Customer service

The New Gordian Leadership Perspective, part 4: Leaders ignore customer feedback at their own risk

Thought Leadership on Execution Strategies presented by Simple Solutions.

This article illustrates how leaders who do not adapt their performance to customer feedback expose their companies and their own careers to risks. Longevity of high performance, along with customer satisfaction, can be achieved if leaders will enable their organizations (and themselves!) to adapt to changes called for by performance data.

Why companies provide poor service (the reason is so simple, it’s sad)

As a customer, have you ever been required to follow an illogical or inconvenient process to get service and been told the reason is that “our system doesn’t work that way” or “we don’t do that here?” Are there organizations in your life that require you to endure their inconveniences each time you make contact?

The experience offers an example of what happens when an organization does not adapt to the needs of its customers. Specifically, the organization does not identify what creates a problem for customers and therefore makes no adjustment to prevent the problem from recurring in the future.

The most common reason why a service is not adapted to please its customers is that the leader – be it of a large corporation, small establishment, the entire organization, department, or government entity – either chooses not to collect or utilize customer feedback to evaluate its service or is not cognizant of the need to do so (which is arguably worse). As a result, service is consistently provided in a manner that accommodates the REASONs why customer feedback is not utilized, and subordinates customer preferences to those reasons. Click here to see a short list of reasons.

Either way, leaders are ignoring customers at their own risk. The exposure to customer demand provided by social media and other technology is also exposing leaders’ alternative reasons for ignoring its customers and creating real consequences for the leaders themselves and the organizations they operate.

The failure of leadership to adapt is exposed

Leaders who can better adapt are replacing “tenured” corporate CEOs at a record rate.

By way of consequences to leaders, the 2015 annual study of CEO success conducted by PriceWaterhouseCoopers revealed that global CEO turnover in 2015 was at 16.6%, the highest it has been in the study’s 16-year history.

In addition, the survey of the 2,500 largest public companies around the world also found that 22% of CEOs hired in a planned succession over the previous four years came from outside the company. (Planned successions exclude mergers and acquisitions, as well as situations when CEOs are abruptly forced out.) That’s nearly double the rate from 2004 to 2007 (14%). Outsiders, in effect, have become more of an intentional leadership choice than a stereotypical hire in a turnaround or crisis situation. [1]

There are several reasons why the top job is increasingly going to outsiders when boards have time to plan for succession: 1) Boards of Directors who are now unencumbered by ties to the CEO (due regulatory changes introduced after corporate-governance scandals early last decade) are are choosing leaders based upon who best master a broader range of skills than in the past, when top executives might have climbed the ranks with just one discipline. 2) Companies are increasingly complicated and Executives must also adapt to quicker technological change, including shifts brought on by widening use of mobile devices.[2]

This example helps to reveal how leaders – both CEOs and Boards of Directors – who have historically prioritized considerations like tenure and political loyalty, are being replaced by leaders whose focus is on how to best adapt to environmental changes and increased exposure to performance feedback.

Uber exposed how the taxi business served itself first and customers thereafter.

Think about the Taxicab industry in your area before Uber. It was immune to the wants and needs of its customers and delivered service based upon what was expedient for the Taxi industry, its unions, and the individuals who drive the cabs. Ever tried to complain about an experience with a Taxi? There is no mechanism to collect a complaint, no channel for the complaint to follow, and no driver evaluation process to utilize the complaint. More importantly – there was no expectation held by the Taxi industry for itself that it should do anything other than what it was doing. So why ask customers how to be better?

Customer needs have not changed now that Uber provides an alternative transportation service. Instead, Uber has exposed the needs of customers that have always existed and built its service around meeting those needs. In fact, Uber has put customer feedback at the center of its business model to ensure that it continually adapts to what customers want.

The result has been a financial gutting of the Taxi industry: the largest taxi company in San Francisco, Yellow, has filed for bankruptcy, taxi trips in Los Angeles have dropped nearly 30% citywide in three years, and the prices of New York City’s medallions has plummeted from $1.32 million in 2013 to $650,000 as of last August. Prices have been similarly impacted in Boston and Chicago.[3]  Uber, meanwhile, now operates in 67 countries, and recently raised an additional $2.1 billion for a $62.5 billion valuation, as of January 2016.

Now that it’s too late, the DC taxi industry is playing the role of the victim, as if Uber is to blame for the business it’s losing.

Independent of Uber, as an example of an industry that ignores its customers, evidence that the Taxi industry put other considerations above serving customers is easy to find. It had many opportunities to evolve over the years but chose a posture of resistance instead. Experiential information from customers is itself a rich source of information. I personally spoke to scores of taxi drivers who were annoyed when I suggested that installing credit/debit card readers would be convenient for customers and help eliminate the risk of carrying cash for drivers. In the District of Columbia, card readers and actual meters were installed only when taxis were “forced” to do so.[4]

This example makes the point that no immunity to customer demand ever lasts. The more prolonged the resistance, the more ferocious the change.

Best Buy saved itself by giving customers what they wanted

Best Buy has utilized performance data to accomplish what many on Wall Street once considered impossible: it successfully fought off an attack from The electronics retailer’s operating margins have rebounded and same-store sales are up. That is a dramatic improvement from January 2013, when Best Buy’s shares were trading at roughly one-quarter of their current value as fears of “showrooming”—shoppers’ practice of researching products in bricks-and-mortar stores and then buying them from online competitors—swirled around the company.

CEO Hubert Joly, who joined in September 2012, managed to turn Best Buy around by looking outside of its walls to what its customers liked about Amazon and changing its service accordingly. For example, Best Buy matched competitors’ prices and brought its prices in line with Amazon’s. At the same time, the company improved its website and mobile app. Best Buy’s stores do double duty as e-commerce warehouses. Best Buy says half of online orders are now picked up in store or shipped from a store, and 70% of Americans live within 15 minutes of a store. That has helped Best Buy speed up shipping times so that most online purchases arrive in two days, matching Amazon Prime’s speeds without the annual fee.

And Best Buy didn’t just become more like Amazon. It also focused on areas where it could set itself apart from the e-commerce giant in the eye of customers. As a result, Best Buy got more than 88% of its $36.3 billion in U.S. sales in its stores in the fiscal year ended January. [5]

This example shows that what’s good for the customer is often good for the company. What made Best Buy vulnerable was customer dissatisfaction. What turned the company around was giving customers services, products and prices they like.

Every leader has a choice

The choice to be made by every leader is whether or not to collect and utilize performance information to help guide how services are provided.

But it is practical for leaders to ask why they should adapt if not required to do so?

Below are only six of the many reasons why you should voluntarily collect customer feedback and adapt your services as an ongoing part of the company strategy:

  1. Do unto others as you would have them do unto you. The most immediate reason is provided by the experience of receiving poor service and wanting to spare your customers a similar experience from your organization.
  2. It’s the right thing to do. The need to collect and respond to customer feedback seems self-evident.
  3. It’s not that hard. Many customer service requirements are not difficult or costly to accommodate until they’ve been ignored to the point of putting the company out of touch.
  4. Get ahead of the curve. Customer feedback can alert an organization to future trends and help to plan ahead.
  5. Cultivate customer loyalty. Organizations that request customer feedback and are responsive to it cultivate customer loyalty that can last when service is imperfect and competition becomes tight.
  6. Practice adapting. There is only one constant in business and that is change. All organizations must learn how to adapt in order to be successful over time. Leading the organization to become adaptive while pleasing the customer is a win-win approach to longevity.

The key to success and longevity in all organizations of every type is to proactively stay connected to the environment and to adapt.

[1] Harvard Business Review, Outsider CEOs Are on the Rise at the World’s Biggest Companies, Curt Nickisch, April 19, 2016

[2] The Economist; The Outside Track, Why companies are appointing more outsiders as CEOs, April 23, 2016.

[3], New York City Taxi Medallion Prices Keep Falling, Now Down About 25 Percent, Josh Barro @jbarro January 7, 2015

[4] The Atlantic CityLab, D.C. Taxis Finally Forced to Start Accepting Credit Cards, A decree from the D.C. Taxicab Commission will force drivers to install credit card machines by Mar. 31, David Wagner, January 18, 2003

[5] Wall Street Journal, How to Fight, Best Buy-Style; Best Buy’s turnaround strategy should be a model for other retailers scrambling to compete with, Miriam Gottfried, Nov. 20, 201

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