Your Employees Are Double Agents
Bridging the Gap Between Doing the Right Thing for the Customer and Following Company Policy
Some customer service situations are frustrating for both the customer and the employee. I had one of these mutually challenging experiences when I purchased a paper shredder at my local office supply store. The shredder was intended to replace one I’d thought was broken, but after returning home with the new shredder I discovered that the old shredder had stopped working because of a user error. (It appears those safety features designed to protect you from shredding your fingers actually do work!) This seemed like a happy discovery until I looked at the receipt and saw it was clearly marked EXCHANGES ONLY—NO RETURNS.
This “no shredder returns” policy was apparently an exception to the store’s 100 percent satisfaction guarantee that allows you to return an item for a refund within thirty days of purchase. I hadn’t removed the new shredder from the box, so I took it back to the store and tried to return it, despite the warning on the receipt. The customer service associate listened to my story and then meekly explained that shredders could not be returned.
“Can I get store credit?” I asked. The associate told me they weren’t able to provide store credit, even though the shredder hadn’t been removed from the box.
I tried another tactic. “I know this was my mistake, but are there any other options besides being stuck with a shredder I don’t want or need?”
This was a no-win situation for the employee. He obviously saw the logic of my argument, but he was under strict instructions not to allow any shredders to be returned. He could violate the store’s policy and return the shredder, but then he’d likely get in trouble. He could refuse to return the shredder, but then he’d run the risk of making a customer angry who would probably complain to his boss.
The employee finally offered to get his manager to see what he could do.
I retold my story when the store manager appeared, acknowledged my error, and asked him for his assistance. The manager looked at my unopened shredder and quickly realized the “no shredder returns” rule wasn’t written for my situation. To my surprise and pleasure, he promptly refunded my money.
In this chapter, we’ll see how service failures like the one I narrowly avoided can occur when employees are forced to balance the competing needs of their employer and their customers. We’ll examine how customer service representatives ultimately make decisions that are in their own best interests when these types of conflicts occur. We’ll even look at some surprising research that suggests customer service leaders are more likely to create these sorts of situations when they don’t have direct customer contact.
In Chapter 3, we examined the principal-agent problem, where companies sometimes struggle to get their employees to act on their behalf. Customer service employees can often feel like double agents because they serve two principals: their employer and the customer. As a result, three sets of self-interest are present, and potentially competing, in every customer service interaction.1
Let’s look at the office supply store example and imagine each party’s interests in this situation (as summarized in Figure 4-1).
Figure 4-1. One customer service interaction, three sets of self-interest.
Are the three parties’ interests incompatible? The store manager’s “no returns or exchanges” policy certainly makes it seem that way to the employee. The policy was written because the store can’t resell a shredder that’s been used, and management wanted to provide employees and customers with clear and unambiguous guidance. But my situation was a gray area that couldn’t easily be addressed with a black-and-white policy. The shredder hadn’t been removed from the box and could be resold even though the employee didn’t have the authority to make the right decision. He was stuck between the policy and common sense.
Rigid policies that don’t allow for employee discretion, even when they become absurd or unfriendly to customers, can lead to a double agent problem. A stadium concession stand may be covering its legal risk by requiring employees to check ID on anyone buying alcohol, but it could be annoying to a seventy-year-old customer with gray hair and a wrinkled face who didn’t bring his ID when he went to buy a beer. A customer who calls her cable company to discuss a billing issue may not be in the mood to hear the customer service rep make a required sales pitch about premium channels. A store that requires customers to check their bags at the front may deter a few thieves but may also turn off quite a few customers who are made to feel that they can’t be trusted not to steal.
Employees who feel caught in the middle can sometimes make matters even worse if they try to remain neutral. Some double agents have even developed their own customer service phrases that highlight their frustration. If you’ve ever encountered a double agent you may have heard a few of these phrases:
“Hey, I don’t make the rules.”
“I just do what I’m told to do.”
“You’ll have to ask the boss why we do it this way.”
Do any of those phrases sound familiar? They are used by employees attempting to disassociate themselves from their company. But, as you may recall from Chapter 3, customers tend to view the company and the customer service representative as one and the same. Double agent employees who try to remain neutral may come across to customers as just lazy or uncaring; rather than engendering any sympathy for their dilemma, their comments and behavior have the opposite effect.
Companies offering outstanding customer service avoid creating double agents by eliminating the potential for conflict between their customers and their employees—and that means eliminating the factors that create double agents in the first place. They rigorously avoid policies that are obviously unfriendly to their customers. They try to see beyond the value of each individual transaction to understand the value of a happy customer, and they empower their employees to do the same.
Companies set rigid policies because they worry about customer abuse or employee error. For example, the office supply store may worry about losing money if it allowed customers to return shredders that couldn’t be resold. Giving employees the discretion to determine if merchandise is resalable may not ameliorate such a problem in the minds of corporate policy makers if they don’t trust their frontline employees to make good decisions.
You have to speak the language of business to get past this fear, so let’s see what happens when we run some numbers on shredder returns. The average gross margin for retail office supplies is 38.7 percent.2 That means a $100 shredder costs the store an estimated $61.30 ($100 – [38.7 percent × 100]). By this estimate, the store stands to lose $61.30 if it accepts a returned shredder that can’t be resold or returned to the manufacturer. That looks like a sizable loss on one item.
Now let’s look at the bigger picture. I spend an average of $500 per year at this store. This translates to an annual gross profit of $193.50 at a 38.7 percent average gross margin. When we compare that to the potential loss of $61.30 on the shredder return, we see that my average contribution to the office supply store’s profitability is more than three times what the store would lose by refunding my money for a shredder that can’t be resold.
The business case now looks a little different. The store could lose $61.30 if it took back a shredder that can’t be resold, but it would lose $193.50 that year if it refused the return and I decided to take my business to a competitor. Of course, the store wasn’t in danger of losing anything since the shredder I returned was unopened and could easily have been resold. In retrospect, the frontline customer service associate was needlessly put in a double agent position by a bad policy.
L.L.Bean is an example of a company that has built a reputation for outstanding customer service with the help of a generous returns policy. The retailer realizes the key to long-term success is making sure customers are happy with their products and trusting that the majority of customers won’t abuse this generosity. This philosophy helped L.L.Bean earn the number-one ranking on Businessweek’s 2010 Customer Service Champs list.3 The company’s return policy is clearly posted on its website. Here is what is says:
Our products are guaranteed to give 100% satisfaction in every way. Return anything purchased from us at any time if it proves otherwise. We do not want you to have anything from L.L.Bean that is not completely satisfactory.4
L.L.Bean’s return policy means its employees aren’t stuck between the customer and the company when a customer is unhappy with a purchase. According to a former L.L.Bean employee named Dennis, customer service representatives are instructed to make it easy for a customer to return a purchase: “It was never a question about returns. Customers would call to ask how to return something, and I’d just give them the information on how to return it.”
Creating policies that some customers won’t like can sometimes be unavoidable. A coffee shop may impose a one-hour time limit on customers sitting at a table during peak hours because without the policy people would take up tables for half the day at the expense of other customers. However, frontline employees should still be given as much discretion as possible when it comes to enforcing this policy. A one-hour time limit may make sense when people are waiting for a place to sit, but it would seem unfriendly on a slow day with plenty of tables to go around.
The bottom line when it comes to avoiding double agent situations is trust. Companies that distrust their customers and employees end up creating rigid policies that cause employees to get stuck between a rock and a hard place. On the other hand, companies that emphasize trust, generosity, and goodwill almost always create more positive and profitable relationships between their employees and customers.
When customer service employees feel caught between their employer and their customer, their actions may be decided by their perception of risk vs. reward. On one hand, they can follow the employer’s policies and avoid getting into trouble with their boss, but this course of action may risk angering the customer. On the other hand, they can side with the customer and be rewarded with the customer’s gratitude, but then they risk getting into trouble for violating the company’s policy.
Employees experiencing conflict in double agent situations tend to be influenced by two factors:
1. Whether their actions are monitored
2. What the consequences are for pleasing or displeasing each principal
Employees are more likely to side with their employer over the customer if their actions are being monitored and they are at risk for being reprimanded. Call center employees tend to be sticklers to company policy since many of their calls are recorded and reviewed. Employees who work in close proximity to their supervisor know their supervisor may be watching them at any given time. Any transaction that results in an electronic record also increases the chances that a double agent employee will side with the company.
Returning the shredder at the office supply store required a transaction that would be captured in the store’s computer. Toeing the line and refusing a shredder return makes sense from the employee’s perspective because a refund for a shredder is likely to be noticed. The store’s computer may have even required a manager override to approve the transaction, so the employee couldn’t do it without the manager’s knowledge.
Employees’ risk vs. reward calculation may change when they are not easily monitored. Employees who work autonomously or whose work is not digitally monitored are less likely to be observed by their supervisor. Double agent employees may be more likely to side with their customers if they think they won’t get caught.
My wife and I often bring our own bottle of wine when dining at a restaurant. This is fairly common practice in California, where many people are wine enthusiasts and liquor laws allow it. Restaurants typically charge a $15 to $25 corkage fee to open and serve the wine, which is usually much less than the markup on wine purchased from the restaurant. The corkage fee ensures restaurant owners will still make a nice profit, even though customers aren’t buying the wine from them. Over the years, though, I’ve observed that servers waive the corkage fee nearly 20 percent of the time. We don’t ask them to waive the fee; it just doesn’t appear on the bill. This happens even more when we’re regular guests at the restaurant and have gotten to know the servers, or when we are dining with a larger group and bring in more than one bottle.
Waiving the fee saves us money, but it costs the restaurant revenue. So why do they do it?
The decision to waive the corkage fee may come down to the incentives and disincentives that guide a double agent’s behavior. Unlike a shredder return at the office supply store, where all transactions are recorded in the store’s computerized cash registers, the restaurant’s corkage fee is harder to monitor. Since we’re bringing in our own bottle, no wine comes out of the restaurant’s stock. Also, drinking wine with the meal that we’ve ordered doesn’t necessarily signal that a corkage fee is in order.
This leads to the second factor that influences an employee’s risk vs. reward calculation—the consequences involved. Restaurant corkage fees can generate complaints from customers who aren’t used to the practice or who believe the fee is too high. On the other hand, waiving the corkage fee is an easy way for our server to give us a little something extra with our meal. It’s a good chance we’ll be happier with the service and increase the server’s tip correspondingly.
Employees will sometimes engage in unethical or even illegal behavior when their actions are unmonitored and the rewards are great enough. A nightclub bouncer could put the club’s liquor license at risk if he lets in an underage drinker, but a small bribe might get him to look the other way if a manager isn’t watching. These bribes might add up to become a significant source of income and could outweigh any fear of getting caught and losing his job.
Companies can do several things to help their employees make better decisions in situations where their customers’ demands seem at odds with the organization’s best interests. As discussed previously in this chapter, the first step is to institute more customer-friendly policies. Employees have less incentive to act on their own when their company’s interests are aligned with the customers’.
Let’s look back at restaurant corkage fees. Many restaurants have eliminated this problem by opening a small wine shop or partnering with a local wine merchant to offer a wide selection of wine at reasonable retail prices. One of my favorite restaurants in San Diego, Cucina Urbana, charges a modest $7 fee to open a bottle of wine purchased at its store. This policy encourages more customers to buy wine from the restaurant rather than bring their own. Since customers generally like this policy, servers feel less pressure to waive the small fee to prevent complaints.
Nevertheless, careful monitoring is important to give employees less incentive to act on their own. When I worked for a parking management company, we often increased revenue by 30 percent or more when we took over a parking garage from a competitor. Our secret was a rigorous auditing process that discouraged employee theft and ensured customers were charged the appropriate parking fee. People don’t like to pay for parking, so complaints were a natural part of the business, but employees knew they would be caught if they gave in to the demands of an unreasonable customer and lowered or dropped the fee.
Training is another way to prevent employees from becoming double agents. There are certain situations, like charging a parking fee, where it may be impossible to align the company’s and the customer’s interests. Employees who have the skills to effectively handle tricky situations are less likely to give in to a customer’s unreasonable demands.
One of the best techniques employees can learn is to provide options instead of saying “No.” The word no can trigger a customer’s anger because it makes her feel powerless. Providing options is usually more acceptable since it invites the customer’s cooperation. For example, at the parking company, I trained attendants to give customers the option of paying the full fee or going back into the building to get their parking validated when applicable. Customers were much less likely to get upset when it was their choice, and most of them chose to pay the full fee rather than spend extra time obtaining a validation just to save a few dollars.
Getting Employees to Do the Dirty Work
The television show Undercover Boss exposes an interesting bit of workplace psychology: It’s easier for bosses to ask an employee to do something unpopular than it is for them do it themselves.
In each episode of the show, an executive dons a disguise to avoid being recognized and goes “undercover” to shadow employees working frontline positions in his or her own company. The boss’s goals for participating in the show usually include seeing if executive decisions are truly being carried out on the frontlines. During the show, the bosses almost always make surprising discoveries about the quality and consequences of those decisions.
One episode featured Michael Rubin, CEO of GSI Commerce. GSI Commerce provides marketing, customer service, and order fulfillment services to help companies like Major League Baseball sell merchandise. Rubin found himself squarely in the middle of the double agent problem during a segment where he took customer calls in the escalations department of one of the company’s call centers.
An upset customer called because she discovered she was being charged $149 for a $99 item. The customer wanted to pay the correct price of $99 but was told the company policy was to charge her $149 and then issue a $50 credit to fix the error after the item had shipped. Her call had been transferred to the escalations department, and now Rubin had to handle the irate caller.
The undercover CEO struggled. Simple logic dictated that the customer should pay the correct price, but his own company policy didn’t allow him to make this adjustment. The customer’s anger, coupled with his inability to do anything about it, left him at a loss for words. Danielle, the call center employee he was shadowing, had to step in and take over the call.
Danielle was now facing the double agent dilemma. Unaware that she was sitting next to the company CEO, she resorted to treating the customer rudely.5 At one point she informed Rubin that the way to handle the customer was to sound confident and “put her in her place.”
Unfortunately for Danielle, Rubin was able to step back into the role of CEO when she took over the call from him. His focus shifted from the obvious discomfort of the double agent dilemma to annoyance at how rudely Danielle was treating the customer. Danielle’s performance, not the restrictive policy, became the focus of his attention.
Each Undercover Boss episode ends with a segment where the employees the boss has shadowed are called to the corporate office. Here they discover whom they were actually working with. During this segment, Rubin reprimanded Danielle for her performance and told her that he was going to have her retrained. He made no mention of addressing the policy that caused the problem in the first place.
John Hamman, George Loewenstein, and Roberto Weber are social scientists at Carnegie Mellon University who discovered a possible explanation for Rubin’s behavior. They conducted an experiment where participants were given $10 and instructed to share as much of it as they’d like with another participant. Next, they were asked to repeat the experiment, but this time they used an intermediary (i.e., an employee) to share the money on their behalf. On average, participants shared $1 less when using an intermediary than when they shared the money directly.6
The implication of the experiment—and of the Undercover Boss segment—is that unfavorable or unethical policies are easier for managers to implement if they don’t have to carry them out themselves. Insulated from angry customers and frustrated frontline employees, executives turn to data such as financial statements, cost/benefit analysis, and other tools to make decisions that impact customer service. Executives who are really out of touch may dismiss any negative feedback as the viewpoint of a small minority rather than something to be legitimately concerned about.
Bank of America grabbed headlines in September 2011 when the bank announced it would begin charging customers a $5 monthly fee for making purchases with their debit card.7 Consumer outcry was loud and swift, but CEO Brian Moynihan initially defended the decision as being in the best interests of the company and its shareholders. In an interview with CNBC’s Larry Kudlow, Moynihan explained that the fees were an effort by the bank to be transparent and up front with its customers while maximizing profitability. Moynihan was insistent that the decision to implement the fee was made only after gathering extensive feedback from customers, and he was convinced that customers would accept the fee in the long run.8
However, Bank of America faced a wave of criticism from its customers in the month that followed. One customer collected 153,000 signatures on a petition denouncing the fee.9 The Credit Union National Association released a study that suggested as many as 650,000 customers had transferred their accounts to a credit union in response to fees at Bank of America and other institutions.10 Protesters even organized a nationwide Bank Transfer Day to encourage people to move their accounts in response to new bank fees.
Moynihan was undoubtedly aware of the bad press, and he repeatedly had to answer questions about the $5 fee as he made the rounds on the talk show circuit. What he didn’t have to do was spend his day working face-to-face with the bank’s angry customers. That was left to the tellers, the call center representatives, and other employees who were on the frontlines of customer service.
Ultimately, Bank of America relented to the growing pressure and dropped its plans to implement the $5 monthly debit card fee. In an interview published in the Boston Globe, Moynihan admitted the fee was a mistake: “We didn’t do our best work there. We did a lot of testing, but the customer spoke and we pulled it back.”11
My own bank, a Bank of America competitor, also raised fees in 2011 that drove customers to other banks. Customer after customer came in to close their accounts or complain about the new fees, and this constant criticism began to wear on the bank’s frontline employees. Several employees told me that they felt frustrated and powerless because the bank had sent letters to customers to explain the fees, but they were the ones who had to field the complaints, try to justify the decision, and make what was often a futile attempt to retain the customer’s business.
The solution to avoid being insulated from customers is quite simple. Executives must spend time on the frontlines to see what is really going on in their operations. They should listen directly to customers and frontline employees so that their decision making is influenced by real feedback and not just aggregate numbers on a spreadsheet or a slick presentation from the marketing department. They should observe their operations to see if employees are truly delivering the kind of service they expect their customers to receive. And they should take time to carefully explain strategic decisions and policy changes, so employees have an opportunity to understand and embrace their leader’s vision.
This leadership approach is sometimes referred to as “management by walking around” and has been practiced by many legendary customer service leaders. Walt Disney, Bill Marriott, and In-N-Out founder Harry Snyder were all famous for their willingness to view their business from the ground level to understand what was really happening. William Rosenberg, the founder of the Dunkin’ Donuts franchise, tirelessly visited his franchisees to ensure their food quality and customer service met his exacting standards. He was even known to dump out a batch of coffee if it wasn’t fresh enough when he visited a Dunkin’ Donuts store.12
Solution Summary: Avoiding the Creation of Double Agents
The double agent problem comes from a conflict between the company and the customer, with the employee stuck in the middle. The ultimate solution for any company trying to provide outstanding customer service is to identify these harmful pressures and neutralize them as much as possible. It should be easy and natural for an employee to want to do the right thing for both the customer and the company.
Here is a short summary of specific ways to help employees avoid becoming double agents:
• Avoid policies that are certain to anger customers and require your employees to face their displeasure.
• Whenever possible, allow employees to use their discretion when carrying out corporate policies; give them the flexibility to meet the needs of the company and the customer.
• Look beyond a single transaction to consider the lifetime value of a customer when setting restrictive policies or implementing new fees.
• Trust that the vast majority of your employees and customers are not trying to take advantage of you.
• Make sure employees are adequately monitored so that you can guide their performance.
• Identify and eliminate incentives that may cause employees to act against the company’s best interests.
• Spend considerable time interacting with employees and customers, to avoid becoming insulated from reality when making policy decisions.
1. Susan R. Ellis, Siegfried P. Gudergan, and Lester W. Johnson, “The Satisfaction Mirror as a Principal-Agent Problem,” paper presented at the ANZMAC (Australian and New Zealand Marketing Academy) Conference, December 1, 2000.
2. The Retail Owners Institute (www.retailowner.com), 2010 figures. I also reviewed financial statements from Office Depot, Staples, and Office Max and verified this approximation of gross margin as reasonably accurate for the purposes of this discussion.
3. Michael Arndt, “L.L.Bean Follows Its Shoppers to the Web,” Bloomberg Businessweek, March 1, 2010.
4. “Guaranteed to Last” return policy, www.llbean.com.
5. Danielle was interviewed by Roy A. Barnes for a Yahoo! blog. In the interview, Danielle said the actual call lasted about ten minutes, but portions of the call were not aired on the show. The blog post is available at http://voices.yahoo.com/undercover-boss-gsi-commerce-episode-5702070.html.
6. John R. Hamman, George Loewenstein, and Roberto A. Weber, “Self-Interest Through Delegation: An Additional Rationale for the Principal-Agent Relationship,” American Economic Review 100, no. 4 (September 2010), pp. 1826–1846, http://sds.hss.cmu.edu/media/pdfs/loewenstein/Self-InterestThruDelegation.pdf.
7. Blake Ellis, “Bank of America to Charge $5 Monthly Debit Card Fee,” CNNMoney.com, September 29, 2011.
8. Jennifer Liberto, “BofA Chief: We Have a ‘Right to Make a Profit,’” CNNMoney.com, October 5, 2011.
9. Devin Dwyer, “Bank of America Customer Delivers 153,000 Signatures in Petition Over Fee,” ABC News Blogs, October 6, 2011.
10. Credit Union National Association, “Rising Fees at Banks Spark Consumer Action During October in Run-up to ‘Bank Transfer Day,’” news release, November 3, 2011.
11. Todd Wallack and Shirley Leung, “Moynihan: ‘Our Job Is to Be Fair to Consumers,’” Boston Globe, December 21, 2011.
12. William Rosenberg with Jessica Brilliant Keener, Time to Make the Donuts (New York: Lebhar-Friedman Books, 2001).