Workforce.com

Why Customer Satisfaction Starts with HR

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

August 8, 2002

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

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

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

There was a time when customer service was seen as the responsibility ofsales managers and tech-support team leaders. Today that attitude is as dated asrotary telephones at corporate call centers. Increasingly, companies arerecognizing that HR plays a seminal role in building a customer-friendlyculture. Throughout the business world, HR departments are focusing theirefforts on improving customer satisfaction. They’re using HR activities --hiring, training, coaching, and evaluation programs -- to give employees thetools and support they need to develop and nurture positive, lastingrelationships with clients.


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

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

Moreover, subtle changes in hiring or training sometimes can produce majorimprovements in customer happiness. One of this year’s Workforce Optimas Awardwinners, NCCI Holdings Inc., discovered in a survey last year that its customerswanted more help in using the company’s insurance-data software products. As aresult, NCCI created a training initiative to give its customer-service repsmore technical expertise. By the fourth quarter, the surveys were showing thatcustomers were much more favorably impressed with the reps’ technicalabilities. Apparently as a result, the overall customer-satisfaction rating rose33 percent during that period, from 6 to 8 on a 10-point scale.

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

Conversely, a company that provides lousy service may have trouble hanging onto its customers over time, and thus may be forced to continually replace lostaccounts that have fled in frustration. The cost of acquiring new customers isfive times higher than the expense of servicing existing ones, says MichaelDeSanto, a consultant for Walker Information, an Indianapolis-based businessresearch firm. At that rate, chronically dysfunctional customer service becomesa monster that can devour whatever gains a company is making in other areas. Ifthat company runs into a stalled economy or an aggressive competitor, its badcustomer karma can prove fatal.

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


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

Identifying employees with customer-satisfaction potential
Most service-quality gurus say that hiring is the first and most criticalstep in building a customer-friendly company. “You need to be selective,”says Ron Zemke, president of the consulting firm Performance ResearchAssociates, located in Minneapolis. “It’s a lot easier to start with peoplewho’ve got the right personality qualities to work with customers than it isto struggle to teach those skills to whoever walks in the door.”

Zemke says the key indicator of customer-service potential is a high level ofwhat mental-health professionals call “psychological hardiness” -- qualitiessuch as optimism, flexibility, and the ability to handle stressful situations orcriticism without feeling emotionally threatened. Those are, of course, goodqualities for many jobs. But experts note that the personality of acustomer-service maven may be markedly different from those of achievers inother business venues. Verbal eloquence and persuasiveness, for example, aren’tas important as the ability to listen.

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

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

What’s the best way to distinguish those who are the most likely to pleasecustomers from a raft of applicants? Some companies have tried standardizedpsychological tests. But many consultants and HR professionals say that it’smore effective to observe an applicant at work. At Rosenbluth, the scrutinybegins the moment that a job-seeker walks in the door for an interview. “We’relooking for a person who shows the same courtesy to everyone he or sheencounters,” says Cecily Carel, company vice president for HR. “Ourreceptionist, who’s been with the company 20 years, is a pretty good judge ofcharacter. One time she called me from her desk to say, ‘This person is notpolite.’ That applicant wasn’t hired.”

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

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

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

Turning the knack for niceness into skilled service
Service-quality consultants and HR professionals from service-consciouscompanies say that even an employee with the right personality traits needsguidance on how to channel positive qualities into developing good customerrelationships. At a time of economic uncertainty, when many companies may try tocut costs by scrimping on customer-service training, it’s all the more crucialfor HR to make a strong case for its vital importance.


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

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

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

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

One way to compensate for the lack of human contact is by teachingcustomer-service employees the technique of “active listening” -- restatingand summarizing what the customer tells them. This not only helps understandingbut also conveys a message of attentiveness and concern. Employees also can betaught to notice and respond to subtle cues in a customer’s speech.

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

But good customer service requires more than just “soft,” ornon-technical, skills. Customer-service consultant Zemke notes thatorganizations frequently neglect to give their customer-service employeesadequate product training. “If I order something and it doesn’t work, I wantsomebody who knows the product and can help me, not somebody who’s beentrained to smile at the right times.” Companies such as NCCI have successfullyused surveys to find out what kind of technical knowledge and assistancecustomers most need, and incorporate the information into customer-servicetraining.

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

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

Strong relationships between employees and customers may actually keep bothfrom fleeing the company. “Good customer relationships may actually be afactor in employee retention,” DeSanto says.

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

There are many things HR can do to help create an environment that nurturesgood service and customer relationships. Rosenbluth International has developeda culture that encourages associates to seek one another’s help in solvingcustomer problems, and emphasizes its concern for the customer with “elegantlanguage.” CEO Hal Rosenbluth often personally serves tea and cookies to newassociates at the completion of their training. “It’s a little corporateritual that sets the mood,” Carel says. At the same time, it helps Rosenbluthtalk with new employees about what they can do to serve customers.

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

Workforce, May 2002, pp. 26-32 -- Subscribe Now!