Something has gone horribly wrong in how customers are treated. We all know it. Peter Mills traces the problem back to how executives and business leaders are incentivised: KPIs (Key Performance Indicators).
Customer service is appallingly bad in almost every sector we consumers touch and significantly worse than it was ten or even twenty years ago. It’s certainly costing the economy billions in lost productivity — and hitting company bottom lines.
A recent global study by PwC found one in three consumers say they will walk away from a brand they love after one bad experience — a data point that might be resonating within PwC itself at the moment.
Trace the source of the problem back through any organisational sausage machine, and it lands in the same place every time: senior executives, and their KPI-linked bonuses. Nobody else makes these decisions.
Chop the people, cut the service
Having previously led the consumer and business research teams at three of Australia’s and two of the world’s largest publicly listed companies, I’ve seen inside the reactor. Cost-cutting is a standard KPI (key performance indicator) and the easiest and most effective way to achieve bonus targets, hands down.
The equation is simple: cut costs, receive bigger bonus. People are the easiest of costs to cut.
If the Federal Government is serious in its recent pronouncements about increasing productivity, then legislation that addresses this epidemic of lousy service and installed minimum and measurable standards would be a good place to start.
Millions of wasted hours
Lost productivity is in large part, a direct consequence of millions of hours of the accumulated time spent waiting for basic levels of service from banks, insurance companies, public service, transport, health services, energy companies, telecommunications companies and all the rest.
One recent study found that the average British person ‘wastes’ 26 days a year. The number one reason: waiting on the telephone. According to Australian software development company, Service Now, Australians spend about 100 million hours a year on hold.
Unfortunately, productivity doesn’t exist in a convenient location of its own. The link between executive KPIs and lower productivity would benefit greater study.
What’s obvious is that productivity can’t be cranked up by simply flicking a switch. All the technology now wired into the economy doesn’t seem to have made a difference because it regularly delivers its own problems.
Those extended wait times occur at both work and home and keep a large slice of the population either trapped on the phone, or doing circles on a website to nowhere. It’s Newton’s Third Law writ large: every action has an equal and opposite reaction. Make me wait for an hour now and somewhere down the line, things aren’t getting done.
Horror stories from the frontline
Last week my partner was kept on hold by a major international bank for over eight hours across three days and multiple calls, all while attempting to discharge a home loan account.
Banks don’t appreciate that kind of behaviour as closing products doesn’t look good on their loan book. Towards the end of the eight or so hours, I called the same bank on the pretence of opening an account and was talking to someone within three minutes. That’s not an accident.
Banks attach profitability scores to all their customers: those the modelling identifies as profit diluters get poor service, because dealing with them erodes profitability even further. That’s why the phone is answered when I call to open a new product, and my partner waits an eternity to close one.
Service NSW had me on hold a few days later for ninety minutes because they had the usual ‘higher than average call volumes, and wait-times are longer than expected’. You know the drill.
The real reason, as everyone knows, is that they and others like them simply don’t and won’t employ enough staff. Having more staff would impact the executive KPI’s and put bonuses at risk.
The knock-on impact isn’t rocket science: all this waiting is chewing up time I could be productive.
In June 2023 the Sydney rail network was thrown into chaos (again) because one critically important staff member at the rail operation centre had called in sick. With no immediate backup to step in, commuters were faced with long delays and inconvenience.
The cost of one job cutting
This was more than likely another KPI related issue. The senior bureaucrats would be working to meet cost saving targets set by the finance people — and so the productivity of half a million people trying to get to work or home again goes down the toilet.
It would be like running a cardiac emergency centre with only one specialist, because having more will impact the bottom line. And the KPI targets are set by people who don’t have the requisite skills to step in and perform open heart surgery.
Save one salary and waste millions of productive hours when the city grinds to a halt.
There are plenty stores like it
After years of diluting service by cutting staff numbers, getting hammered by cheaper competition and better online options, department stores now survive by leasing out allotments of floor space to individual brands and then taking a cut of the revenues each stall holder makes. They are like flea markets with shiny counters.
None of the staff deal with the brand next door and the department store is now nothing more than a name on a bag. Service levels are also extremely poor.
I recently wrote to David Jones’s senior executives and suggested they could do worse than removing the advertisements for vacuum cleaners covering the Elizabeth Street windows in Sydney.
Those windows are an asset and can be leveraged but they can’t be valued or counted because of the rules governing cost accounting methods. The revenue acquired from the vacuum posters can.
DJs could then remove the nineteenth century window dressing mannequins, clear out the cookie-cutter cosmetic stalls, move them upstairs and turn the entire ground floor into a naturally lit Grand Salon replete with ceiling fans, hardwood floors, palm trees and all the rest.
It’s the sort of thing the store needs to again become a truly unique destination. They need something astonishing to drag people back to the store because a lack of imagination isn’t going to solve their problems. But, again, KPI’s might be a hindrance to such an alternative.
Customer satisfaction: no one is asking the right questions
The irony in all of this is that these entities, and many others like them, spend billions of dollars each year on ‘customer focused’ market research.
Customer satisfaction and its equally useless derivatives attempt to measure and understand customer service issues so they can be improved (apparently). The attributes they measure tend to be so broad that they point nowhere in particular and the clients really don’t know what to do with the data.
Where it all goes is anyone’s guess, because no-one is asking the right questions and no-one is taking any notice of the shite coming out the other end.
The Service NSW experience noted previously was followed by an invitation to complete a customer satisfaction survey relating to the service I had received. There were no questions about the ridiculous (ninety-minute) length of time I was forced to wait.
If the research was of any real use and anyone was taking notice, service levels would be outstanding and everyone could get back to work. Poor customer service is a consequence of cost based ‘performance measures’ designed to reward those further up the totem pole while simultaneously leaving large swathes of the entire economy on pause.
It’s happening in every street of every suburb and town, and in every sector with which we deal. Millions of hours of productivity waste away while we listen to irritating music and verbal reminders of just how important we all are to their business.
Designed by the wrong people
When organisations put executive performance measures in place, we assume it’s to build value in the company and the economy at large. But when those measures are tailored by the very people who stand to gain from them, the consequences are delivered just as Newton stated, an opposite reaction in equal measure
The causes are often difficult to recognise because of their conspicuous nature. Look closely and they can be found hiding in plain sight.
Peter Mills is the Principal at Contrepoint. He began his career with political polling strategists ANOP before leading research teams at American Express, Westpac, IAG, Optus and Toyota Finance working Internationally for both Amex and Toyota.