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Experiencing World Class Service Excellence

Experiencing World Class Service Excellence

US Service Excellence Tour November 2001

The Stimulus to Go

This tour has excellent credentials – it has been running annually for many years under the auspices of Manchester Business School. There is a sister UK tour.

For us, the visit was part of a continuing professional development programme- a sort of experiential MBA – visiting world-class companies. Interestingly and appositely the CEO of Federal Express in a video we saw said that

‘the most important thing to invest in is yourself’.

It was also a chance to spend time with a group of senior people from diverse backgrounds and understand some of the business challenges they are facing. Fellow travellers were directors and senior executives from companies including Sky, Argos, Legal & General, Nationwide, Alliance & Leicester and Bristol Airport.

The Main Objective

The hypothesis is that a reputation for Service Excellence is the outcome of how companies align their strategic focus, key processes and people in effectively delivering their customer proposition.

Programme of Experiences

Monday Stew Leonard’s Elizabethtown Water

Tuesday Ritz-Carlton FedEx Hub Night Visit

Wednesday FedEx Express

Thursday USAA Nordstrom Sewell Village Cadillac

Friday Southwest Airlines

Making Sense of It All

The concept of  ‘a line of sight’ through a company’s activities has been chosen to both analyse the experiences and to help surface any alignment gaps there might be (see below).

In true marketing fashion the start point should be with the customer. In narrative terms, however, the flow is better starting with the Context which is important for two reasons. Firstly, to help understand how companies got to where they are today. Secondly, because of the implications it has for the culture and leadership style that we were likely to experience.

Business Model is used instead of Strategic Intent because it has more commercial overtones.  Quite simply how were these companies making their money given their Service Excellence ratings? What trade-offs were there?

In between the Business Model and the Customer, many companies have Processes and indeed design Products in such a way that staff are caught between a rock and a hard place as they intermediate between the company and its customers – ‘Company Push’. How were staff encouraged to behave?

Lastly what evidence was there of an open and timely dialogue with customers? How closely were companies listening to their customers? What were they doing about it? What evidence was there of the customer manifestly influencing what the company was doing? – ‘Customer Pull’.

Inevitably some visits were more fruitful than others in providing input for the analysis and much information had to be taken at face value. Quantitative performance data was almost universally absent.

The Visits

Stew Leonard’s

Format of Visit

• Tour of store with introductions from heads of sections (coffee, bakery, fish etc.)
• Classroom presentation by Stew Leonard’s daughter
• Time –half day
• Location: Yonkers New York

Context

• Founded 1969
• Graduated from doorstep delivery of milk
• Invested everything to fund first store
• Mom & Pop store to world class cited by Tom Peters
• Three stores now all family run
• Big personality of Stew Leonard writ big across the business
• In Guinness Book of Records for sales per square foot

Business Model

• Limited product range – 1000 items only
• Focus on fresh produce where margins are typically higher (provided wastage is closely managed)
• Concept of life time value
• No overt premium for service

Processes

• Single aisle only so customers trail round like a guided tour
• Section heads treated as owners of small businesses do buying and set prices
• Frequent, immediate & varied internal communications highlighting staff performance
• Underlying logistics not examined

Product Variables

• Bulk purchasing cost benefits shared with customers to generate higher volumes still
• Freshness & perceived value for money critical
• Quick (days) trial and error product development process
• Only recently introduced wine section which has been very successful
• Disney style entertainment a feature

Staff Management

• Department managers introduced their respective areas with walk-throughs
• We were able to talk to customers and floor staff – good eye contact

• Front line staff encouraged to deliver outrageous service (see story)
• Hire for attitude – use bespoke psychometrics – three interviews
• Focus on self supporting teams; close attention to under performance
• Promote from within
• Handwritten notes recognising exceptional performance – ‘a moo to you’
• Fund of stories which make staff heroes & demonstrate exceptional customer service
• Strive to create an atmosphere of smiles
• Staff given time off to visit competitors but must  implement one improvement in 72 hours
• Use tours as income stream but also energises staff

Customer Dialogue

• As you enter the store there is a ‘rock of commitment’ which says:
  ‘Rule 1 –The Customer is always right
  ‘Rule 2 – If the customer is ever wrong, reread rule 1
• Tangible customer involvement and entertainment; factory outlet/market feel
• Staff encouraged to imagine that they are the customer
• As in a theatre, the customer is an integral part of the interaction
• Constant product sampling so immediate response
• Instant refund policy
• Customer Suggestions Boxes – all responded to whether acted on or not
• Customer Panels with store management team
• Customers encouraged to comment on staff
• Satisfaction Surveys

Commentary

• The ‘line of sight’ was crystal clear throughout the store particularly the behaviour of the customer facing staff and the level of immediate and on-going dialogue.
• This experience should be relatively straightforward to engineer and deliver but there is no comparison between the robotic and sterile experience of many UK supermarkets and the vibrancy of Stew Leonard’s.
• Their biggest challenge – which they acknowledge – is scalability.
• There is nothing to say they have to get bigger – ‘right sizing’ has a number of connotations and they may be the right size now.
• The showmanship is the velvet glove of a very focused business model but their people are used and encouraged to make a difference
• Clear ‘Stick to the knitting’ approach.
• Had only recently introduced a wine department in the Yonkers store which was going well which suggests corporate flexibility against perhaps a prevailing paternalism.
• There seems to be a virtuous circle between, competitive pricing, engaging service standards, higher volumes and win-win distribution of the benefits between company and customer.

Some Delegate Comments

Sell to all the five senses (sight, smell, sound, taste, touch)

Epitomized all the learning that is necessary to create a ‘wow’ in any company

Effective staff orientation can result in excellent service but slogans can ‘tell a story’

Stew Leonard’s – A Service Excellence Story

At five minutes before closing one Sunday night, a customer said to cashier Betty Mucci, ‘We’ve just returned from vacation and are so happy you’re open. Our refrigerator is empty, and we needed this bread and milk for breakfast and the kid’s school lunches tomorrow.’ When the total of $37.12 was rung up, the customer panicked and said, ‘Oh my gosh, I forgot my wallet. I don’t have any money!’

Betsy just smiled and said, ‘That’s OK, just give me your name and address.’ Betsy wrote the information down, put the void slip in the register drawer, and said, ‘Don’t worry, the next time you’re in the store you can pay for your groceries.’ The customer asked, ‘Do you have the authority to let me walk out without paying for all these groceries?’ Betsy said yes, but the customer wasn’t convinced and asked to see the manager.

When the manager appeared and the customer explained the problem, he said, ‘When it comes to keeping our customers happy, we have no hard and fast rules. Each of us has the authority to use our own best judgement and treat every customer the way we’d like to be treated our self’.

Two weeks later, Stew Leonard ran into a friend at a local restaurant. He came up to Stew all excited and said, ‘Stew you won’t believe this story!’ He proceeded to tell how it was his wife that had been the customer who forgot her wallet, and how she had been telling the tale to everyone she met. ‘But what I don’t understand,’ he said, ‘is how you can afford to do it. Aren’t you afraid cashiers will use poor judgement and you’ll lose money?’

Stew responded, ‘How can we afford not to do it?’ Ninety nine percent of people in our store at any given moment are repeat customers. They’re back because we satisfied them the last time they shopped with us. Our attitude is that everybody’s honest If we occasionally run into someone who isn’t, we just take it on the chin. But the important point is that 999 out of 1000 customers are honest. We simply refuse to let one dishonest customer determine how we are going to treat the other 999.

Source: American Management Review

Elizabethtown Water

Format of Visit

• Talks from

Andrew M. Chapman, president –

Derek Stroud, vice president of Customer Relationship Management,

Beth Neafy, Change Project Team Leader

Professor Bruce Hawthorn, External Process Design Consultant

• Time: 2 hours
• Location: Head Office Westfield New Jersey

Context

• The seventh-largest water company in the US with 500+ staff serving more than 1m customers in New Jersey
• In November 2000 became a wholly-owned subsidiary of Thames Water
• Regulated monopoly, have to apply to the Board of Public Utilities for rates increases
• Company historically consisted of three distinct silos on split sites– water & waste management, engineers and billing
• Since current CEO appointed in 1997 have been going through major process and organisational change programme to deliver a more customer focused organisation.
• CEO also felt that customer satisfaction could be a positive differentiator as an acquisition tool for municipal water authority management & should industry become de-regulated
• Also felt that fewer complaints would lead to happier staff and hence lower staff turnover.
• Implementing a SAP CCS customer billing and account management system (the first of its kind in a US utility).

Business Model

• Shaped by regulatory rules
• Pricing is a cost plus model
• Penalties if historic customer satisfaction criteria not met

Processes

• IT Strategic Review identified opportunity to bring together activities of silos
• Customer Relationship Management is defined as Single operational view of the customer
• Used SAP Enterprise wide system to re-define processes
• Key process Revenue Management i.e. Meter Reading to Receipt of Funds

Product Variables

• Responsibility is only for water supply to property boundary. From road to property is owner’s responsibility

Staff Management

• Exemplified by internal team approach to process re-design – led by very credible long serving member of staff
• Quote ‘People march to their measurements’
• Need to re-skill Customer Representatives to problem solve (improved thinking) and understand issues around water quality (chemistry) and pressure (engineering) – described as getting the crew ready to run the new ship

Customer Dialogue

• Little evidence that customers have had an input into the process design and change management programme
• Industry prescribed measures for customer satisfaction a given although they were attempting to redefine these.
• Implied customer frustration given fragmented delivery through historical silos

Commentary

• A different context from Stew Leonard’s and the other visits
• The impetus for change was driven solely by the vision of the CEO – there were no external drivers – arguably the company was ahead of the curve.
• It emerged in conversation that the heads of the business silos had acted as brakes on the proposed process re-focusing.
• The pace of the change programme was accelerated with the arrival of a UK Thames Water executive some eighteen months ago
• The orthodox view would be that processes should be re-designed before IT is applied although it could be argued that the approach was contextually appropriate
• The absence of any customer input into the re-design suggests that a supplier mentality still prevails and therefore potentially a serious line of sight misalignment.
• Because of the way rate increases were signed off, provided the regulator agree, the customers would of course effectively be paying for the change programme.

Some Delegate Comments

Similarities with our current situation and interesting to see mechanisms and structures put in place to direct transitional change

Change is always difficult, particularly when your colleagues only pay lip service to it

Placing an employee of long standing with the respect of her colleagues teamed with a visionary leader is a recipe for success

Elizabethtown Water

Customer Service Vision

To provide an appropriate level of service for each type of customer which they value, appreciate and would choose in an open market.

Customer Mission

To provide value to our customers by providing safe, adequate and proper service at the most economical cost by continually improving our facilities, our work processes and the capability of our employees.

Customer Service Strategy

• Billing: to provide accurate and timely bills that our customers understand
• Payments: to collect all monies in a timely manner using all reasonable methods
• Billing Contacts: any contact with a customer should add value in terms of cash, image or both
• Service Contacts: To provide a level of service that eradicates the need for customers to contact the company more than once and that customers value.

Source: Boardroom Posters

Ritz-Carlton

Format of Visit

• Presentation from Stephanie Thomas Training Manager
  Back of House Tour
• Time: Half Day
• Location: Buckhead Atlanta

Context

• Group founded by Horst Schulze 1983
• Based on the legendary Ritz Carlton Boston which revolutionised hotels in America by creating a luxury setting
• Now 40 hotels worldwide, 22000 ‘ladies & gentlemen’
• Winner of Malcolm Baldrige National Quality Award.. First and only hospitality organization to win, first in 1992 and again  in 1999
• Only 3 hotels owned by company – rest independent ownership but  using Ritz Carlton systems & processes
• In 1995, Marriott International purchased 49% interest. Three years later increased to 99%.

Business Model

• Superior environment and psychology of comfort a critical part of the experience – the mystique of the Ritz Carlton
• Market niche is essentially corporate business travellers
• Premium price
• Occupancy & revenue per room (REVPAR) key metrics

Processes

• Set of core values collectively called The Gold Standards: The Credo, The Three Steps of Service, The Motto and The Twenty Basics captured in pocket card held by all staff
• Daily departmental “line-ups” attended by all employees including senior executives dealing with one of the 20 basics each day.
• Use Project Teams to continually review key processes and also problem solving self directed work teams
• Computerised record of guest’s preferences (often from observation) – staff complete Staff Preference Notes
• Guest Incident Action Forms
• Much attention is paid to the psychological attributes of comfort – the furnishings, the quality of the dressing gowns, towels& bedding etc.
• Backstage photos of table layouts, areas in bedroom to dust & repeat cycles are on display – this helps with the ethnic diversity of the staff

Product Variables

• Quality Hotels
• Club lounge, Room Service, Casual restaurant, Banquet Food, Recreation/Fitness

• Luxury residential condominiums located at The Ritz-Carlton hotels and resorts.
• The Ritz-Carlton Learning Instituteopen to executives from other companies wanting to learn and adapt the principles of service and leadership to their own organizations.

Staff Management

• Motto ‘We are Ladies and Gentlemen serving Ladies and Gentlemen’
• Intensive orientation for new employees – 2 days to orient & select, 21 day review, 30 day Certification Programme
• Customised psychometrics covering empathy, Caring, Exactness, Professionalism, Politeness and Positiveness
• Staff encouraged to take ownership of problems – $2000 per guest ‘recovery’ discretion
• Complaint handling scripted ‘I apologise’ – try to make problem really small – move the customer out of the public areas
• Recognition – ‘Five Star Employee of the Quarter’

Customer Dialogue

• By observation
• Satisfaction surveys
• JD Powers rating

Commentary

• Ritz-Carlton is a high quality operation. Was the ambience tangible in the hotel? – Yes. Was the quality evident in the Club Lounge and the bedroom? – Yes. Was the high service palpable from the people? – Not uniformly.
• Ritz Carlton is process dominated in principle in the same way as McDonalds – another franchise operation. The scope is, of course broader.
• Inevitably franchises have to be rules based and much time and effort goes into embedding these into the employees – though it has been called a cult occasionally.
• Whilst they premium price for the service,  they still face the same occupancy challenges as all hotels to get ‘heads on beds’. It is not clear if their model is more resilient or how they have fared post 11 September.
• Behind the scenes there was evidence of the rhetoric breaking down – Ladies and Gentlemen referred to as ‘employees’ in memos for example. The administrative staff offices were very cramped – not a case of treating your staff as you treat your customers.
• There was some evidence of staff trying to introduce spontaneity into the prescribed daily routines.
• Understanding customer preferences and invading their privacy is a fine line that the hotels are careful not to cross.
• On paper using an 80/20 basis the alignment was strong. However, it is not clear how open the dialogue with the customers is and how this informs the process improvements that the Ritz Carlton carries out.
• It was also not clear what the trigger criteria would be for employees to use their personal discretion of $2000.

Some Delegate Comments

‘All that glitters is not gold’.  It is easy to present a veneer but very hard to embed values effectively in some environments

Reinforcement through ‘over the top’ communication programme works well

A simple message to staff relating to ‘values’ can encompass an entire culture and consequent behaviour

Ritz Carlton

7 Year Vision

• To be The Premier Worldwide, Provider of Luxury Travel and Hospitality Products and Services

2 Year Mission

• Product and Profit Dominance

The Vital Few Objectives

• Improve Employee Pride and Joy
• Improve Customer Loyalty
• Reduce Customer Difficulties
• Enlarge REVPAR
• Improve Hotel Profitability

Method

• TQM – Application of Quality Sciences
• Baldridge Quality Awards Criteria

Foundation

• Values and Philosophy
• The Gold Standards
• Credo
• Motto
• The Three Steps of Service
  – A warm and sincere greeting. Use the guest name, if and when possible
  – Anticipation and compliance with guest needs
  – Fond farewell. Give them a warm good-bye and use their names, if and when possible.
• Basics

The Employee Promise

• At the Ritz-Carlton, our Ladies and Gentlemen are the most important resource in our service commitment to our guests.
• By applying the principles of trust, honesty, respect, integrity and commitment, we nurture and maximise talent to the benefit of each individual and the company.
• The Ritz-Carlton fosters a work environment where diversity is valued, quality of life is enhanced, individual aspirations are fulfilled, and the Ritz-Carlton mystique is strengthened.

Ritz-Carlton – A Service Excellence Story

Enrique, a bell hop, noticed that a lady customer was having difficulty shutting her suitcase – he tried to help but in fact the catches were broken and there was no way to secure the suitcase. The guest was due to leave shortly and there was no time to go to the mall to buy a replacement. Shortly after Enrique went off duty but he continued to be concerned about the guest. He went home, took a suitcase he had recently bought for a holiday from his wardrobe and returned immediately to the hotel to give it to the guest.

Source: Ritz Carlton Presentation

Federal Express

Format of Visit

• Evening visit to Memphis SuperHub
• Half Day Workshop
• Presenters:
  Myron Bowery: Manager Corporate Communications
  Kathy Bergeson: Quality Process Manager
• Location: Peabody Hotel Memphis

Context

• Founded in 1971 at the age of 27 by Fred W Smith ex US Marines Corp who flew 230 combat missions in Vietnam and based on a paper on logistics which he wrote as a student at Yale (marked C)
• Quote from corporate history ‘ Fred Smith and Fedex are a virtual case study in how entrepreneurial America should work’
• Created modern air/ground express industry; invented overnight parcel delivery; first to provide on-line shipping and tracking
• Pioneered hub& spoke approach
• 1983 first US company to reach $1bn revenues without merger or acquisition
• 1990 First Service Company to win Baldridge award
• 215k employees worldwide, 600+aircraft
• Currently shipping at 1998 levels

Business Model

• Philosophy ‘Take care of your People. They in turn will deliver the impeccable Service demanded by our customers who will reward us with the Profitability necessary to secure our future’
• Have redefined themselves from Parcels to Airline to Information Technology Company
• Have a number of companies within group which ‘operate independently, compete collectively’
• The 2001 Annual Report quotes ‘Only FedEx remains focused on a unique business model – to operate each company independently, focused on the distinct needs of each customer segment, but also to compete collectively, leveraging our greatest strengths, the power of the FedEx brand and information technology.’

Processes

• See model below
• Baldrige Award 1990 but ISO now benchmark driver
• Activity a mix of low skilled highly labour intensive (making sure bar coding on packages is face up for the readers) and highly automated (bar code sorting)
• International package scanned 11 times which provides data for track and trace system
• Very heavy focus on ‘scientific’ problem/process analysis
• Use actual numbers of defects not %’s as even 1 is too many
• Heavy investment in FedEx TV as means of internal communication
• Have high level Weekly Analysis & Review (WAR) Committee
• 98% response to annual employee survey – results published within hours of cut off time
• Employ 12 weathermen to help with routing of flights

Product Variables

• FedEx Express: time definite global express package & freight delivery
• FedEx Ground: small package ground services including home delivery
• FedEx Freight: regional less-than-truckload freight deliveries
• FedEx Custom Critical: exclusive expedited door to door delivery
• FedEx Trade Networks: Customs brokerage & trade facilitation systems
• Recently invested in ground presence in US as losing out to UPS
• Recently gained US Postal Services Airport to Airport contract

Staff Management

• Hub has 60% staff t/o
• Focus on experiential (85%) rather than classroom training (15%)
• Recently withdrew ‘on the spot’ rewards system (Bravo Zulus – a US Navy term for ‘Well Done’) as belt tightening move
• Upward appraisal process which outputs a company wide Leadership Index which has improved year on year since inception
• SQIs used as the basis for bonuses at all levels.

Customer Dialogue

• No single view of customer and value
• Their Service Quality Index is weighted and varies year on year depending on what customer thinks is important
• Have used television advertising extensively which shows an engaging sense of humour

Commentary

• The hub visit was a classic example of what the tour is all about. An intellectual understanding of what was going on was no preparation for the raw energy, cacophony of noise and pure hard metal rock that confronted us.
• Fedex is an operational giant and what we were seeing was no more than the tip of the process iceberg. The service chain also includes the door to door pick up of parcels and delivery at destination.
• Like a class sportsman it was apparently effortless professionalism – there was also a sense of the quickness of the hand deceiving the eye!
• In terms of alignment it was interesting that FedEx claimed to have no single composite view of a customer relationship although their SQI measurement factors shaped by customers was a particular plus point.
• The withdrawal of the Bravo Zulus – the on the spot reward scheme – was contentious. It was presented as a much needed opportunity to tidy the scheme up but there was a feeling that it could be interpreted negatively by the staff. Outstanding service should be rewarded at all times.
• There was a suspicion also that it may have been being used to get round an inflexible pay scheme.

Some Delegate Comments

How to change from a transportation company to an intelligent service provider

Good effective process management is possible.  The operation was very impressive

The operation is more important than the staff (Process before people)

Night Visit to the Memphis SuperHub

Getting into the hub was like going to a football match. At 10 o’clock at night there were long queues snaking back from the security checkpoints. In any one night some 8000 people might be on duty. It was a wet and windy night and since many employees work out in the open loading and unloading the planes they were wrapped up like Michelin men (and women of course).

From the observation tower we could see planes lining up to land. – 85 in an hour. On landing, planes moved quickly and efficiently to their berths where in minutes the doors were opened and the specially designed containers – which mimic the shape of the aircraft- unloaded. We were told planes could be emptied in 17 minutes. Trains of containers pulled by small tractors – or tugs as they are called- drove off smartly to the sorting areas – on this night in heavy and persistent rain.

Here letters, packages and parcels streamed along conveyer belts to be divided amongst teams of workers whose role was to turn packages upright so the scanning system could do the automated sort. Parcels then tracked along a series of conveyer belts where computer controlled arms sent them to the right distribution point. Further sorts would separate out priority express packages and narrow the destinations down by cities and even the suburbs of the major large cities. Shortly after the planes were unloaded, screens throughout the complex show the projected time at which the sort will be completed.

Unbundled and re-bundled as it were, the packages were then loaded back into containers and back on to the planes which then left. Memphis can deal with as many as two million shipments (overnight – 30%of the total volume in the FedEx system.

As we toured the hub, small teams of maintenance men were on standby like rapid response units should the machinery splutter. Indeed such is the contingency planning that spare planes are kept in the air in case of mechanical difficulties.

FedEx – A Service Excellence Story

The call from a big medical laboratory in Phoenix was urgent. Shipments of amniotic fluid from two high risk pregnancies had failed to arrive for testing. If they didn’t come soon, the mothers to be would have to endure the difficult procedure again. Senior customer service representative Brenda Currey got on the phone and found the shipments on a truck near Dallas. With help from FedEx operations staff, she had the truck stopped and 20,000 pounds of freight unloaded to retrieve the two samples. ‘Get them to Phoenix and I’ll take care of them’ Currey told the Dallas ramp manager. She met the flight carrying the shipments at 11pm, stored them in her refrigerator as instructed by the lab, and delivered them personally next day. ‘Why did you do this?’ asked the laboratory technician. ‘It needed to be done,’ Currey replied. ‘and I was there.’ Three days later the laboratory called to let Currey know her efforts had paid off. The samples were just fine. (Brenda Currey has been with FedEx since 1985.)

Source: ‘How Time Flies – Fedex delivers the 21st Century’

USAA

Format of Visit

• Half day visit
• Presenters:
  Donna Wildey Planning Manage
• Joe Bruha VP Brand Management
• Beverly McClure Customer Relationship Management NE Region

• Location: Corporate HQ San Antonio

Context

• Founded by Army Major William Garrison in 1922
• USAA (United Services Automobile Association) serves present and former members of the US military and their families
• One of America’s leading insurance & financial services companies; 4.7m customers, 23,500 employees, assets $62.4bn
• President & CEO the most decorated combat veteran to lead USAA. Board chairman retired US Air Force four-star general and former vice president of the US Joint Chiefs of Staff
• Essentially a direct operation with most business done by phone, mail & web site
• Strapline ‘We know what it means to serve’
• Largest mail order company in US and third largest in world

Business Model

• The mission of the association is to facilitate the financial security of its members, associates and their families through the provision of a full range of highly competitive financial products and services; in doing so USAA seeks to be the provider of choice for the military community.
• Have extended definition of target market to include enlisted men but still remained within military affinity

Processes

• Use Balanced Scorecard
  Market Performance 35%      Financial Performance 35%
  Projects  20%                        Mission Accomplishment 10%
• Within Market Performance lost members = 50% of score
• See detail of Key results areas below
• Key Service tenets
  – Trust & reliability          – Simplify the Process
  – Multiple Access           – Customer feedback
• Aim for what they call the ‘Wizard of Oz effect’ i.e. the illusion of simplicity
• Evidence that planning process is used to drill down understanding within the company

Product Variables

• Wide range of insurance and financial products including: property and casualty insurance, life and health insurance, annuities, mutual funds, discount brokerage, credit cards, banking services, travel services and alliance services
• They had a diagrammatic wheel incorporating  six Business Divisions, ten Key Life Events and ten products to give 600 potential segments.

Staff Management

• Must be a/the major employer in San Antonio
• Work spaces heavily personalised; much use of the American flag; military memorabilia in public spaces

• Head office in San Antonio has three on-site fitness centres, health clinics and cafeterias which also offer take-home meals.
• There is also a sophisticated system for interacting with staff  and they have never had to lay off staff.
• One third of the employees have their college education sponsored by USAA.
• Have a Workforce Transition Team which employees join for 12 months if job disappears through re-structuring etc.
• Managers have their own restaurant & restrooms – shades of officers & enlisted men

Customer Dialogue

• No real time IT single view of customer but periodic snapshots they gave themselves a 5/10 rating on current capability
• Re-aligning products & support areas into customer focused centres of excellence
• Customer numbers doubling every 10 years
• Minimalist branding and advertising – rely on word of mouth in close knit military communities
• Claim 98% ‘loyalty’; products per household 4.97; less than 2% churn
• Have only recently introduced rules for direct mail volumes – two pieces per member per month
• Key marketing tasks seen as
  Prospecting – Segment Management – Life Event Management – Product Design & Delivery – Retention – Brand Management
• Extensive Customer based feedback loops in place using formalised research processes; retention a key focus
• One of their secrets is the 140 personal characteristics they are reputed to keep about each customer

Commentary

• USAA have cornered an outstanding affinity market in the US military. Their focus on family and community is reflected in the way they value customer and staff loyalty.
• Whilst they have broadened their segment definition, for example, to include listed men, and they have a tremendous heritage, there must be a suspicion that they could be heading for a cul de sac given an ageing customer base and the lower numbers of recruitment into the military overall.
• Their tone could be characterised as one of quiet understatement – certainly the branding is low in personality.
• Many of their practices and processes seem familiar nowadays and their approach to direct mail is dated. Clearly it was not possible to benchmark their pricing but this together with the product range and features must be a critical part of their offer.
• It was interesting that despite the strength of the brand in the target market there was no evidence of brand stretch beyond financial services.

Some Delegate Comments

Niche markets are wonderful things, especially if there is an emotive pull

Customer loyalty and trust attracts higher profits

Understand your target market

USAA – Key Results Areas

Service Goals

• Trust & reliability
• Simplify Processes
• Customer Access & delivery
• High levels of persistency
• Evaluate lost member trends
• Use member feedback to improve processes & service
• Community outreach
• Legislative & regulatory flexibility
• Industry affairs
• Civil justice reform
• Public education
• Education outreach
• Loss control
• Synergy among lines of business
• Expand breadth & depth of member relationship
• Cultivate member feedback
• Educate members
• Strengthen community affinity
• Build strategic alliances
• Promote personalised solutions
• Sufficient net worth & liquidity
• Strongest possible ratings
• Maintain capital self sufficiency
• Optimise USAA investment portfolio
• Migrate losses
• Improve our operations environment
• Implement efficient business practices & solutions
• Quality financial products
• Co-ordinated packages of products
• Tailored information
• Increase penetration of core markets

Public Outreach Goals

Relationship Building Goals

Financial Strength Goals

Product Value Goals

Mission Support Goals

• Facilitate responsive, value added response services
• Promote productivity, health, safety and welfare of USAA employees
• Provide high quality facilities & services
• Diverse, flexible, motivated, multi-skilled workforce
• Foster highest ethical standards
• Value diversity of employees as we value the diversity of members
• Cultivate employee feedback
• Educate employees on  products and issues relevant to USAA
• Encourage employee self development
• Integrate information technology architecture
• Develop and manage common information & technology systems
• Enhance data infrastructure

Strategic Assets – People

Strategic Assets – Technology

Source: CDRom ‘Take a Quality Journey with USAA’ 12/98

Nordstrom

Format of Visit

• 1 hour Lunch time visit
• Presenter: Cindy Mahan Store General Manager
• Location: Dallas Store

Context

• In 1901, John W. Nordstrom – who emigrated from Sweden aged 16 -used $5000 of his stake from the Alaska gold rush to open a small shoe store in Seattle, Washington
• Store subsequently passed to sons and grandsons and Nordstrom still remains family owned
• Expanded from shoes in 1960’s and is now one of the nation’s leading fashion retailers, with 132 stores in 25 states

Business Model

• Family management, values and approachability
• Entrepreneurial focus for staff with income largely commission based on sales – have own business
• Successful sellers may earn more than senior management team
• Sales staff build and manage own portfolios of customers

Processes

• Underlying logistics not examined

Product Variables

• Perception of premium pricing created by environment and ambience but do not premium price per se
• Aim to never be out of stock of any one size of shoes catering for exceptional widths & lengths
• Ambience important – wide aisles & low racking so can see length of floor

Staff Management

• Employee handbook is a double sided card with the only message ‘Use your good judgement in all situations’ see below
• Look to recruit ‘nice’ people
• Frequent performance recognition ceremonies and celebrations

Customer Dialogue

• Quality and frequency essentially in hands of sales people who manage own contact strategy using phone & thank you notes etc.

Commentary

• We had the opportunity to see their corporate video tracing the history of the company and talk briefly with the Dallas Store Manager – a lady who had previously been a buyer with them.
• One member of staff (see story below) was grossing $1.5m sales a year and earning more than the store manager.
• Subsequent shopping confirmed the appeal of the environment and ambience compared with other US major retailers
• Staff were particularly personable and appropriately attentive in initiating the sales process. Prices were comparable with the other major stores in the Shopping Mall.

Some Delegate Comments

The natural confidence that comes from empowerment

Pride in your work is noticed and appreciated by your clients (and rewarded by your company)

Empowerment of key staff works for the bottom line (regardless of status) – ask people to do what they are good at

WELCOME TO NORDSTROM

We’re glad to have you withour Company.

Our number one goal is to provide outstanding customer service

Set both your personal and professional goals high.

We have great confidence in your ability to achieve them.

Nordstrom Rules

Rule#1: Use you good judgment in all situations

There will be no additional rules.

Please feel free to ask

Your department manager,store manager or division general manager any question

at any time

nordstrom

Nordstrom Service Excellence Stories

• Nordstrom is famous for is refund policy. The archetypal story told by Tom Peters is of a customer returning two tyres to a store for which the customer was given the money back. Nordstrom don’t sell tyres but apparently there was a garage on the site before Nordstrom arrived.
• A male customer arrived with a bag of some fifty pairs of socks at the Dallas store. He emptied the socks over the counter and asked for a refund on the basis that they had been uncomfortable to wear. The salesman – relatively new – started to say that they would need to see the receipts at which point a more senior colleague took over. A full refund was processed and it transpired that the socks had not fitted properly. A suitable make was found and the following day the customer returned to buy $1000 worth of shirts. The senior seller in question grosses $1.5m in sales!
• The Dallas Store Manager was having a difficult time over a piece of jewellery valued at $10000. The circumstances were not elaborated on but the Store Manager decided to personally ring the Nordstrom family member responsible for this product line. ‘You know,’ he said, ‘we knew this was a difficult product area to get into and this was our decision not yours. You do what you feel is right for this customer and you’ll have my full backing’. The cost of the jewellery was refunded.

Source: Dallas Store Manager

Sewell Village Cadillac (www.sewell.com)

Format of Visit

• 2 hour tour of two showrooms
• Guide: Chip Besio Sales & Marketing Director
• Location: Dallas

Context

• When Carl Sewell joined his father’s car dealership in 1967 he set out to make it the best in the world.
• Thirty years later the company has grown from $10m turnover to $500m
• In four locations Dallas, Fort Worth, San Antonio & New Orleans
• Co-wrote book ‘Customer’s for Life’

Business Model

• Exponent of life time value
• Mission: We will provide the best vehicle sales and service experience for our customers. We will do this in a way that will foster the continuous improvement of our people and our company. We will be a top performing, thoroughly professional and genuinely caring organization in all that we do.
• Early to recognise that car purchase only (minor) part of potential income stream  – servicing , parts and second hand car sales significant

Processes

• This is about the integrated engineering of the total customer experience to which every employee contributes
• Have computer terminal in car park so when mechanic drops off one car can key in to see where next job is  and thus minimise downtime
• Automated German parts storage system
• McDonalds type tiles on the floor – justified by business case
• Customers stay with same Service manager/team

Product Variables

• Cadillac, Hummers, Lexus, Saab, GMC, Chevrolet, Pontiac, Oldsmobile, Infiniti
• Use physical cues to denote quality and care – leather couches, private working areas for customers, chandeliers & flowers, tiles on the workshop floors, chrome plating
• Pays to have grass verges cut more often than corporation would do

Staff Management

• Used same psychologist to select staff for last 25 years  – then staff take applicant out to lunch as part of selection process – if staff don’t want to spend time with the applicant then customers probably won’t either.
• Service staff are self employed – faulty work is corrected in the technician’s own time

Customer Dialogue

• Post purchase/service surveys
• Mystery shopping

Commentary

• It’s often said that ‘retail is detail’ and this is an impressive example of where the ‘line of sight’ factors have been engineered to create a memorable total customer experience.
• It also again emphasises the core role of product in the total experience and the added benefits of tangibility that are missing in most services contexts.
• In the suburb of Dallas that Sewell are in, they have three substantial showrooms and workshops in a matter of say 500 yards – a saturation strategy.

Some Delegate Comments

Need to continue to innovate. Differentiation is always key.  Understand the subtleties of your market

Environment is important – it helps to attract good staff and encourages custom

Engineer the total bundle of benefits to deliver superior customer experience.

The Ten Commandments of Customer Service

1. Bring em back alive

Ask Customers what they want and give it to them again and again

2. Systems, not smiles

Saying please and thank you doesn’t ensure you’ll do the job right first time, every time. Only systems guarantee you that.

3. Underpromise, overdeliver

Customers expect you to keep your word. Exceed it.

4. When the customer asks, the answer is always yes

Period.

5. Fire your inspectors and customer relations departments

Every employee who deals with clients must have the authority to handle complaints.

6. No complaints? Something’s wrong

Encourage your customers to tell you what you’re doing wrong

7. Measure everything

Baseball teams do it. Basketball teams do it. You should, too

8. Salaries are unfair

Pay people like partners

9. Your mother was right

Show people respect. Be polite. It works.

10. Japanese them

Learn how the best really do it, make their systems your own. Then improve them.

WARNING: These ten rules aren’t worth a damn…..unless you make a profit. You have to make money to stay in business and provide good service.

Source: ‘Customers for Life’ by Carl Sewell & Paul B. Brown

Sewells Village Cadillac

Beliefs and Values

1. We will be at the top when measured against appropriate business standards or performance in every function, in every department, in every dealership.
2. We will pursue quality and profitability with the aim to stay in business and provide jobs for our people.
3. The development of our people is essential to our growth and future success. We will provide training and education to encourage the long-term employment and professional advancement of all our Associates.
4. We will earn and re-earn the good will, trust and confidence of our customers and colleagues every day.
5. Our suppliers are important to our success. We will establish long-term relationships with suppliers whose values and quality are consistent with ours.
6. The highest ethical standards will guide everything we do.
7. We will strive for constant improvement and innovation in all that we do.

Sewell Village Cadillac – Service Excellence Story

Some of our most appreciative customers are people who’ve left us to buy a Jaguar, Mercedes or BMW and have experienced the customer service those dealers provide.

I have a great memory of picking up the president of a company here in Dallas who was standing out front of the Mercedes dealership waiting for a taxi to take him to work. He needed to call a cab because he couldn’t get a ride from anyone at the Mercedes dealership. I was driving down the street, and I saw him waiting there, so I picked him up and took him to his office. On the way he shook his head and said, I don’t know why I left’. Twp years later, when it came to trade in his Mercedes, he traded it to us and bought a Cadillac. He said the Mercedes was a nice car but it just wasn’t worth the hassle of getting it serviced.

Source: ‘Customers for Life’ Carl Sewell and Paul B. Brown

Southwest Airlines

Format of Visit

• Day visit
• Presenters: Pat Jansen
  Brian Allen Career Coach
• Location Southwest Airlines University for People Dallas

Context

• Profit making for 28 consecutive years
• Has announced no lay offs before or after 11/9 ; share price fell only 24.1% v United 43.2%
• Within days of 11 September they had transferred the Staff profit Sharing Fund to a trust account so the funds would be there to distribute
• Faced years of legal battles and obstruction from established players and vested interests
• Have a history of moving quickly if a new business expansion opportunity occurs e.g. failure of a competitor, gate availability at a desirable airport – based on scenario planning
• Stock Exchange ticker symbol is LUV
• Marketed itself as the LUV airline
• 33000 employees; 84% unionised
• Strongly associated with the personality of Herb Kelleher who is frequently quoted around the company – he once settled a major legal dispute by arm wrestling – and lost!
• Described by Tom Peters as ‘Air Travel’s Greatest Show on Earth’

Business Model

• Low cost domestic airline
  – fly 737s only – 15 minute scheduled turn rounds- no seat reservations – no meals
  – plastic re-usable boarding cards- no hub – city to city only – first to use two tier peak and off peak pricing
  – use smaller city not international airports
• Perfected niche of short flying trips 10.5 daily flights per gate v industry average of 8.0; typical plane flying 11.5 hours per day v industry average of 8.6
• Each station functions as an independent business unit

Processes

• Percentage ‘on time’ arrivals shown on a live display on all computer screens

Product Variables

• Frankly the university looks like a playschool. Walls are unfinished. It’s decorated by murals depicted cities and places in the US – they take pride on how little money they spent and the unfinished nature symbolises that minds are always under construction
• Have a programme of ‘Gate Games’ if flights are delayed

Staff Management

• Talk about the 4 E’s – Employment, Empowerment, Environment & Enjoyment. Encourage staff to ask for forgiveness not permission. Promote it’s OK to be ‘Younique’
• Staff encouraged to ‘own’ their part of the business
• Look for Warrior Spirits (see below)
• Have Career coaches & Culture Committees
• Put their staff before their customers – the customer is not always right
• Family spirit is sustained by customised environment, spontaneity and frequent staff events – pizza parties, barbeques etc.
• Casual dress is a given – not restricted to specific day

Customer Dialogue

• No suggestion boxes – challenge managers to interact with staff and staff with customers
• Strong JD Powers ratings

Commentary

• By any standards this was a remarkable experience – a rigorously applied business model that has been copied many times but without replicating its total success;
• Have consistently stuck to the knitting and not been sucked into other value destroying areas;
• Emotion, passion, and fun are used as strategic assets. The family card is played very strongly. They go public on putting their staff before their customers.

• It’s often remarked that people park their brains when they come to work but personality is important too;

• Succession in a company where there has been a dominant personality is always a challenge. The sense is that the culture is so well rooted it will live on anyway;
• Another challenge Soutwest face quite simply is the current economic climate – what damage would there be to the culture if the company had to lay-off staff? Again one would be confident given the rigours they have historically faced that they could win through this too.

Some Delegate Comments

The most powerful force for excellence in service is your people and how you treat and lead them

The importance of celebration, attitude and living the values to the creation of a truly innovative organization

Culture is at the heart of organizational success – it is at least as important as process

You are the SPIRIT of Southwest Airlines

Service – make it positively outrageous

Productivity – always give your personal best

Individuality – you can make a positive difference

Responsibility – hold yourself accountable first

Imagination – create some fun in your work

Teamwork – together we accomplish great things

Southwest Airlines Service Excellence Story

In the height of summer, a young man boarded a flight in shorts and T shirt. He took his seat, but as the plane taxied away from the stand – and against the Civil Aviation rules – he ran quickly to the toilet. The flight attendant banged on the door and remonstrated with him to return to his seat. When he sheepishly opened the door she asked him what was wrong – suspecting a surplus of beer. Embarrassed and red in the face he admitted ‘My balls are on fire!’ ‘Excuse me,’ she replied. He repeated himself and explained that somebody had left some dried jalapeno chilli peppers on his seat and they must have worked their way into his shorts. The flight attendant, suppressing the urge to laugh, took charge and immediately bought him the necessary first aid – a towel, an ice pack and a blanket.

Source: Presentation

The Brits are Coming

The day we arrived at Southwest University was the day George Harrison died, The meeting started with one of his songs being played on the hi fi system. As representatives of the UK we were offered the presenting teams condolences.

The same day was the graduation day for some 200 cabin crew. They had been whittled down from 90,000 first stage applicants and from 200,000 overall.

They had been on the training for five weeks without pay and (this was the end of November) would not get their first pay until early January. We were invited to go down – to the chant of the Brits are coming – and join them – and what an experience it was! A ten-minute ‘Hi’ turned into an hour long cultural exchange.

The energy, enthusiasm and positive emotion in the room was PALPABLE. For us reserved British people it was a bit like an Oprah Winfrey show in your office. We were paraded to the front and listened as personal tributes to the Southwest Airlines family, spirit and community came from young and old, coloured and white and male and female. Individuals stood up and personally recounted why they were proud to be part of the Southwest family to the accompaniment of cheers, whistles and clapping.

Such was the infectious nature of the enthusiasm that we responded by doing a tour of the room ‘high fiving’ with as many of the people as we could.

This personal story telling and spiritual commitment seems to be a feature of the company. It happened again when we sat down with the training team as a relatively new recruit recounted how she had been made redundant from her last three jobs and had been expecting the same again given the difficulties in the airline industry as a whole. So far, SWA have laid off no staff.

Summarising the Findings

A quantitative evaluation to give company rankings was considered. However, given the varying formats of the visits, the data collection was uneven and this approach was therefore discounted.

Dealing then with the ‘Line of Sight’ components in turn:

Context

• An important part of the context is the concept of the American dream and an equal opportunity society. Many companies played to this with their oft-repeated ‘rags to riches’ dynastic corporate history, incessant stories, Mark Twain type aphorisms, and a focus on friends, family and community. In the context of UK companies, they were also relatively young.
• The tour took place as the American economy was in a recession and post the 11th September. There was evidence that companies were tightening their belts and trading conditions were more difficult. For many, the well being of their company was under threat.

Business Models

• Business models were consistently well defined niches ranging from the extended ‘mom and pop’ store of Stew Leonard’s to the low cost model of Southwest Airlines.
• In all cases their origins were in an innovative definition of the markets they were in, the customers they were serving and how they chose to deliver their proposition.
• In some cases these models appeared to be tiring and strategic renewal was becoming a necessity. There was a sense, also, that some of the models risk becoming jaded although there is no particular evidence of consumer backlash for the time being.
• Well-communicated and shared values were an explicit part of the Business Models. Leaders personified these and put great emphasis on removing the perceptual and actual gaps between leadership, ownership and management. In many cases this made the resulting model highly entrepreneurial and high levels of personal involvement as staff think and act like owners.
• Whilst Service Excellence was a unifying goal for the companies visited, this was not a blank cheque and investment had to be justified against business benefits.

Key Processes

• In most cases the stories told by the companies we visited were similar to well rehearsed case studies. Their enterprise wide operating models were well established and in the time available it was difficult to uncover the gaps.
• Exposure to Baldridge and other Quality measurement systems has made process management extremely detailed and scientific but in a way which is largely accessible and comprehensible for the majority of staff. As a result they are actively involved in process re-design and continuous improvement and own and deliver the outcomes.
• Processes are fundamental because in the same way that they can promote alignment they can also engineer in misalignment and higher operational costs. The switched-on companies made a point of backward engineering from an understanding of their customer’s requirements into the organisation (as shown in the ‘Customer Pull’ feedback loops in the earlier ‘Line of Sight’ diagram) – and keeping it simple.
• One tends to think of processes as having a manufacturing or production connotation. However, many of the tools used by companies in the management of staff such as internal communications had the same structured and focused rigour.

Product Variables

• Functional value and competitiveness of core products remain a fundamental.
• No overt evidence of overall premium pricing – although this may have varied for individual product lines – (apart from Ritz Carlton) for service or ambience benefits.
• At a given volume, typically margin will be traded against volume to share the benefits with customers and deliver greater incremental income.

Staff Management

• Most companies had developed their own psychometric recruitment models with a focus on good personal qualities and positive attitude rather than academic capabilities.
• Training programmes were as much to do with culture and ethos as technical skills. There were frequent opportunities to re-affirm the personal and cultural fit.
• There was a strong focus on personal accountability reinforced by family, team and community values. Employees are encouraged to about their feelings.

• Entrepreneurial models prevailed and were reflected in the measurement and reward processes – ‘Go Huge or Go Home!’.

• Promotion from within is a regular occurrence; companies worked hard at being an employer of choice.

• Staff are encouraged to bring their individual personalities to work and see things through the customer’s eyes.
• Fun and emotion are seen as strategic assets in delivering the WOW facto

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