Why Customer Satisfaction Starts with HR

There's convincing evidence that HR drives customer satisfaction -- and corporate revenues - by careful attention to who is hired, how they are trained, how they are coached, and how they are treated on the job.

By Patrick J Kiger

In a conference room at Philadelphia-based Rosenbluth International, one of the country’s most successful travel agencies, a dozen new employees are participating in a customer-service training exercise. What’s astonishing is that the new company associates are practicing how to provide bad customer service.

One group is asked to dream up the rudest ways a motor-vehicle bureau staff member could treat a hapless customer who comes in to apply for a driver’s license. After a few minutes of preparation, the associates perform a skit for an audience of other new employees. The trainee who plays the customer arrives at the ersatz office and stands in line. Just as he reaches the counter, the trainee portraying the clerk posts a sign proclaiming that he’ll be back in 15 minutes. Other trainees make the hands move on a fake clock to simulate the wait stretching to 20 minutes, then 30, then 40. As the customer pleads for service, the clerk -- who is sitting behind the counter, reading a magazine and loudly cracking gum -- berates him for his impatience. The ultimate indignity comes when the customer proceeds to the license-photo area and learns that the camera is broken.

Rosenbluth’s HR team uses the exercise because it’s fun, but mainly to focus trainees on a serious lesson: Customer service arguably is the most critical factor in an organization’s long-term success and even survival.

There was a time when customer service was seen as the responsibility of sales managers and tech-support team leaders. Today that attitude is as dated as rotary telephones at corporate call centers. Increasingly, companies are recognizing that HR plays a seminal role in building a customer-friendly culture.

Throughout the business world, HR departments are focusing their efforts on improving customer satisfaction. They’re using HR activities -- hiring, training, coaching, and evaluation programs -- to give employees the tools and support they need to develop and nurture positive, lasting relationships with clients.

Most service-quality gurus say that hiring is the first and most critical step in building a customer-friendly company. 

The evidence is compelling that HR practices can promote customer satisfaction -- and, in the process, improve corporate revenues. A landmark 1999 analysis of 800 Sears Roebuck stores, for example, demonstrated that for every 5 percent improvement in employee attitudes, customer satisfaction increased 1.3 percent and corporate revenue rose a half-percentage point.

Moreover, subtle changes in hiring or training sometimes can produce major improvements in customer happiness. One of this year’s Workforce Optimas Award winners, NCCI Holdings Inc., discovered in a survey last year that its customers wanted more help in using the company’s insurance-data software products. As a result, NCCI created a training initiative to give its customer-service reps more technical expertise. By the fourth quarter, the surveys were showing that customers were much more favorably impressed with the reps’ technical abilities. Apparently as a result, the overall customer-satisfaction rating rose 33 percent during that period, from 6 to 8 on a 10-point scale.

A company with strong customer satisfaction and loyalty can survive and prosper even when faced with a tough economy or an unforeseen disaster. The salient example: Southwest Airlines, which consistently ranks first among airlines in customer satisfaction. Following the September 11 terrorist attacks, which pushed many airline companies to the brink of demise, Southwest actually managed to post a profit in the fourth quarter of 2001, and was confident enough about the future to add new routes.

Conversely, a company that provides lousy service may have trouble hanging on to its customers over time, and thus may be forced to continually replace lost accounts that have fled in frustration. The cost of acquiring new customers is five times higher than the expense of servicing existing ones, says Michael DeSanto, a consultant for Walker Information, an Indianapolis-based business research firm. At that rate, chronically dysfunctional customer service becomes a monster that can devour whatever gains a company is making in other areas. If that company runs into a stalled economy or an aggressive competitor, its bad customer karma can prove fatal.

For proof, you only have to look at Kmart, the once-mighty discount retailer that went bankrupt in January, at least in part because it couldn’t compete with the famously courteous folks at Wal-Mart. (A recent study by MOHR Learning, a New Jersey-based consulting firm, found that 20 percent of customers will immediately walk out of a store when confronted by bad service, and 26 percent will warn their friends and neighbors not to shop there.) Last year, the Dow Jones News Service reported that customer dissatisfaction was costing the McDonald’s chain a breathtaking $750 million in lost business annually.

“We don't want people who are mavericks or into self-aggrandizement. We’re looking for a person who plays nicely with others.” Identifying employees with customer-satisfaction potential

Most service-quality gurus say that hiring is the first and most critical step in building a customer-friendly company. "You need to be selective,” says Ron Zemke, president of the consulting firm Performance Research Associates, located in Minneapolis. "It’s a lot easier to start with people who’ve got the right personality qualities to work with customers than it is to struggle to teach those skills to whoever walks in the door.”

Zemke says the key indicator of customer-service potential is a high level of what mental-health professionals call "psychological hardiness" -- qualities such as optimism, flexibility, and the ability to handle stressful situations or criticism without feeling emotionally threatened. Those are, of course, good qualities for many jobs. But experts note that the personality of a customer-service maven may be markedly different from those of achievers in other business venues. Verbal eloquence and persuasiveness, for example, aren’t as important as the ability to listen.

"The great customer-relationship person has a very even-handed view of things, a strong sense of fairness,” says Dianne Durkin, who teaches customer-satisfaction techniques at Loyalty Factor, an HR consulting firm in New Castle, New Hampshire. "This is a person who tends to balance his or her own interests and the company’s interests with the customer’s interests.”

Ruth Cohen, Rosenbluth’s director of HR/learning and development, says her company doesn’t want "people who are mavericks or into self-aggrandizement. We’re looking for a person who plays nicely with others.”

What’s the best way to distinguish those who are the most likely to please customers from a raft of applicants? Some companies have tried standardized psychological tests. But many consultants and HR professionals say that it’s more effective to observe an applicant at work. At Rosenbluth, the scrutiny begins the moment that a job-seeker walks in the door for an interview. "We’re looking for a person who shows the same courtesy to everyone he or she encounters,” says Cecily Carel, company vice president for HR. “Our receptionist, who’s been with the company 20 years, is a pretty good judge of character. One time she called me from her desk to say, ‘This person is not polite.’ That applicant wasn’t hired.”

Patrick Wright, director of the Center for Advanced HR Studies at Cornell University, recommends a carefully structured, situational interview process like the one he helped develop for Whirlpool. "You want to present an applicant with a series of potential scenarios that he might face on the job, and ask him what he would do,” Wright says. "Just because a person gives a good answer, of course, doesn’t ensure that he’s going to actually do that when he becomes an employee. But you want to make sure you’ve got a person who at least has the right instincts, which you can reinforce through training.”

Talent+, Inc., an HR consulting firm in Lincoln, Nebraska, has designed a system for evaluating job applicants that compares their answers in an open-ended interview to analyses of the traits of top performers in that particular field. The company’s managing director, Lisa French, says the process can predict a candidate’s job performance 80 to 85 percent of the time. In the case of customer service, she says, one of the key determinants is a strong sense of values. A good customer-service performer will work hard on a customer’s behalf, not with the hope of getting a raise or a promotion, but because it’s the right thing to do. "This is the sort of person who will go down fighting for his or her customers,” she says.

Talent+ started working with Ritz-Carlton in 1992, when the rate of "customer defects" -- people who complained about the service -- had reached a disturbing 27 percent. The consultants helped Ritz-Carlton overhaul its interview and hiring practices, with a focus on identifying applicants with the best customer-service potential. With the new system in place, complaints dropped steadily. By 2000, they had dropped to 1 percent. At the same time, annual job turnover at Ritz-Carlton also decreased from 75 percent to 25 percent.

Turning the knack for niceness into skilled service

Service-quality consultants and HR professionals from service-conscious companies say that even an employee with the right personality traits needs guidance on how to channel positive qualities into developing good customer relationships. At a time of economic uncertainty, when many companies may try to cut costs by scrimping on customer-service training, it’s all the more crucial for HR to make a strong case for its vital importance.

A large part of achieving great customer service is keeping the employees happy. 

One of the most basic steps in teaching good customer-service skills is fostering employees’ self-awareness, Durkin says. "You’re not going to be good at customer relations unless you first understand yourself. You have to know how you come across to other people, how you react under stress, what your communication style is.”

To help an employee become more self-aware, a company may want to use an assessment tool. The Myers-Briggs Type Indicator, for example, helps an employee see her own personality style, such as whether she is a "thinker," a methodical person; a "sensor,” one who learns through observation; an "intuitor,” who is enthusiastic and excitable; or a "feeler,” who tends to avoid conflict. With training, a customer-service employee also can learn more about identifying customers’ personality types.

Another crucial area of customer-service training is communication skills. "Research shows that only 7 percent of the impact of your communication with another person is in the words you use,” Durkin says. "Thirty-eight percent is in the tone of voice. The remaining 55 percent of the message comes from physical appearance, mannerisms, eye contact, and so on.” Because so much of communication is nonverbal, customer-service employees who have to deal with customers primarily over the phone find themselves at a major disadvantage in getting across their message -- or, conversely, in understanding the customer’s need.

One way to compensate for the lack of human contact is by teaching customer-service employees the technique of "active listening" -- restating and summarizing what the customer tells them. This not only helps understanding but also conveys a message of attentiveness and concern. Employees also can be taught to notice and respond to subtle cues in a customer’s speech.

Rosenbluth takes a slightly different approach. The travel agency focuses on educating its customer-service associates to use what it calls "elegant language" -- words and phrases intended to create a tone of courtesy, respect, and attentiveness to detail. A company associate uses the word "certainly" instead of "yeah" or "sure,” and after helping a customer with a problem, reflexively responds, "It has been my pleasure.” And they always, always ask for permission -- and wait for the response -- before putting a customer on hold. "We think this gives customers a message about how much attention we pay to little details,” Cecily Carel says. “It’s subtle, but important.”

But good customer service requires more than just "soft,” or non-technical, skills. Customer-service consultant Zemke notes that organizations frequently neglect to give their customer-service employees adequate product training. "If I order something and it doesn’t work, I want somebody who knows the product and can help me, not somebody who’s been trained to smile at the right times.” Companies such as NCCI have successfully used surveys to find out what kind of technical knowledge and assistance customers most need, and incorporate the information into customer-service training.

Supervising to build a customer-friendly environment

In order for carefully selected, well-trained employees to build great relationships with customers, a company must develop its own good internal relationships, HR professionals say. Walker Information’s Michael DeSanto says that he’s noticed an intriguing phenomenon: customers’ and employees’ relationships with companies tend to have striking parallels.

Research at Cornell University’s Center for Advanced HR Studies and at other institutions indicates that there’s a strong link between customer and employee satisfaction. "The really crucial issues are retention and, more important, loyalty,” DeSanto says. "Both of them tend to operate in a three- to five-year cycle. Brand-new employees tend to love you, because they’re still learning new skills and have the potential to move up in the company. New customers love you because you’ll do anything to keep them happy.” Three years down the road, both the employee and customer relationships with the company suddenly are different, he notes. "The employee may feel like he’s buried in the organization. Chances are, he’s already got whatever training you’re going to give him. He’s hearing from headhunters. And the customer is in a similar rut. He’s being taken for granted, and he’s already learned about the business from you, so maybe he doesn’t need you as much.”

Strong relationships between employees and customers may actually keep both from fleeing the company. "Good customer relationships may actually be a factor in employee retention,” DeSanto says.

A large part of achieving great customer service is keeping the employees happy. Service-quality experts say that customer-service employees tend to model externally the treatment they receive from management. An intensely top-driven, autocratic corporate culture with spotty internal communication leads to tense, confused customer relations. A company with a collegial atmosphere and good channels of communication will be a lot better at keeping its customers happy.

There are many things HR can do to help create an environment that nurtures good service and customer relationships. Rosenbluth International has developed a culture that encourages associates to seek one another’s help in solving customer problems, and emphasizes its concern for the customer with "elegant language.” CEO Hal Rosenbluth often personally serves tea and cookies to new associates at the completion of their training. "It’s a little corporate ritual that sets the mood,” Carel says. At the same time, it helps Rosenbluth talk with new employees about what they can do to serve customers.

Rosenbluth’s HR team has discovered an important truth. Just as subtle qualities such as a facial expression, choice of words, or a nuance of etiquette can help make a good impression on a customer, any comprehensive HR strategy for customer satisfaction depends on attention to detail. In designing hiring, training, evaluation, and other programs, nothing should be left to chance.

Reprinted from Workforce magazine