What if Your Customers Can’t Be Trusted?

post # 398 — July 5, 2007 — a Client Relations post

I was participating in a discussion with a group of executives, when an insurance company CEO pointed out that, according to their market research, about 30 percent of their customers acknowledged that they would “cheat” on an insurance claim. (He didn’t elaborate on the precise details: it wasn’t that kind of meeting.)

But assume his research is correct: what is the appropriate company response? In most cases, as we know, companies will then get very suspicious of ALL of their customer claims (they can’t know which 30 percent are untrustworthy) and you end up with bureaucracy and MUTUAL distrust, which quickly spirals down.

Insurance companies get a bad rap (Hurricane Katrina, Mike Moore’s new film – Sicko) for too often denying claims. But the fault is not just on one side, is it?

Put yourself in the shoes of being an insurance company exceutive. Is there a middle ground between over-trusting a customer base which will exploit your goodwill 30 percent of the time, and acting defensively all the time and coming across to everyone as non-responsive?

There’s clearly a difference bewteen what you wold do as an individual, on-on-one, when you can take it case-by-case. But what do you do if you’re a corporation, trying to work across the country or internationally with hundreds of thousands of customers. What policies do you put in place, and how do you train your front-line people?

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The Consultant and the CEO

post # 394 — June 28, 2007 — a Client Relations post

R Shawn Callahan, Founder of Anecdote Pty Ltd in Australia, has a question for all us. He writes:

“For the last month or so I have been working well with a client and her staff helping them develop their brand strategy. My client heads a division of a company. A couple of weeks into the project I’ve become aware that my client has an abysmal relationship with her CEO, whom she reports to. I also quickly learned that the CEO is a tyrant and displays many of the characteristics Bob Sutton described in his book The No Asshole Rule. The CEO makes the lives of her staff miserable. They are both terrified and befuddled by her unpredictable, bullying and overbearing behavior.

“Last week my client went overseas for work and the CEO has decided she wants to run the branding project during my client’s absence. The CEO attended a meeting of the leadership team I’m working with and she proceeded to denigrate her staff telling them that their opinion meant nothing and then proceeded to attack the project. The staff all looked at me to say “sorry” but couldn’t say a word.

“My question for you and your readers is this. How involved should a consultant get in trying to help a group of people who can’t make headway because the way the CEO behaves?”

***

Shawn, others may disagree, but my opinion is that you have virtually no choice. You were not hired to help the group deal with their boss, and it’s neither practical nor “the right thing to do” to try and take on that role. You’re gonna lose!

Maybe, if you really have superior psychological, political, interpersonal, sociological, emotional and intervention process skills, you could pull this off. But the odds are incredibly low. It’s one thing to be explicitly hired as a process consultant to help an organization function, with the CEO’s explicit consent. It’s a whole ‘nother thing to take it on as an extra challenge on a project where you were hired to do something else.

And if that means the project you were hired for is doomed, well, it’s doomed.

***

Anyone else have different advice for Shawn?

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Client Focus and the Halo Effect

post # 393 — June 27, 2007 — a Client Relations post

Ed Kless, Senior Director of Sage Software, just wrote me an email asking this: “I have just finished Phil Rosenzweig’s The Halo Effect . It casts some serious doubts on the beliefs of many people in business today. In particular he calls in question the belief that customer focus causes financial performance. This has been a key belief of mine and was reinforced by your book Practice What You Preach. I would be most interested in your seeing thoughts (if any) as a blog post.”

Well, Ed, Rosenzweig’s book is, indeed very stimulating. He doesn’t actually question the conclusion (or belief) that customer focus causes financial performance; he challenges the validity, rigor and logic of the various studies that purport to have proven the link. In the language of the court system in Scotland, it’s a matter of “case not proven.”

Rosenzweig’s main point — the halo effect — is that it is a fatally flawed research approach to identify successful companies and then ask people (internal or external) what attributes these companies or leaders have. He argues that this approach could equally well uncover attributes that are the outcomes of successful financial performance, not the cause of it.

So, he points out, if you ask observers or employees at a financially successful company if the company is customer focused, there will be an “after-the-fact” bias to say “yes,” whether or not the company actually was, in some more solidly measured way, actually more customer focused than others.

Rosenzweig’s targets are books like “In Search of Excellence,” “Built to Last” and “Good to Great.” He doesn’t say their conclusions are wrong; he says their conclusions are not even close to being “proven” (contrary to what the authors say.)

My book, Practice What You Preach, is not covered by Rosenzweig (it wasn’t a best-seller) but I have no doubt he would make a similar critique of my methodology. I surveyed people in 139 businesses on 74 questions and explored the statistical relationships between that opinion data (on what was and wasn’t going on in their office) and the financial performance of those businesses.

I think I would argue two relative strengths of my study: By allowing the statistics to tell me which of the 74 questions had explanatory power, I allowed the data to be discriminating between which aspects of office culture was correlated and which wasn’t.

If you were nit-picking, you COULD argue that all I discovered is which characteristics have a high halo effect (i.e. are given high ratings by employees when things are going well) and those that have a low halo effect. But that’s a pretty complicated argument.

Secondly, I did use a statistical methodology (structured equation modeling) — used by none of the authors Rosenzweig examines — which allows you to test for causality (and the direction of causality) not just correlation. (Which is one of his big concerns.)

So, net, net, net — I think he’s written a terrific book to remind all managers to beware of quick fad conclusions, and to remind all researchers and consultants that many (if not most) relationships in business that we think we know for sure actually don’t have much of a solid research backing to them.

(Which by the way, was also the subject of Pfeffer and Sutton’s book: Hard Facts, Dangerous Half-Truths and Total Nonsense)

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