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What Great Service Leaders Know and Do

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Entire service businesses have been built around the ideas of Heskett, Sasser, and Schlesinger, pioneers in the world of service. Now they test their ideas against the actual experiences of successful and unsuccessful practitioners, as well as against demands of the future, in a book service leaders around the world will use as a guide for years to come.

The authors cover every aspect of optimal service leadership: the best hiring, training, and workplace organization practices; the creation of operating strategies around areas such as facility design, capacity planning, queue management, and more; the use—and misuse—of technology in delivering top-level service; and practices that can transform loyal customers into “owners.”

Looking ahead, the authors describe the world of great service leaders in which “both/and” thinking replaces trade-offs. It's a world in which new ideas will be tested against the sine qua non of the “service trifecta”—wins for employees, customers, and investors. And it's a world in which the best leaders admit that they don't have the answers and create organizations that learn, innovate, “sense and respond,” operate with fluid boundaries, and seek and achieve repeated strategic success.

Using examples of dozens of companies in a wide variety of industries, such as Apollo Hospitals, Châteauform, Starbucks, Amazon, Disney, Progressive Insurance, the Dallas Mavericks, Whole Foods, IKEA, and many others, the authors present a narrative of remarkable successes, unnecessary failures, and future promise.

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8 Chapters

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1 Leading a Breakthrough Service Is Different

ePub

What great service leaders know: leading a breakthrough service is different.

What great service leaders do: they take steps to ensure repeated memorable service encounters.

Robert Nardelli left General Electric to become CEO of Home Depot in 2001. Expectations were high for Home Depot, the home improvement retailer whose growth had slowed when Nardelli took over. After all, he had already led several GE manufacturing operations to great success.

At Home Depot Nardelli found that the stores were staffed with knowledgeable, full-time employees, sometimes more than were absolutely necessary. He led a move to hire more part-timers, many with less expertise in home improvement, in order to size the retail workforce to customer traffic patterns. The move backfired. Customers noticed immediately that their favorite employees on the floor were no longer there. Soon after, Nardelli was no longer there.

 

2 Shaping Service Strategies That Deliver Results

ePub

What great service leaders know: customers buy results and value, not services or products.

What great service leaders do : they focus on results and value for the right customers, as well as on the employee and customer value equations that produce them.

Some organizations clearly know to whom they will and, more importantly, will not sell their services. Private banking organizations impose minimum limits on the available wealth of the customers they will accept into their investment counseling and management programs. The advertising agency TBWA\Chiat\Day passes up prospective clients who are not interested in its philosophy of “disruption” that the organization applies in designing and implementing marketing programs. These organizations have a clear market focus, something that is worth a great deal on the bottom line.

A growing number of organizations understand that their customers do not primarily seek products or services. Rather, they’re looking for results and value. This is particularly true for manufacturers that add services to their product line to deliver a package of offerings designed to provide solutions to problems. GE Aircraft sells engine uptime and productivity rather than just the engines themselves. As we mentioned earlier, IBM centered its renaissance several years ago on its Global Solutions business. In some cases this has led the company to operate entire turnkey data centers for its customers. In other cases, it has encouraged clients to replace their data centers with cloud-based services supplied by IBM.

 

3 Designing Operating Strategies That Support the Service Vision

ePub

What great service leaders know: the best service operating strategies don’t require trade-offs.

What great service leaders do: they foster both/and thinking in designing winning operating strategies.

One or two companies in an industry produce off-the-chart performance while changing the rules of the game by which competition occurs around the world. Each of these organizations exhibits a well-thought-out strategic service vision. You know these breakthrough service organizations when you see them, hear what their leaders have to say, and watch them act out their beliefs.1 While they are not necessarily the largest in their respective industries, they do share a few things in common. For example, organizations producing outstanding performance on two important dimensions of breakthrough service, “best places to work” and “best customer service,” show an unusually high, statistically significant overlap. In fact, 20 percent of the organizations found among Bloomberg Businessweek’s Customer Service Champs from 2009 through 2013 also appeared on Fortune’s 100 Best Companies to Work For, after eliminating manufacturers from both lists (figure 3-1).2

 

4 Creating and Capitalizing on Internal Quality—“A Great Place to Work”

ePub

What great service leaders know: great service starts with the frontline employee.

What great service leaders do: they hire for attitude, train for skills.

It’s fashionable for CEOs to proclaim that, in their organizations, “people are our most important asset.” In the majority of service organizations, that is literally true. For these firms, people represent by far the largest cost—as well as the greatest opportunity—for differentiation. Employees are the heart, figuratively and literally, of the service profit chain. British historian Theodore Zeldin—who studies the history of work—commented to a reporter that, in the reporter’s words, “the world of work must be revolutionized to put people—rather than things—at the centre of all endeavours.” Zeldin continued: “I remember talking to some CEOs in London. One of them said, ‘We can no longer select people, they select us.’ If we want the best people and we want to attract them, we have to say: ‘What do you want in your job?’ “1

 

5 The Nuts and Bolts of Breakthrough Service Operations

ePub

What great service leaders know: effective service operating strategies have to create value for employees, customers, and investors.

What great service leaders do: they ensure the achievement of the leverage and edge that produces win-win-win results—the service trifecta.

Caesar’s Entertainment, the gaming company, has a policy for its high-lifetime-value customers (called Diamonds and Seven Stars in the company’s Total Rewards customer loyalty program) that calls for them to always be next in line for whatever service they seek at a Caesar’s facility. Additional lines will be created for them if necessary. Thus, at cashiers’ windows, if the line for high-value customers has two or more people in it, another line for customers of lower value (Golds or Platinums) will be closed, and the Diamonds and Seven Stars will be ushered to the front. If Gold customers complain, Caesar’s associates are advised to counsel them that if they increase their loyalty to the Caesar’s casino, they too may someday qualify for Diamond or Seven Star status. What they can learn from the Total Rewards brochure is that they will have to raise their value to Caesar’s from $2,000 lifetime as Golds to $100,000 lifetime as Diamonds or $50,000 a year as Seven Stars by increasing their patronization, regardless of whether they win or lose at the slot machines or gaming tables.

 

6 Develop Winning Support Systems

ePub

What great service leaders know: the best uses of technology and other support systems create frontline service heroes and heroines.

What great service leaders do: they use support systems to elevate important service jobs and eliminate the worst ones.

Technology, networks, and facilities are as important to services as they are to manufacturing operations. However, for service leaders, decisions regarding the design and application of support systems comprising these elements become more complex because they often have to take into account the impact the decisions have, not just on investors but on service providers and their customers.

Too often service leaders get priorities wrong or leave out one of the important constituencies of change, most often employees. Those who have studied the problem have concluded that “it is tempting to blame poor quality on the people delivering service but frequently the real culprit is poor service system design.”1

 

7 services Marketing: Foster Customer Ownership

ePub

What great service leaders know: satisfying customers is not enough.

What great service leaders do: they take steps to develop a core of customers who are owners.

We’ll be up front about it. The purpose of this chapter is to convince you that much of conventional marketing theory and effort is misdirected, especially when applied to the marketing of services. Because such marketing effort is insufficiently focused, it is not just wasteful, but it overlooks the fact that no more than 10 percent of the customers of many, perhaps most, service organizations represent all the profit. They are what we have come to regard as “owners”—customers who are loyal and engaged and who provide referrals, ideas for new services, and suggestions for ways to improve the service encounter. A core of owners, as few as one in 20, can replace most conventional marketing activities.

We saw what happens when employees act as owners in chapter 4. Mabel Yu stood her ground and even faced ridicule as she helped her employer, the Vanguard Group, avoid buying exotic, risky investments before the economy crashed in 2008. Customers can also have a significant impact on service cost and value when they act as owners and co-creators of service. They do that at La Villa Gallarati Scotti in northern Italy, one of more than 30 château-style seminar and meetings venues operated by Paris-based Châteauform’. A seminar there in which one of us (Heskett) taught provided a reminder of the power of the customer in creating value in a service.1

 

8 Leading for the Future of Services

ePub

What great service leaders know: their current beliefs about the future of services are wrong.

What great service leaders do: they build agile service organizations that learn, innovate, and adapt.

When he was asked recently about the future, Herb Kelleher, CEO emeritus of Southwest Airlines, who was well known for cultivating a freewheeling image to go with Southwest’s culture, commented that, “I’ve always tried to look a little bit ahead, at least when I’m sober—and when I’m not, I look way ahead!”1

Fourteen views of the future of services that we’ve expressed or implied throughout the book are presented in the sidebar. To these we have added a 15th to reflect the discussion to come. All were formed while we were fully sober!

If there is one thing we’re certain about, it is that some of the observations in the sidebar are wrong. We just don’t know which ones. To make matters more interesting, we’re convinced that the leaders with whom we engage don’t know either. What’s just as important is that they can’t be certain how these changes are going to affect their jobs or organizations.

 

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