Excellence Starts at Home: Why CEOs Should Hold Functional Leaders Accountable for Serving Their Internal Customers

Michael AllensonMichael Allenson, Associate Director Business Performance Improvement

Imagine a scenario where a company decides that it needs a proprietary app to better engage with customers. It hires an outside developer to create the app but the developer fails to deliver on time or as specified. The company isn’t able to drive the adoption of the app as planned, and in turn its projected growth and customer retention suffer. There is a strong dissatisfaction with the developer; they will not be hired again.

Now imagine a similar scenario but this time the contractor is the IT department. They are supposed to roll out a new ERP system expected to streamline various customer transactions. The rollout is poorly planned and as a result the system is not aligned to certain frontline customer processes. This leads to urgent and unanticipated process changes which impact the customer experience negatively. Customers express their anger at the frontline representatives. Employees don’t understand why IT and management do not recognize the downstream impact of their failure to set them up for success with the company’s customers. When concerns are raised, the response is, “What can you do? ERP implementations are hard!”

Lest we leave the impression that technologists are the only ones prone to being seemingly oblivious to the downstream impact of their activities, Finance, HR, Marketing, Procurement – just about every function in a company – can disappoint in the execution of a project that has a material downstream impact on both employees and customers. The only difference with external contractors is that the function isn’t fired or placed on a “do not use again” list, despite its subpar delivery.

A company that is focused on growth and meeting customer demands cannot afford to allow its people to become insensitive to the needs of other teams within the organization whose mission they support. Functional departments should be heldto the same standards external providers are held to. The growth plans and strategies of the business are no less dependent on internal functions delivering as promised than on an outside provider performing a contract.

While a company may not simply replace an entire department because they did not succeed in meeting the needs of an internal customer, it can make sure its internal departments are as concerned with their performance in support of internal customers as outside vendors would be. Their variable compensation should, in part, depend on a focus on the internal customer experience (iCX).

Why iCX Hasn’t Been a “Thing”

One reason iCX hasn’t taken off is because leaders don’t always perceive the negative impact of bad iCX on the business – and so bad iCX has become commonplace and acceptable. Imagine a finance leader for a distribution company who believes the finance department is issuing too many credits to customers and implements a process that requires greater documentation to give a credit. The process is much harder (and dissatisfying) for both frontline employees and their customers and may, in fact, ignore the root cause of the issue, which is not their fault. Although the number of credits issued may decline, an apparent win for the organization, frontline employees may miss their bonus that is tied to customer satisfaction, which declines when customers don’t receive credits they feel they deserve. As a result, employee and customer turnover will increase. An apparent win for the finance director is actually a significant loss for the company.

An iCX program would uncover the issue by discovering why frontline employees are dissatisfied with finance. By being held accountable for internal satisfaction, the finance team is motivated to identify the true root cause of the problem and address it. The number of credits issued will be reduced while frontline employee and customer satisfaction will increase, a win-win. Departmental leaders’ own performance metrics are often not aligned with how they contribute to the collective effectiveness of the organization, or the success of other departments. An iCX program addresses this lack of alignment.

A second reason that iCX has not grown in popularity is that even when leaders do recognize that organizational tensions seem to be boiling over and may have even become a drag on the business, they often assign the wrong cause to it. Often, the tension is diagnosed as an employee engagement issue. Leaders may launch employee engagement surveys that focus on issues such as training, development, goals, feedback, empowerment, rewards, wellbeing and other dimensions. These tools are useful in that they provide relevant metrics related to individual employees, their team and their attitude toward the company. However, these tools do not capture the level of satisfaction with specific departments or provide any understanding of the implications of bad departmental performance for the business.

The questions CEOs and other management team members should be asking instead are: “Do we understand if the performance of functional departments is holding back achievement of our company’s growth and efficiency objectives?” and “Which departments need to change how they operate to better support these objectives?”

Why iCX Needs to Be a “Thing”

External CX metrics, such as Net Promoter Score (NPS) or Customer Effort Score, are often used to gauge the success of the business and are a critical component of the variable compensation of various frontline employees and their leaders.However, the idea of including such metrics in functional leaders’ KPIs, though well-intentioned, is misguided because those leaders often have no idea how their department’s employees impact or contribute to those metrics. They are often rewarded or not rewarded based purely on what others in the organization do to provide a good external customer experience. If the IT department installs point-of-sale (POS) terminals that are fast and work without a glitch, but the sales person using them never bothered to complete a training on them, the IT department will receive a low score based on the salesperson’s poor performance. Conversely, if the salesperson went above and beyond despite a badly programmed POS terminal, IT would be rewarded on someone else’s merits, not their own. Internal functions would be much more accountable and better incentivized to improve their service if there were metrics that reflected their contributions directly. This is where an iCX program comes in.

Reinventing the Wheel Is Not Necessary

An iCX program should not strike leaders as difficult to implement. Customer experience practices and tools used for external audiences are equally applicable for internal audiences, and they are easy to set up. A transactional CX program that measures satisfaction after performance of a service is an important building block. It should feature measures such as customer effort score, overall satisfaction and a few diagnostic questions to understand the reason for the score. The results will surface issues while there is still time for course correction and identify improvement opportunities that will make it easier for functional teams and their internal customers to reduce their costs.

A customer journey map used by many companies for external CX can also be a valuable tool for internal audiences. Just because you’re running an internal department doesn’t mean that you can’t benefit from understanding what your customers are trying to accomplish, the pain points that they experience in dealing with you, moments of truth where they really need your support, and opportunities for you to make a difference for them, and by extension for your organization.

As a functional leader within an organization, it’s worth asking these questions in order to understand how your department might improve:

  • If you were an outside contracted service organization, would your internal customers still hire you?
  • Is your team’s job to give customers what they ask for or to figure out what they need and help them succeed?
  • How does your department create value for the internal customers it serves?
  • What is the best way to measure your team’s contribution to the external customer experience and resulting growth and loyalty it creates for the company?

Most people want to provide meaningful service to others and measure their contributions – and be rewarded appropriately. In this sense, an internal customer experience program will benefit the company beyond the external performance – it will create a sense of purpose and responsibility within, help foster loyalty and generate an impetus for improvement.

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