Q&A with St.George Bank Limited - Customer Service Institute of ...

customer service
excellence
The Official Journal of the Customer Service Institute of Australia
Australian issue # 28
NOVEMBER 07
New 100%
Government
Funding for
CSIA Customer
Service
Excellence
Programs
Q&A with St.George
Bank Limited
Antoine Casgrain
and Paul Fegan
Enrol in
Australia’s
only Certified
Customer Service
Manager Course.
CSIA- Australia’s Peak Customer Service Association.

Contents
02
08
15
Q&A with St.George Bank Limited
New 100% Government Funding for CSIA Customer
Service Excellence Programs
Measuring the Financial Cost of Bad Service
Art Director
Tiffany Mehnert
Editor
Christine Churchill
Contact CSIA
info@csia.com.au
www.csia.com.au
(02) 9386 4477
Welcome to the 28 th edition Customer Service Excellence Magazine!
We are excited to have on our cover this issue, the new CEO of St.George
Bank, Paul Fegan and Antoine Casgrain General Manager of Customer Contact
Centres for St.George Bank. Both Paul and Antoine were part of St.George
Bank’s successful Australian Service Excellence Award judging visit and we are
very pleased to feature the story of one of Australia’s Leading Customer Service
Organisations in this issue of the magazine.
We congratulate Paul Fegan on his new appointment and we are impressed that
St.George Bank is maintaining its tradition of appointing CEO’s who can deliver
Customer Service Excellence.
In addition, we have included Brett Whitford’s white paper on the Cost of
Bad Service. This insightful article will make it clear, even to the skeptics, the
importance of investing in customer service team members and the absolute
importance of sublime customer service. Make no mistake that customer
service team members are the heart and soul of an organisation.
Don’t forget to talk to us about our new CSIA accredited government funded
training opportunity. This outstanding program will set you apart in the industry.
Wait until you hear all we can for you! And at no cost to you or your organisation!
As always, we seek and welcome your feedback — please email any contributions
or ideas to info@csia.com.au. If you are interested in reviewing a book or
contributing an article for one of our upcoming magazines, please let us know.
Happy reading!
Christine
The Customer Service Institute of Australia was established in 1997 to serve the needs of all Australians who work in customer service. Today
it is our nation’s peak customer service body and secretariat for the International Council of Customer Service Organisations. ICSSO is an
international collective of organisations promoting service excellence through the International Customer Service Standard certification program
and the International Service Excellence Awards.
Our members include CEO’s, business owners, government employees and of course customer service professionals. High quality customer
service is universally regarded as imperative for long term business success. To enhance customer service in your organisation join the CSIA.
We are driven by and committed to the development of people, systems and standards to improve customer service.
The CSIA is a not-for-profit company limited by guarantee.

St.George
Bank Limited
Antoine Casgrain, General Manager
of Customer Contact Centres for
St.George Bank, and Paul Fegan,
CEO of St.George Bank
Q
Briefly describe your position
and role in the company.
My position is St.George General Manager
Customer Contact Centre (CCC), I am
responsible for the Staff, Customer &
Financial results of St.George Bank’s multisite
Contact Centre. My role is to guide &
develop a team of six business managers
to achieve these outcomes.
Q
What training and development
programs exist to drive
development in Customer Service
at all levels of the organisation
All our training initiatives must support our
vision to become the ‘most respected service
organisation in Australia’. The Contact
Centre’s overarching goal is to achieve formal
accreditation from the Customer Service
Institute of Australia (CSIA) within 18 months.
All our day to day training initiatives feed
nicely in the organisation’s vision and the
CCC’s objectives:
‘e-Luminate’ Online Training Courses are
mandatory for all staff members, the first
being Customer Service Fundamentals, which
provides a broad understanding of “Our
Roadmap” and the St.George Customer
Experience Model. This session also provides
a foundation for understanding the servicebased
initiatives underway across the Group.
The second of the series is ‘Living Customer
Service’, this helps the staff member to
understand what we need to do around
customer service to maintain our differentiation
and identify what they can do to shift our
customers to the “Zone of Delight”.
Further to this, Contact Centre-specific
training modules have been developed to
enhance soft skills in customer facing staff,
such as Customer Service Fundamentals and
CUSTOMER SERVICE EXCELLENCE
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2

St.George Bank Limited…continued
Q
Smile in the Voice & Conflict Resolution. This
training is delivered online and is divided into
short modules of 15-20 minutes to allow
consultants to complete them through the
course of normal business in quiet times.
Our Leaders and Senior Consultants also
attend a 2 day workshop on Developing Great
Service Turnaround Skills, for example how
we respond when someone complains is
a real “moment of truth” for the customer,
and an opportunity to show true service
differentiation, re-win the customer’s loyalty
and advocacy and even gain business.
We also work with external training providers.
One of our most effective courses is the
‘Impromptu Counsellor’ provided by Helen
Cummins. The course looks at development
of skills and self-awareness essential in the
successful handling of customer complaints
and difficult customer interactions. We have
also invested in the art of ‘taking responsibility
and control of issues’ with a most engaging
Sports Psychologist Dr. Phil Jauncey. And just
recently we have done some NLP work (Dr.
John Gora) to provide verbal tools to better
engage with the customers over the phone.
Q
What management techniques
are used, describe the best
aspects of employee relations and
the managerial style of the company
I hold quarterly Staff Briefings with all staff, to
set the scene and the expectations for the
months to come. We’ve built a transparent
culture where individual and team results are
publicly shared and celebrated. I believe this
underpins the St.George ‘ExCITE’ values of
excellence, customer focus, integrity, ,
teamwork and valuing each other.
The style of the CCC Leadership team is
very consultative with monthly focus groups
(called Fireside Chats) and staff committees
are formed whenever significant change
management is required.
CUSTOMER SERVICE EXCELLENCE
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3

St.George Bank Limited…continued
The program demonstrates
to frontline staff
that the St.George
Executive management
team are committed
to the St.George
service culture.
I put aside one full day per fortnight to be on
the floor to listen to calls and touch base
informally with staff. Other avenues for staff
to provide feedback and suggestions are their
own team meetings, the ‘CCC feedback’
email address and the very popular ‘Roz Wall’
situated at the entrance of each Call Centre.
Staff are invited to write comments which
I personally respond to within 24-48 hrs.
Q
Has the workforce been
involved in developing
strategies for success What areas
were identified by employees to
improve the company’s operations
Every one of the CCC staff members speaks
to between 60 to 100 customers per day.
Staff are an invaluable source of Business
and Customer Intelligence. My first action
whenever an issue arises is to walk the floor
and seek the staff’s, and thus the customer’s,
perspective on the situation. We recently
found that staff were consistently commenting
on our ‘hold music’ and ‘on-hold messages’.
Investigation indeed confirmed that our
approach was fragmented and inconsistent
between various phone queues. We thus
set out to completely review the ‘in-queue
customer experience’ for our customers.
The early results are most encouraging with
customers now pro-actively commenting
about the music and the ‘pleasant voices’
on the messages on hold.
Q
What systems and processes
exist to promote ongoing
Customer Service improvement
across the organisation
The CCC’s Listening Post program invites
more than 200 St.George Group executives
and key stakeholders to listen to calls for 90
minutes and participate in a 30 minute debrief
session to provide feedback. The program
demonstrates to frontline staff that the
St.George Executive management team are
committed to the St.George service culture.
The experience is also invaluable for them as
they get to regularly monitor the pulse of our
customers first-hand. Of course, CCC staff
love showing off their good skills and the CCC
management never miss an opportunity to
lobby particular executives for their time and
resources to address specific issues that need
prompt attention!
We also launched the ‘Business Rule
Challenge’ (BRC) where staff are invited to
challenge any unfriendly or cumbersome
process or protocol. The CCC staff raised
CUSTOMER SERVICE EXCELLENCE
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4

St.George Bank Limited…continued
Every quarter up to 10 colleagues
become Customer Service
SuperStars…They have shown that
they consistently provide exceptional
service to their customers and really
do go above and beyond.
over 1200 BRCs in 2 years. 86% have
now been closed satisfactorily. The BRC
program has provided CCC staff an avenue
to share customer frustrations with our
processes as well as a medium to provide
their ideas/suggestions to improve our
customer experience.
Q
How does the organisation
recognise and reward staff in
relation to Customer Service
The Star Awards is a Group-wide recognition
program that provides managers and peers
with the opportunity to recognise their
colleagues for providing exceptional service.
Our program consists of three categories —
Customer Service Star Awards, Business
Performance Star Awards and Serious About
Service Team Star Awards.
Every quarter up to 10 colleagues become
Customer Service SuperStars. These are
the people who received three or more Star
Awards in the quarter and are selected by
the Peer Panel as a quarterly SuperStar. They
have shown that they consistently provide
exceptional service to their customers and
really do go above and beyond.
Our Customer Service SuperStars are
presented with their special Award at the
quarterly Star Awards presentation and then
compete to be a ‘Star of the Year’ at the end
of year awards ceremony.
More specific to the CCC, the ‘Bravo Award’
is a tool that enables anyone within the CCC
to provide immediate feedback to a colleague
for a particular feat, action to a colleague or
to a customer. Our intent is to encourage
everyone to ‘catch someone doing great
things today’. The award is physically split
in two, with a first half adorning the staff
member’s desk and the second finding its
way into the team’s ‘Bravo Box’. At the end
of each week, lucky prizes are handed out
by picking names form the ‘Bravo Box’.
On a monthly basis each CCC Manager
awards staff in the following categories: Top
Gun, Rising Star, Silent Achiever, Peoples
Choice and ExCITE (St.George Values).
These awards are chosen by the Manager and
Team Leaders.
Q
How has being a recipient of an
Australian Service Excellence
Award helped the organisation
Receiving such a formal accolade from the
CSIA reinforced that the CCC was on the right
path to help St.George ‘become Australia’s
most respected service organisation’. It
rewarded the many ‘educated decision’ and
leaps of faith a leader has to take at times
CUSTOMER SERVICE EXCELLENCE
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5

Service Manager
Service M anager
St.George Bank Limited…continued
The public acknowledgment was a great tonic
for the very loyal St.George CCC staff (average
tenure = 4.3 years) who had toiled dutifully for
years without any industry recognition.
when imbued with a clear sense of purpose
and direction. The public acknowledgment
was a great tonic for the very loyal St.George
CCC staff (average tenure = 4.3 years) who
had toiled dutifully for years without any
industry recognition.
The formal recognition also provided
further credence and congruence to
St.George Bank leading Customer Satisfaction
results as measured by the independent
Roy Morgan index.
Becoming the first Call Centre to ever win the
award two years in a row further cemented
our reputation of never resting on our laurels
and always looking for the ‘next best thing’.
For we indeed believe that customer, and
indeed, staff satisfaction alike, is about
identifying and responding to the multitude
of ‘little things’ that make a relationship, any
relationship, real.
Become a CSIA Member
customer service
excellence
The Official Journal of the Customer Service Institute of Australia
Australian issue # 2
Special Customer Service week edition
October 04
2004
Australian Service
Excellence Awards
Enter Today!
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excellence
The Offi cial Journal of the Customer Service Institute of Australia
Australian issue # 10
October 05
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Start Staff Right
Ron Kaufman
2005/06 Australian
Service Excellence
Awards
last chance to enter
Enrol in
Australia’s only
Certifi ed Customer
Service Manager
Course.
10 Lessons from
Harley Davidson
Interview with
The Hon. Joe Hockey
Australia’s most Customer
Focused Politician
Book Review -
Striving & Surviving
Generation Y at Work
customer service
excellence
The Official Journal of the Customer Service Institute of Australia
Australian issue # 6
June 05
Australian Service
Excellence Awards
Winners Announced
JoAnna Brandi’s 9 ways to
keep employees engaged
The Opposite of Love
Phil Dourado takes a quick
look at the state of the loyalty
card market
Enrol in
Australia’s only
Certified Customer
Service Manager
Course.
Australian Service Excellence Awards Special Edition
Sonia Hudson
Colorado
QLD CEO of the Year
When
Customers Explode!
Ron Kaufman
Enrol in
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only Certified
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Manager Course.
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Return on Customer
Book Review
How To Stand out
from the Crowd
David & Lorrie Goldsmith
Toop&Toop Real Estate
Medium Business Winner
When Service Goes
Wrong.... Bounce Back
Ron Kaufman
JoAnna Brandi’s
9 ways to keep
employees engaged
CSIA- Australia’s Peak Customer Service Association.
Anthony Toop
CSIA- Australia’s Peak Customer Service Association.
CSIA- Australia’s Peak Customer Service Association.
CSIA- Australia’s Peak Customer Service Association.
CSIA Membership Benefits
Becoming a member of CSIA has
many benefi ts and is only $295
inc GST. Membership forms can
be downloaded from our website
www.csia.com.au/membership.asp
or email info@csia.com.au to
request a form.
Discounted access to Australia’s
fi rst professional qualifi cation
for customer service managers
- the “Certifi ed Customer Service
Manager Course”
Twelve issues of our monthly
e-magazine “Customer Service
Excellence Magazine”
Copy of the new edition best
selling book: “Customer Service
Excellence”
Free opportunity for attendance
on the 2 day International Customer
Service Standard Licensed
Assessors Accreditation
Course (annual places are limited)
Continuing recognition of
member’s professional
standing through maintained use
of the CSIA’s designatory postnominal
letters: MCSIA
Automatic free nomination for
judging as one of Australia’s leading
customer service professional
through the individual section of
the prestigious Australian Service
Excellence awards
Discounts on training, events and
functions
Certificate of Membership
7
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basis-FZR1030

New 100% Government
Funding for CSIA
Customer Service
Excellence Programs
Australian organisations are now
eligible for government funded
customer service training
for managers, team leaders,
supervisors, contact centre
staff and frontline personnel.
The funding can also be used for
certification to the International
Customer Service Standard.
For the first time approval has been given
for FULL Federal government funding of
customer service programs for large, medium
and small enterprises as well as state, local
and some federal government departments!
This landmark decision has been made in
recognition of the importance of superior
customer service management qualifications
and systems to the Australian economy.
As Australia’s peak customer service body,
the Customer Service Institute of Australia
(CSIA) is pleased to announce its partnership
with Federal Government training initiatives to
offer a comprehensive and fully subsidised
customer service training package. By
complying with government guidelines, CSIA
delivered customer service training programs
will be 100% funded through government
incentive payments.
CSIA’s Executive Director, Brett Whitford,
is delighted by the announcement and
commented, ‘This is exciting news for
Australian enterprises of all types as well as
state government departments and agencies.
Clearly the federal government has recognised
that all organisations need to develop a team
of qualified customer service leaders to
champion and manage increasingly complex
customer service management systems.’
The training package has been designed and
approved in consultation with the relevant
Government appointed ACC and RTO bodies
to comply with the Government’s funding
requirements. The full Government funding
now enables organisations to receive a
comprehensive training suite delivered by the
CSIA — Australia’s expert customer service
authority — that is completely reimbursed.
For example, by enrolling just 60 eligible
candidates* in the CSIA’s Nationally
Accredited Certificate IV in Business for
CUSTOMER SERVICE EXCELLENCE
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8

Customer Service Management/Certified
Customer Service Manager (Level I) Course,
an organisation would receive funding for
a comprehensive and integrated program
of customer service training
for managers, team
leaders, supervisors,
contact centre and
frontline customer facing
staff worth $240,000.
* see eligibility criteria in panel
With so many organisations understanding
the need to deliver on their customer service
promises, CSIA believes this suite of
programs will provide the tools required to
enable them to meet increasing customer
expectations for higher service standards.
“Over the last 10 years the CSIA has
demonstrated it has the experience,
capabilities and resources to assist in the
preparation and implementation of these
accredited training programs, and is pleased
to offer its services and advice to assist
all types of organisations in a variety of
industries to improve the service
competencies of their teams.
“In this employment market all leading
organisations are seeking to provide
professional development for new and existing
staff. Such an investment in people would
really be an investment in service excellence
that would see dramatically improved
retention of customer service personnel
leading to greater customer advocacy and of
course, customer retention as well. The 100%
funding is too good an opportunity for our
leading companies to miss!’ Whitford says.
The funded Customer Service Training covers
new and existing management, team leaders,
contact centre (if applicable) and frontline
employees. The programs cover all
components of effective customer service
management, supervision and delivery:
(i). Course outcomes for Customer Service
Leaders — Managers and Supervisors:
u Understand the strategic value of a
customer service philosophy for business
growth and attaining service excellence
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u Develop and assess the success of a
Customer Service Management System
including the International Customer Service
Standard and Certification Trustmark Program
u Display Service Leadership
u Manage Service Personnel
u Understand and Develop Service
Infrastructure and Technology
u Effectively Utilise Customer Service
Measurement Systems and Tools
u Ensure Integration and Operationalisation
of a world class customer service
management system
(ii). Course outcomes for Contact Centre
and Frontline staff:
u Improve internal and external customer
service & communications
u Develop interpersonal service skills
u Enhance telephone skills and etiquette
u Superior customer service skills
u Understand Customers and their
personality styles
u Managing challenging customers
u Conflict management and resolution
u Customer focussed email and verbal
communication styles
u First call resolution, ownership &
empowerment
u Managing Complaints
u Choosing your attitude
The training will be carried out by accredited
CSIA trainers in all states. Each of the
courses listed above can be customised to
take into account each organisation’s unique
requirements.
The approved CSIA courses have been
designed by some of Australia’s leading
customer service thought-leaders in
consultation with Chief Customer Officers
and senior executives from Australian Service
Excellence Award winning organisations.
The purpose of the programs are to train
managers and frontline staff to deliver
customer service excellence as part of the
efforts to improve customer service and
increase customer advocacy.
In return for a government reimbursed training
investment, CSIA will deliver companies with
managers and employees who are:
u more innovative
u more efficient
u save the organisation money by
understanding the Cost of Bad Service TM
CUSTOMER SERVICE EXCELLENCE
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10

u grow the business
u enjoy working with your customers,
in fact, building long term relationships
with them which encourages customers to
spread positive ‘word of mouth’ advocacy
leading to increased referrals.
The CSIA’s Customer Service Excellence
Training Programs consist of face to
face instructed sessions (two days for
management and one day for contact
centre and frontline). Each aspect of the
course focuses on achieving specific
objectives through classroom exercises
and are enhanced through each participant
continuing their learning after the training
via ongoing recommended readings and
activities. Students that complete the CSIA
Accredited and Nationally Recognised
courses receive certificates recognising their
achievement in attaining the qualification.
“Customer service competency is
increasingly becoming a vital business
issue as organisations realise the benefits
of an integrated, strategic customer service
management system for providing effective
customer support. Just as other
professions such as accounting and HR
have professional qualifications eg.
Certified Practicing Accountant (CPA),
professionals working within customerfocused
businesses, or those managing
their organisation’s customer service
function, need to have professional
qualifications making sure they keep
informed about the latest techniques and
experiences,” concludes Whitford
For more information on these programs and how to move to a
new stage in your development as a customer service focused
organisation. Please contact CSIA’s executive director, Brett
Whitford on 02 9386 4477, everyone here at CSIA look forward to
working with you, and will be happy to provide further information
should you require it.
CUSTOMER SERVICE EXCELLENCE
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*Terms and Conditions based on the Eligibility Guide for Government Incentives
The CSIA have developed the Certified Customer
Service Manager (Level 1) Course/Certificate IV in
Business for Customer Service Management to be
conducted over 2 days of lectures and activities.
During this time the bulk of the course workbook is
completed. The remainder of the electronic
workbook and assessment must be completed
within 24 months of commencement but most
students will complete the course and assessment
early. The majority of the course is completed in the
2 days of class room time with the rest of the
program including readings completed by the
student at work or at home.
The CSIA and its Government appointed ACC and RTO
partners will manage every aspect of the administration
and approval process; deliver the training, certification
and arrange reimbursement. This will further reduce the
administrative requirements of your organisation to
manage the funding process.
There are two categories of Federal Government
incentives, New Employees and Existing Employees.
Employers receive the $4,000 incentive payment for
both eligible New Employees and eligible Existing
Employees. Payment is made in two parts:
u Employers will be eligible for up to $4,000.00
in Government Incentive payments for each eligible
candidate*. This Government Incentive payment is
paid as follows:-
– The Commencement Payment of $1,500.00 is paid
to the employer 3 months after the enrolment
application is made and the course is commenced.
– The Completion Payment of $2,500.00 can be paid
to the employer approximately 10 months after the
first payment is made and is only payable if the
employee has completed the Course and is still
employed.
Availability of the qualification that government
funding may be applicable.
Candidates can come from across Australia and the
program will be delivered in each state but candidates
which are existing employees in Western Australia,
Victoria and Northern Territory are not considered
eligible candidates for funding. New employees
(employed for less than 3 months) which meet the other
criteria are eligible in all states and territories except
Western Australia.
*Eligible candidates
To be considered an Eligible Candidate for Government
incentive funding the candidate must complete a PRE-
ASSESSMENT OF INCENTIVE ELIGIBILITY form and be
interviewed by the Government appointed ACC.
Depending on the candidates’ fit with the criteria and
individual circumstances, the ACC will notify the
Organisation and CSIA of the eligibility for the
Government incentive payments.
Below is a guide only for eligibility for Australian
Government Incentives.
Final assessment of eligibility will be determined after
finalisation & approval of the Training Contract.
To be considered eligible as a New Employee:
u At the time they start the course the employee has
been employed with your organisation less than 3
months full time or less than 12 months part time or
casual.
u Australian Citizen/New Zealand Passport Holder/
Permanent Resident
u Not currently undertaking any other form of study
in the Business Training Package.
u Has not received more than one other
Commencement Payment
u Has not completed a higher than Certificate II
qualification. Candidates may still be eligible if they
have completed a Certificate III or IV over 7 years ago.
(Please note: Qualifications completed in the two years
immediately after finishing high school do not affect
eligibility).
u A candidate may still be considered ‘eligible’ if the
qualification previously awarded is in an unrelated
discipline. The ACC will ascertain this relevance of an
existing qualification and provide guidance during the
interview.
To be considered eligible as an Existing Employee:
u At the time they start the course the employee has
been employed with your organisation more than 3
months full time or more than 12 months part time or
casual.
u Australian Citizen/New Zealand Passport Holder/
Permanent Resident
u Not currently undertaking any other form of study
in the Business Training Package.
u Has not received more than one other
Commencement Payment
u Has not completed a higher than Certificate II
qualification. Candidates may still be eligible if they
have completed a Certificate III or IV over 7 years
ago. (Please note: Qualifications completed in the two
years immediately after finishing high school do not
affect eligibility).
u A candidate may still be considered ‘eligible’
if the qualification previously awarded is in an unrelated
discipline. The ACC will ascertain this relevance of
an existing qualification and provide guidance during
the interview.
Other government funded initiatives can also apply. For more details contact CSIA.
CUSTOMER SERVICE EXCELLENCE
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Who made your
Season Bright
Let CSIA reward the individuals who help
spread cheer year round!
‘Tis the season;
Long queues, cranky sales people, crowded shops,
you know the scene.
What about the rare twinkling star that you run across,
that truly changes your day and spreads joy to all
around them I found mine at the Chicago airport
during my favourite American holiday, Thanksgiving, the
busiest travel holiday of the year. A lovely gentleman by
the name of Bryan was spreading joy all around him.
From the moment he assisted me, my entire holiday
experience, crazy family included, was an absolute joy
with no headaches, except for the self-inflicted ones.
So, let’s keep an eye out for that individual this year.
Who made you smile Make note, tell them how they
are doing, and send me some details to Christine.
Churchill@csia.com.au and tell me:
Let’s spread some joy and remember the reason for the
season. We will put our favourites on the website and will
choose one winner from your submissions. The winner’s
story will be featured in one our upcoming magazines
and will be presented with a complimentary membership
to CSIA and subscription to our online magazine.
The winner and individual with the winning story will
also receive one complimentary ticket each to next
year’s National Australian Service Excellence Awards
dinner. This event has been sold out for two year’s
running. Don’t miss your chance to get a ticket reserved
in your name today!
u Where you had the experience
u Who the individual was (first
and last name preferred —
but we will take what we can get)
u What they did to make your
experience a ‘brighter’ one
CUSTOMER SERVICE EXCELLENCE
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Certied
Customer Service
Manager Course
Certificate and Diploma for Customer Service
The Customer Service Institute of Australia is
currently taking applications for its two day
Certi ed Customer Service Manager
Course (CCSM). Some additional course work is required.
The CSIA has worked with leading
organisations to develop a training,
assessment and certi cation program leading
to Australia’s first and only formal and nationally
recognised “Certi ed Customer Service
Manager” designation.
Organisations can now benefit from qualified service professionals.
The course includes a workbook and a two day
workshop followed by an assessment. By meeting
Government criteria certain candidates may attract incentives of up to $4,000.
“I would like to congratulate the
Customer Service Institute of Australia
for putting together such a practical
program in the CCSM Course.
I have found its exibility very valuable
in allowing me to work at my own pace
and in implementing what I have learnt
almost instantly through the workplace
based activities and assignments.”
Anthony Keyes, Baxter Healthcare
For more information
Phone: 02 9386 4477
info@csia.com.au
www.csia.com.au
SSIA C
Certified Customer
er vice
M anager

Measuring the Financial
Cost of Bad Service
Making the case for service
improvement by accurately
measuring the potential return
on investment
To celebrate CSIA’s National Customer Service Week 2007 executive director,
Brett Whitford gave a series of breakfast lectures on the financial cost of bad
service. The following article expands on the topic and encourages CEOs and
executives to make a considered business case for service improvement.
A
study from US Company Coldwell
Banker found that nine out of 10
consumers surveyed declared that
great customer service is “very or extremely”
important in deciding whether to give a service
provider repeat business. Additionally, 32% of
respondents indicated they change providers
because of bad service. Despite the importance
of satisfying the customer, it does not appear
that US companies are properly gathering
vital consumer feedback, with just 25% of
surveyed consumers reported having frequent
opportunities to voice their opinions on their
service experiences. About 30% reported they
had infrequent opportunities to do so.
According to the findings, the average US
consumer switched businesses they dealt
with twice in the past three years due to “bad
service”. The top characteristics of companies
with “great service” were: Resolving questions
and problems (66%); Knowledge of the product
or service (49%); Being easy to reach (35%);
Understanding requirements (35%). The top
characteristics associated with “bad service”
were; Inability to resolve questions or problems
(46%); Being unavailable/difficult to reach
(38%); Needing to deal with multiple people/
departments to resolve problems (37%); Lack of
product knowledge (34%); and Unprofessional
demeanour (33%).
A study, entitled “The Customer Experience
Report, Great Britain 2006”, reveals that 65 per
cent of all respondents moved their business
elsewhere after a bad service experience, while
more than one quarter - 27 per cent - of Britons
also indicate that once their custom is lost, it is
lost forever.
On the other hand, positive customer
experiences have a major impact on consumers’
brand perceptions and buying behaviour, with 78
per cent of participants saying that they would
be most likely to ‘greatly or somewhat’ increase
their custom on the basis of consistently
excellent service.
Clearly there are costs associated with
money wasted on customer acquisition when
customers, after experiencing the service
offered, defect thus reducing revenue because
of poor customer retention. This is especially
true as research confirms that long-term
customers are more profitable to serve.
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Winning back lost custom and
reputation is extremely costly
as well, with more than half
of respondents saying they
would require evidence that the
organisation’s customer service
had improved
Winning back lost custom and reputation is
extremely costly as well, with more than half
of respondents saying they would require
evidence that the organisation’s customer
service had improved, and 48 per cent stating
that the organisation would have to prove that it
valued their custom
It is undisputed that customers leave if the
customer experience isn’t up-to-scratch; we
also know that businesses are being mandated
to control or reduce operating costs. You
may feel your organisation is in a Catch-22
situation: it either spends money to improve
the customer experience or cut costs and risk
losing customers. A breakthrough is needed in
management thinking to resolve this service/
cost dilemma by better understanding the
actual Cost of Bad Service and the effect it
has on cost, revenue, reputation and customer
experience across all key interactions.
Most organisations currently offer some poor
customer experiences and find it challenging
to eliminate the problems that traditionally
roadblock success. These include the service/
cost dilemma, where costs increase in ratio
with efforts to boost customer experience,
while slashing costs often means slashing
service. This mindset is not always correct as
the cost of delivering poor service may not be
properly accounted for and allocated across
organisations. A clear correlation between the
Customer Service Improvement efforts and
savings and profitability has been established
in many Australian public and private sector
organisations through work carried out by the
Customer Service Institute of Australia.
While the exact figures and organisations
understandably remain confidential, the following
savings and efficiencies have been obtained
at the same time as customer satisfaction has
increased.
A Major bank reduced its group ‘customer
service’ budget by 17% through eliminating a
number of costs associated with bad service at
the same time as increasing profit and moving
towards its goal of leading the Roy Morgan
customer satisfaction index
A Major telecommunications group is beginning
to implement Customer Service Institute of
Australia recommendation’s with an initial
saving from just one suggestion of over $1
million. Future improvements in its customer
service management system will result from
this change.
A Government department has reduced
complaints being made to its Minister and other
stakeholders resulting in significant savings.
Similar examples come from Energy Utilities
and Banks – industries highly regulated by
Ombudsmen.
Long term Customer Service Institute of
Australia members are reporting significant
revenue increases and cost savings in the order
of 25% to 30% of revenue.
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Clearly an opportunity exists for organisations to
measure the cost of non-value adding activities
that are caused by bad service in a manner
that will ensure that the final figure or ‘size of
the prize’ is accepted by the organisation’s
leadership team.
Such a project will expose problems and wasted
effort arising and being dealt with in one place
but caused in another place and time. To fix
the results of propagated error, an organisation
has to learn about the ‘hidden operation’. The
re-work and cover ups, the hours and days
of wasted time in a company of people who
constantly correct mistakes. Every time a
corrective action is taken, you incur unnecessary
re-work. By accepting these events as “just
the way it is”, an organisation mentally hides
all the re-work activities from improvement
potential. The ‘hidden operation happens’ in all
organisations, fixing the problems, correcting
mistakes, dealing with complaints and wasting
time and money! Identifying the ‘size of the
prize’ and acknowledging the service issues
causing re-work will return these two precious
commodities, time and money, back to the
business.
CSIA has developed a Cost of Bad Service
Methodology to measure the financial cost
of bad service and the tangible and intangible
savings and benefits of reaching Customer
Service Excellence. The following diagram
outlines the direct and indirect benefits of the
Customer Service Improvement Program and
how the model works to improve profitability
through reduced costs.
Figure 1
A Model of Service Quality Improvement and Profitability
Improvement Effort
Service Quality Improvement
Word of Mouth
Perceived Service Quality and
Customer Satisfaction
Attraction of
New Customers
Customer Retention
Cost Reductions
Revenues and Market Share
Profitability
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A little considered factor in justifying the cost and effort of
implementing a service improvement program is the fact that
there are many cases where bad service is more expensive to
deliver than good.
As outlined above, word of mouth and
reputation risk should not be underestimated
as the following example of how the cost of a
very simple bad customer experience can be
huge:
One lost book, one disgruntled customer and a
potential million dollar legal fee for Amazon - it’s
the latest in a series of morality tales showing
how companies can be hit where it hurts most
due to bad customer experience.
The tale begins in October 2005, when Peter
Calveley from New Zealand ordered a book
from Amazon, which never turned up. One
month later, Peter decided to let loose the
wrath of Utu upon the mighty Amazon - Utu
is a traditional Maori ‘obligation to undertake
payment upon others for a wrongdoing’. And
his chosen form of payment was to inform
the US Patent Office that Amazon’s famous
patent for 1-click payment was in fact covering
essentially the same idea as a patent filed 18
months earlier.
As if to test Peter’s resolve, the US Patent Office
replied with a request for $2,520 - the cost of
a full patent re-examination. Undeterred, he
posted a request for donations, added a Paypal
button to his blog site and two months later the
fee was in the post.
Fast forward to May 2006 and the request
for re-examination is granted by the Patent
Office. According to Wikipedia a typical patent
infringement case in the US costs $1-3M in legal
fees - not sure if this counts as an ‘infringement’
case but one thing for sure, it’s going to cost
them a lot more than a replacement book and
an apologetic phone call.
The reputation risk makes the problem worse,
once something’s been written about you in
the press and online, it’s very difficult to get
it removed. This means that any prospective
customer who decides to do a search on your
business name could come across it.
A little considered factor in justifying the cost and
effort of implementing a service improvement
program is the fact that there are many cases
where bad service is more expensive to deliver
than good.
A lesson about the price of bad service
comes from the Secretary of Transportation in
Vermont:
‘Reporting to me was a smart Commissioner of
Motor Vehicles named Bill Conway. When we
were putting together our budget, I was pushing
Bill to cut his expenses. “Tell me what we can
save,” I said, “if we don’t turn around license
renewals almost instantly.”
“It’ll cost us more to do that,” Bill said.
“You’re just trying to protect your budget,” said
I. “How can that possibly be It costs you more
to process more slowly”
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Independent studies reveal
that COBS is costing
companies millions of dollars
each year and its reduction
can transform marginally
successful companies into
profitable ones. Yet most
executives believe that their
company’s COBS is less than
5%, or just do not know what
it is.
“Today,” Bill explained, “our rule is to turn
around every application the day we get it. If it is
complete, it gets processed. If it is incomplete,
it gets sent back for more information. If we
are going to start queuing applications, then we
have to build a queue management system to
track the queue and make sure we don’t lose
stuff that gets held or hold some transactions
forever. But that’s a relatively small expense.
“The greater expense,” he continued, “is in
customer support calls. For every day that
we delay turning something around, a certain
percentage of people are going to call us to ask
where it is. So we get more calls. If we are
managing a queue, then we have to be able to
look in it to see where a particular transaction
is. We have to be able to predict when it’ll be
handled. We have to prepare for calls from
legislators who want this constituent or that one
given priority. No queue, no problem. When we
turn things around fast, we get very few calls.
When we do get a call, the status is either ‘we
didn’t get it yet’ or ‘it got mailed back to you on
such-and-such a date.’ No requests to jump
the queue because there’s no queue to jump.”
So he convinced me and I didn’t cut that part
of his budget. And notice he was only talking
about direct expense. He wasn’t even talking
about the happy customers who get things back
fast.’
To further underline the cost benefits of a
implementing a Customer Service management
system the following example is offered. A
manufacturing company had annual sales
of $250 million. Its finance department was
instructed to calculate the total cost of repair,
not getting information right first time, rework,
scrap, service calls, refunds, sales commission
paid on returned product, warranty claims and
complaints. This aggregated cost; called the
Cost of Bad Service (COBS) amounted to 20%
of their annual sales. A 20% COBS implied that
during one day of each five-day workweek, the
entire company spent its time and effort making
non-conforming or scrap products, which
represented a loss of approximately $100,000
per day.
Experts have estimated that Cost of Bad
Service (COBS) typically amounts to 5% to 30%
of gross sales for manufacturing and service
companies. Independent studies reveal that
COBS is costing companies millions of dollars
each year and its reduction can transform
marginally successful companies into profitable
ones. Yet most executives believe that their
company’s COBS is less than 5%, or just do
not know what it is. All levels of executives
recognise that a customer service management
system is an absolute necessity to survive and
succeed in today’s business environment.
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The diagram below provides a framework for calculating COBS as a percentage of sales.
Cost of Bad Service (COBS)
as a % of Sales
Unnecessary
Capacity
Rework
Compensation/
Refunds
Warranty Costs
Lost Sales
• Planned overcapacity to
anticipate problems
• Increased FTE to manage
Customer Service Issues
• Handoffs between silos
• Reliance on cascade
information dilutes
effectiveness of
communication and training
• Rework Costs and
Restocking costs
• Non-material rework costs
(sorting, handling, downtime
and expedited shipping)
• Cost of credit notes
• Product performance not as
specified
• Damage, Inspection Data,
On time accurate delivery
• Warranty costs include
customer credits.
• SLA Penalties
• Cost of complaints handling,
Ombudsman/ Ministerial
issues and compensation
• Complaint management
• Lost Revenue
• Customer Churn Costs
• Excess Inventory carrying
costs due to fewer sales
• Inaccurate tracking of
customers
• Poor Customer Satisfaction
as surveyed
• 360 degree view of the
customer and all products
and interactions
• Cost of Repair system
• Not getting it right the first
time
• Cost Per Sale/Customer
Acquisition.
• Cost of Commission on sale
that is later reversed
• Some back-end processes
may not kept pace with
promises made at point
of sale, resulting in the
customer needing to contact
the organisation to correct
errors, clarify information or
to arrange delivery of what
was promised.
• Cost of incorrect invoicing
The Cost of Bad Service for an average
company is estimated at about 30% of sales.
When reviewing Australian industry, this can
range from:
• under 3% for companies who have achieved
Customer Service Excellence
• approximately 15%-25% for companies
who have spent one year on their customer
service excellence journey
• approximately 25% to 40% of revenue for
companies who have not implemented any
customer service management system.
The savings for non-manufacturing service
companies are potentially larger and less
understood than manufacturing organisations
which have long examined ‘quality processes’
and are better able to currently account for the
Cost of Bad Service. A large Fortune 500
communications company calculated its Cost
of Bad Service at 8.6% of sales in 2005 and
has set a goal of 5.4% for 2007, which will
result in a savings of a little less than $1 Billion
per year!
Most service projects require its champions to
build a business case to justify the capital spend.
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In building a business case, the champions
need to capture all tangible benefits that the
company would obtain from implementing the
program and then place a defensible monetary
value on these benefits in terms of annual
savings to the organisation. The goal of the
business case is to ensure that the project
delivers value greater than the corporate hurdle
rate for capital investments.
Developing Project Metrics
One of the crucial elements of the project
charter in the defining phase of a service
improvement project is the selection of project
metrics. Project metrics selected should
reflect the voice of the customer (customer
needs), as well as ensure that the internal
metrics selected by the organisation are
achieved. Metrics selected should be simple,
straightforward and meaningful. Metrics
selected should create a common language
among diverse team members.
When drafting metrics for a particular project
one should consider how the metrics are
connected and related to key business metrics.
Typically there is no one metric that fits all the
requirements for a particular situation. The
first step is to identify the actual costs that are
created by bad service. There are two types of
costs that can be attributed to ‘Bad Service’:
Visible Cost of Bad Service
These include the cost of complaints handling,
Ombudsman issues and compensation, rework,
cost of incorrect invoicing, commission
paid to sales people for services later
cancelled or compensated, absenteeism and
staff attrition, poor ‘word of mouth’ requiring
increased defensive advertising resulting in
higher customer acquisition costs, etc.
Invisible Cost of Bad Service
Examples of invisible costs of bad service are
multiple contacts and hand-offs to deal with
a single issue or complaint driving increased
Customer Service FTE, Hidden Activities to
deal with poor service problems, lost sales
due to lack of confidence in company service
standards and ability to meet requirements,
lost revenue based the lifetime value of the
customer when ‘churn’ is caused by service
issues, etc.
When organisations start identifying, tracking
and measuring both the visible and invisible
costs of bad service then they can begin to
justify the cost of service improvement projects
to deal with these issues.
The most common approach used by teams
is to understand the size of the prize or total
cost of bad service including both visible
and invisible. For each project the team
will brainstorm metrics, and finally decide
what metrics can help them achieve better
performance. The team then reviews these
metrics with executive management to ensure
that they are in synergy with the overall
strategy of the business, and an interactive
approach may be utilised.
Care should be exercised in determining
what is measured. Metrics should be based
on what, in fact, needs to be measured to
improve the process, rather than what fits the
current measurement system. Metrics need
to be scrutinised from the value they add in
understanding a process.
Balanced Scorecard Approach To
Metrics
The Customer Service Institute of Australia
advocate the use of a Balanced Scorecard
type of approach for the selection of
project metrics as a method for ensuring
that the project meets both customer and
business needs. The Balanced Scorecard
approach includes both financial and nonfinancial
metrics, as well as lagging and
leading measures across the four areas or
perspectives: Financial, Customer Service,
Operational Processes, and Learning and
Growth. Lagging measures are those that
are measured at the end of an event, while
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leading measures are measures that help
achieve the objectives and are measured
upstream of the event.
Most Balanced Scorecard metrics are based
on brainstorming, however the approach
of brainstorming can have limited success
in establishing sound metrics that have a
good balance between lagging and leading
measures.
While establishing the right metrics to consider
it is vital to decide on the benefits, financial
and otherwise, of your organisation’s service
improvement program and resulting Customer
Service Management System, the total cost
of the implementation of a customer service
management system requires financial
justification.
From the identified savings the total cost of the
system (implementation, training, measurement
of financials, additional headcount to manage
the system, annual maintenance etc.) needs
to be subtracted to obtain the Average Return
per annum, remembering savings made will be
ongoing and usually increased over time as the
CSIA’s customer service management system
becomes more effective and improvements
continue.
A well framed ‘request for budget’ that addresses
bottom-up operational needs and top-down
management requirements, along with well
quantified financial justification will go a long
way in satisfying all relevant stakeholders to
approve the funding for the Customer Service
Management System.
Financial Justification:
What is the financial return from
the system
Total annual savings from a national customer
service management system
• Total cost recovery savings
• Total savings from reduced rework
• Total savings from reduced complaints and less escalation
• Total savings from better tracking
• Total savings from more accurate information from more
knowledgeable staff
• Total savings from improved equipment utilisation
• Total savings from less expedited and incorrectly routed freight
• Total savings from reduced complaints and ombudsman or
Ministerial issues
• Total savings from reduced credit notes, discounts & compensation
• Total savings from reduced inspections
• Total savings from reduced FTE and staffing turnover
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Case Study in Bad Service in the building
industry.
Take a look into the most prevalent of the building
industry’s customer service issues, window
and door installation, which was witnessed on
23 percent of the 100,000-plus site inspections
Criterium Engineers has carried out. Specifically,
we’ll look at what happens when your windows
and doors are not installed properly.
The Later the Detection, the Greater the Cost
When windows and doors aren’t installed
correctly in your communities, how are the
different areas of your business affected How
does timing affect the total cost of this quality
issue
Scenario No. 1 (Best-Case): Your Site
Supervisor Identifies the Issue
It’s a clear afternoon, and your site supervisor
is visiting homes throughout your Shady Pines
community to check construction quality before
he gives the trades the green light to install
siding. He notices the windows and doors on
several of your homes have not been installed
correctly, leaving gaps for water to enter and
damage drywall, flooring, etc. He stops work,
gets the trade super to check on the issue
and has him realign his team to go back and
fix the problems — which could be 20 or more
installations per home and on tens of homes
just in that community.
Scenario No. 2 (Worse): It Becomes a Customer
Service Problem
Say your site super is having an off day, or the
few houses he visits in a community aren’t the
ones affected by the window and door issues.
Six months down the line when many of your
homeowners have moved in, problems are
popping up, which could affect up to 23 percent
of the Shady Pines community. Homeowners
are pressing your customer service team to fix
the issues; your representative investigates
the root cause, coordinates the repairs, tries to
appease the unhappy customers, and so on.
Scenario No. 3 (worst-case): Insurance Agents
and Lawyers Get Involved
Your Customer Service team has done its
best, but the situation hasn’t been resolved
to your homeowners’ satisfaction. First, your
homeowner complaints turn into multiple
warranty claims. What’s the cost of this quality
issue to your business in the near-term, and
longer-term, given residual annual premium
price hikes Some homeowner claims turn ugly
and end up in lawsuits.
What are your resulting legal costs and possibly
even litigation/punitive damages Liability costs
rise accordingly.
The Ripple Effect: Impact on Your People
and Reputation
No matter when the issue is identified it will
affect two other areas you may not already
have considered.
Marketing And Sales
Word gets around the neighbourhood, your
reputation gets tarnished, you end up with lower
referrals and, potentially, lower home sales. This
can have tremendous impact on your brand
value. For many mid-size builders, your brand
equity is a major component of your company’s
financial value — especially in a time when
you may want to sell your business. If you’re a
giant, stock market-driven public homebuilder,
poor public perception or “newspaper liability”
can negatively affect your stock price.
Human Resources
You start to lose your best employees because
they’re tired and are losing pride in your
company. You now have to find and hire new
team members, who by HR experts’ estimations
can ultimately cost your business up to three
times the salary for each manager lost.
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A Key Tool in CSIA’s Methodology -
Activity Based Costing (ABC)
Activity based costing is an accounting
methodology that assigns costs to activities
rather than products or services. This enables
resource and overhead costs to be more
accurately assigned to the products and the
services that consume them.
With activity based costing, organisations
can identify where to remove waste, improve
processes and eliminate re-work, as well as
understanding what drives their costs. They
can also see the degree of alignment of their
cost structure with their organisation’s mission
and strategy. CSIA believes that utilising ABC
to establish Activity-Based output data serves
as enabler for ongoing improvement programs.
Key steps in the methodology involve defining
the major business processes and key activities
of the organisation using Process and Customer
Touchpoint Mapping and tracing operating costs
and capital charges to key activities.
The tables below demonstrate the differences
between traditional accounting models (general
ledger style) and activity based cost accounting
models, for an Insurance Company’s claims
department.
Both styles of accounting are required, yet that
of most immediate value in allowing managers
to make decisions is the one on the right – the
activity-based view. The general difference
between the two is the structure:
Traditional Accounting (General Ledger) View
Claims Processing Department
Actual ($) Plan ($)
Favourable /
Unfavourable
Salaries 621,400 600,00 (21,400)
Equipment 161,200 150,000 (11,200)
Travel Expenses 58,000 60,000 2,000
Supplies 43,900 40,000 (3,900)
Use and occupancy 30,000 30,000 ---
TOTAL $914,500 ($34,500)
Activity-Based View
Claims Processing Department
Key / scan claims $31,500
Analyse and re-work claims $121,000
Suspend claims $32,500
Receive provider enquiries $101,500
Resolve member problems $83,400
Attend training $45,000
Determine eligibility $119,000
Make copies $145,500
Write correspondence $77,100
Process batches $158,000
TOTAL $914,500
As we can see from the above tables, the
activity-based view allows more transparency
of where activities that stem from ‘bad service’
exist and how much they cost. In this view,
we can see that “Analyse and re-work claims”
along with “Resolve member problems” are
high volume areas. In making one or two
efficiency changes, the organisation has
an opportunity to save money and improve
service to customers.
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ABC doesn’t eliminate or change costs, it provides data about
how costs are actually consumed.
ABC doesn’t eliminate or change costs, it
provides data about how costs are actually
consumed. In the above example, if you wanted
to reduce costs using traditional data you would
have to decrease salaries, or decrease costs of
supplies. You don’t know enough to change the
forms, processes or overhead costs. In order
to correctly associate costs with products and
services, ABC assigns cost to activities based
on their use of resources. It then assigns cost
to cost objects, such as products, processes,
rework or customers, based on their use of
activities. This information assists in making
decisions about pricing, outsourcing, capital
expenditures and operational efficiency.
Customer service improvement teams can
use ABC to determine the cost and benefits
associated with their reengineered processes
and systems. This cost and benefit analysis will
then become part of the overall business case
for the project.
An ABC approach will account for:
• Activities/processes (comparing before and
after the customer service improvement
project)
• The frequency and cost of the activity/
process (comparing before and after the
customer service improvement project)
• The do-nothing scenario (what would happen
if we do not do the project)
• Which processes provide value (i.e. are
needed to attract and retain customers,
result in operational savings)
The steps needed to develop ABC data
include:
Step 1: Define the major business processes
and key activities of the organisation
(Process and Customer Touchpoint
Mapping).
Step 2: Trace operating costs and capital
charges to key activities. Use existing
accounting and financial data which
includes labour and capital equipment
expenses and any other resource that
can be changed/eliminated. Some
reports to analyse include: budget,
general ledger, supplier invoices.
Step 3: Link activities to processes and identify
the cost drivers. The best way to do
this is to actively engage the doers
of the process. Have the doers of the
process identify where the costs
come from – then seek out data from
that source.
Step 4: Summarise the total costs for each
process.
Step 5: Once processes are reengineered then
the “new” costs must be tabulated.
Finance as a Business Partner
A key decision made at the design stage of
the customer service improvement project is
that finance has to be involved in the customer
service improvement project from the very
beginning. This may sound easy, but in fact it is
not, especially in the beginning. Many operations
people see the finance people as bookkeepers,
scorekeepers or auditors. Operations people
typically do not like it when “those finance guys”
get involved in operational decisions. This is the
first big barrier to overcome.
Throughout the process, finance works closely
with teams to identify the benefits of a given
project. Many times projects actually report
more benefits than process owners originally
envisioned due to insight provided by the
finance representatives. During this period,
finance and the process owner agree on how
the benefits will be calculated once the project
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Many times projects actually report more benefits than process
owners originally envisioned due to insight provided by the
finance representatives.
is implemented. At the end of the process,
immediately before transferring ownership
of the solution to the process owner, there
is a second official review by finance and a
recalculation of the expected benefits using the
data gathered during the project, the customer
service improvement team does not become
involved with calculating the benefit. They can
focus only on the improvement process.
During the 12 months following the date solutions
are implemented, the company captures and
reports the benefits. After that period, a new
baseline is calculated using the already improved
Key Performance Indicator (KPI). From that
time forward, only incremental benefits beyond
the new baseline are captured and reported.
If there is room for additional improvement, a
new customer service improvement project is
generated. While the involvement of finance in
a project begins before the involvement of the
customer service consultant, it also continues
long after the customer service consultant has
transferred ownership of the solution to the
process owner.
Some projects start capturing benefits during
the initial phase of the project since some
portion of a solution may create immediate
benefits even before the entire solution has
been executed. Every month, all the benefits as
well as the performance indicators are reported
internally in a standard format. By doing this,
there is continuous tracking on the KPIs that
are being improved and also the financial
impact of those KPIs on the bottom line. Both
indicators are compared with the official target
that was agreed to at the time the project was
launched.
By applying financial knowledge, business savvy,
change management and common sense, the
finance department and your organisation’s
management will know with certainty that the
organisation’s customer service improvement
program has accomplished beyond what was
targeted both on a customer satisfaction level
and financially.
Conclusion
I trust the points above demonstrate how
organisations, by focusing on the wrong
financial data, actually deliver poorer service
more expensively. I would like to conclude this
overview of the cost of bad service by providing
an example which demonstrates how not
properly understanding the cost of bad service
can be more than a reputation risk.
The story is from Harvard Business School
Professor W. Earl Sasser. In this edited
transcript, Sasser discusses how a seemingly
harmless budget trim upended an airline’s plan
to pamper its best customers.
Airline Case Study
“One of the companies I’ve had chance to work
with is a large global air carrier. And working for
an air carrier is really great, the chance to fly
first class.
At some point, I had to give a presentation to
their top management group. I was going to
give the presentation right at the airport. First
class flight from Boston to that location. It was
really a great meal, great service. Everything
was perfect.
As we pulled into the gate, the plane (was)
met by someone on the ground. The person
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It told me a lot about the pressures of an organisation, and the
discontinuity between making budget and not making it.
said, “Would Professor Sasser meet the
special service agent”. I was feeling a little
uncomfortable because I was going to talk
about customer service and customer focus
and these folks were really sort of showing me
stuff I’d never seen before. They were doing a
really outstanding job, so it was like, “What am
I going to tell these folks”
It told me a lot about the pressures of an
organisation, and the discontinuity between
making budget and not making it.
We got into the golf cart. We went through
customs...We took my passport and just sort of
waved it. We were down in baggage claim in
about ten, twelve minutes. And I said, “Wow,
this is unbelievable.” So I asked the woman,
“This service that you’re giving to me, do you
give to other folks” She said, “Sure. We have
a frequent flyer program, and this frequent flyer
program identifies our very best customers. And
our very best customers often fly one or two
times a week. Now, you’re not in that category
of frequent flyers, but because you’re talking
with the top management group, you’re in that
category for the day.”
Now, first thing, is it okay to discriminate in
favour of your best customers Can you use
that information You’re not bothered by that
She was trained to handle this service. She
was pumped because she had degrees of
freedom. She could have rented a limo, written
a ticket for another airline if that was necessary.
Anything it took to satisfy this customer at the
very top end.
So, I kept quizzing her about this and it was
obvious that they’d done a lot of homework.
They understood the value of this customer to
them. After about twenty minutes, I ran out of
things to talk about, and the bags still hadn’t
arrived. The first-class folks had just come
down, and I had expected the bags to be there
when the first-class folks arrived. The standard
would probably be that when first class arrives,
have the bags there.
Coach people came, no bags. Now we’re all
waiting, and it takes an hour before the bags
arrive. I’m a little upset because I need to get
on with my presentation, getting checked out
and so forth. But, I’m a little happy too, because
now I have something to talk about. And so I’m
holding this little story in my back pocket waiting
for the appropriate time in my presentation.
As I did my presentation, I started talking about
the service bookends. The first encounter and
the last encounter are where the people really
remember—the service bookends. And as I
started describing what had happened to me, I
was very accurate. I told about everything. Up
until this point, the faces were looking up, all
the executives were looking me right in the eye.
And I started telling this story.
Once I got past that it was a great flight ...
and I started waiting in baggage handling—
the eyes—no more eye contact. It’s all gone.
After the presentation people came up to talk
to me. There was a person just standing over
to the side. When the last person finished, this
person walks over and said, “I’m responsible
for baggage handling at the airport.”
And I said, “I’m sorry that I told exactly how it
happened. I didn’t make anything up. I thought
you should know that ... it’s very complicated
when you’re in the airline business, because
there’s so many interactions on the trip. Some
of them the airlines control, some of them not.
But that last interaction can have a big impact.
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I just wanted to drive home that point. Sorry, if I
caused you any problem.”
He said, “I’m not surprised it happened.”
I said, “What do you mean, you’re not
surprised”
He said, “This is the last week of the month.
This is the last month of the quarter. I have
deliberately understaffed baggage handling to
make budget.”
Now, what about that He said, “I deliberately
understaffed baggage handling to make budget.”
First question is, did this person make budget
Probably did. Probably it is a cost centre, and
I suspect this person was rather close to either
meeting or not meeting budget.
And it also told me a lot about the pressures on
an organisation, and the discontinuity between
making budget and not making it. Not making it
even by a little bit is bad. Making it is absolutely
great. And therefore, this person did something
because they were close to meeting their
budget target.
What’s the implication of this behaviour
Does it have any consequences Economic
consequences What are they
Would someone who was on that airline this
time would consider flying another airline the
next time he or she had a chance to fly Most
likely…
Baggage handling…That’s not going to affect
my revenue, right Whose revenue is that
revenue that I’ve lost It’s my best customer! MEE
BRETT WHITFORD
Executive Director
Brett Whitford
Executive Director
Customer Service Institute of Australia
Brett Whitford is the founder and an Executive Director of CSIA. He is the author of
five best selling business books on technology, best practice and customer service.
His business experience is extensive, including joint ventures with International
Prentice Hall. Brett is currently completing his new book on customer service,
showcasing some of Australia’s top organisations.
Brett founded Beaumont Publishing House at 22 and listed his consulting,
Brett Whitford is the founder a
certification and publishing company on the Australian Stock Exchange in December 2000. Director His of CSIA. He is the au
experience and expertise makes him a highly sought after speaker and he often lectures selling for universities,
business books on
international conferences, radio and television.
practice and customer servic
experience is extensive,
Brett, along with selected CSIA members, recently wrote Australia’s first Strategic Customer ventures Service with International Pr
Management MBA unit for Deakin University.
is currently completing his
customer service, showca
Brett is considered Australia’s leading customer service consultant. He has worked with some of
Australia’s top organisations.
Australia’s, and the world’s, top companies and government departments such as Nokia, Johnson
& Johnson, Defence Housing Authority, Medicare Australia, Aurora Energy, Optus, Telstra, Brett Manitoba founded Beaumont Pub
Telecommunications Services, Energex, Queensland Rail, Brisbane City Council, Manningham 22 and listed City his consulting,
Council, Warrnambool City Council, Service Essentials, Westpac, ANZ, AAMI, Yarra Valley publishing Water, company Ergon on the
Energy, Fone Zone, Colorado Ltd., and numerous other organisations.
Exchange in December 2000
and expertise makes him a hi
speaker and he often lectures
international conferences, rad
brett.whitford@csia.com.au
Ph: +61 2 9386 4477
Brett, along with selected
recently wrote Australia’s
Customer Service Manageme
Deakin University.
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Brett is considered Aus
customer service consultant.
with some of Australia’s, 14 and
companies and government d