Is the front line customer service employee a commodity?

A client recently posed an interesting question: Should frontline customer service employees be viewed as commodities where one employee is relatively the same as the other? My client is the Human Resources Director, so unsurprisingly she thought the answer is no. However, her company’s Chief Financial Officer firmly believed the answer is yes.

Who do you think is right? 

The argument for "No"

My client believes there is a meaningful difference in each individual’s ability to be trained, deliver exceptional service, and ultimately generate profits. If you want to attract and retain better talent, you need to invest more in your employees in terms of wages, benefits, and training. There is certainly plenty of empirical evidence to back up this claim (see my recent post, “Three reasons to give customer service employees a raise”).

The challenge, of course, is proving this to a skeptical CFO or even the company’s CEO in a time when the company is focused on reducing costs. Any increase in wages, benefits, or training expense will immediately be seen on the company’s profit and loss statement, but the resulting impact won’t be readily apparent. Even if revenue or customer satisfaction begins to rise, it will be hard to prove that this wasn’t really caused by an improving market, a clever advertising campaign, or a new product line.

The problem my client has in making her case is a lack of hard data to show that she’s right.

The argument for "Yes"

The CFO’s primary concern is controlling costs and maintaining cash flow at a time when profit margins are shrinking. To him, adding costs immediately makes that problem even worse. It’s foolish to spend the money if he can’t prove that investing more in employees will provide a positive return on investment. He is also drawing from his own belief that frontline customer service employees’ performance is more a reflection of the system (products, processes, and management) than their individual strengths.

The CFO’s challenge, however, is the same as the Human Resources Director’s: a lack of hard data. Sure, he can see labor expense on the profit and loss statement, but looking at those numbers in aggregate can obscure what’s really going on. An outstanding employee might generate twice as much revenue as a co-worker, but then leave the company for a higher paying job with better benefits. The replacement employee may cost more to train while producing less revenue, but that story won't be told on the company's financial statements.

Who is right?

My view is both could be right. Great employees will flourish in almost every environment, but those employees are also hard to find. Mediocre employees can become great given the right products, processes, and management, but you need to invest time and money in those things to ensure your employees have the right support.

The best way for the HR Director and CFO to settle their debate is through testing and evaluation. For example, rather than giving all employees a raise, they can pick a test group of new hires to start at a higher salary. This minimizes risk and expense, but it also allows them to compare the test group’s performance to the rest of the new hires who join the company around the same time.

Where do you come out? Are frontline customer service employees truly unique and special? Or, are the vast majority of them really interchangeable?

Would you rather hire rock stars or roadies?

I've seen a lot of help-wanted ads lately from companies looking for Customer Service Rock Stars to join their team. My first thought is, You really want to hire rock stars?!

Let's break this down a bit and see if you'd be better off hiring rock stars or roadies.

Rock Stars

I don't know any rock stars, but I read the news and have seen more episodes of VH-1 Behind the Music than I can remember. I also once had a roommate in college who was in a band. He skipped out on our apartment to move back in with his mom while leaving me to pay all the rent. I'm fairly sure that's an accurate sample size.

What attributes do rock stars possess? Here are a few that come to mind: 

• Talented
• Famous
• Selfish
• Demanding
• Immature
• Entitled
• Obnoxious

The first quality sounds terrific, but it quickly starts going down hill after that. Can your company truly deliver service with a team of people that resemble rock stars?

Roadies

Now, think about roadies. Just in case you don't know what a roadie does, they are the people that set up the stage, lug the gear, and make sure the rock stars have everything they need to play music. I took a tour of Fenway Park in Boston last June when an army of roadies was setting up for a Roger Waters concert. Watching them transform the ballpark was amazing:

Here are some of the characteristics that come to mind when I think of roadies:

• Unpolished
• Hard-working
• Dedicated
• Tireless
• Selfless
• Caring
• Skilled

The first trait doesn't sound too great, but after that list starts looking a lot more like the characteristics you'd value in a customer service professional.

So, back to the question. Who would you rather hire to serve your customers, a rock star or a roadie? 

How to respond to online complaints

It can feel like a personal attack when customers criticize your company in online forums such as Yelp, Trip Advisor, or even on Twitter. Our first impulse might be to fight back by writing a scathing response that sets the record straight on their so-called “facts” and tells the rest of the world this person is an idiot. While this approach may feel cathartic, it will probably do more harm than good.

Here’s a better way to handle online complaints:

First, take a deep breath

Your priority should be preserving your business’s public image. Trading barbs with a customer in an online forum generally has the opposite effect, so it’s best to give yourself a moment to calm down before responding.

Patrick Maguire’s I’m Your Server, Not Your Servant blog recently featured an incendiary restaurant review, an equally incendiary response from the owner, and a follow-up interview with both the reviewer and the restaurant owner. It’s fascinating to gain a better understanding of both parties’ point of view, but it’s also interesting to note that the majority of the commenters felt both were in the wrong. (Read the post here.)

In an example of a worst case scenario, a bookstore owner infamously found herself arrested on battery charges after she confronted a reviewer in person (Read the article in Inc. Magazine). The ensuing press coverage, with article titles like “Angry store owner assaults Yelp reviewer,” was far more damaging to her business than a single reviewer giving the store two stars.

Second, respond strategically

When you respond to an online complaint, you’re not just responding to the complainer; you’re responding to anyone who reads your response. With this in mind, your goal should be to send a message that your business cares about service and you are eager to address any shortcomings.

Here are three tips that consistently work:

1. Respond quickly
2. Assure the reviewer (and anyone else who is reading) that you want to help.
3. Provide a way for the reviewer to contact you privately so you can attempt to resolve their issue.

This approach works whether the complaint is written by a legitimate customer or a jealous competitor who is trying to hurt your business. Either way, it sends a signal to other readers that you are responsive, professional, and care about your customers. You won't win over a vitriolic jerk, but you will win over people who might otherwise have been persuaded to stay away from your business.

Third, look for the hidden truth

Nearly every complaint contains some kernel of truth that you can use to improve service. That’s not to say that you have to agree with everything the person writes about your business, but what if their complaint is really just the tip of the iceberg? Perhaps other people feel the same way, but haven’t voiced their opinion yet. Even worse, they may have just stopped doing business with you. (See more on avoiding icebergs.)

When you think of it that way, someone flaming your business online might actually be doing you a favor. For example, the bookstore owner might have noticed that her critics consistently mentioned that the store was messy and in need of a good cleaning. Even some of the positive reviews agreed that the store could be better organized. Rather than getting defensive, a smart business owner might have taken a day to thoroughly clean and reorganize her store. She could have then responded to all of the Yelp reviewers to thank them for their feedback and invite them to come back for a grand re-opening.

For more information, check out my whitepaper on engaging customers via social media or get a copy of Micah Solomon's outstanding book, High-tech, High-touch Customer Service.

Why I'm rooting for American Airlines to improve service

Customer service at American Airlines generally leaves a lot to be desired, but I'm rooting for them to improve. A stronger American Airlines creates more competition and can bring some much needed stability to a battered industry. This should result in better overall service from the airlines, even if you aren't flying American.

Competition is Good

The airlines may be much maligned for their overall service, but their industry score on the 2012 American Customer Satisfaction Index (ACSI) was the highest its been since 2003 (see the results here). The traditional carriers like American, Delta, and United continue to lag in service quality, but newer airlines such as JetBlue and Southwest Airlines have picked up the slack considerably.

Without competition, things can get ugly. Look at what happened to Continental Airlines after merging with United. Their ACSI score was 18 percent higher than United in 2010. Two years later, the combined airline's ACSI score declined 13 percent. It will probably get worse since they were responsible for a whopping 33.6 percent of passenger complaints filed with the Department of Transportation in the first half of 2012 (source: The Consumerist).

Competition in the airline industry often comes down to where you fly.

I'm based in San Diego, which isn't a hub for any airline, so my options vary depending on where I'm going. If I want to fly nonstop to San Francisco, I can shop three airlines for the best combination of fare and service. On the other hand, when I travel to Dallas in October to speak at the 2012 ICMI Call Center Conference and Demo, I am literally going two hours out of my way to avoid flying American even though they are my only option for a nonstop flight. I instead chose better fares and service at Southwest Airlines.

Taxing on the runway at DFW

Stability is Needed

Customer service often suffers when businesses struggle. It might start with employee discontent, where employees' concerns over their own jobs create a distraction that negatively impacts their service. This has been happening at American Airlines for quite some time, though their flight attendant union ratified a new labor contract on Sunday which might improve things a bit (see the story here).

Service gets worse when companies start making radical moves in an effort to turn things around. American Airlines is actively considering a merger with another airline, most likely US Airways. Recent history suggests that won't bode well for customers, as evidenced by the United-Continental merger and even the recent decline in service at Southwest Airlines as they merge with Air Tran (see Five Reasons Why Ratings Are Down at Southwest Airlines).

Perhaps worst of all is when an airline goes completely out of business. In March 2008, Aloha Airlines filed for bankruptcy and then abruptly cancelled all of their flights. Ten days later, ATA Airlines (another airline that primarily served Hawaii) followed suit. The result was thousands of stranded passengers and a temporary spike in air fares to and from Hawaii that made it difficult for many people to even get home.

What's Next?

I really don't know, but I fear the worst. Do any airline industry experts care to handicap their chances of turning things around?

Three reasons to give customer service employees a raise

A number of years ago, I managed the call center for a catalog company that sold a wide range of imported collectables. Our call center reps had to have a lot of knowledge about our diverse products, generally dealt with sophisticated customers who had high expectations, and were expected to handle both sales and customer service calls. You might expect to pay a little extra to attract good employees, but our company had cash flow problems. As a result, the company's owners mandated a starting wage that was in the bottom 25% for this type of position. Understandably, we had a hard time finding great people who were willing to work for so little when they could make more money doing the same job somewhere else.

Business owners instinctively want to pay their frontline customer service employees as little as possible, but what if paying low wages actually increased costs and hurt profitability?

Research published earlier this year in the Harvard Business Review by M.I.T. Professor Zeynep Ton suggests that it may make economic sense for retailers to invest more in their employees. She studied retail chains such as Costco and Trader Joe’s that offer low prices, but have achieved high levels of profitability and customer service while paying relatively higher wages, offering more training, and staffing more employees than their competitors. (See the article here plus a related blog post.)

Of course, paying top dollar isn’t the right strategy for every business. In this post, I’m focusing on three potential benefits of paying your customer service employees more.

Reason #1: Gain Access to the Right Talent
Good employees don’t come cheaply. They tend to have more options than less skilled or poorly performing employees. The best employees are also more likely to be employed by someone else when you start searching for them. Unless you have an incredible reputation as an employer of choice, people aren’t going to take a pay cut or make a lateral move to join your organization. Offering a higher starting wage gives you access to more potential qualified candidates.

How can you tell how much to pay? Here are three things you can try:

1. Create a profile of an ideal employee. (You can use my simple competency model.)
2. Go to salary.com and find the salary range for the position you are trying to fill.
3. Experiment with posting the same job at different rates of pay and compare the applicants you receive to your ideal employee profile. If good candidates are scarce, you may need to pay more.

Reason #2: Get Better Results, Faster
If you pay more for better employees, you should expect those employees to bring more skills, ability, and passion to the job than someone who is willing to work for less. For example, when a client of mine increased the starting rate for an open position, they were able to hire someone who needed far less training than their last hire. In less than a month, the new employee was one of their top performers. The slight increase in pay resulted in a substantial cost savings in terms of reduced training expense and productivity gains.

Will paying more yield better results? Look to these key result areas to see if it makes financial sense:

• Training. Can you save time and money by hiring someone who needs less training?
• Staffing. Can you hire fewer people by hiring someone who has a wider range of skills?
• Quality. Can a higher-caliber employee pay for themselves by making fewer errors?

Reason #3: Reduce Turnover
Good employees won’t stick around very long if they feel undervalued, especially if they can get the same job for higher wages. The real cost of employee turnover can be enormous when you factor in the cost of covering for absent employees (overtime, lost productivity, etc.) and the cost of recruiting and training new ones to take their place. Paying just a little more might be much less expensive than the high cost of employee defections.

How can you calculate the real cost of employee turnover? 

1. Try using this turnover cost calculator (Excel spreadsheet).
2. Calculate the cost savings of a modest reduction in turnover.
3. Experiment with investing some of that cost savings in higher wages.

Are employee wages the only factor? No, of course not. There is a whole list of factors that influence employee performance, engagement, and retention. However, the advantage of focusing on employee pay is it is generally easier to make the cost/benefit calculation compared to other possible strategies.