can get crowded out by other instincts, certainly, but if you peel back the layers of what motivates us, more often than not you’ll find a very core ambition to be useful to others. And yet. Good service is still, for the most part, rare. In our experience as economic actors, in industry across industry, we’re increasingly frustrated and disappointed. Customers, employees, owners–no one wants to deliver bad service, and no one wants to endure it. But that’s the experience we continue to inflict on each other.

Why is that?

This is the question that animates this book–why is service so hard to get right, despite the fact that we’re wired for it? How can we channel the human impulse to serve into greater productivity, greater returns, and greater satisfaction all around? Here’s what we’ve learned: uncommon service is not born from attitude and effort, but from design choices made in the very blueprints of a business model. It’s easy to throw service into a mission statement and periodically do whatever it takes to make a customer happy. What’s hard is designing a service model that allows average employees–not just the exceptional ones–to produce service excellence as an everyday routine. Outstanding service organizations create offerings, funding strategies, systems, and cultures that set their people up to excel casually.

“Uncommon service is not born from attitude and effort, but from design choices made in the very blueprints of a business model…Outstanding service organizations create offerings, funding strategies, systems, and cultures that set their people up to excel casually.”

In this book, we try to show you how to do the same thing: how to deliver uncommon service by design. Building any dynamic system means considering inputs and outputs, actions and reactions, and many of the concepts here are rooted in basic engineering principles. But psychology is where we find some of the largest obstacles to excellence. These take the form of denying reality and resisting trade-offs, points that may seem counterintuitive–or at least counter-comfortable. If you walked out on the street today and randomly asked someone to talk about a recent service experience, good or bad, chances are the person would recount a story of deep disappointment.

We know this because we’ve personally developed a bad habit of invading strangers’ personal space with questions like these. That story would probably involve a call center because, as we’ll explain in the book, call centers are designed to be reliably bad. But the story might just as easily be about wandering through department store aisles looking for a clerk to ring up an $8 pair of socks; or waiting for a shipment of parts that came in hopelessly late and hopelessly incomplete or going through endless cycles with a voice-recognition unit (“For what you don’t want, push or say ‘four’”), trying every numerical option in the hope of getting through to some sympathetic soul who has an incentive to care that your son’s talking Elmo won’t say a word.

And yet we should be living through the Century of Service–so what’s going on?

Be the Anti-Hero
Our message begins simply enough: you can’t be good at everything. In services, trying to do it all brilliantly will lead almost inevitably to mediocrity. Excellence requires sacrifice. To deliver great service on the dimensions that your customers value most, you must underperform on dimensions they value less. This means you must have the stomach to do some things badly.

The concept can seem immoral at first blush. We recently did some work with a major healthcare provider. The CEO wasn’t able to join us until the last couple of days. When he arrived, we reviewed what we’d covered, including the link between underperformance and excellence. The CEO immediately pushed back, saying, “I don’t see anything we could afford to be bad at.” He continued, revealing that he saw the idea of lowering the bar on any dimension as dishonorable, particularly in a field like healthcare.

Hands immediately shot up around the room. His team disagreed, and after listening to their ideas for where trade-offs could be made–where resources could be shifted from areas low on the customers’ priority list to areas customers cared more about–the CEO finally backed down. “I get it,” he said. “That’s how we can afford to be great.”

“To deliver great service on the dimensions that your customers value most, you must underperform on dimensions they value less. This means you must have the stomach to do some things badly.”

Charismatic leaders sometimes assume that they can avoid this trade-off by sheer force of personality. If they just get everybody fired up, the kinks will work themselves out. But you can’t design a system that is based on the faith that all of your employees will perform heroically, all day, every day, for an indefinite period. For a system to work, excellence must be normalized. And you don’t get to that point by demanding extraordinary sacrifice. You get there by designing a model where the full spectrum of your employees–not just the outstanding ones–will have no choice but to deliver excellence as an everyday routine. You get there by building a system that just doesn’t produce anything else.

Heroism, in fact, can be a red flag. We know a service recovery expert who comes in early and stays late every day, picking up the slack and overcoming the obstacles in her company’s service design. Whenever a client has had enough and is about to walk, she gets on the case and, through her superhuman effort, “fixes” everything. But as long as she’s around, the company will never confront the serious problems they’ve created for themselves, the money they’re leaving on the table, and the growth opportunities they’re missing–to say nothing of the risk of assuming that this very special employee will stick around. Cynicism can build quickly among talented, client-facing people when service problems are systematically tolerated. The cape starts to feel heavy when it’s overused.

Great service, it turns out, is not made possible by running the business harder and faster on the backs of a few extraordinary people. It’s made possible–profitable, sustainable, scalable–by designing a system that sets up everyone to excel.

The Four Service Truths
Once you accept the idea of trade-offs–and break the addiction to service heroes–the inputs into service excellence are much easier to consume. We lay out these inputs in a framework we call the four service truths, which are the assumptions behind the basic elements of a successful, high-service model: a service offering, a service funding mechanism, an employee management system, and a customer management system.

These four truths act as the mental cornerstones of a sustainable model for delivering uncommon service:

  1. You can’t be good at everything. You must be bad in the service of good. Excellence requires underperforming on the dimensions your customers value least so that you can overperform on the dimensions your customers value most. Once you choose this path, the decision on where to be good and bad should by driven by deep insight into who your customers are and what they need operationally.
  2. Someone has to pay for it. Service excellence must be funded in some way. You can find a palatable way to charge your customers more for it, reduce costs while improving your service experience, or get customers to do some of the work for you. Choosing among these strategies–finding the right funding mechanism for your business–will depend on both industry dynamics (e.g., price sensitivity) and the specific relationship you have with your customers.
  3. It’s not your employees’ fault. Your people matter, but not because they’re the make-or-break input on delivering uncommon service. What matters more is the way you’ve designed your service model, in particular, the way the model sets up average people to excel as a matter of routine. Rather than creating an environment where employees have the time and space to focus on satisfying customers, many service organizations today are actually undermining their people’s ability to serve.
  4. You must manage your customers. You must be deliberate about involving your customers in creating–not just consuming–your service experience. In other words, you also need a management plan for your customers. To return to our manufacturing metaphor, the special challenge of service delivery is that your customers routinely wander onto the shop floor–unannounced–and tinker with the assembly line. And yet success isn’t just a matter of keeping them out of trouble. Your customers need to play a productive role on the line itself, and to do so, they need training, guidance, safety goggles–and more.

Finally, you need to unleash that service model in an organizational culture that reinforces it at every turn. Getting the service design right is only half the challenge. The other half is creating a culture that’s sufficiently aligned with that model.

“You must be deliberate about involving your customers in creating – not just consuming – your service experience. In other words, you also need a management plan for your customers.”

In services, in particular, culture defines an enormous part of the stakeholder experience–every employee decision, every customer touch point. With clients wandering the shop floor, there’s no keeping the ugly truth contained in the back office. In our work, we often ask people to wrestle with this definition of leadership. Leadership, at its core, is about making other people better as a result of your presence–and making sure that the impact lasts in your absence. As a leader, you create the conditions for others (in services, that means employees and customers to perform), and you do what it takes to sustain those conditions, even when you’re not in the room. Designing good systems is part of this “absentee leadership,” but the most powerful tool you have, by far, is culture. Culture not only guides individual decision-making, but also provides the foundation for all other organizational behavior and action.

“In services, in particular, culture defines an enormous part of the stakeholder experience – every employee decision, every customer touch point.’

In other words, culture doesn’t just tell you what to do–it shows you how to think.

We see it this way:

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Cast of Characters
We break up these concepts for the sake of pedagogy, but in fact our message is highly integrative. It doesn’t work to just focus on a subset of these concepts; you have to go after them as a whole. And so we revisit many of the same companies throughout the book to illustrate how the parts work together. Of course, we supplement these stories with many others along the way, but here’s an introduction to some of the protagonists that will be making multiple cameos (in order of appearance):

  • Commerce Bank – With an unconventional business model that broke the unspoken rules of customer engagement, Commerce Bank became the fastest growing retail bank in America.
  • Southwest Airlines – A favorite of business school professors, Southwest remains an exception to the rule that airlines must lose money and make their customers miserable. And it has done so by proving that uncommon service isn’t the exclusive domain of high-priced, high-end offerings.
  • Ochsner Health System – Ochsner is delivering world-class patient care in communities still recovering from the aftermath of Hurricane Katrina, while taking a leadership role in transforming the U.S. healthcare industry. Despite the cost sensitivity of its patient population and the operational complexity of healthcare, Ochsner is refusing to produce anything less than excellence.
  • Bugs Burger Bug Killers – In an industry where competitors only promised to do their best, BBBK became a sensation by guaranteeing complete customer satisfaction. But it meant that business as usual wasn’t possible. Everyone, particularly clients, had to work a lot harder.
  • Magazine Luiza – This huge Brazilian retailer provides exceptional service to an unconventional market: poor, “unbanked” rural customers who are often not functionally literate. For the model to work, the company had to develop creative, new systems for managing customers and meeting their needs.
  • LSQ Funding Group – LSQ uses an innovative service design not only to revolutionize the value it creates for small businesses, but also to set its employees up to excel as a matter of routine. By embedding much of the job’s operations in an intuitive information technology (IT) system, LSQ enables its employees to deliver uncommon service literally on day one.
  • Zappos – The high-profile Internet retailer has designed a winning service model, which it gladly shares with the growing number of observers who want to study it. That’s because the real driver of its extraordinary success is much harder to copy: an organizational culture that brazenly challenges the most basic assumptions about what work and commerce are supposed to feel like.

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We want to stress here that we’re looking at these and other organizations at a moment in time, when the choices they made had something special to teach the world. It doesn’t mean that these companies retained their status as role models. Like many companies, some of them lost their momentum, if not their ways entirely. Sometimes this happens because of integration realities – a company’s service model and culture simply get absorbed or diluted by its buyer. And sometimes a company is bought by new owners who don’t fully understand the origins of their acquisition’s exceptional success.

They skillfully run the numbers, but they don’t see the links between finance and operations clearly enough. We hope to expose those links, for both current managers of service companies and those who may replace them in the future.

“Good people with good ideas were not enough. Our ambition is to help you build an organization that truly reflects your humanity, one that can shamelessly deliver uncommon service.”

The Commitment to Serve
In short, we want to be helpful. Our collaboration was born from the shared belief that the commitment to serve is ingrained in the human soul–and the shared observation that this commitment often fails to translate into sustained acts of service, even with the best of intentions. Frances first saw this challenge in her academic research and while in the trenches with executives trying to improve service in their own companies.

Anne first saw it on the front lines of mission-driven organizations in the public and nonprofit sectors. Good people with good ideas were not enough. Our ambition, with this book, is to help you build an organization that truly reflects your humanity, one that can shamelessly deliver uncommon service.

About the authors
Frances Frei is UPS Foundation Professor of Service Management at Harvard Business School, where she developed the school’s successful Managing Service Operations course.

Anne Morriss is the Managing Director of the Concire Leadership Institute, a consulting firm that helps leaders to surface and remove performance barriers.

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