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When Customer Satisfaction Is Irrelevant
“Has there ever before been an industry that’s so actively tried to piss off their entire customer base?”
Guess which industry Kevin Drum was talking about in his column?
No, it’s not credit card companies since they probably have a few wealthy customers who aren’t getting gouged by 29% interest rates.
The answer is: the airline industry.
Drum does an excellent job of summarizing how the airlines have behaved:
- First, they hassled customers about carry-on bags and convinced them to check their luggage instead.
- Next, they started charging for checked bags.
- As a result, customers stopped checking their bags and started fighting for space in overhead bins.
- American Airlines saw a new opportunity, not to improve customer service and alleviate the bin shortage on planes, but to make a few bucks by charging for “select” coach seats that gives those passengers willing to pay for it dibs on the bin space.
Same crappy seats. Same lack of any amenities. Just peace of mind that your bag will travel with you.
It won’t be long before other airlines follow American’s lead, and it won’t be long after that before airlines start charging for every bag whether you check it or not. And we’ll pay it because we don’t have a choice if we want to fly.
There’s a reason no airline has won the Baldrige Award: Their behavior contradicts one of the Baldrige core values called “customer-driven excellence.”
To read more about customer-driven excellence, click on these articles:
- Creating a Unique Customer Experience
- System Failure
- Do You Trust Your Customers?
- Be Careful How You Measure Customer Satisfaction
- Walk…
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The Lean/Baldrige Connection
Like the Baldrige model, lean started in the manufacturing world but has spread to all types of organizations. Several Baldrige Award winners have implemented lean because it helps them create more value for their customers with fewer resources. Like Baldrige, lean (1) is process-oriented, focusing, in lean’s case, on the value streams that produce products and services for customers; (2) improves quality and cycle time; and, (3) provides a competitive advantage for those organizations that institutionalize it.
In “Lean Confusion” (IndustryWeek, August 18, 2010), Jill Jusko traces the growth of lean in manufacturing, noting that 90 of the 100 IndustryWeek Best Plants from 2005 to 2009 demonstrated significant or complete implementation of lean. “Those same plants reported median 30% reductions in manufacturing cycle times over the past three years, median scrap reductions of 33%, and median productivity improvements of 24%,” according to Jusko.
But lean, like Baldrige, is about far more than quality and cycle time improvements: They are transformative systems, changing the cultures of the organizations that implement them. They help shape strategy, redefine measurement, and engage employees in the process.
Jusko describes an automotive industry supplier, Autoliv, as an example of the human side of lean. Last year at its Ogden, Utah, plant, “managers received 63 implemented ideas per person.” Most suggestion systems are lucky to garner one or two ideas per person per year, and not all of those are implemented. Imagine how good your processes could become if everyone who worked on them initiated more than one improvement every week!
An organization…
18Aug2010 | Steve George | 0 comments | Continued (6 votes, average: 4.33 out of 5) Loading ...
The Remedy for ROA Flatlining
TThe average return on assets of U.S. companies has steadily fallen to almost one quarter of what it was in 1965, and the trend line approaches zero in 2020. ROA is a measure of how profitable a company is and how efficient management is at using its assets to generate income.
The decline in ROA has occurred despite steady improvements in labor productivity, which have occurred despite stagnant wages for the labor. As a result, businesses have been paying no more for an increasingly productive workforce, which pretty much eliminates wage control and productivity as factors in improving ROA.
So how can leaders reverse the trend?
John Hagel III and John Seely Brown address this issue in “Six Fundamental Shifts in the Way We Work” (HBR, August 17, 2010). The six shifts they mention are:
- Management practices and corporate institutions are fundamentally broken. Most have not yet figured out how to compete more successfully.
- The source of value creation is shifting from your stock of knowledge to the flow of knowledge, and most executives lag in understanding what this means for their companies.
- Management innovation is not enough: Institutional innovation, exemplified by China’s open production and design models and India’s open distribution models, are needed.
- A new kind of performance curve is emerging: The collaboration curve, which brings together participants in a carefully designed environment to make rapid leaps in performance improvement.
- Talent development is broader than training programs: People need to learn new skills and behaviors through their involvement in the work of the management system such as…
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Reality Check in Japan
Making assumptions about the world around us is human nature. We have a sense for how the world operates and we interpret information and events based on our experiences and expectations. Peter Senge, author of The Fifth Discipline, calls these assumptions “leaps of abstraction.”
We make leaps of abstraction at work all the time. We assume we know what our customers require, what engages our employees, the source of a problem, and our marketplace and competitors. Because our assumptions may not, in truth, reflect reality, acting on them can cause all sorts of problems, and learning the truth through sound data and information can challenge our most dearly held beliefs.
This is what happened recently in Japan. Japan has a reputation for producing many of the world’s oldest people due, it has long claimed, to superior diet and a commitment to the elderly. It assumed it excelled in this area—until police found the body of one of the country’s centenarians, a man believed to be 111, who had been dead for more than thirty years.
The shocking discovery challenged a long-held belief, prompting officials to verify the status of the other centenarians in the country. According to an article in the New York Times by Martin Fackler, one of Tokyo’s oldest citizens at 113 had not been seen since the 1980s. City officials tried to visit a 125-year-old only to discover that her registered address had been turned into a city park in 1981.
To date, authorities have been unable to find 281 Japanese…
16Aug2010 | Steve George | 0 comments | Continued (4 votes, average: 4.25 out of 5) Loading ...
Leading Also Means Managing
Some leaders believe that leadership and management are two different things and they are only responsible for one of them. In “True Leaders Are Also Managers” (HBR, August 11, 2010), Robert I. Sutton uses the words of Warren Bennis to describe a common perception: “To manage means to bring about, to accomplish, to have charge of or responsibility for, to conduct. Leading is influencing, guiding in a direction, course, action, opinion. The distinction is crucial.”
Sutton disagrees, arguing that such a distinction produces leaders with big, vague ideas that can have little to do with reality or can be nearly impossible to implement. It isolates leaders from reality, giving them a reason “to avoid the hard work of learning about the people that they lead, the technologies their companies use, and the customers they serve.”
The Baldrige Criteria does not make this distinction. The first Category in the Criteria asks a number of questions about how senior leaders lead and manage:
- How do senior leaders set organizational vision and values? (Lead)
- How do senior leaders personally promote an organizational environment that fosters, requires, and results in legal and ethical behavior? (Lead)
- How do senior leaders create a sustainable organization? (Lead)
- How do senior leaders create an environment for organizational performance improvement, innovation, and agility? (Lead)
- How do senior leaders communicate with and engage the entire workforce? (Manage)
- How do senior leaders encourage frank, two-way communication throughout the organization? (Manage)
- How do they take an active role in reward and recognition programs? (Manage)
- How do senior leaders focus on creating and balancing value…
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Catholic Healthcare Systems Excel
According to a Thomson Reuters study conducted for Modern Healthcare, Catholic-owned healthcare systems perform significantly better than investor-owned, for-profit systems.
The study used federally reported core quality measures along with inpatient mortality and complications rates, an inpatient safety index, 30-day mortality and readmission rates, average length of stay, and patients’ perceptions of care. A composite score across all of these measures was computed for 255 systems. The 36 Catholic systems had an average rank of 84 (lower is better), while “other church” systems came in at 121, secular not-for-profit systems scored 129, and investor-owned systems were at 182.
Eleven healthcare systems have won the Baldrige Award and all are not-for-profit. The first healthcare system to receive the Award, SSM, is a large Catholic system with 15 hospitals and two nursing homes in four states.
According to Jean Chenoweth at Thomson Reuters, “health systems owned by the Catholic Church may be the most active in setting and monitoring achievement of quality goals as well as aligning the management of hospitals within a system in achieving what they see as a mission.” That’s a good description of all 11 Baldrige healthcare winners.
You can read more about these winners by clicking on their profiles, which are two-page summaries of their organizations, or their award application summaries, which are their complete responses to the Baldrige Criteria questions:
- AtlantiCare (2009): Profile – Application Summary
- Heartland Health (2009): Profile – Application Summary
- Poudre Valley Health System (2008): Profile – Application Summary
- Mercy Health System (2007): Profile – Application Summary
- Sharp HealthCare (2007): Profile – Application Summary
- North Mississippi Medical Center (2006):…
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Measuring Training Effectiveness
One of the most vexing challenges in completing a Baldrige assessment is showing meaningful results for workforce and leader development. Most organizations can show the percent of employees who received a certain type of training. Many can summarize data from surveys of people who completed specific training. A few can provide hours of training per employee.
Very few can identify results that show how effective their training is.
The Baldrige Criteria ask how you “evaluate the effectiveness and efficiency of your learning and development systems.” Examiners expect to find measures of effectiveness and efficiency, the results of which should appear in Item 7.4. Not many organizations have a good answer for the question or relevant data to put in the Results section.
In “Putting a value on training” (McKinsey Quarterly, July 2010), Jenny Cermak and Monica McGurk explain why this data is so important, noting that “90% of respondents to a McKinsey Quarterly survey said that building capabilities was a top-ten priority for their organizations. Only a quarter, though, said that their programs are effective at improving performance measurably, and only 8% track the program’s return on investment.”
At a time when building capabilities in existing employees is critical but the resources to do that are limited, training must be proven to be effective.
They use the Boys & Girls Club to illustrate how this can be done. To summarize the case study, the BGCA was facing a shortage of leadership capabilities. It did a 360-degree assessment of every local leader to correlate each aspect of…
10Aug2010 | Steve George | 0 comments | Continued (4 votes, average: 4.25 out of 5) Loading ...
