Mar 212014
Customer satisfaction or delight
By Tissa Jayaweera
How crucial it is to ‘delight a customer’. Raising customer satisfaction is such an obvious point. Management tends to forget the importance of delighting a customer. Customer satisfaction is talked about in creative copy writing. What is neglected is the need to constantly and seriously think whether customers are really being delighted and to continually put efforts into raising customer satisfaction.

When price wars are ignited by companies, management by its very nature assumes that it is for the good of their company and customers. Sometimes it happens that when a company strives to bring its prices down than those of its competitors, usually the quality of service deteriorates and the customer satisfaction goes down. The end result will be a cheap and nasty business. This happens, when the company forgets to make the effort to think seriously about delighting customers.

Essence of business
The true essence of business lies in the ability to satisfy opposing interests. Obviously the seller wants to sell their products at a price as high as possible. The buyer wants to buy products at a price as low as possible. There is always a conflict of interests. They are as far apart as the two opposing banks of a river. Delighting the customer creates a bridge between the two sides.

If customers are delighted with service, customers will pay a price to commensurate with their satisfaction. Delighting and satisfying are what make the customer’s and the service provider’s benefits go in the same direction. A delighted and satisfied customer will always be loyal to the brand as well as the service provider.

No company wants the service culture to decline while other organisations are improving. If your company is only focused on making profits and launching new products, lack of attention to building or sustaining the service culture can be costly. If this decline in not arrested, customers will leave and your best employees will join competitors in frustration. This slide can be stopped by becoming a better place to work as a service provider and a better place to be served as a customer. Study the architecture and implementation of roadmaps for building service culture. All over the world, companies are following these guidelines to become distinguished by uplifting service. Best customer services are provided in Japan and the US.

Building a service culture takes time, energy and commitment but this will pay off. Companies with strong service cultures are consistently more profitable and productive. They keep more loyal customers and retain more passionate employees.

Customers react to your poor service disappointment with others, especially with fiends, relations, colleagues and competitors. Very few will complain to the management. These complaints damage your reputation, resulting in loss of sales and profitability.

Customer expectations keep rising as competition increases and the service keeps improving. Trainers will give scripts to use and tell staff what standards to achieve. All this customer service training doesn’t make a lasting difference. Solving this requires a different approach. First, stop telling staff what to say and do. Instead, educate staff to understand service situations and design more effective service actions. Service can be defined as taking action to create value for someone else. The anchor of this definition is not the action taken, or the value created. Service and customer expectations go hand in hand. What do the service providers and customers want to accomplish or achieve? What do they want to avoid? What are their top priorities? What are their real concerns?

Build leadership alignments
Schools teach math, science, language, etc. but never the fundamental principles for creating value through service to others. All of us will spend our lives giving service and obtaining service. Management schools need to provide actionable service education to students and equip them with tools and skills that are needed to provide better service, earn more compliments and quickly resolve expectations.

If the management does not agree on the priority of improving service, the intended focus on service gets fractured and lost in a deluge of comments on pricing, competition, recent problems and defective products. Staff will be confused about how service really matters and they cannot be blamed. This lack of leadership alignment weakens an organisation as your top team argues over projects and budgets, the primacy of service improvement fades away and the likelihood of differentiating on service or building a superior service culture is neglected.

Companies have to build strong alignment among the members of the leadership team and alignment at the top is essential to build momentum within the entire company. Best options would be to study global best practices and successful case studies. With these insights leadership alignments can be built and all have to agree on a common service vision and secure commitment for implementation.

Poor internal service harms external service to customers. If staff is stuck in rigid boxes with poor communication and little cooperation across departments or the reporting structure produces more uncertainty and confusion than urgently needed collaboration or internal departments are more concerned about looking good than they are about looking after the customer expectations.

When things go wrong, staff are faster at pointing fingers than they are at pointing out what can be done. Unwilling attitude towards internal service consumes time, costs money and damages employee morale and worse, it prevents staff from giving external customers the quality of service they deserve. Some organisations suffer with this condition but some thrive by making excellent internal service to colleagues a focus of their culture and benchmark their service to customers. To build a culture of excellent service between functions, divisions and departments, the management must provide teams with consistent support.

Improve activities that influence your staff service culture every day. Have a service vision, common service language and communication method, benchmark service, staff service measures, service improvement process, rewards and recognitions, orientation and service role modelling, train service staff on service
recovery/guarantees and to listen to voice of customers.

Deadly service sin
Budget is management responsibility. Service staff will have blue sky ideas, great ideas but despite this high volume of new ideas, there is painfully little new action at the end, all the happy talk about excellent service seems to be just talk. A pile of ideas can be transformed into a mountain of results with a process that moves ideas into action.

How could this be done? Select a team of change leaders who get certified to conduct service improvement workshops. Then deploy this powerful resource to teach service principles to all internal and external service providers. Next, apply the tools and frameworks. Learn to review service problems and generate new ideas. Choose ideas that offer quick wins and others that hold the possibility for big and positive changes. Now put these ideas into action. As results are achieved, trumpet the service solutions and praise the people involved. Repeat this cycle until everyone appreciates how service issues lead to new ideas, new ideas lead to new actions and new action produces results.

As time goes on customer complaints may increase and internal problems may keep building up and they wear your people down. Enthusiasm dims like a slowly dying ember. Fortunately, you can fan a glowing ember back to life. Reignite the interest and motivation of your team with contests, workshops, keynote presentations, customer visits, panel discussions, cross-functional teams and more. Be proactive. Make sure everyone is engaged weekly, monthly and quarterly in creative programmes that keep the flame for service burning brightly.

Sustaining focus and enthusiasm for service is an essential leadership skill. Not sustaining focus and enthusiasm is a deadly service sin. Second rate service culture can be found in many business, government and community organisations. When you see these signs at work, take action to turn the tide. You can lift your culture out of the darkness and into the ‘light of delight’.

Oct 022013
Balancing of financial leverage across Asia is vital
By John Caparusso
As emerging economies endure another episode of financial-market stress and volatility, it is appropriate to consider whether and how they might foster more stable conditions.
External factors such as global growth and Fed policy matter and are beyond developing countries’ control; but this is not new. The interesting question is, are emerging economies now unusually vulnerable to global forces because their structural resilience has weakened?
Our recent research has focused on a central aspect of this question: what factors lead to borrowers’ default?  The classic answer – excessive financial leverage – points in the right direction but lacks nuance. Singapore’s aggregate leverage is nearly level with Spain’s. Does anyone believe the two countries are equally vulnerable? Japan’s total credit relative to GDP is about twice as China’s. Does this adequately capture their relative levels of financial system strain?
Fallacy of aggregating debt
These comparisons highlight the fallacy of aggregating debt across entire economies. Individual borrowers repay their own obligations from their own cash flow. It is impractical to aggregate a country’s repayment difficulties from the cash-flow solvency of individual borrowers; at the other extreme. Then is it inappropriate to think of solvency as the repayment of a country’s aggregate debt from its aggregate GDP?
Fortunately, recently improved databases from the Bank for International Settlements offer a happy medium. Matching borrowings by governments, households and non-financial corporates against cash flow yields meaningful to sector-level debt service ratios.

“Japan’s total credit relative to GDP is about twice as China’s. But does this adequately capture their relative levels of financial system strain?”

Within Asia (excluding Japan), our region of focus, leverage and debt repayment strain is most acute in China’s corporate sector. Korea’s aggregate leverage is higher, but two considerations offset this: borrowings are more evenly distributed across corporates and households, and high leverage is a long-established condition to which borrowers are acclimated. India’s solvency stress, much in the news, is acute but surprisingly narrow. Farmers, households and small businesses have very low borrowings; leverage is highly concentrated among listed firms, particularly among a small subset of large companies with high borrowings in both domestic and offshore markets. Most Southeast Asian economies have quite modest corporate leverage; their strains are less acute and reside mainly in the household sector.
While financial leverage is obviously fundamental, we believe full consideration of default risk should also consider business risks, including the level of operating leverage and the extent to which the underlying business is cyclical. To illustrate, memory chip production is a risky business, with highly cyclical volume and volatile prices combined with a production process dominated by fixed costs. One would not expect a DRAM maker to operate with the financial leverage of a stable consumer-products manufacturer. A similar trade-off between business risk and financial leverage extends from individual borrowers to industries and the broader economy.
Useful insights overlooked
We think neglecting operating leverage as a source of systemic risk can lead policy makers and investors to overlook useful insights.  Over the past ten years, listed companies across Asia have reduced their degree of fixed asset intensity, and have evolved toward more flexible cost structures – even in China, where rising fixed asset investment relative to GDP suggests a shift toward higher capital intensity and cost rigidity. (We suspect the investment has been skewed toward public infrastructure.) Conversely, neglecting operating leverage arguably under-emphasises the risks in Hong Kong, a market with a large sector of high-fixed cost property developers in an economy highly correlated to frothy asset prices.
Balancing financial and operating leverage, we think structural risks in Asia are potentially most severe in China, closely followed by Hong Kong and, at a distance, by India. Structural solvency risk in Korea is surprisingly benign, and it is low in ASEAN.
Worst-case scenario
Even for China, the probability and timing of any worst-case outcome is uncertain – classic ‘tail risk’ conditions. India’s worst-case scenario is much less severe but, under current circumstances, more likely. The delay of Fed tapering does not alter this opinion; it simply defers it, hopefully for long enough to permit remedial measures. As we scan countries, we find it useful to distinguish between structural risk (which affects the worst-case depth of a problem, but not its probability or timing) and ‘cyclical’ risk (which highlights periods of maximum vulnerability).
Systemic distress is not inevitable anywhere in Asia. However, we believe that certain conditions – particularly the build-up of financial leverage in some countries and sectors, and the (usually related) property-market froth – are incipient risks that policy makers should continue to manage and investors should monitor vigorously.
(John Caparusso is Global Head of Banks Research at Standard Chartered Bank)

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