Chapter 9

Managing Change, Performance, and Talent

In the last chapter, we introduced the four elements of a Level III customer focus (Figure 9.1). We also went into detail on the first two of those elements—develop a value creation mindset and take an ask, act, and align approach (the triple “A’s”). In this chapter, we’ll move into the third element or step, which is ensuring that your internal management system supports and drives your customer focus.

Figure 9.1 Level III—Internal Management System

Key Element 3: Apply An Effective Internal Management System

The management system we are referring to isn’t a system in the technological sense, but a series of management practices and tools that are integrated with the customer focus and work in concert with each other.

This section is not meant to be a comprehensive or exhaustive view of an entire management system, which would include operating, financial, and other management processes. Rather, it deals with the three management areas—change management, performance management, and talent management—that are most vital to an effective customer focus journey.

As part of this discussion, we’ll also highlight the remaining three elements of our 10-Point Customer Focus Framework: capacity for change, consequences, and committed leadership.

As was the case in some of our earlier discussions, there is a fair amount of overlap and connection between these various management areas and framework elements. As a result, our discussion about them will be more woven than linear. Figure 9.2 loosely depicts the relationships between these various pieces and will serve as a general guide to our discussion.

Figure 9.2 Your Internal Management System Drives Your Customer Focus

We begin by looking at the role change plays in a supplier’s customer focus. By its very nature, a customer focus journey is about a process—a process of continual discovery, improvement, and growth. In every respect, it’s a process of change.

Key Change Management Practices

There are several common tools or levers that suppliers use to drive and support their customer-driven change process. They include, but are not limited to: clearly and consistently defining their customer focus; measuring and reminding people about the company’s progress; deploying and showcasing change champions; and maintaining persistent, relevant, internal communications. Two other vital tools or levers involve consequences and committed leadership. We will discuss these later.

The first important step is to define your customer focus in clear, easy-to-remember and easy-to-explain terms. You must use realistic everyday terms, not the hyperbolic, exotic terms typical of many mission and vision statements. Remember our earlier discussions in Chapter 6 about employee engagement and readiness? Your employees must be able to translate your customer focus at a very individual level so they can readily describe it to others and clearly understand the role they play in it. This means that all of your communications cannot be designed for the management reader—they must, more importantly, be designed for the shop floor and office cubicle reader. In addition, you must ensure that definition and purpose are always visible. This must be active, not passive, visibility. We don’t mean keeping your customer focus someplace where everyone has access to it. We mean keeping it someplace where people can’t avoid seeing it.

The second key change management tool is to set and measure realistic expectations for results or progress. Pick the top 3 to 5 key customer focus metrics you want to measure. Then set short-term, mid-term, and longer-term goals for those metrics, and maniacally communicate the status of them. Many organizations make progress against their customer focus goals—whether quantitative or qualitative goals—a topic of every staff meeting, just like financial results, production, safety, or other key objectives and results. Others show it as the first regular topic in a regularly distributed company newsletter, or as a daily or weekly update on computer splash screens, intranet log-in pages, paycheck stuffers, and so on. We don’t just mean posting the numerical results or statistics in a cold, uninspiring fashion like that of most financial and operating reports. We mean surrounding them with a brief illustrative message or a recent success story (recall Ritz-Carlton’s wow stories in Chapter 6) so you can celebrate, compliment, and thank people for their specific roles in generating the progress or results.

The third change management tool or lever is to identify and engage, as soon as possible, your team of internal change champions. We referred to this concept earlier in Chapter 6. Get these informal leaders to provide staff meeting updates, lead related projects or initiatives, and serve as a conduit between the other employees in their department or assigned area and the customer focus leader(s) or senior management team. Equally important is to publicly recognize, showcase, and commend these champions on the roles they’re playing. Make it clear to everyone that this is the behavior and support you expect and are happy to reward. Show your organization that these are the role models you hope everyone aspires to emulate.

One other area inferred in the above points, but which needs to be highlighted, is internal communications. One aspect of such communications is general sharing of customer-focus–related information. The organization needs a systematic process that shares—enterprise-wide—the lessons, actions, and new processes, policies, or tools that come out of your customer focus efforts. This is particularly important where a supplier is significantly involved in Level II teaming activities—with its many moving parts and projects. We see many situations where a particular business unit, product line, or functional area has discovered a customer-impacting issue or has created a solution to one, and the rest of the company doesn’t know about it.

Another related problem is one we frequently see occur in multiple-product or service-line companies. In these cases, a special allowance or problem fix provided to a customer by one product line in the supplier company was denied that same customer by another product line in that same supplier company. We’re not suggesting there might not be a perfectly valid reason for the dual treatment, but oftentimes there is no valid reason. The reason was miscommunication within the supplier organization. These communication breakdowns can cause costly duplicated effort, lost time, internal feelings of mismanagement, and external perceptions of a disconnected organization.

Internal communications must be persistent. Your customer focus communications need to be provided regularly—almost obsessively. We say this because people learn through repetition, and that’s important to a customer focus in at least two ways. First, people need to know that this focus is not an initiative du jour, and is not going to fade away. It’s a persistent, enduring focus that they cannot outlast. One way to help them see that is to never let up on your communication, which means continuous reinforcement of your core messages, your priorities, and results. Repetition is also important because a customer focus usually entails as much unlearning as it does new learning. Employees often need help clearing their minds of old models and philosophies as well as old approaches and priorities. Repetition helps them unlearn so they can learn the improved ways of doing the things you’ll need them to do throughout the customer focus journey.

One final aspect of an organization’s communications practices relates to creating some internal momentum and branding for your customer focus. Companies miss substantial opportunities to advance their customer focus effort by not helping people connect the dots between various improvements in the organization and the organization’s customer focus. Whenever a policy, process, practice, system, or tool is improved, there’s a real good chance that improvement can be traced back to something learned or discovered from a customer. You need to help people see that linkage at every possible turn. We talked earlier in our voice-of-the-customer discussion about the importance of continually reminding your customers that: you asked, they responded, you acted, and they benefitted. Similarly, in your internal management system, you need to continually remind your employees of how various changes are driven by or connected to the customer’s experience. In effect, you’re saying to them: our customers asked and we’re responding. Even better is to say: we asked, they responded, we acted, and both sides benefitted. The overarching message here is that we don’t change just for the sake of changing. We change for the sake of our customer’s experience. The more you remind them of that, the more embedded it becomes in their way of thinking.

One small but perfect example of something companies do to short-circuit their change efforts is that they constantly revise their internal policies and procedures. We discovered the hidden impact of this seemingly harmless practice when we were interviewing managers and supervisors at one particular organization, and it had surprising customer focus implications. We learned that an average of at least two policy revisions per month went out to the organization’s managers and supervisors. We sensed that was too much so we started asking about it. We were right. The managers and supervisors had gotten to the point of not even reading the revisions, and just putting them in the policy manual binder, or letting them pile up on their desk or credenza, or even throwing them away. There clearly was a cynicism about the value of the policy manual and consequently the credibility of the organization’s senior leaders.

In general, because the updates were so difficult to keep track of and stay apprised of, the organization got to the point where they simply ignored updates. In time, they stopped relying on the manual entirely—because they knew they hadn’t kept it up to date. Instead of referring to it as a management tool, they would go to each other, or to someone in administration, for the answer. We discussed this with the CEO and expressed our concern that it was not only chewing up productive time, but it was diluting her credibility even though she wasn’t the source of the constant stream of revisions.

We suggested an “über policy”—one that governs all the other policies. That über policy stated: there can be no more changes to the internal policies and procedures manual unless it is required by law or required by your customers. What we were suggesting, in effect, is if it doesn’t improve the customer’s experience, don’t change it. Obviously, there would be exceptions periodically, but constant revisions would no longer be the norm. There are two key takeaways from this particular organization’s example. One, be careful using change as an excuse for making frequent, annoying policy and procedure revisions that aren’t business-driven. They can cause numbness throughout the organization that will impair your more substantive and mission-critical change efforts. Two, try to get into the habit of connecting your changes to your customer focus. Where you do change something, it’s to your advantage to help everyone understand how the change was driven by or related to the customer’s experience.

Every customer-focused company, regardless of where they are on the Customer Focus Maturity Model® (CFMM), will require some degree of change at various points of their journey. One of the misconceptions people have, however, is thinking a customer focus requires a new or different culture for the organization. That’s rarely the case in our experience. Organizations need to understand those aspects of their culture that still create or add value, and then work hard to preserve and leverage them. Conversely, though, organizations need to be honest about identifying and pruning philosophies, policies, and practices that do not create or add value. The question is not which culture do you prefer—the current one or a different one? The question is which current aspects do you keep, which ones do you let go of, and which new ones do you need to develop due to your changing landscape? The answer isn’t either/or. The answer is both. In sum, customer focus isn’t about a new culture as much as it’s about molding a culture that can adapt to the environment around it.

Even if you are on the right track, you’ll get run over if you just sit there.

—Will Rogers

Some organizations have a difficult time adapting to changes in their environment. That is, their capacity for change isn’t strong. As a result, those organizations need a much more deliberate, structured approach to ensure change happens successfully. They have to be very diligent and persistent in the change management practices we described above.

To help organizations plan and prepare for the stages of their journey, we find it helpful to get them to think about the way their organization typically approaches change. To do that, we use three categories to denote their capacity to change, and define those categories as follows:

In addition to an organization’s capacity for change, the degree of change required will vary significantly from organization to organization, and will vary over time for any given organization. In our work with suppliers, we help them understand the three different levels or types of change experts typically recognize, and our particular definitions of them:

Graphically portraying where a company is in both its capacity for change and level of change can help people think about the level of effort they must expend and how closely they need to manage the change process for their journey. (See Figure 9.3.)

Figure 9.3 Assessing Capacity and Level of Change

The level of effort an organization must expend on their change process, and the degree of managing they must apply to that process, will depend in large part on their capacity for change and the level of change they are pursuing. As an organization moves from incremental to substantial change, or from substantial to transformational change, it usually encounters increasing levels of intentional and/or unintentional internal resistance. Thus, as the level of change increases, so does the amount of effort and time that’s needed to generate broad-based acceptance of, then support for, and ultimately, involvement with, that change.

As a company’s capacity for change evolves or matures from reactive to proactive, and from proactive to competitive, it becomes relatively easier to continually get people rallied around and dedicated to various change efforts. Conversely, the more reactive an organization’s change capacity is, the harder it will have to work to change effectively. A good example of a reactive capacity for change is an organization confronted with a burning-platform situation. In essence, they need to change just to survive or stay in the game. It’s a circling of the wagons where everyone digs in, gets focused, and does whatever it takes—because there is no acceptable alternative. Reactive capacity is relatively easy to get started and kicked into action, but it eventually fades in the absence of additional fires or significant change management support.

The reacting capacity for change isn’t a self-sustaining, inherent capability, but is more of an episodic capability that rises in extreme cases, almost on an “as-needed” basis. It does not, however, become part of the culture. Reactive change also isn’t very gratifying since the organization did a great deal of work just to “catch up.” Oftentimes, there’s not much to show for their efforts in terms of net gains. Lastly, people tend to believe such efforts have an endpoint as opposed to being a perpetual state or capability. The typical sentiment is: once this is over (i.e., once the fire is out), things should return to normal.

So reactive change cultures require a high level of effort or closely managed change activities to succeed at most change challenges—even challenges that only call for incremental change. They also require substantial effort to sustain any kind of change capability, and get an organization ready to rise again in the face of the next threat or crisis.

Change must become the norm, not cause for alarm.

—Tom Peters, from his book Thriving on Chaos

At the other end of the spectrum, a competitive capacity is where change is the normal state. Organizations with a competitive capacity for change don’t think about putting fires out—they think about starting them. They drive changes that start fires burning on the competition’s platform. That competitive drive can be fed for a long period of time, with relatively less effort, as the organization develops a strong sense of and commitment to keeping the competition behind them.

Such competitive changes usually generate a sense of progress or success that galvanizes an organization’s competitive change culture and gives people cause for celebration. Things like new product or service launches, press releases, stock market rallies, new facility openings, competing companies going out of business, winning those “whale” accounts, sales rallies, and other successes tend to keep people alert and hungry for that next big idea or opportunity to leverage change.

Even when confronted with the need or opportunity for transformational change, the competitive change culture is much better equipped to tackle the challenge because they have so many supporting practices and tools already in place. Change has become not only a competitive weapon, it has become a way of life. Apple, Nike, 3M, Gillette, Amazon, and Microsoft are all good examples of companies that we view as having a competitive capacity for change.

Key Performance Management Practices

Managing performance is the second key area required for a customer-focused internal management system, one of the integral elements of achieving a Level III customer focus. (See Figure 9.4.)

Figure 9.4 Managing Performance: Part of Your Internal Management System

A tool that we have used successfully for managing performance in dozens of different organizations is our driving peak performance tool. While there are countless theories and viewpoints around what separates desired performance from undesired performance, it all boils down to this: When a person doesn’t perform as desired, the cause is clarity, skill, will, or support.

More specifically, when an individual or team doesn’t perform as well as its members want, or as well as you want, it will always be due to the members’ lack of one or more of these four performance drivers:

We’ll look at each one of these a bit more closely. As you’ll see, these four drivers have already come up in various other contexts throughout this book. In Figure 9.5 we pull them all together into an integrated model you can use as a management tool. We’ll discuss the first three (clarity, skill, and will) below, and pick up our discussion of the fourth driver, support, a bit later in this chapter.

Figure 9.5 Four Drivers of Performance

Clarity: “Before I know what to do, I need to know what you want or expect of me.”

Clarity means your performers have a clear picture of where the organization, business, department, and/or team are going and why. They have well-defined goals that are needed to get them there, and they know in very clear terms their personal role in achieving those goals. They also can readily see where they and the team stand in terms of progress made against those goals. Annual performance goals and scorecards, customer focus or customer experience dashboards, customer relations management (CRM) reports and analyses, voice of the customer (VOC) reports and analyses, as well as broader business and financial plans and reports, are all useful tools for ensuring the clarity your performers need. Clarity provides the answers to the performance questions shown in Figure 9.6.

Figure 9.6 Performance Questions Related to Clarity

Skill: “I understand what you expect of me, but I need the ability to do it.”

Skill includes the knowledge, competency, or ability your performers need to achieve their goals. The skills they need for their customer-focused responsibilities must come from formal training and informal on-the-job training and practice, but must be reinforced by role modeling and coaching from their managers. One tactic we see missing in so many organizations is ample opportunity for people to practice their new skills and have those dry runs observed and critiqued by their peers. Most organizations (and people) hate the idea of practice or role-playing exercises. But those who use such opportunities have the results to show for it. Skill provides the answers to the performance questions shown in Figure 9.7.

Figure 9.7 Performance Questions Related to Skill

Will: “I know what you want and I’m able to do it, but I must want to do it.”

Will, also referred to as consequences, includes techniques that create a motivational or emotional connection between performers and their role and provide both positive and negative consequences for performers’ behaviors and results. Will provides the answers to the performance questions shown in Figure 9.8.

Figure 9.8 Four Performance Questions Related to Will

While the techniques used and actions taken to create consequences are many and vary widely, the most common types of positive consequences we see used in customer focus efforts are:

• Financial incentives
• Nonfinancial rewards
• Customer and employee-nominated awards programs
• Special recognition honors and events
• Internal competitions and contests

Financial Consequences

Group incentive or bonus programs are the most prevalent approach we see. In these situations, everyone in the organization receives the same financial award, provided the organization as a whole achieves its pre-set customer focus targets or goals. The goals are typically set in any number of the various economic or quantitative indicators we discussed in Chapter 2. The financial reward most often provided is a cash bonus that equals a fixed percent of their annual pay, or a fixed amount of dollar payout. For example, where organization XYZ Inc. achieves the customer focus goal they had set for the year, everyone would get a customer focus bonus or incentive payment equal to 5 percent of their annual salary or wages, or everyone might receive a flat amount of $3,000 (percentages and amounts are for illustrative purposes only). Most often, customer focus performance is one of several factors used in the calculation of total bonus or incentive payouts; is typically combined with other performance factors such as operating income (OpInc), gross margin dollars (GM $), free cash flow (FCF), return on invested capital (ROIC), return on capital employed (ROCE), safety indices, and so forth.

Another practice we often see is where the organization requires certain people to set specific individual customer focus goals at the beginning of the year. Then, their individual performance against those goals is factored in to any annual pay increases or bonus/incentive payments they would receive. We prefer this approach rather than the group incentive approach described above because this approach tends to make a much clearer and direct linkage between the individual’s personal effort and results, and the consequences. That is, individuals see a direct benefit of the performance they personally achieved, whereas in the group approach, everyone tends to benefit (or lose) equally regardless of the personal role they actually played in helping reach the target. The individual goal approach, however, takes more time and thought to establish on the front end, and requires more judgment and possibly tougher decisions and conversations at the individual level on the back end.

Clearly, there are many variations of each of the above approaches, as there are various pros and cons of each variation. Organizations need to weigh what they are trying to achieve, the investment they’re willing to make, and their reward philosophy and culture to ensure they have an approach that works best for them.

As an example, one company we work with uses a customer experience index (CEI) to set and track a company-wide customer-focus goal. That index has several component metrics in it including customer retention rates, customer survey scores, and gross margin gains. Imagine that at the beginning of the year they set a goal to achieve a CEI improvement of 2.5 percent. The CE bonus plan for the year might be set such that if the full 2.5 percent improvement is achieved, 5 percent of the year’s gross margin dollar gains are paid out in CE bonuses. If they achieve between 2.0 percent and 2.49 percent CEI improvement, 3.5 percent of the year’s gross margin dollar gains are paid out in CE bonuses. If they achieve between a 1.75 percent and 1.99 percent CEI improvement, 2.0 percent of the year’s gross margin dollar gains are paid out in CE bonuses. Any CEI improvement less than 1.75 percent does not generate any CE bonuses.

In another company, each member of the senior management team member has to set a specific customer focus goal for the year that they are personally held responsible for achieving as part of their other annual performance goals. That goal might pertain to improving a certain customer focus metric, working to improve a particular customer-facing process, or leading a specific customer-focus–related joint project or cross-functional project. Whatever the goal, all members of the management team must have one, and their merit and bonus awards at the end of year are determined by the level of progress they make in achieving their respective customer focus goals.

What is most effective about this approach is that all members of the senior team, regardless of their functional role, take ownership for some aspect of the organization’s customer focus. That goes a long way to create the internal alignment we talked about earlier. Of course, you gain an added benefit of that practice when each senior manager, in turn, cascades his or her customer-focus–related goal down into the rest of the organization—similarly holding the members accountable for doing their part to achieve the goal. That cascading is where the alignment and shared sense of ownership gets multiplied, and really starts becoming embedded in the organization.

The commitment to customer focus at W.W. Grainger, for example, hinges on Grainger providing a very simple incentive for employees to work hard: More success means more money in the company’s profit-sharing trust, which is divided among employees every year. In 2009, for instance, the company provided $119 million to employees, which amounted to 18 percent of pay for employees with five or more years of experience.1

Well known provider of insurance, investment, and retirement services to military personnel and veterans, USAA (United Services Automobile Association) provides a reward/culture framework that emphasizes account growth over new account development. This sends a clear message that serving, retaining, and growing the business with current customers (clients) is more important than attracting and winning new customers. That kind of message can play a vital role in providing employees with a clear sense of priorities and an alignment around those priorities.2

When IBM transformed itself into a customer-centered company, the employees had to be convinced it was necessary; they had to “get it.” Some of the actions IBM took to enable that included ranking and rating employees on their individual performance and their team contributions toward specific customer-focused objectives. Executive compensation, which had been based primarily on business unit performance, was now based on overall business results and customer satisfaction.3

Recall the Kansas City Harley-Davidson plant we discussed back in Chapter 8. One need not walk very far into that facility before seeing or hearing obvious signs of how they build consequences into their culture. Every employee in the plant is on some type of variable pay plan that links individual, team, and plant performance. With few exceptions, every employee learns every job in the plant. Employees rotate to a different job every two hours. The workers are organized into self-directed work teams. Each team has its own scoreboard, which might track any number of things, even cash flow. If a team performs better than its budget, the team gets to decide what to do with the remaining cash. One team used it to hire an on-site masseuse!

There’s reserved parking for owners—Harley bike owners. If you drive your Harley to work, you get to park right in front of the facility’s main doors. If you drive another brand of bike to work, you park it . . . elsewhere. A super-relaxed dress code coexists with strict rules around shop-floor hygiene and safety. For example, the paint facility has strict rules about what the team can wear and eat, as well as the soap and shampoo they can use. Some foods and soaps can create skin oils that contaminate certain finishes. At several workstations, employees listen to music as they work.

As you can see, Harley-Davidson uses a blend of consequences to keep their employees aligned, engaged, and focused on their priorities. Some are financial consequences, whereas others are not.4

Nonfinancial Consequences

The types of nonfinancial awards, and the various mechanisms for delivering them, are even more numerous and varied than the financial ones we just discussed. In fact, the possibilities are limited only by the organization’s imagination. We will highlight just a few examples here to give you a flavor for the range of things that are possible. In-kind awards such as fitness club memberships, gift cards, award trips, and other perks are common examples. Public award ceremonies, recognition dinners, press announcements, desktop and wall plaques, and awards are other examples. Contests and competitions can be particularly effective at generating at least awareness, if not interest, from the broader organization as a whole. Such contests can be for any number of customer-focus–related actions or results including:

• Going above and beyond to solve a customer’s problem or fill a need
• Ideas for improving specific internal or customer-facing processes
• Suggestions for making internal policies more customer-friendly
• New product or service innovation ideas
• VOC score improvements by region, by product line, by business unit, and so forth

A number of companies proudly display their award winners (photos, stories, etc.) on their lobby walls, throughout their main hallways, in trophy and award cases, or on what some call their Wall of Fame. At one company, for each quarterly period, an employee is nominated by both fellow employees and customers as one of the year’s four CE Champions of the Year. On the award wall is a picture of the award winner and their family members, the amount of their award,5 detailed examples (stories) of what they did to earn the award, and testimonials from the coworkers and customers who nominated them.

They are in the process of enhancing their Wall of Fame by using video testimonials instead of written ones wherever possible. You’ll simply click the button under the CE Champion’s photo, and a video will play describing his or her accomplishments and showing the coworkers and customers actually stating their testimonials. The video might also contain sound bites from the champion’s family members. At the end of the year, the CEO takes all four of the nominated champions, along with their individual spouses or guests, to dinner at an exclusive area restaurant.

Negative Consequences

Providing negative consequences is just as important as, if not more important than, providing the positive ones. Unfortunately, a large majority of organizations have a difficult time making the tough decisions, and having the tough conversations, that come with creating negative consequences. This difficulty is true in any of their organizational endeavors, not just their customer focus journey. We say it’s more important than the positive consequences because you can still make substantial progress if less than 100 percent of your people are aligned with and bought into your customer focus. Not everybody can be, will be, or has to be a champion for it to succeed. However, even a handful of internal resistors—depending on who they are and what job they are in—can have a noticeable diluting impact on your efforts. If some of your employees don’t want to jump on the wagon of support—that’s something you can probably deal with. If some of them stand in the way of that wagon—that’s something you cannot tolerate.

In effect, your message and actions must persistently show people there are benefits to them for supporting the customer focus, and there are negative outcomes for those who resist or try to undermine that focus. There’s no room in your organization for the latter. Such people—assuming you’ve been clear about your expectations and their opportunities to be supportive—need to be dealt with forthrightly and effectively. That might mean excluding them from the financial and nonfinancial incentives described earlier, taking away certain privileges or discretionary benefits, loss of potential earnings, and other penalties—up to and including moving them out of the organization. This tough talk might sound harsh or extreme, but we have seen too many situations where a small number of very vocal and influential naysayers have caused an otherwise effective customer focus to stall, decline, or just not reach its potential.

We’re not suggesting you take these negative consequence actions lightly or execute them rashly. Clearly, they must be done in a reasonable and legally compliant manner. At the end of the day, however, the gains at stake in your customer focus effort are just too significant to turn a blind eye on the chronic resistors. They either need to get on the wagon or out of the barn altogether.

In the section above we discussed how will is about motivating and holding people accountable for achieving your expectations, and being willing to make tough decisions when they do or don’t deliver as expected. Now we’re ready to talk about the fourth driver of performance.

Support: “I know what you want, can do it, and want to, but something’s stopping me.”

Support is the final enabler your performers need to optimize their success. Support can come in the form of providing your performers with the right amount of needed guidance, resources, and information. Relevant competitive intelligence, customer satisfaction and loyalty data, and tools for shifting brand preference and describing your UVP are all examples of valuable support. Support might come by way of providing performers with decision-making authority and parameters, and help in problem solving and priority setting. The Value Driver Priority Matrix tool described in Chapter 7 is one example of providing the prioritization support they might need.

Performers also need periodic help in diagnosing stalled projects or assignments, getting around obstacles they can’t control, and evaluating and managing other types of internal interference, including lack of cooperation from other departments. Support is especially important for an organization’s customer focus. To the extent some function or leader is appointed to lead an organization’s customer focus charge, it is unlikely that they’ll have authority over everyone who must play a direct role in the effort. As such, they will need a level of cooperation and coordination from others that can make the role quite exhausting and frustrating. Although the customer focus leader has the clarity, skill, and will, they will likely need a steady stream of support—especially early on—from executive leaders to clear internal obstacles and ensure goals and accountability are shared throughout the organization. Support provides the answers to the performance questions shown in Figure 9.9.

Figure 9.9 Four Performance Questions Related to Support

The Peak Performance tool can be quite valuable in terms of helping you anticipate and plan for the kind of performance effort a customer focus activity will entail. It can also be an equally valuable tool in troubleshooting and breaking through stalled efforts or related performance shortfalls or breakdowns.

Key Talent Management Practices

Talent Management is the third key area required for a customer-focused internal management system (Figure 9.10). In essence, an organization’s talent management system includes all the processes, practices, tools, and policies an organization uses to manage the acquisition, retention, development, and exit of its talent or people.

Figure 9.10 Managing Talent: Part of Your Internal Management System

Recall the customer experience pivot points described in Chapter 7 and how they represent the key points where the customer’s experience or the supplier’s focus significantly shifts, or pivots, between key processes, functions, or steps. A very similar principle and parallel set of processes pertain to your people and how you manage them into and through your organization. Each talent management pivot point is an opportunity to further support and enable the alignment and implementation of your customer focus. Figure 9.11 shows the talent management life cycle (also referred to as the employee’s experience by some people) and its related talent management pivot points.

Figure 9.11 Talent Management Cycle

In most organizations, the people who are continually reviewing, improving, responding to, and leveraging the organization’s customer focus are very different from the people who are designing, reviewing, improving, and leveraging the organization’s people practices. Not only are these functions performed in totally separate parts of the organization, it’s amazing how little they typically talk to each other, share information of common interest, and discuss the best way to link and mutually leverage their respective areas. In essence, customer focus people and human resources (HR) people don’t collaborate or coordinate nearly enough . . . if at all.

Every step or process in the talent management cycle represents an opportunity to build or improve the organization’s customer focus capabilities, effectiveness, and culture.

We’ve already discussed some of these linkages in other chapters, but will take a moment here to refresh and pull them all together. It begins with the type of people you’re trying to attract and acquire (hire) into your organization. At Dell, for example, we believed that if we hired the right people into sales and customer care positions, we could teach them the business model, product specs and features, and any technology developments they needed to know. So we hired for the qualities we couldn’t readily teach once a person was hired. Such qualities included being a self-starter and a quick study, having a natural curiosity about how people use their PC’s and similar products, and having a customer-focused attitude and desire to help.

The alignment step begins with the employee’s first day of work, and for some progressive organizations—even before that first day of work. Alignment consists of the steps an organization takes to on-board their new employees and acclimate them to the organization’s culture and direction. When done well, an on-boarding process reinforces the new employee’s decision to join the organization and begins building a sense of pride, connection, and brand advocacy in their new organization. When done well, this critical alignment step will tell the employee which things are somewhat important and which ones are critically important in the organization’s view. In sum, the employee’s early weeks on the job are an important step to ensuring they have the customer focus you want—right out of the gate. Alignment also includes the process you use for setting goals, monitoring, adjusting, and evaluating employee performance against your expectations. We’ve already talked about the customer focus importance of that in the performance management practices discussion.

You might note a striking parallel by now between many of the actions we suggest for creating loyal customers and the actions we’re describing here for managing your talent. The above discussion on alignment is a great example. Reinforcing an employee’s decision (or customer’s decision) to join you (or buy from you), using the relationship to advance your brand (through employees and through customers), establishing clear expectations and goals for the relationship (with employees and with customers) are all examples of practices that are as important to your talent on the inside as they are to your customers on the outside. And there are many other parallels you might see in the areas of attracting and acquiring, as well as developing, retaining, and exiting, which are further discussed below.

Development and deployment are the steps and actions you take with employees once they are fully on board and performing as expected. The key here is to ensure that they not only have the clarity about what you expect, but they increasingly have the skill to deliver what you expect. That means developing them with the training, coaching, counseling, and assigning them to projects that develop their customer focus skills. Skill development was discussed earlier in Chapter 6.

Deploying is largely related to the consequences we discussed earlier. Are you providing the plum assignments to your customer focus champions or do the better assignments and opportunities sometimes go to your customer focus cynics? When you make promotion decisions, to what extent does the promotion candidate’s customer focus commitment and results come into play? Can someone be promoted in your organization if they don’t visibly and credibly support your focus? Is your succession plan populated with successors who will sustain and advance your customer focus, or is it populated with successors who will scrap it as soon as they are “in control”? In sum, if customer focus is truly important to an organization, it should be an obvious driver in the organization’s talent development and deployment activities and decisions.

Reward, retain, and exit are all part of the consequences tools or mechanisms we discussed earlier. It’s often said that you get what you pay for. Like it or not, it’s often the reality. Rewards, or the withholding of rewards, can play a significant role in driving your customer focus, as we’ve already discussed. Granted, many like to think that most people will naturally do the right thing without requiring a financial kicker to do so. But until your culture is one in which the customer’s experience is truly viewed as everyone’s job, that noble sentiment of people naturally doing the right thing will be hard to make real throughout the organization.

We have had some senior leaders tell us: I am not going to pay someone an incentive or give them an award for something they should already be doing as part of their job anyhow. While we don’t disagree with the logic of that position, we don’t think it’s very practical. If you expect people to automatically “get it” and support it, we suspect you won’t get very far—especially if you are pursuing significant levels of change or improvement and your organization’s capacity for change is limited. In that case, people will give you lip service, do as little as they can to comply, and try to outlast you. In such slow-to-adapt cultures, rewards can play a vital role in kick-starting your focus, expanding your base of champions, and getting some of the needed customer focus processes and improvements under way. Rewards can create early traction for your customer focus.

Please note that we’re not suggesting rewards be a permanent part of your customer focus. They will, however, be hard to avoid in the initial stages. In time, once the culture has accepted and learned how to use its new skills and approach, you can start making rewards less of a key part of your effort. We do, however, advise against completely eliminating all customer-focused incentives or awards. Most successful Level II and Level III organizations continue providing some type of opportunities for employees to earn more as the customer focus produces more financial gains for the organization. That is, they continue creating ways for everyone to share in the financial success customer loyalty brings.

Retain and exit represent another striking parallel between your customer focus and talent management efforts—and that parallel is segmentation. We discussed the importance of customer segmentation earlier. Employee segmentation is similarly very important. All employees have equal rights, but they do not have equal skills and potential. There are high potential employees—those who can significantly increase their scope and level of responsibility and contribution to the organization. There are top performers who, although they might not have as much advancement potential as high potentials, are still among your most productive or talented workers. Then there are your solid contributors—people who aren’t or may never among your “A” players, but nonetheless are consistently solid performers and valued members of the team. All of these types or segments of employees are essential for your organization’s success. Retaining them is critically important, and what it takes to attract, develop, and retain them often differs segment by segment.

Conversely, any organization has employee segments at the other end of the spectrum. They include people who don’t currently have sufficient skills to perform as needed, but might be able to develop those skills in time. There are others who simply are not suited for the job you hired or promoted them into. Finding another job in the organization where they can succeed might be the best option for people in that segment. If other more suitable jobs don’t exist, you might have to exit them from the organization. Still others have the job skills they need but just aren’t the right cultural or behavioral fit for the organization. Coaching and development might help these employees in time, but in some situations, they too will need to leave the organization. Finally, and unavoidably, there will always be some number of employees who are your performance and/or behavior problem people. They either can’t or won’t meet your expectations—no matter what you try. They too will likely have to exit either voluntarily or involuntarily.

Please note that this retain-and-exit discussion is not meant to be a technical, human resource–related, or legal discussion of employee segments and what to do with them. Rather, we point it out to show that your employees are all different, and their value to and impact on the organization and its customers will differ. As a result, the decisions you make about retaining and exiting them will differ as well.

All of these talent management practices act to continually shape and support an organization’s culture. As a result of your practices and decisions at these talent pivot points, in time, people clearly understand the kind of people the organization wants. They see it in everything you do—every hire and fire you make, every time you promote or reward someone, the people you invest in developing and those you don’t, those you’ll put on key projects and those you won’t. Every decision you make about your people will help define and reinforce the message of what’s important to the organization.

When these talent management processes are aligned with your change management and performance management processes—they form a highly effective internal management system. That’s the kind of internal management system you need to drive, support, and sustain your customer focus over time. This management system is vital for preserving the gains you made in Level I and Level II and preventing any loss of traction or backsliding. It’s vital to building internal core capabilities around these processes and related activities so you can eventually inspire, teach, and guide others—outside of your company—to make the same progress in their respective organizations.

Given the above discussion, we hope it’s clear that a sound internal management system is critical to reaching and sustaining Level II of the customer focus journey. An organization’s capability to effectively manage change, performance, and talent are all essential processes in that management system. You will not be positioned to successfully transition to and progress in Level III until those processes are developed with a customer-centric intent and are working in concert with each other and with your broader customer focus.

One other important conclusion we hope was obvious, though not explicitly discussed above, is the need for committed leadership to provide the direction, drive, and inspiration that ensures all of this happens. It requires a leader who can create a compelling view of why a customer focus is necessary and how everyone can contribute to and benefit from it. It requires a leader who consistently and visibly demonstrates the core principles of the customer focus in their daily actions and decisions. Finally, it requires a leader who is committed to putting the customer focus first among the organization’s myriad priorities. We like to test that commitment as early as possible in our work with senior leaders who are looking to take their customer focus to the next level. We typically do that by using the following three questions as our litmus test on them:

With these questions we’re trying to gauge what their own measure or proof of success is, how realistic their expectations are in terms of outcomes and timeline, and how ready they are to make tough decisions to support this.

Throughout these nine chapters, we’ve talked often about the many implications of those three questions. We’ve also talked about dozens of other perspectives, approaches, and tools that cannot be implemented in any meaningful way without the right leadership. Before leaving this internal management system discussion, let’s highlight a few remaining requirements for an organization’s customer-focused leadership. No matter how informed or “ready” senior leaders are to forge ahead on a customer focus journey, they are still senior leaders—many of whom still have recurring blind spots they must stay alert for and see through. Below are five of the more nagging or persistent blind spots we most often have to coach senior leaders through.

In conclusion, Level III is a level where the organization’s customer focus and its culture are completely linked, integrated, and indistinguishable from one another—the two are one in the same. The customer focus is a business priority that permeates and defines the culture. The culture of the organization is customer focused.

That sameness becomes evident in the way the employees talk, think, and behave. It’s clear in their realization of why their company exists, and the role customer value plays in that existence. It’s clear in their understanding of how the company makes money, the role the customer’s experience plays in them making that money, and the role they play in that customer experience. It’s an alignment of purpose and focus that gives every employee the permission, and an obligation, to think like the customer, challenge each other to think that way, and act in ways that differentiate the company in the customer’s eyes.

Finally, it’s a culture made possible and reinforced by an integrated internal approach to managing change, performance, and talent. In sum, Level III is where your customer focus has been articulated, reinforced, rewarded, and driven in every function, department, and aspect of your business. (See Figure 9.12.)

Figure 9.12 Three of the Keys to Level III

Level III is also the level where the processes you improved, the new skills you learned, the new systems you established, and the new touch point relationships you capitalized on are no longer new. They’re no longer experiments you’re trying or methods you’re practicing. They have become real capabilities within your organization, which you consistently execute. They are no longer the priority of your customer service and support teams, or of your sales and marketing personnel. They have become the overarching priority or focus of everyone in your organization. The ability to identify, articulate, and deliver unique customer value that truly differentiates your company is no longer limited to your sales transactions or your products and service. You now have people positioned throughout the entire customer experience who know how and are motivated to create that differentiation. Differentiation has become a core capability.

As a result of your continually improving capabilities and evolving culture, you have created meaningful barriers to entry and other competitive advantages that have translated into any number of economic gains including: new revenue streams; higher margins; lower costs of sales; cycle time improvements; more productive and collaborative relationships; greater share of your customers’ wallets; repeat and referral business; and many of the other economic gains we’ve discussed.

When people use the capabilities and advantages like those above in describing your organization, you’ll know you have arrived at Level III in terms of your customer focus maturity. If that were the end of your journey, you would likely already be way ahead of any competitor in your space. Your economic growth would be light years ahead of where you were before you started the journey. Indeed, you would have come a long, long way! However, as we’ve often said, this journey has no end. Even at the enviable level described above, there are still untapped possibilities for further optimizing your progress—ways to yet extend and further leverage your capabilities and culture. Our next chapter discusses this fourth key element of Level III—further leveraging your value-creating culture across your broader value chain.

1 Jared Shelley, “Time to Re-Engage,” Human Resource Executive (December 2010): cover story and page 14.

2 Ronald Henkoff, “Growing Your Company: Five Ways to Do it Right,” Fortune, November 25, 1996.

3 Harvey Thompson, Customer-Centered Enterprise (New York: McGraw-Hill, 1999).

4 Kansas City Harley-Davidson plant tour and meetings with work teams, May 2003, in conjunction with the annual Customer-Supplier Division Conference for the American Society of Quality.

5 Note that this particular organization includes a cash award of $2,500, $5,000, or $10,000 depending on the type of achievements that earned someone the champion’s nomination. Nevertheless, we are using their program here as an example of the nonfinancial recognition mechanisms some organizations use.