They’re Your Customers, Not Mine
Aligning Employees’ Interests with Those of the Company
The phone message wasn’t good news. The caller was reminding me that my new grill would be delivered that morning. The problem was I’d scheduled an afternoon delivery. My wife had even arranged to leave work early so that she could be home when the grill arrived, but nobody would be there if they came in the morning.
I called back to see if the delivery schedule could be corrected and got an employee named Chris on the phone. I calmly explained that the grill was scheduled to be delivered that afternoon, not that morning.
“Who told you that?”
Ah, four of the worst words a service rep can say to an irritated customer. Chris had an opportunity to fix the problem, but instead he focused on laying the blame somewhere else. He accused the store associate who had sold the grill of getting the delivery schedule wrong. Chris tried to further distance himself from the error by explaining that deliveries were handled by a separate department that only made deliveries where and when it was told to by the store.
None of this information mattered to me, and I didn’t care whose fault it was. My goal was getting my grill delivered in time for a cookout I had planned that weekend, and sparing my wife the hassle of needlessly taking time off from work. Chris was unable or unwilling to honor the original delivery schedule, so it ultimately took quite a bit of back-and-forth to reschedule the delivery for another date when I knew I would be home all day.
Customer service problems often occur because an employee fails to take ownership of a situation. In this chapter, we’ll explore the reasons employees don’t necessarily share their employers’ customer service goals. We’ll also examine how efforts to direct employee behavior, such as offering financial incentives, employee recognition, or establishing customer service standards, often have unintended consequences. Customer service leaders need to know how to avoid these pitfalls if they want to motivate their employees to serve customers at the highest level.
Customers usually view employees as representatives of the entire company, but employees often see themselves as individuals who are separate from their employer.
I was frustrated with my experience getting my new grill delivered, and Chris was a part of that poor experience. It didn’t matter to me that someone in one department sold the grill and someone in another department delivered it. As far as I was concerned, they were all employees of the same company. The salesperson who sold me the grill had agreed on a delivery date and time, and I expected Chris to honor that agreement.
Chris obviously saw things differently. His insistence on identifying a culprit for the scheduling mishap indicated that he wasn’t consciously responding as a representative of his company. He was acting as an individual whose day just got more challenging because another employee didn’t properly schedule a product delivery.
Economists refer to the relationship between companies and their employees as the “principal-agent problem.” A company (the “principal”) hires employees (the “agents”) to perform work on behalf of the company. The employees will ideally represent their employer’s best interests, but of course they’re also people who have their own motivations.
The principal-agent, or employer-employee, relationship has two primary challenges: First, the goals of the employer and employee can come into conflict. Second, employees operate with a certain degree of autonomy since the employer can’t monitor and control all of their actions. This autonomy can make it tempting for employees to pursue their own self-interest, even if it comes at the expense of their employer.1
Both these challenges were evident during my conversation with Chris. It was in the company’s best interest for him to take ownership of the problem and make sure my grill got delivered so the company could keep me as a happy customer. Yet Chris seemed motivated by a desire to avoid blame. He was acting autonomously by attempting to disassociate himself from the problem and the other department, rather than acting on behalf of his employer and providing a solution.
It’s not difficult to find other examples where employees autonomously pursue their own goals instead of their employer’s. An employee who takes a cigarette break in front of the store’s entrance may look unsightly to customers, but it saves her from having to spend half of her break time walking to and from the designated smoking area behind the store. A retail sales associate may carry on a conversation with a coworker to avoid helping people. A delivery driver may drive like a maniac in the company van, weaving in and out of traffic to get to his destination more quickly, even though he is creating an obvious safety hazard in a vehicle marked with the company logo.
I once went into a gift shop and discovered the item I wanted was sold out. When I asked a salesperson to call a sister store to see if it had what I was looking for, he dialed the number and then handed the phone to me, saying, “Here, you talk to her. I can’t stand that lady!” You would never expect someone to act that way until you realize that his goal, which was to avoid talking to a coworker he disliked, was more important than his company’s goal to provide customers like me with assistance. The salesperson was also acting autonomously because there wasn’t anyone else working in the store to observe or correct his behavior.
This situation reveals another complication in the employer-employee relationship: Employees control information regarding their interactions with customers, which means it’s unlikely the supervisor will become aware of an employee providing poor service if the supervisor doesn’t observe it directly. Many customers never complain about poor service from employees, and when they do, those complaints often fail to reach a supervisor.
John Goodman estimates that 90 percent of customer complaints are directed to frontline employees.2 If employees aren’t at fault, you might expect them to take action to resolve the problem or pass the complaint along to someone who can address the issue. But what if handling the complaint isn’t in an employee’s best interests?
There are several explanations for why an employee might not want to address a customer complaint or pass it along to management:
• The employee fears being reprimanded for causing the complaint.
• The employee thinks the complaint will not be properly addressed by management, so sharing the information is a waste of time.
• The employee views handling the problem as an annoyance or inconvenience.
• The employee believes he was treated poorly by the customer, so intentionally mishandling the complaint is a means to exact revenge.
To overcome the principal-agent problem, employers need to find a way to align their interests with their employees’ personal motivations. This begins with the hiring process. It’s not enough to simply hire someone with the right skills to do the job. Companies must hire employees who will love the job and love your company.
The starting point is to make a list of the essential traits or characteristics an employee must have to enjoy working for your company. If you offer a high-energy, fast-paced work environment, then you’ll need employees who love that type of work. Someone who prefers a slow and deliberate work style would probably not be a good fit.
The next step is to test the employee’s fit through screening, interviewing, and training. Online retailer Zappos is known for having committed, customer-friendly employees. Part of this commitment comes from an unusual offer made to all new hires after their first week of training. New employees are told they can receive $2,000, in addition to what they’ve already earned, if they choose to resign before the end of their four-week training program. While fewer than one percent of employees accept the offer, it’s a true test of whether employees feel they belong.3 Employees will also remember that they turned down $2,000 to stay with the company.
Another way to align employee interests with company goals is to involve employees in decision making. Soliciting employee input on designing work procedures, creating customer service strategies, and setting goals helps them gain a sense of ownership. When employees are asked to help write a new policy, they are more likely to understand its importance and meaning.
Involving employees can also convince them to agree to tasks they might otherwise find objectionable. When I worked for a catalog company, our call center representatives were expected to pitch a store credit card offer to certain preapproved customers. Unfortunately, most of our reps had a negative impression of the credit card and were uncomfortable offering it to customers. As a result, there was a meager 5 percent acceptance rate.
As the call center’s training supervisor, I was instructed to devise a training program that would improve our sales performance. The first thing I did was identify a few employees who were highly successful. Some of them got as many as 40 percent of their customers to accept the credit card by enthusiastically promoting several of its features and benefits. It was easy to build a simple training program around the successful formula used by these reps.
When I rolled out the training I was able to get buy-in from participants by explaining that the techniques they were learning came from their coworkers. I also shared the features and benefits that these employees found got the most positive reactions from customers. Even the most skeptical employees were willing to give the new approach a try once they knew people like them had used it. After training thousands of employees over a few months, we were able to increase our average acceptance rate to 20 percent and observed many more reps enthusiastically offering the credit card to their customers.
The final piece of the puzzle is an ongoing dialogue between frontline employees and their supervisor. Employees are more likely to develop bad habits or deliver poor service if they aren’t properly monitored. Supervisors should regularly observe employee performance and offer praise for good results while providing constructive feedback when employees stray from the guidelines. This continual feedback keeps employees aligned with company goals and prevents them from going too far astray.
This level of involvement can be challenging for supervisors who find it hard to make time to supervise their employees. They may be overwhelmed with administrative duties, have employees working on several shifts or in different locations, or simply have too many direct reports to pay careful attention to each one. In the big picture, companies must carefully design their supervisors’ responsibilities so that they have the ability to spend time coaching and developing their employees. At an individual level, supervisors who work hard to encourage good performance soon discover they have to spend much less time correcting mistakes.
Some supervisors find it easy to spot negative performance, but they have a difficult time remembering to recognize and praise an employee for doing something well. One solution that they may find helpful is to create a simple system to help remind them to spot and encourage positive performance. I know a supervisor who would start each day with five coins in his right pocket. Each time he commended an employee for doing something well he’d take one of the coins and put it in his left pocket. His goal each day was to move all the coins from the right to the left pocket so that he knew he’d made at least five positive observations.
Customer service levels can improve dramatically when employees and employers share the same interests. Employees are much more likely to follow procedures, adhere to policies, and give extra effort when they are committed to the company’s goals. They are also more likely to share rather than suppress valuable customer feedback that can be used for continued improvement.
The Problem with Financial Incentives
Companies often try to solve the principal-agent problem by providing financial incentives for good performance. The assumption is that employees are more likely to act in their employer’s best interests if there’s money on the line. Unfortunately, financial incentives often cause unintended consequences that can lead to worse rather than better service.
Sales commissions are a common form of financial incentive, but they can lead to all sorts of negative results. They may encourage unethical conduct, reduce cooperation among employees, and cause salespeople to focus so much on earning commissions that they ignore other customer service issues. In some extreme cases, sales commissions may lead to fraud or other illegal behavior.4
One of the most famous cases occurred in 1992 when Sears, Roebuck & Company was investigated by several state consumer affairs agencies for alleged fraud and deceptive practices in its automotive department. These investigations found that auto mechanics who earned commissions on the revenue they generated consistently recommended unnecessary repairs in an effort to meet sales goals and earn more money. Sears ultimately eliminated sales commissions for its auto mechanics as a result.5
Employees who receive tips can help us understand the impact of financial incentives for customer service as well. Many service workers, such as food servers, valet parking attendants, and taxi drivers, depend on tips for a substantial part of their income. However, customer service is only one of several factors that influence the size of a tip. Michael Lynn, a professor at Cornell University’s School of Hotel Administration, has conducted extensive research on restaurant tipping and concludes that service quality influences tipping amounts by an average of only 2 percent.6
Social norms and customs provide guidelines for tipping that are generally followed unless customers receive what they perceive as exceptionally poor or exceptionally good service. Furthermore, since tipping is usually based on a percentage of the bill, a customer who orders a bottle of wine in a restaurant will almost certainly tip more than a customer who orders a soda yet receives the same level of service. There are also individual customers who are particularly cheap or incredibly generous when it comes to tipping, so their unusually small or large tips won’t be an accurate reflection of their server’s performance.
Like sales commissions, tipping can result in unintended consequences. Some servers may withhold service from customers they believe will tip poorly. Teamwork may suffer among tipped employees if they believe the extra effort to cooperate won’t result in additional income, and employees might avoid tasks that don’t directly result in a tip.
In a perfect world, employees would be intrinsically motivated to do their job at a high level without any financial incentives. But sales commissions and tips can be an important part of an employee’s income, so it isn’t always practical to completely eliminate them. Businesses that believe they must offer these incentives should carefully design and monitor their use to ensure employees don’t have a strong incentive to treat customers poorly.
One best practice is to align financial incentives with team goals rather than individual ones. Notable entrepreneur and Inc. Magazine columnist Norm Brodsky puts his salespeople on the same bonus system as the rest of his employees rather than a sales-based commission. The result has been a stable sales force that consistently outperforms the competition by working closely as a team and emphasizing long-term customer relationships.7
Tipped employees should pool their tips rather than keep everything they individually collect. While this practice may discourage a few of the highest earners, it promotes more teamwork. When I worked for a parking company, valet locations that pooled their tips had consistently higher service levels than locations that did not. One of our locations switched to a tip pooling system and immediately saw valets take a greater interest in activities that impacted service but didn’t directly lead to tips, such as greeting arriving vehicles and helping guests unload their luggage.
You see the same effect in restaurants. When tips are shared, servers are more likely to help guests in someone else’s section. This team approach raises overall service levels and ultimately increases the tip pool.
Customer service leaders must also monitor employees who receive financial incentives just as closely as they would other employees. Supervisors should never assume that a commission, tip, or bonus provides enough motivation for employees to consistently provide great service. All service employees need periodic coaching and feedback, regardless of how they are paid.
The Unexpected Side of Employee Recognition
Some customer service leaders use recognition programs in lieu of financial incentives as a way of encouraging employees to act in their company’s best interests. They offer small rewards for achieving goals. Unfortunately, even employee recognition programs can backfire.
Steve was the parking operations manager for a large sports stadium. One day, he bought doughnuts for his employees as a way to recognize their hard work and great customer service. The doughnuts were such a hit that he bought them again before the next game. This soon became a tradition, and Steve brought in dozens of doughnuts every time there was an event.
Steve’s employees were initially delighted by the treats, but they soon learned to expect them every time. Some employees got discouraged if they didn’t get their favorite variety, while others got upset with coworkers who made off with more than their fair share. A few employees even complained about getting only doughnuts but never bagels or other pastries.
Steve soon discovered that a reward’s motivational value quickly diminishes once it becomes expected. He realized the doughnuts were no longer considered recognition, yet his employees would be disappointed if he didn’t bring them. He summed up the lesson nicely by saying, “Be careful what you start.”
Some managers use games, contests, and prizes to promote internal competition and to motivate employees to give extra effort. These motivators also have a hidden trap that can lead to unintended consequences. Employees can easily focus too much of their attention on winning the prize while losing sight of the big picture. I remember one such contest when I worked at a clothing store as a teenager.
Christie, the store manager, announced one day that the person who helped the most customers over the course of a week could write his own work schedule for the following week. From my perspective, that was a huge prize, so I went out of my way to help every customer I could and ended up the winner. Christie ran the contest the next week, and I won again, aided in part by my plum work schedule. She finally discontinued the contest when she realized having one part-time employee (me!) name his own hours created scheduling challenges for all the other employees.
The contest may have been great for me, but it hurt both customer service and sales because it gave me an incentive to concentrate on behaviors that would help me win. Since the contest was based on the number of customers assisted rather than on sales, I tried to interact with as many customers as possible. This meant limiting the amount of time I spent with any one person so that I could move on to the next one. It also took my attention away from other duties, such as keeping the dressing rooms clean, refolding clothes in my department, and checking stock for people who called the store.
Recognition can be used as an effective employee motivation tool, but it must be unexpected and occur after a desired outcome is achieved. This way, recognition becomes a way of showing appreciation for good work rather than a means of incentivizing behavior.8 That’s why Steve’s doughnuts were so well received the first time but were soon taken for granted when they became part of the routine.
Unexpected rewards also eliminate the possibility of employees changing their behavior just to win a prize. A client of mine worked diligently to improve its customer service survey scores and encouraged every employee to work toward the team goal. It was only after the employees achieved their objective that my client threw a big party to celebrate their accomplishment. Had the company announced the party ahead of time, the employees’ performance might have declined afterward since the celebration would feel like the end of a journey. The party made employees feel appreciated for what they had accomplished, and making it a surprise motivated them to continue to improve their performance.
Customer Service Standards That Backfire
The industrial era led to the development of management methods that emphasize strict adherence to standard operating procedures. This approach works well in a manufacturing environment where the goal is to produce each widget quickly and to exactly the same specifications. But a series of well-defined processes tends to fall short when applied to relationships between human beings.9
My local grocery store has a policy that requires checkers and baggers to ask customers if they’d like assistance carrying their purchases to the car. The standard was put into place to foster a consistent level of service and to make sure customers didn’t feel discriminated against when one customer was offered assistance while another wasn’t. Unfortunately, this requirement leaves no room for employees to use their own discretion. I once purchased a single pack of gum and my cashier dutifully asked, “Do you need any help out to your car today?”
Service standards like these place employees’ attention on a task (offering assistance) rather than an outcome (customer satisfaction). Employees know they may be monitored by their supervisor or even a secret shopper with a checklist of required actions. Failure to fulfill all the required actions could lead to disciplinary action. On the other hand, employees might receive a small bonus or another form of recognition for maintaining 100 percent compliance with the required customer service actions.
This creates the potential for an employee to receive praise for complying with internal service standards while delivering poor service in the eyes of the customer. Being asked if I needed assistance carrying my pack of gum to the car felt awkward and inauthentic. At the same time, the employee did exactly what she was supposed to do.
Call centers are notorious for requiring their customer service reps to adhere to a long list of standard responses. These calls really are monitored for “quality assurance and training purposes” by a supervisor or quality assurance technician who listens to the call and verifies whether each requirement is met. Unfortunately, these requirements often have little to do with customer satisfaction. Reps who answer the phone using the correct scripted greeting might get points for compliance even if they deliver the greeting in a monotone voice completely devoid of warmth and enthusiasm. On the other hand, reps may be disciplined for failing to upsell even if the customer specifically says, “I don’t want to buy anything else or hear about any other products today.”
Some customer service standards may sound terrific in a marketing meeting but fail to resonate when put into practice. I was once out shopping for shoes and, right after making my selection, stepped into a short line to wait for a cashier. When it was my turn, the cashier called me over by saying, “I can help the next shoe lover over here.” That phrase may have been engineered to accurately reflect the shoe store’s brand positioning strategy, but it felt forced and a little weird in practice.
Like financial incentives and recognition, customer service standards can sometimes lead to unintended negative consequences. A company that provided computer support for its clients routinely included a service-level agreement (SLA) in its contracts. The SLA stipulated an average response time for handling trouble tickets submitted by the client. The service provider’s employees quickly found a loophole in the agreement and began closing trouble tickets without verifying that the problem had been corrected. In many cases, the problem hadn’t been fixed, so the client had to open a new trouble ticket since the previous one was closed. This created an additional hassle for the client, but the practice helped employees meet the standard for average time to close a ticket.
Companies are right to try to create a consistent customer experience, but they’ll find that broad guidelines rather than rigid standards often work best. Guidelines allow employees to adapt to each individual customer’s needs. Ironically, most employees are more likely to act in their employer’s best interests when a checklist of standards is replaced by clear goals.
Nordstrom consistently ranks at the top of a number of customer service surveys, including the American Customer Satisfaction Index. Nordstrom is perhaps the best-known example of a company using broad goals rather than task-based standards to guide employee behavior. All Nordstrom employees receive a five-inch by eight-inch index card that states that the number-one goal is outstanding customer service. The card goes on to explain that the one and only rule is to “use good judgment at all times.”10
Broad guidelines also allow employees to use their individual personalities to make the service they provide more authentic. True Value is consistently recognized for its hardware stores that offer outstanding customer service. Part of True Value’s success comes from a policy of encouraging each employee to rely on his own unique personality. My local True Value hardware store requires employees to greet customers immediately and offer them assistance. How they do it is up to them, as long as it makes customers feel welcome and results in customers finding what they came in to buy.
An employee once greeted me by saying, “What are you doing in here?” I had already made several unexpected trips to the store because I was doing a home project, and this employee had helped me several times over the span of a few days. Each time, we joked that we hoped this would be the last time I’d have to come back in to get supplies for this particular project. This greeting was his friendly way of telling me that he hoped I would soon succeed in completing my project. It put a smile on my face and made me feel quite welcome.
Solution Summary: Getting Employee Buy-in
Aligning employees’ motivation with their company’s interests can be a challenging task, but it’s an essential part of building an organization capable of delivering outstanding customer service. Companies should strive to put employees in a position where their intrinsic motivation leads them to the right action, rather than try to manipulate employees through incentives that may have negative side effects.
Here is a summary of the solutions presented in this chapter:
• Hire people who will love their job and love your company, so they’ll naturally want to do what you ask them to do.
• Involve frontline employees in decision making and problem solving so that they will take ownership of company goals.
• Frequently monitor employee performance so that you can recognize positive achievements and correct mistakes.
• If you must use financial incentives such as commissions or tips, be sure to align them with team goals rather than individual accomplishments.
• Don’t assume that commissioned or tipped employees need less supervision than employees who aren’t paid by their performance. They require the same monitoring and coaching as anyone.
• Make employee recognition an unexpected event and offer it only after good performance. This approach shows employees they are appreciated while keeping their focus on customer service rather than earning a prize. Use broad service guidelines rather than detailed standards to allow for more flexibility and personalization.
Notes
1. Kathleen M. Eisenhardt, “Agency Theory: An Assessment and Review,” Academy of Management Review 14, no. 1 (1989), pp. 57–74.
2. John Goodman shared this statistic in his presentation called “Treating Employees as Customers” at the International Customer Management Institute (ICMI) Dreamforce 2010 conference, San Francisco, December 8, 2010.
3. Tony Hsieh, Delivering Happiness: A Path to Profits, Passion, and Purpose (New York: Hachette Book Group, 2010).
4. Lisa D. Ordóñez, Maurice E. Schweitzer, Adam D. Galinsky, and Max H. Bazerman, “Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting” (working paper, Harvard Business School, Cambridge, 2009).
5. Lawrence M. Fisher, “Sears Auto Centers Halt Commissions After Flap,” New York Times, June 23, 1992.
6. Robert J. Kwortnik Jr., W. Michael Lynn, and William T. Ross Jr., “Buyer Monitoring: A Means to Insure Personalized Service,” Journal of Marketing Research 46, no. 5 (October 2009), pp. 573–583.
7. Norm Brodsky and Bo Burlingham, The Knack: How Street-Smart Entrepreneurs Learn to Handle Whatever Comes Up (New York: Penguin Group, 2008).
8. Daniel Pink, Drive: The Surprising Truth About What Motivates Us (New York: Riverhead Books, 2009).
9. John H. Fleming and Jim Asplund, Human Sigma: Managing the Employee-Customer Encounter (New York: Gallup Press, 2007).
10. Patrick D. McCarthy and Robert Spector, The Nordstrom Way: The Inside Story of America’s #1 Customer Service Company (New York: John Wiley & Sons, 1995).