Why your most important customer isn't who you think it is

What lean philosophy teaches us about employee engagement and the customer value chain.

As I go about my daily business, like most people, I am continually exposed to varying levels of customer service, from fantastic to (as Buzz Lightyear would say) awful and beyond!

Unlike most of the people around me though, I wonder whether the proprietors of this service really think and/or attempt to understand who the real customer is and what are their needs?

I have spent the last 20 years working in industry, implementing and sustaining lean philosophy, both as a direct line leader and in an advisory capacity. There are a couple of key enablers we talk a lot about in the lean philosophy: firstly, the value chain – the chain of activities and interactions that produces the output, be it a product or a service; secondly, the customers within the value chain – which is simply the next person in the chain or the receiver of the output of the previous activity.

As those more conversant with lean philosophy will know, there are then a whole host of tools one can use to optimise this value chain and what the customer receives. There is, of course as with all good philosophies, a higher purpose at play here as well, a why are we doing this at all question to be answered and principles to guide us to that higher purpose. But on the whole, in its simplest terms, it is about optimising customer value and experience.

So when I consider this service excellence, customer experience, customer loyalty or whichever other term you prefer conundrum, I just see the external customer as the end of a long value chain. While it is important to expend concerted effort to recognise all of my needs, wants and desires in an attempt to satisfy them and get me to buy, it strikes me that this is often out of balance with the effort put into satisfying the only customer truly in our circle of control the internal one, our employees.

The eighth waste

In my field of expertise I am amazed at the continued lack of understanding amongst leaders, practitioners and consultants about the critical importance of the engagement of people at the heart of the result. In lean terms, people are the eighth waste, the descriptor Toyota (the founding Fathers of Lean) gives to the underutilisation of latent people power, either mental or physical.

It strikes me that the poor service I often receive is just the outward manifestation of the lack of engagement effort the employer has expended on the internal customer (the employee). In other words, the service outcome is merely a by-product of the engagement proposition, just as high levels of quality and productivity are, within the lean philosophy.

The evidence is there but we may just be looking in the wrong place. For example, in 1998 the Harvard Business Review published an article entitled “The Employee – Customer Profit Chain at Sears.” This article (worth a read by the way) talks about the turnaround and transformation undertaken over a three year period at Sears Roebuck Company, an American Department store chain.

It strikes me that the poor service I often receive is just the outward manifestation of the lack of engagement effort the employer has expended on the internal customer (the employee).

As with all good turnaround stories, it has the CEO and the senior leadership team climbing the torturous mountain of culture change to place the flag of victory at the peak. What however is more interesting, is the approach they took in climbing the mountain. They started with creating a compelling place to work or employee engagement.

The second interesting point here is that they put just as much, if not more energy into this, as they did into the other key area of focus, the external customer. The result was that they found a direct correlation: a five unit increase in employee attitude drove a 1.3 unit increase in customer impression, which in turn drove a 0.5% increase in revenue growth. 

More recently, MacLeod and Clarke in their study on the topic of engagement “Engaging for Success – enhancing performance through employee engagement”, found similar evidence to support the employee to customer to profit value chain outlined in the Sears example.

Therefore, a service culture at its heart must be an engaging culture; a culture where by every internal customer must be engaged as a whole person: body; mind; heart and spirit. This means equipping our people managers and leaders to think and behave differently and use the customer service tools differently.

People are a competitive advantage

When I help organisations embed a lean philosophy my advice is generally think of the lean tools as an engagement vehicle and the improvement interventions as an opportunity to engender greater levels of employee engagement first and improve the business secondly.

If this approach is adopted we can then ask our leaders to chase four imperatives:

1. Inspiring trust;
2. Clarifying purpose;
3. Alignment of systems;
4. And unleashing talent.

When we do this we obtain more of the whole person. The more we tap the whole person, the individual, the more engagement we obtain.

So what about:

• Employee journey mapping instead of customer journey mapping; 
• or mystery employee instead of mystery shopper;
• and Employee Promoter Score as well as Net Promotor score?

I also often hear those who work in the field of customer service talk about empowering the customer facing staff and having a customer focussed obsession. Just imagine how easy the former would be if the latter had internal in front of it!

For those of you that are still not quite there and are thinking, “well there is a difference in the relationship - the external customer pays me to do what they want and I pay the internal customer to do what I want”, the answer is simple: if you are not careful the internal customer is only doing what you want on the outside and my experience suggests what’s on the inside eventually appears on the outside.

I am not saying this is easy as those who have tried leadership and engagement will tell you it is relentless and unforgiving, but we should be familiar with this as that’s what customer loyalty is like.

As Alan Jones, chairman emeritus of Toyota UK said: "Wherever you work, your job as a manager is to make your people the very best they can be - and usually they don't know just how good they could be. It's individuals that make the difference. For Toyota, this approach is not based on altruism - though it is based on a profound respect for its members. It is predicated on the firm belief that the most valuable asset the company has is its people, and that enabling them to have an intellectual and emotional relationship with their work, as well as a financial stake in the success of the company, is the key to continuous product and productivity improvement from the shop floor to the boardroom. Toyota's people are their competitive advantage."

So who is the customer really?

Mark Gregory is founder and MD of Unleash & Engage Ltd, a business transformation consultancy specialising in lean and employee engagement.