Customer satisfaction is good for business

The quote “if you build it, they will come” (of rather “he will come”) is from the movie Field of Dreams (1989) and often used to indicate that if you take a chance, good things will follow (or something of the kind).

I was reminded of this in the most wonderful and service management related way the other day, when I was part of a management-team meeting of our company. Our organisation (a service ‘outsourcer’ by lack of a better word) is set-up according to our various customers, who are each managed by a ‘Service Delivery Manager’ or SDM; kind of a Service Level (Process) Manager in ITIL terms.

One of the great things about our company is that these SDMs are not primarily managed on financial performance figures, but on service targets. There is financial oversight, but this is more looking at trends rather than at the performance of a single month.

We understand the theory of this: service deliver value or rather value-for-money and as long as the customer is satisfied with the value received, they will pay the money\cost\price involved.

This is actually not as common as you would like to hope\see in the industry where plenty of organisation are chasing the mighty dollar (or currency of your choice).

During the management meeting the financial trends were presented, together with some other corporate governance KPIs, mainly the customer satisfaction ones. We have ‘independent’ relationship managers, who perform standard customer satisfaction surveys at each of our customers, twice-a-year. The key KPIs are the satisfaction of the customer with the service from, and of the relationship with our organisation.

In general we cannot complain about customer satisfaction. We have ‘100% referencability’ in our core values and so far (18 years+) we have not lost a customer. This despite the fact that we discuss (and even plan) ‘transitioning out’ as part of our service design. It’ll be interesting to see if this works (if\when it is ever used) and whether we’ll be able to maintain referencability even after we've parted with a customer (we think this is possible).

Compare this to a recent transition meeting between us (as the new provider) and the incumbent (and leaving) provider; we witnessed a literally high-fiving project- and account-manager of the other organisation as they had increased their fee\price for the transition OUT. Not really a long-term view.

But back to the customer satisfaction KPIs. They showed a range of satisfaction, ranging across the usual scales of 1 – 5 (with 5 being extremely satisfied). Only a few of the customer were around the median of neither satisfied nor dissatisfied (and the rest above). Interestingly we mostly saw a slightly higher score on the relationship satisfaction than on the service target one, which indicates that the customer more-or-less understood why targets were not always met.

With two customers in particular it was ‘hard going’ during the past year. In general theses were relatively new customers and we had to work hard on maturing our relationship with them and the service agreement in tow.

This is actually a common occurrence: after the honeymoon of a new contract and the transition period, there is normally a phase of some tension. The agreement\contract may have been overly strict or 'aspirational' and/or not everything has turned out the way it should have. Black-and-white the customer will blame the outsourcer for this (lack of delivery), and the outsourcer blames the customer (lack of information\participation). In extreme cases this is where an SLA becomes the stick to hit each other with, depending on whether something is or isn't defined within.

However, if both parties manage to work together through this period, this normally leads to a contract variation which is more realistic for both parties. This then becomes the start on which a more constructive relationship can develop leading to better outcomes.

This is not just theory, but something that actually happened with those two customers in question and we saw the service & relationship satisfaction increase when the contractual hurdles were addressed and the focus was turned towards beneficial outcomes (for both).

Next was the presentation of the financial performance of each of the contracts. Luckily for us did most accounts show a healthy performance. It became interesting again with those two specific customers where the first part of the year showed a declining (‘though not necessarily negative) performance.

This trend was turned at roughly the same time when satisfaction turned around as well!

And remember that our SDMs are not managed on financial performance, this was the first time they actually were shown these numbers. During the year they had been focusing and working on meeting the service targets and changing the relation with the customer. This hard work, focused on service performance, not only showed success in that area, but subsequently changed the financial performance of the accounts as well!

What a powerful message: rather than focusing on financial performance it actually pays for an outsourcer to focus on service performance and the relationship with the customer. To paraphrase the quote from the start: “If you give them service, the money will come!”

the ITIL Zealot
March 2013

The wax-on & wax-off of SLM

I am a great fan of analogies. I think it makes it so much easier for people to understand the service management theory if they can relate it to something already very familiar. My favourite one for describing the essence of a service (delivering value without the ownership of specific costs and risks) is public transport:

• You use the bus (or train) without worrying about the mechanics (bus-technology, maintenance, etc.)
• You pay a fixed-price every time (not related to variable fuel-prices, drivers-salaries etc.)
• It gets you where you want to go, in a certain time (=value)

Whilst there is still costs (the fare) and risks (you could have an accident), you don’t have to worry about these and can instead concentrate on other things during the journey (in my case angry birds).

I could go on-and-on about this and other analogies (and probably will, but in other blogs) but for this time I want to look at the one I use to explain the activities of the Service Level Management (SLM) process. In fact this is not so much an analogy, but a ‘depiction’ with a reference to pop-culture.

It is based on an old (v2) diagram showing the different activities in two circles. The first cycle is around the ‘define-document-&-agree’, the second ‘monitor-measure-&-report’. Originally these circles rotate similarly (clockwise), but in my depiction I have turned one around so they turn ‘into each other’. This way they become the wax-on and wax-off of SLM (the pop-culture reference to the Karate Kid, either the original or the half-hearted remake with Will Smith’s kid and Jackie Chan as Mr. Miagi).

Apart from (hopefully) a good laugh, and a great way of memorising the various activities, I think there is also a lot of benefit in this depiction:

The two circles represent two distinct activity-streams within Service Level Management. I have earlier retold how the perception of the Design (and Strategy) processes is not that of one with a single input and a linear set of activities leading to a single outcome\deliverable. But rather multiple activity streams based on several distinct inputs and outcomes.

‘Define-document-&-agree’ (wax-on) is the Design-stream, in which SLM negotiates with the Customers (and with the various technical functions and other design processes) to establish the Service Level Agreements (SLA), Operational Level Agreement (OLA) and Underpinning Contracts. These documents will form the basis of the further Service delivery (through Transition and into Operations) as they identify the service levels and targets to be achieved.

Those achievements are the basis for the ‘monitor-measure-&-report’ cycle (wax off) which occurs more in Operations. The operations processes (event & incident management, request fulfilment …) provide operational reports, which (together with those from the other processes such as change, capacity, availability … management) give an overview of the service delivery against the designed agreements.

The two cycles don’t operate independently: the output of the wax-on cycle (SLAs) forms the basis of the wax-off cycle. The output of the wax-off cycle (reports) are fed into the ‘review’ activity, which links this cycle back to the wax-on one: if the reports indicate a service shortfall, opportunity for improvement or and changed business requirement, we have to restart the wax-on of ‘define-document-agree’. The review activity therefor sits in the middle connecting the wax-on and wax-off.

Of course we can further detail this depiction by entering Service Improvement (and Quality) Plans into it, or linking it to complimentary processes, CSI in particular (but also some of the Strategy ones). But why complicate things when a ‘simple’ diagram can provide enough insight for a good understanding of the objective and activities of the SLM process.

I think simplicity is a key in teaching the ITIL basics\foundations. Simplicity without condescending, if we can clarify the complex concept of interrelated processes in terms of depictions and analogies, we can spread the understanding of service management to a much larger audience (zealots like myself, and probably you, can then further discuss the finer details!).

the ITIL Zealot
December 2012