Chapter 12

The Service Excellence Index

TYPES OF ORGANIZATIONS WHERE THIS METRIC IS APPROPRIATE

It does not matter whether you sell to consumers (B2C) or to other businesses (B2B), good-quality service is important and needs to be measured. Certainly this metric is appropriate for health care organizations that range from clinics to hospitals to doctors’ offices. Good service in health care is about as rare as good service on an airline these days. This measure also applies if you are in any kind of service business—airlines, restaurants, retail stores, online retailers, travel companies, hotels, repair businesses like auto dealerships, banks, credit card companies, insurance companies, and pretty much any city, state, and federal government agency that provides direct services for taxpayers and visitors. Even products like hardware and software usually come with service contracts, and you might have to deal with repair people or customer service call centers to address issues and problems. Universities and schools are in the service business as well and need to measure service excellence.

HOW DOES THIS IMPACT PERFORMANCE?

Most industries today are producing good-quality products. The total quality management (TQM) movement of the 1990s seems to have paid off in many industries. Cars are now very well built, as are most of the things we buy today. Appliances don’t seem to last 20 to 30 years like they used to, but most other things have gotten better. What has gotten steadily worse is service. We have learned to accept bad service or are unwilling to pay for it to be better. Call your health insurance company that you pay $1,000 a month to and you get to talk to a machine that makes you repeat everything. Many online retailers like eBay don’t even have a published phone number—you have to e-mail them or try to use another method of contact.

Bad service has a huge impact on all sorts of success measures, like revenue, profits, customer loyalty, brand image, and even employee satisfaction. No one wants to work for a company that everyone hates. No one wants a job talking to mad customers all day long. Yet there are a few shining stars showing us that it is possible to offer good service and still make a profit. Discover Card in Chicago has TV commercials out right now showing that if you call 1-800-DISCOVER you will immediately get through to a live person who is both friendly and knowledgeable and sounds like a native English speaker. Wow, what a concept! Discover has always been this way, but I guess it didn’t realize what a competitive advantage that was. The company has a really great culture (see Chapter 18) and provides good service in many other ways besides answering the phone. Other examples of good service exist as well: Starbucks, Zappos, UPS, Nordstrom, Southwest Airlines, and Orchard Supply Hardware. Good service is so rare these days that we are almost shocked when we get it. When we do get good service and we get it consistently, those are the organizations that continue to get our business.

COST AND EFFORT TO MEASURE

The cost of developing a good service quality index is going to be high. This is not as simple as developing a survey. One of the most important first steps is to do a thorough job on “voice of the customer” research to define exactly what people want and expect and what their priorities are. One organization that does this exceptionally well is pet food company Purina. In fact, their research methods are viewed as one of their competitive advantages and are a big part of why they are number one in sales and market share in a very competitive and profitable business. Once you have spent the time and money to figure out exactly what people want and don’t want, the next step is to develop mechanisms to track compliance with these needs. Sometimes these are operational metrics that you already track, like on-time delivery for package companies or airlines, or fixing the car correctly the first time. Other times they are behavioral measures such as whether you are greeted with eye contact and a smile when you walk into the doctor’s office. Behavior measures are often the key to good service, but these are the toughest and most expensive to measure. What is even tougher is getting frontline employees to engage in the right behaviors on a regular basis. Places like Disney and Marriott spend a lot of money on training and supervision to ensure that everyone does the right things to ensure a positive customer experience.

HOW DO I MEASURE IT?

Before talking about how to measure service excellence, I need to start by warning you about how not to measure it. The following are some of the more common mistakes to avoid when developing service metrics:

Okay, so now that you know what to avoid, how do you measure service excellence? A call center I worked with had one metric for customer service reps (CSRs), which was an index comprised of three submetrics:

The three factors were weighted so that solving customers’ problems were worth 50 percent of the score, getting them off the phone quickly was worth 30 percent, and courtesy was 20 percent. This encouraged the right behaviors of never getting a customer off the phone or worrying about the “Have a nice day” stuff until you are sure you have solved the problem. While this is a call center, there is something to be learned here in developing a service excellence metric for any type of organization.

Service Quality

The first type of metric to develop for your service excellence index is one that measures the quality and accuracy of whatever transaction is being performed: 10,000-mile service on the car, package shipped to your parents, hotel check-in, annual physical at the doctor, or whatever the service is. The point is to make every attempt to measure service quality without having to survey the customer. A quality call is measured by a supervisor listening in or a lack of callback. A quality car repair is measured by the customer not having to come back. A quality flight is one that lands on time and has no claims for lost or delayed bags. Service quality might also be comprised of several different metrics. For example, your car dealership might have a checklist of things that must be completed before returning a car to a customer: called customer to inform them when car is ready, car washed, complete documentation on repair order and invoice, floor and steering wheel clean, and so on. Service quality in a grocery or retail store might be an accurate receipt. My wife frequently catches mistakes (which are always in the store’s favor) as items are scanned by the cashier. In fact, a local news story indicated that this happens quite frequently. A service quality measure for a government organization might be whether Medicare paid your hospital bill, or unemployment sent you a check, or the doctor cured your problem.

Service Efficiency

AltaMed, the largest community health care organization in California, recently partnered with the PhDs at Purina to help conduct “voice of the customer” research. They researched patients of AltaMed as well as patients of competing health care providers like Kaiser Permanente. One of the findings is that men and women have different priorities for health care service. The number one concern for men is getting in and out of there as quickly as possible. I recall Pfizer telling me that 70 percent of doctor visits in the United States are made by women. Men don’t want to go to the doctor in the first place, and when they do go, all they want is to get out of there fast. Women care about efficiency as well, but they care more about the doctor spending time to really diagnose their problem and treat them properly. They also want to get all of their questions and concerns answered. A simple and easy measure of efficiency is cycle time. However, you need to measure the total cycle time from the customer’s perspective, not yours. You need to track how long the patient was in the clinic from the time he walks in the door until the time he leaves.

Hotels need to track how long it took to get checked in and into the room from the time the guest walks in the door. This includes time spent waiting in line, walking to the room, and walking back to the front desk because the stupid electronic key does not work. Some hotels are getting smart about this and have put phones by the elevator so you can call the front desk and have them bring a replacement key, rather than making you schlep your luggage all the way back to the desk and wait in line again for another key. This small improvement probably reduces the cycle time of getting guests into their rooms. If you are a call center, you need to measure the total time the person was on the phone, including time spent waiting on hold and listening to the recorded voice telling you, “Your call is important.” The DMV in California has dramatically improved efficiency for key processes by letting you renew your registration online, which takes about five minutes and you don’t have to leave home, and by letting you make appointments online for in-person visits to the DMV. Both of these changes have dramatically improved efficiency for both customers and DMV personnel.

Besides cycle time, other service efficiency measures might include self-service options. Home Depot might track the percentage of customers who check themselves out using the new scanners that don’t require cashiers. I don’t know if any of you have tried these things, but they are often not efficient for the customer. Checking out takes a lot longer since you frequently have to scan everything two or three times because the scanner didn’t get it the first time, bag your own stuff, do the payment, and so on. However, these automated self-serve checkouts lower costs for Home Depot. Other transactions actually are faster if customers do them themselves. Booking a trip on the Internet is a lot faster than going to a travel agent. Automation is great if it saves customer time but not if it makes life harder. I recently stayed at the Grand Hyatt New York, and it had self-serve check-in kiosks. Swipe your credit card, get a room key. Simple and efficient, and it really does save time. The self-service check-ins at the airport are not quite as reliable, and for some reason I always have to have a person help when the machine won’t issue my boarding pass. However, checking in at home and printing my boarding pass saves me about 15 minutes at the airport, so total cycle time to get a boarding pass has been dramatically reduced. Hertz has a new service where you just drop off the car and walk away. An employee checks the car and e-mails you a receipt that you usually receive before you get too far.

Service Courtesy

This one is way down the list on most people’s priority list, but it is still important. Dealing with someone who is nice and polite can help differentiate a company—that service advisor at the dealership who always remembers you and asks about your dog or kids; the receptionist at the doctor’s office who actually looks up and smiles and greets you by name; the Starbuck’s barista who remembers both your name and order and starts working on it as soon as you walk in the door. Little things like this make a big difference. However, many companies choose to focus on courtesy over competence. Most call centers these days are staffed by really nice idiots. They teach people all these comforting phrases, but they don’t teach them how to solve your problem. Service courtesy can help make up for inefficiency. Our local Italian restaurant Mama D’s always has a long wait. Many people bring their kids, who are hungry and sometimes cranky. The friendly hostess comes out to smile at the people waiting for a table and hands out focaccia bread and crayons and coloring placemats for the kids. The restaurant has even installed several child-size desks on the sidewalk so kids can color or play with some of the provided toys while the family waits for a table. A restaurant I used to go to in Chicago would hand out small glasses of Chianti to people waiting for a table. A smile and a glass of wine or piece of bread can certainly do a lot to offset a wait for a table.

Of the three metrics, service courtesy is the toughest to measure because it usually involves observing and recording behavior. Many organizations use mystery shoppers to measure employee behavior. They can track things like eye contact, smiling, tone of voice, and other factors that might be hard for even a supervisor to track if he has seven people to supervise. Call centers record telephone conversations and listen to a small sample of them and score the CSRs for their courtesy—“This call may be recorded for quality purposes.” Another measure related to courtesy is communication. I recall an article in Fast Company that said people’s anxiety levels go up several notches when the person they are talking to to get a service problem resolved has a foreign accent. Knowing this, a simple metric might be the percentage of your customer contact people who have an accent. Another related measure might be the nationality of your customer contact personnel compared to the nationalities of your customers. A health care client has found that Hispanic patients give Hispanic service providers higher courtesy ratings. Chinese patients give Chinese service providers higher courtesy scores. Matching the demographics of your customer-facing personnel to the demographics of your customers could be something that is measured as part of your courtesy score.

Service Recovery

The fourth type of submetric that goes in your service quality index is one that looks at how well you recover from service problems. When I worked with Sheraton Hotels years ago, the standard response to any guest problem was a fruit basket. Fruit baskets seemed to solve all customer problems in the hotel business, or so the Sheraton thought. How you recover from problems can often make the difference between keeping and losing a customer. I will never return to Expedia based on how it handled my problem that was caused by the company, but I am a lot more likely to return to Marriott after how it has handled problems in the past. Empowering employees to solve guest problems on the spot and spend money to do so is part of what makes Marriott service so great. United Airlines used to have a good system for doing this, but it appears to have stopped it. If you had any kind of problem on your flight, the flight attendant gave you a coupon that you could redeem for 10,000 to 30,000 miles, which is enough for a free ticket! Getting a few of these and an apology more than made up for not being able to recline my seat or listen to the movie. A simple metric for United was counting out how many of these recovery coupons its employees handed out. I am sure Marriott tracks service problems and their resolution. Tracking how many service recovery episodes you have is a simple and objective way of measuring excellence.

FORMULA AND FREQUENCY

Of course the specific metrics under each of these categories need to be tailored to your organization, but the following configuration is a good generic model to start the design of your own service excellence index:

One of the good things about all of these measures is that they are unobtrusive. In other words, you don’t have to ask your customers to fill out your surveys to get the data. Quality is measured via internal observations or using operational metrics like checklists or repairs completed correctly. Efficiency is just total cycle time for a transaction from a customer perspective. Courtesy can be measured via supervisors or mystery shoppers, and communication can be tracked the same ways. Call up your call center 20 times throughout the day and see how often you encounter someone with an accent. Combine that with the demographics of your customer-facing personnel versus the demographics of your customers, and you have an easy and important metric.

Most organizations that deal with consumers track the service excellence index every day. Those that have business customers might track it once a week or even once a month.

VARIATIONS

One common variation is to combine the proposed metrics with a customer satisfaction measure gathered via a brief one- to four-question survey. Even though I am not a big fan of surveys when used in combination with other metrics, I think they have their place. Another variation is to have a number of specific quality and efficiency metrics to go into this part of the index. For example, a call center I worked with had a service efficiency measure that included:

• Average speed of answer
• Call length
• Blocked calls (busy)
• Hang-ups
• Callbacks

TARGETS AND BENCHMARKS

Targets for these four individual metrics need to be set based on your own baseline and benchmarks. A big factor in achieving benchmark-level performance is hiring and training. You find that just about every firm that provides excellent service is very careful about each person they hire. Disney claims it hires the smile, and Marriott has identified important traits (things you are born with, not competencies) for every job, and it selects for these traits. You will also find that the best service companies do an amazing amount of training. Disney spends days and days training new cast members (the company’s name for its employees), knowing that many won’t even stay a year. Zappos offers new employees $2,500 to quit in the first 30 days, and almost no one takes the offer. When you set your targets for service metrics, you need to be realistic about the caliber of your employees, policies, tools (e.g., hardware and software), training, and other resources. Simply measuring service excellence does not help if your organization is unwilling to spend the bucks to make it improve.

BENEFITS OF DATA

Having a composite metric that gives you an indication of how the organization is performing for customers is going to be very useful. Of course, some CEOs don’t seem to care that their company’s service is bad, so a metric like this is not going to help at all. If your organization does care about service quality and thinks improving it might give you a competitive edge, then this is certainly going to help you do so. Some of the benefits of data generated from the service excellence index include:

• Identification of operational problems that cause dissatisfied customers.
• Identification of exceptional and bad customer-facing employees.
• Finding links between service quality and customer loyalty.
• Saving money on expensive customer surveys that are only filled out by a small minority of customers.
• Recovering from service problems faster and winning back customer goodwill.
• Improving your hiring and training of customer contact personnel.
• Identifying policies and procedures that detract from good service.
• Detecting system problems that slow down service or lead to poor-quality outcomes.