Can systems thinking revolutionise your customer service?by
17th Jun 2011
What is systems thinking? And can it really be a powerful customer service improvement method? Bryan Himsworth explores.
Viewing your organisation from the customer's perspective is, of course, the best way to improve customer service. And this way of working is the central tenet of systems thinking which examines how customers draw value from the process of interacting with an organisation and conversely, how the design of an organisation and its processes can drive poor service and poor performance.
The Institute of Customer Service estimates that poor levels of customer service costs the British economy £50 billion a year, which equates to an average of £248 in lost business from each UK citizen.
During the last century, organisations developed a method of evaluating design and management of work known as traditional thinking. This model is top-down, based around functional specialisation, and measures progress according to budget, activity, productivity and standards. However, this model is now growing increasingly obsolete.
Systems thinking offers a very real alternative to this and is fast gaining an increasing reputation as a leading method for improving customer service and business performance.
Wikipedia defines systems thinking as: "an approach to problem solving, by viewing 'problems' as parts of an overall system, rather than reacting to specific part, outcomes or events and potentially contributing to further development of unintended consequences. Systems thinking is not one thing but a set of habits or practices within a framework that is based on the belief that the component parts of a system can best be understood in the context of relationships with each other and with other systems, rather than in isolation."
Systems thinking explained
Where traditional thinking is top-down, systems thinking is outside-in; where traditional thinking separates individual pieces for analysis, systems thinking is holistic; where traditional thinking measures according to budgets and productivity, systems thinking has measures relating to purpose. So how does this relate to customer service?
Systems thinking enables people to view their organisations not only from a customers’ point of view, but from a broader perspective and focusing on the whole business as a system rather than paying attention only to its various parts or departments. It is a powerful approach to improving service or production, reducing failure and mistakes, and eliminating waste at every level of the organisation.
Customers' view or opinion of a firm is formed by what happens at the point of transaction, how their demand is met, how the organisation responds and whether the organisation adds value to them. Value must be defined in customer terms. World class businesses think of the customer transactions in terms of how well the customer is able to 'pull value' from the system - that is, get his or her needs met. The faster the 'pull' of value, the better the service and the lower the cost.
The difficulty most organisations have is that they do not possess the skills to truly understand how to analyse their own business from a customer’s point of view and as such, invariably design processes and strategies from an interpretation of what they believe customers want and then impose their products or services on to their customers rather than designing against true customer demand. This often leads to a functional design of departments such a front office and back office splits, so it becomes harder for a right first time response to be achieved at the point of contact.
To manage an organisation as a system means understanding how work flows from and to the firm's customers. Customers transact with organisations to purchase goods and/or service and to take an operational view of how we retain customers through current service we need to know what happens to them at the points of transaction, what demands they make, and how capable the system is to respond to those demands. If we think of service as customers pulling value from the system and if the organisation responds to any customer demand by doing what is important to each customer and only that, service will be good and, and efficiency will be optimised therefore reducing costs at the same time. This is counterintuitive, however, for most firms as traditional thinking teaches us that improving service comes at a cost.
Systems thinking in action
But a growing number of firms are now applying systems thinking to customer service, including the likes of Aviva and Scottish Power. In light of the rising volume of financial organisations being asked by the Financial Ombudsman to compensate their consumers due to poor levels of service, the financial services sector in particular is taking a serious look at the implications of systems thinking.
One well-known high street bank, for instance, recently applied systems thinking to its organisation in a bid to resolve service and lending issues. Pursuing a mission to become one of the largest mortgage lenders, the bank had implemented hard performance targets based on business rather than service, and this resulted in the organisation over-lending mortgages to its customers. As a consequence of this, the bank found itself in trouble – the duration of moving a mortgage from application to offer had risen to predictably up to four months, and the time it took to move a mortgage from application to completion had risen to predictably over a year.
The bank soon found that it was losing customers and losing profit. A vast number of customers were withdrawing from the process because it was taking too long whilst others were driving call demand up, chasing for progress updates that should not have been needed. These calls were as a result of poor work flow design and the inability to offer and complete efficiently and effectively, and as such were solely focused on how they could better manage their abandonment rate of calls.
This focus led to staff being highly targeted on the duration of the call, the thinking being that if staff dealt with calls quicker then the abandoned rate would decrease therefore the bank had provided a better customer service. This thinking can be seen in many organisations and, although abandonment rate does have a direct correlation to the service provided to customers, focusing on reducing it can lead to doing the wrong thing. In this case, staff morale tumbled as staff were consistently dealing with frustrated customers and they were unable to give them what they wanted, which in turn led to high staff absenteeism and turnover.
So passionately had the bank pursued its goal of becoming the largest mortgage lender, putting all of its energy and expertise in to getting as many mortgage sales on to its books as it could, that it had lost sight of its real purpose from a customer’s perspective which was to actually provide the mortgages, and from a customers perspective that means giving the money when they want it.
By applying systems thinking, the bank was able to understand their operations as a system and understand how the design of how the work flowed from application to completion was actually driving avoidable calls into the front end of the business and causing delays to the customers and waste and costs into the business.
With this shift in thinking and focus on new measures around delivering customers needs the bank was able to reduce the number of days needed to move a mortgage from application to offer from an average of 47 days to 5 days whilst the number of days from application to completion fell from an average of 102 days to 27 days. End-to-end staff levels reduced from nine teams with a collective total of 250 FTE to one team of 40 FTE taking 100% of demand whilst complaints fell from an average of twelve per application to zero.
This improvement took only a few months and is not the only example of how significant leaps in service performance can occur. Recently a government-run drug and alcohol addiction centre has successfully reduced its patient waiting times from 22 days to 3 days by applying systems thinking.
Organisations that want to improve customer service need to put their 'traditional' thinking under scrutiny - could looking at the bigger picture benefit their company, their customer service department and, ultimately, their customers? Systems thinking could provide the solution, changing processes within the business to put the consumer at the heart of each process. Certainly a growing number of organisations are discovering this for themselves.
Bryan Himsworth is managing director and systems thinking consultant at Himsworth Consultancy. For more information email [email protected] or telephone +44 1473 407320.