Human Resources: Executive Summary: Customer Focus

Companies appear to agree that customers are playing an ever-expanding role in business success. Yet, when pushed to evaluate how well they are exhibiting customer focus, many admit they're not doing so to the extent that they should.

A 2006 global study by the American Management Association (AMA) and the Human Resource Institute (HRI) asked 972 executives about the extent to which their companies take 60 specific strategic actions to develop and maintain customer focus and the extent to which they should, on a scale of 1 (very little) to 5 (very much). For every strategic action in every category - communication, the environment/culture, HR practices, measurement and organizational practices - the responses were consistently higher in the should ratings. Some of the biggest gaps surfaced in "creating excitement among employees for our products and services" and "being customer-focused at all customer touch points, not just sales and customer service."

Another survey captured similar confessions of inadequacy. According to a 2006 report by global consulting firm Strativity Group, Inc., only 45.9% of 230 surveyed global executives said their firms were "truly committed to the customer." While this is more than the 43.5% who responded similarly in 2004, it is significantly lower than the 57.6% who felt that way in 2003. The study concluded that firms are "self-centric, transaction-based and product-focused."

And in Bain & Company's Management Tools and Trends 2005 survey, nearly two-thirds (65%) of 960 respondents agreed that being out of touch with what customers want has diminished company performance.

In addition to being important to the corporate bottom line, customer focus may also be important for the U.S. economy, and customer satisfaction is one measure that's been followed closely over the years. The University of Michigan's American Customer Satisfaction Index (ACSI) rose each quarter in 2005 and the first quarter of 2006, ending at 74.1, but still did not return to 2004 levels. The index has generally been edging up since the third quarter of 2001, but it plummeted 0.7 points in the fourth quarter of 2004, the most serious quarterly decline since 1997. When customers are dissatisfied, it's "more than a nuisance," cautions ACSI director Claes Fornell. "The U.S. economy is heavily dependent on increases in consumer spending. Such increases are hard to come by when consumers become less satisfied."

But according to William J. McEwen, a global practice leader for Gallup and author of Married to the Brand, there may be a disconnect between what Wall Street values (sales, market share and growth) and what may really drive company worth - customer engagement. Wall Street's emphasis on profits can lead organizations to focus on cost-cutting, a strategy that may not deliver any value to the customer and could diminish the brand connection, causing customer engagement to slip, along with the sales, market share and growth that Wall Street monitors. McEwen suggests that organizations should "be laser-focused on building and protecting the company's most precious assets - its powerful and passionate customer relationships."

It's clear that organizations need to step up their game. They've recognized the importance of customer focus, and now it's time to put plans into action. Organizations are beginning to reflect a sharpened focus on customers within many levels of the business. Customers feature prominently in vision statements, scorecard measures, innovation efforts, employee performance standards, reward programs and other important areas of business operations - a focus that organizations hope will have a positive impact on the bottom line.

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The Institute for Corporate Productivity (i4cp, inc.) improves corporate productivity through a combination of research, community, tools and technology focused on the management of human capital. With more than 100 leading organizations as members, including many of the best-known companies in the world, i4cp draws upon one of the industry’s largest and most-experienced research teams and Executives-in-Residence to produce more than 10,000 pages annually of rapid, reliable and respected research and analysis surrounding all facets of the management of people in organizations. Additionally, i4cp identifies and analyzes the upcoming major issues and future trends that are expected to influence workforce productivity and provides member clients with tools and technology to execute leading-edge strategies and "next" practices on these issues and trends. i4cp is a for-profit company with offices in St. Petersburg, Florida.