Mike Hohnen

Coaching for personal growth, change and development

General

What is their secret sauce?

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Pal's sudden Service‘People go out of calibration just like machines go out of calibration’, CEO Crosby explains. ‘So we are always training, always teaching, always coaching. If you want people to succeed, you have to be willing to teach them’.

HBR just ran a lovely portrait of Pal’s Sudden Service, a 26-unit fast food chain based in Kingsport, Tennessee.

The chain apparently outperforms all the big national fast food chains on all the key parameters, including customer satisfaction, quality, speed, service, value…and employee satisfaction.

Pal’s Sudden Service is a showcase example of the service profit chain implemented as a strategic foundation for success.

Education, training and coaching are at the core of the culture. Managers are expected to teach others every day

New employees get 120 hours of training before they are allowed to work on their own, and they must be certified in the specific jobs they perform.

When you take a closer look, you can see the nine core elements of creating a Dream Team.

Check out my overview of The service Profit Chain and how to creat a dream team

Do you want Strategic HR?

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In a hyper-competitive environment, service is probably the last frontier of sustainable competitive advantage.

Service creates customer loyalty, not because of mechanical processes and scripts, but because, if done right, service creates an emotional connection.

We can ‘force’ our frontline people to give scripted mechanical service – saying things like ‘Have a nice day’ – but they can only offer an emotional connection if they feel like it.

An emotional connection is established by employees who care and who feel that creating one is meaningful.

But to make this happen, the first emotional connection they must feel is with their workplace.

So what does it take to create an organisation that provides this?

This is what the Service Profit Chain is all about.

Show your colleagues this simple slide show. Make sure everyone at the top understands how it works.

It could be the first step to a strategic HR approach that takes your customer experience to the next level.

Download my presentation on the Service Profit Chain here:

The simple ABC of leadership

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ABC of Leadership

Three Things You Need to Master

You will find lots of articles and books describing the importance of trust in a leadership context.
Because you are a leader only if you have followers, and having followers presupposes that there is trust, if I am going to follow you – anywhere – I need to trust you. If I don’t trust you, I will be reluctant to do much for you, let alone follow you.
The trickier a task is or the riskier an adventure is going to be, the more important is this notion of trust.
So, what is it that the best leaders actually do to build and maintain trust?

It’s quite simple – they do just three things:
• they act
• they are aware of their behavior.
• they have powerful conversations

So, think of yourself and your leadership role. You are the main instrument, and you have these three movable parts to work with:
A) Your actions – what you decide to do or decide not to do
B) Your behavior – how you comport yourself on stage
C) Your conversations – Who do you talk to, why do you talk to them, how do you talk to them, and how often does this happen

Each of us does this differently.

The way you combine these three instruments defines you as leaders. This is your unique leadership style.

Leadership Style is Important
There is a direct correlation between how a leader engages with his team and how the team engages with the customer.
There is a direct relationship between a person’s level of engagement and the leadership style of his immediate supervisor.  That applies at all levels of the organization.
As a consequence, the role of the team leader, regardless of what level in the organization, becomes increasingly important.
The challenge for most of us is not so much that we lack the skills but that we are just unaware of how our actions, behavior, and conversations are affecting our surroundings.

What we are aware of, we can control – what we are not aware of, ends up controlling us.

Service is a Contact Sport

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Appels - one bad
And that needs to be reflected in the way you manage who gets to play on your team.

Step number one, when we are trying to create a service dream team, is having the right people on the bus. There are two parts to this: recruiting and developing.
Before we explore those two aspects further, let’s just take a look at why this is important. The name of the game, when we are running our service company using the Service Profit Chain framework, is employee loyalty.
In this context, loyalty has two dimensions: retention and attitude.
So, if we want to keep our best people and ensure that they continue to have that world-class, can-do-attitude, we need to be careful not to take away their job satisfaction.

How to Insult Your Best People

Ask them to work alongside an idiot!
Nothing demotivates a great service provider as much as having to work with a colleague who is not performing or, even worse, is blatantly annoying our clients. And if you – their manager – are not seen as doing something about what is obvious to everyone, one of two things will happen.

Either…
1) They will leave the team and find a place to work where they are sure to work with other star performers. (This is one of the secrets to Ritz-Carlton’s success, in my opinion – the best service people want to work there. Why – because they know they are going to work with the best in the industry.)
Or…
2) They will reduce their efforts so that they match the underperforming colleague.
In either case, your customer will be at the receiving end of a lousy service experience.
So, when we look at the best companies in a given service category, we always see that they are picky about who they hire. They do not adhere to the warm-body principle, “As long as they have a pulse, we’ll take ‘em,” to the extent that they prefer not hiring to hiring someone they are not 100% sure fits. And ‘fit,’ in this instance, is about values and attitude – not about skills.

Deal with the Bad Apples

Secondly, great managers do not put up with bad performance. If someone is not performing, they are coached. And if they are not seen to be making an effort to improve, they will need to go.
Great service organizations play to win – consequently, they have no room for players who are not performing – it’s that simple.

Seven Steps to a Dream Team

There are 7 more steps to creating a dream team – I have outlined them in a handy Checklist that you are welcome to download here.

Building a great service business begins with understanding the Service Profit Chain framework. In my view, that is the foundation. Check out my free introduction here

What has Value – From a Customer Perspective?

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Value Equation

Why Value Is Not about Money

In the old economy – the one dominated by goods – value was created through the transfer of ownership. I create or produce something; and when I transfer the ownership to you, you give me money in return. The way you check the value of what you bought has to do with the specifications. Whether you are looking for strawberries or a new car, it is about product attributes. This ‘widget’ is _______ (stronger, faster, slimmer, tastier…) than the other ones you have looked at.

In the new economy – the service economy – value is created in use.
When I rent a car, use a consultant, or search for a great place to stay for my vacation, there is no transfer of ownership. It is all about utility – I need something, and my preferred service is the one that best takes care of that need. When my need is met, it translates into a result for me. And most of us are more than happy to pay for getting the result we need.
So, if our aim is to create a great customer service experience, the starting point is to make sure that what we are offering matches the value expectation of the customer.

In order to do that, we use the Value Equation – a tool that originates from the research conducted to produce the Service Profit Chain framework. The Value Equation has four elements:

R Is for Result

What is the result that the client is expecting or looking for? Do we understand the need? If I buy an airline ticket from Paris to Rome, and we end up in Berlin, the airline did not deliver the result that I was expecting. So, no matter how cheap the ticket is or how many drinks they serve, it is a lousy service experience. Do you book a table in a restaurant because you are hungry? Maybe. More often, you have a different need. Maybe you are looking for a special moment, an occasion to celebrate or an ideal setting for a special conversation. Whatever it is, the food is just an instrument in providing the real result that you are looking for.
This means that for every service product we create, we need to ask ourselves, “What is the result they are looking for?”

P Is for Process.
You can fly from A to B with many different airlines. In general, they will all get you to where you planned to go; but each one does it their way. The difference comes out in their process.
From a customer point-of-view, a process has five elements. Each plays a part when evaluating to what extent the value proposition actually covered their needs.

 Time. How does time play into the need or result that they have? Is it important that we are on time? Is it important that we are fast or slow? If my wife and I are having dinner before the cinema, we are looking for one kind of time experience. If we are celebrating her birthday the following week, we are looking for a different kind of time experience. Same people, same restaurant, but different situations.

Reliability. Do we do what we say we will do? Are we consistent?
Competence. How does the customer experience the competence level of our employee at a given touchpoint? How well do our frontline teams respond when asked a question or a request for help?

Empathy. To what extent are our employees able to see the situation from the client’s point-of-view? When a customer feels understood, we are more than halfway to solving their needs.

Proof of service. Do we provide a service that the client does not notice – are there ways that we could remind the client that we are servicing them?
Under the fraction line we have –

$ for price and E for effort
The client pays a price for our service; but depending on the service package, they also put in more or less effort themselves. If you buy a sofa from IKEA, the price is low; but you put in quite a bit of effort yourself. If you fly Virgin Upper Class, they will pick you up at your office and take you and your stuff right to the plane. A different experience than flying Ryanair – and, to be fair, also at a different price point.
So, there you have it.

If you want to understand how customers perceive value, the value equation is your key. And, your starting point for developing a great customer experience is to understand how you tailor your customer value proposition to each segment using the Value Equation.

Simply enter your email below to download the Value Equation

The Frontline Manager Makes the World go Around

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Despite the fact that we read stories that companies such as Zappos and others are abolishing the role of middle management, the reality out there is that the vast majority of companies rely heavily on middle managers to keep the wheels moving.

So, unless you have embarked on the experiment of abolishing middle managers, there is a high likelihood that you recognize that your frontline managers are crucial to your business.

Take one metric. Staff turnover.

A controllable cost that also has a high impact on your customer loyalty and satisfaction. It is widely recognized that employee turnover is linked to the management style of the immediate supervisor.

Or, change management.

Whatever customer satisfaction strategy and tactics you are developing – the effort is wasted if your frontline is not implementing according to that plan.

The Frontline Manager is the Linchpin

But, how much attention are you giving the growth and development of those frontline managers?
If you are like most of the companies recently surveyed by HBR, not much.

What that same survey shows is that, paradoxically, the same companies that say the frontline manager is a linchpin in the organization also say that the same frontline managers need to develop a number of crucial skills, including organizational savvy, leadership, and talent development.

But they recognize that not much is being done in the company to actually develop those people – go figure.

The reality out there – still according to the HBR survey – is that most development for this level of management tends to be ad hoc, sporadic, or just too brief to actually make a difference.

In general, it seems that leadership development follows the trickle-down model. Most gets invested at the top; and if there are resources left, they are spent on the frontline managers – sometimes.

So, once again, we have a classic knowing – doing gap. The problem is recognized – but somehow nothing gets done.
I wonder why.
Let’s just recap why frontline leadership is crucial to your service organization. We live in a world of Hypercompetition. Customers are flooded with offers and messages. In every imaginable category, supply outstrips demand.

So, if you are not just going to live a mediocre existence trying to survive, you need to stand out and be, if not the absolute best, then at least among the best.

Your aim is customer loyalty. If you can get that right, you will drive profits and growth as a result. This is the basic learning from the research done that led to The Service Profit Chain.

The best starting point for developing your frontline managers is to introduce them to the Service Profit Chain framework.

If you would like a refresher course on the mechanics of the Service Profit Chain and how employee engagement ultimately leads to profit and growth, check out my free video course here: 

A Managers Guide to a Dream Team

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DreamTteam

The Service Profit Chain is a well-documented concept.

Since the original research was published in 1989, hundreds of articles have promoted the original findings which essentially boil down to the fact that happy employees create happy customers – and the happier the customers you have, the more money you make –
Yes, I know that was a very simplified version.

What not so many people talk about, or even document, is that this concept of ‘happy employees’ is not so much a question of employee satisfaction but, to a much higher degree, a question of employee engagement.
So, what are the steps to producing a high level of engagement on a service team?
According to the original research in The Service Profit Chain, there 8 steps in a self-reinforcing cycle called the dream team cycle.
Look closely and you will recognize that this is exactly what the best high profile service companies do:

The Right Team
Careful selection of new recruits. Hire for attitude. Train for skills.Coach for performance and that includes dealing with the bad apples.
Continuous Improvement
Best in class training and development at all levels in the organization. Continuous improvement is considered one of the great benefits of the job. “In this job, I grow”…
Great Support Systems
Service is not just something the frontline does for our customers. Service is our culture. Employees and managers who do not have customer contact service the employees that do. (Our IT department is not the IT-Police – it is an internal service department that supports the frontline in getting the job done.)
Empowerment
The best service employees take pride in solving the problem on the spot. So the freedom to act is hugely motivating. Southwest Airlines famously tells its employees, ”You may do anything you are not uncomfortable doing to solve a passengers problem.”
Clear Expectations
In the same way that anyone who has made it to a great sports team knows what is expected of them, employees in the best service organizations also know what is expected of them. It is part of their motivation to be part of a team that is not afraid to set the bar high.
Appropriate Rewards and Recognition
Focusing on what works, celebrating success, and acknowledging each others contributions makes work meaningful.
High Levels of Satisfaction and Engagement
As a result of Steps 1-6, we generate not just higher levels of satisfaction, but also real engagement – Service work becomes fun and meaningful.

Employees Recommend New Employees
When we need to recruit new team members, our best employees recommend friends and previous colleagues from other organizations because these are the people they would like to work with. Gradually we become the preferred employer in our region – which means we get the pick of the crop.

And that takes us back to Step 1 – The Right Team.
Done consistently this 8-step cycle become a self-reinforcing process that propels our service delivery capacity to higher and higher levels – and we all know what that does for our customer satisfaction and loyalty.

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Building a great service business begins with understanding the Service Profit Chain framework. In my view, that is the foundation. Check out my free introduction here

Management Team or Just Heads of Tribe?

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Often when I work with a GM and the department heads, I will start by asking each of them to write down the name of a person on their team – just the first name that comes to mind.  Then I ask them who in the group has written the name of a person who is in this room now on their piece of paper. And invariably, it will always be only the GM who raises his hand. The GM sees the other people in the room as his team. But, the department heads seldom see each other as the team.

Department heads tend to see themselves as Indian chiefs. Each represents his or her tribe; and when they meet, it is about defending territory and resource allocation, not about collaboration.

Two Different Cultures:  Taking Responsibility and Being held Responsible –

They key to understanding why department heads end up as heads of a tribe and not as the team we dream about has to do with how we work with responsibility.
If we spend our time at management meetings trying to identify who was responsible for ‘That’ when something goes wrong, then each department head learns that the only way you can play that game and not get hurt is to create clear boundaries. ‘This is what I am responsible for – and that is what you are responsible for. Just make sure you don’t cross that line.’
The savviest department heads also learn not to stick their necks out and take on more responsibility than they need to.

Responsibility means trouble.

So, over time leaders  (and their teams)  become more and more passive and reactive.

But, we all know that being passive/reactive is not what gets us raving customer reviews. In order to rise to the top in our category, we need to be proactive. Managers and their teams need to take initiatives and anticipate needs in order to delight customers.

But, they will only do that if:
a) it is accepted that boundaries between departments are soft and
b) that we do not ‘punish people’ for taking initiative even when they are not successful.
That means a different culture.

Taking Responsibility

The alternative to being held responsible is to develop and encourage a culture where we take responsibility.

But that is a completely different culture; because, if you think about it, no department is an island. The boundaries we have created between departments are, in reality, just here for our own sake so that we can organize stuff in a meaningful way. From the customer’s viewpoint, these boundaries should be invisible.
The customer is looking for a total experience – the whole.
And because no department is an island, when something goes wrong, in most cases it goes wrong for a number of reasons – not just for one reason.

So, the question we need to always ask ourselves when something goes wrong is: “What could WE have done to prevent this happening?” Then, maybe department head A immediately jumps in and says: “That was my fault. I screwed up, and I will do my best not to make that mistake again.”  Case closed and we can move on to the next item on the agenda.

If that does not happen, we need to analyze what happened, not to place the blame, but to learn how we could have prevented this… most probably, with better collaboration at some level.
Because – if you remember – the definition of a team is:

A group of people with a common goal and who feel mutually responsible for reaching that goal.

Feedback Drives our Behavior.

Everything that we do is based on our previous experiences or our beliefs about what an experience will be. So, as the leader, your feedback to your team governs their behavior, and over time they become a reflection of your feedback.

And, they will either become a team or they will default to heads of tribe – it’s up to you.

 

Building a great service business begins with understanding the Service Profit Chain framework. In my view, that is the foundation. Check out my free introduction here: