Service Profit Chain

[Guest post] Soft power is the driver of engagement.

July 28, 2017By Mike Hohnen

engagement

Managing people has changed considerably over time. Basically we are moving from hard to soft .

Professor Joseph S. Nye, Jr. at Havard Kennedy School was one of the first to talk about soft power and leadership.

To distinguish soft power from hard power in leadership, he compared the two as follows:

Type of Power

Behaviors

Sources

Examples

Soft

Attract and co-opt

– Inherent qualities- Communications

– Charisma- Persuasion

– Leading by examples

Hard

Threaten and induce

– Threats, intimidation- Payment, rewards

– Hire, fire, demote- Promotions, compensations

Looking at the Service Profit Chain, we know there is a connection between employee engagement and customer loyalty, and thus revenue. What do you think motivates you to work? Where does engagement come from? Is it the pay and other material benefits? Or is it because you love your job, your workplace, or you team?

Motivation comes in two basic forms: intrinsic and extrinsic. While extrinsic motivation is all about external rewards, intrinsic motivation refers to the joy and the fulfillment you have from doing something.

“Intrinsic motivation occurs when we act without any obvious external rewards. We simply enjoy an activity or see it as an opportunity to explore, learn, and actualize our potentials.”
(Coon & Mitterer, 2010)

Numerous researches have shown that intrinsic motivation plays an important part in employee engagement. Whether or not your intrinsic needs are met depends a lot on the leadership style of your line supervisor.

Let’s think about yourself in these two scenarios:

Your job pays well but you just hate your bossy manager who is always commanding and threatening to fire anyone who disagrees with him. You are always so stressed and you count down every second till the day ends.
Your boss is thoughtful and understanding and he just inspires you. And you believe in what you are doing even it pays a bit less and you feel you have a sense of belonging in your workplace and your team.

In which case do you think you will choose to commit? I think the answer is obvious.

Leading with soft power, managers will be able to not just to inspire and motivate their team members, but also to influence their behaviours and boost team performance.

On this blog, we have often discussed the need to shift our mindset from transactional to transformational. At the basic level, this is a shift from hard to soft power.

“A leader is best when people barely know he exists, not so good when people obey and acclaim him; worst when they despise him.” Lao-Tsu

To learn more about employee engagement and transformational leadership, you can download Mike’s ebook Understanding Engagement. The ebook provides a very different approach to and perspective on leadership that I think you will need to rethink about how you are leading and managing your team.

Enter your email below and download the ebook now!

ETC is at the heart of your employee experience.

January 26, 2019By Mike Hohnen

ETC

What kind of employee experience are we delivering? That has been the theme of my blog posts over the past 3-4 weeks.

A few years ago, MIT Sloan Management Review ran an article entitled “Designing the soft side of customer service”. In it the authors argue that regardless of whether we are talking a pizza delivery or a complex consulting agreement, emotions are lurking under the surface and that our job is to make those feelings positive.

If we are aiming to create the optimal customer experience, we will need to start off by examining the kind of employee experience that is going to be the foundation of the customer experience.

A miserable employee is not going to provide your customer with a breathtakingly positive emotional experience – no matter how much you train them.

But this is not just about the full employee journey: recruitment to exit-interview. As managers, we need to focus on the day to day experience as well.

We have looked at endings, consequences and psychological safety in previous posts, so this week let’s take a look at what else we can learn from the field of behavioural science that can help us understand what drives a great employee or customer experience.

You need to focus on the “ETCs”.

Emotions influence what we remember. Emotionally charged episodes are easy to recall. “Experiences” that triggered no emotional reaction, positive or negative, are quickly forgotten.
Basically our emotions are triggered when something turns out better or worse than we expected. And the corresponding emotional response is then either positive or negative. A good manager does her best to manage the emotions of her team – and sprinkles the day with a few unexpected positive surprises as well. Positive surprises are anything from throwing a pizza and beer party to celebrate a win, to the simplest little gests of encouragement during the day.

Trust is the basic psychological variable that is essential to any form of relationship. No trust, no relationship. If we want engagement, there needs to be trust. And trust is the mirror of how we show up on a day to day basis as human beings. Are we reliable? Do we do what we said we would do? Do we care for and stand up for our team?

Control over one’s environment and knowledge of how events are going to unfold are fundamental psychological needs. But control is also linked to trust. In a high trust environment, the need for control is less. There is one more aspect of control when we are talking employees and that is the sense that I have some degree of control over how I do my job. This is one of the foundational cornerstones of employee engagement.

Every situation in the day that involves uncertainty either in outcome or in process will cause our team members to experience a loss of control – and that closes the loop back to emotions because a sense of loss of control creates some very negative emotions.

So there it is, as a manager, I need to manage the emotions, trust and sense of control of my team if I want to make sure that they are in the best possible shape to create a fabulous customer experiences.

It sounds complicated, but it does not need to be – In our next manager’s toolbox workinar*, we will talk about some simple tools and tips that can help you do a much better job at this.

* I have a new online training out on this: The Team Leaders Toolbox – check it out

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This is the 14th article in a series on how to lead as a first time manger. If you would like to know more, check out other articles of the first time manager series:

No fear, it is the foundation of a great team.

January 26, 2019By Mike Hohnen

No fear

The past weeks, we have been looking at the employee experience. If we buy into the whole concept of the Service Profit Chain, it makes perfect sense that creating a great employee experience will help us create the best possible guest experience.

So let’s explore another element of the employee experience.

At a very basic level, we all have a need to feel safe. Only when we feel safe can we do our best work – if we feel anxiety in some form or the other, our system directs our resource toward coping with whatever we feel as a threat and, at a very deep level, tries to answer the question: Fight, Flight or Freeze? Obviously none of these modes are conducive to producing great customer experience or anything else for that matter.

When we dissect great customer experiences, most of them are the result of one of our team members deciding to do something ‘different’ in a given situation. The guest’s situation does not fit ‘the script’ and there is a need for an improvised solution. The last thing that guest wants to hear is “Sorry, we can’t do that”. But in order for our frontline staff to produce those creative alternatives that win us customers for life, they need to feel safe.

A good team is a great place to be, exciting, stimulating, supportive, and successful. A bad team is horrible, a sort of human prison. – Charles Handy

That is also confirmed by research from Google where they have identified psychological safety as the number one driver of great team performance. Teams that experience a high degree of psychological safety outperform teams that don’t.

But what does psychological safety actual entail?

The research breaks it down into four components:

Tribe – A sense of belonging
Expectations
Hierarchy – what are the roles
Autonomy

So in simple terms, that means it is important that everyone feels included, that we set clear expectations and that we try and limit the surprises; that there is not an excessive focus on authority and positions – and finally the ultimate motivator: do I get to have a say in how I do my work? (Not what I do, that is a management decision, but how I do it.)

This is all fairly easy to understand and makes perfect sense to most of us. But how do you as a busy team leader actually do that?

Well it so happens that there is a very nifty way to approach this. It is called the high performance team model and I plan to explain how it works in details on my next managers workinar*.

If you have this approach in the back of our head as you tackle your day, you will notice a marked difference in team performance.

* I have a new online training out on this: The Team Leaders Toolbox – check it out

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This is the 13th article in a series on how to lead as a first time manger. If you would like to know more, check out other articles of the first time manager series:

Employee experiences and why you need to focus on consequences

January 26, 2019By Mike Hohnen

Motivation
Last week, we looked at how progressive organisations are focusing on managing their employee experience as way to ensure the best possible customer experience. From a Service Profit Chain‘s point of view, this makes perfect sense.

We can create super sophisticated employee career journey maps – but we could also just look at what a day looks like on our team from an employee experience point of view. What are the emotional highs and lows in a day? So we looked at how managing positive ending has a huge influence on how the whole day is perceived.

This week, I would like to look at why managing the end of the day is just as or maybe even more important than managing the start of the day from a motivational point of view.

A reasonably accepted definition of motivation is:

“A reason or reasons for acting or behaving in a particular way”

So that reason, we call it the activator, for doing or not doing something can come from two main sources. It can be external; somebody does something to make you act (A request, a threat, a reward etc.). Or the activation comes from within yourself; you feel an inner urge to do something.

In either case, you end up doing whatever it is. That is the behaviour part. And all behaviour has a consequence. So there is this sequence: Activator – behaviour – consequence in everything we do.

In simple terms: You feel a craving for sweets. That activates you to get up and go to the cupboard and find a bar of chocolate. The consequence is that you feel good – your sugar craving is satisfied. (And, maybe you learn that eating chocolate is a solution for killing a sweet tooth.)

So now just pause for a minute.

What do you think has the largest influence on your behaviour on a day to day basis? The activator or the consequence?

If you are like most of the people I have in my workshops, you will say the Activator – We tend to think that we do things because there is a push. But that is not entirely correct.

80% of what we do or don’t do is determined by what we think the consequences are going to be. The drive is the consequence – that triggers the activator.

Ah, but that is not true, you may be thinking because I know that the consequences of eating chocolate is that I will get fat. So why do I still do it? Because we are all wired to value short-term consequences higher than long-term consequences. On top of that, we will value consequences that are certain, more than consequences that are a possibility in the future.

At 2 o’clock in the morning on New Year’s Eve – someone suggests that we crack open a bottle of Jack Daniels. The short-term well known consequence is that it is going to feel great. The long-term possible consequence is that we are going to feel terrible tomorrow.

That is also why it is hard to get people to stop smoking. The immediate 100% certain consequence is that they will feel a kick from the nicotine, the long term possible consequence is that it may kill them.

So back to managing our daily employee experience.

What do you think has the largest influence on our motivation to go to work? How the day starts (activation) or how the day ends (consequences)?

It’s a no brainer.

If we want our team to come in tomorrow, energised and ready to rock and roll, we need to think about how we manage the ending today. What was the consequence of their efforts today?

How are they going to feel when they go home: Elated, confident, positive? Or downcast, self blaming, frustrated and angry? Whatever it is, it is going to be our starting point tomorrow.

So how do we do a better job of managing our endings?

That is the subject of my upcoming tranings: The Manager’s Toolbox – you can join us and participate with your questions on comments live. Check it out here.

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This is the 12th article in a series on how to lead as a first time manger. If you would like to know more, check out other articles of the first time manager series:

Implementing the Service Profit Chain requires a different state of mind.

May 4, 2016By Mike Hohnen

As we have seen in previous posts, our state is influenced by how we see things – SeeBeDo.

The dominant way of seeing the world of work is called transactional – it’s the something-for-something system – and as we saw in my previous post, it is not madly inspiring.

But what is the alternative?

Is there a different way to look at the world of work that would produce a different state of mind and as a consequence, a different kind of leadership?

The short answer is yes – it is called transformational leadership and what is puzzling about this is that this way of seeing work has been around since the late 1970s.

Transformational Leadership was first coined by the historian and political scientist, James MacGregor Burns in the late 1970s, and was used to distinguish the inspirational leadership style from Transactional Leadership.

It was later expanded on by Bass and Rigio in their book “Transformational Leadership”

“Superior leadership performance — transformational leadership — occurs when leaders broaden and elevate the interests of their employees, when they generate awareness and acceptance of the purposes and mission of the group, and when they stir their employees to look beyond their own self-interest for the good of the group. Transformational leaders achieve these results in one or more ways: They may be charismatic to their followers and thus inspire them; they may meet the emotional needs of each employee; and/or they may intellectually stimulate employees. “

Transformational leadership includes four central components:

Idealized Influence	being a role model that is highly regarded, valued, trusted, and deserving of emulation
Inspirational Motivation	encouraging enthusiasm in others through challenge and instilling a sense of significance while promoting cohesion, harmony, and confidence
Intellectual Stimulation	kindling creativity and inventiveness by encouraging novel ideas, questioning, and thinking outside the box
Individualized Consideration	paying particular attention to the individual needs of each follower

At the core of this is a fundamentally different approach to what work and life is all about

Transactional	Transformational
Homo economicus – humans are rational, and act only out of self-interest.Reward and punishment are the prime motivators.	The integrated human works on developing herself on many levels, physical, mental and emotional.Humans are driven by a need for purpose / meaning and a hunger for development and autonomy.
The transactional manager works within the established way of thinking and does not question these basic assumptions about how the organisation operates.	The transformational leader is continuously renewing the organisation by challenging existing assumptions and implementing new ideas process that question the status quo.
The employee and the employer have opposite interested it a zero sum game, I win/ you lose	The employer and the employee have common or at least overlapping interest and concerns. It’s a win/win or a lose/lose.

There is a ton of academic research that shows that the transformative approach produces superior results. If we then drill down and try to understand what exactly it is that makes this significant difference, two things jump out.

Transformational leadership, more than anything else, creates a high level of employee enthusiasm / engagement.
In a rapidly changing world full of wicked problems – survival, let alone growth, is dependent on the contribution of everyone.

The transformative leader is distinguished by the ability to mobilise all the resources that are present in a given group or organization. And because people feel involved, included, and accepted for who they are, you get a completely different level of engagement. It becomes a self-reinforcing upward spiral.

Because of this, there are better relations and a much better understanding of each other’s perspectives. This also builds a culture where everybody feels like contributing and adding their point of view and ideas without being nervous about being criticized, ridiculed, or otherwise falling foul in the system.

This also means that the transformational leader is more humble in respect to other people and open to their ideas and contributions, because it’s not about the leader as a hero, but about a challenge, a purpose, that we need to solve together.

The transformative organization does better over time – they are much better equipped to handle change.

This also solves a personal inquiry I have had for a few years now: Why is it that some organisations implement the Service Profit Chain framework with a natural ease and subsequent amazing results, while others seem to get stuck.

The answer lies in their fundamental approach to work, is it transactional or is it transformational?

Even with the best intentions, if your fundamental state of mind is transactional, you will not create the kind of internal quality that is foundational for success when implementing the Service Profit Chain.

Are you the chief employee experience officer?

March 31, 2016By Mike Hohnen

Focusing on the customer experience is the key to high customer loyalty – it’s well established.

That is also why around 70% of medium to large UK companies have a customer experience manager at the level of VP or equivalent. The current buzz-tool for developing these customer experiences is ‘service design thinking’.

So far so good.

But if you’re familiar with the service profit chain, you also know that the key to an exceptional customer experience starts somewhere else. We need to create what we call ‘internal quality’ – more popularly referred to as ‘a dream team cycle’.

So what would happen if we were to turn all this service design thinking on its head and focus more on the employee experience? When did we last sit down to analyse the employee journey as it unfolds throughout the day?

Do we know what the critical touch points are? Have we done some emotional mapping that could help us understand what the possible frustrations are during a day?

What are the learning opportunities? Does this job have varying challenges, or is it just the same thing day in, day out?

This idea came to me as I read Global Human Capital Trends 2016, published by Deloitte University Press. According to this latest survey, 92% of executives listed organisational design as very important and something they will be focusing on this year.

So designing our service organisations from the employee perspective should receive the same kind of attention and resources as we use when looking at the customer experience. Yes?

This leaves the question of who the chief employee experience officer is going to be in your organisation. Will they be part of HR, or will your organisation create a totally separate role?

I would love to hear your views on this, so please feel free to reply to this mail.

Do you want Strategic HR?

January 21, 2017By Mike Hohnen

117

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:

What has Value – From a Customer Perspective?

March 20, 2017By Mike Hohnen

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