There are several accepted quality improvement methodologies which are used internationally, such as the well-known Six Sigma. Many of these were originally developed in manufacturing contexts to optimize for quality and profit. This approach comes intuitively in a business context with predictable properties, however, when it comes to the employee-customer encounter more volatile human dimensions govern business outcomes. In order to optimise these employee-customer perceptions, businesses must actively build programs which apply a consistent assessment method, combined with a disciplined process for managing and improving it.

In a study involving hundreds of companies and millions of customers and employees, cross-validated over 1 979 business units, the Gallup group applied the Six Sigma principles in sales and service teams to optimise employee-customer encounters. What they found went something like this:

Which is magical, because from these studies they developed the Gallup Human Sigma concept. In their findings they arrived at four core principles applicable when measuring and managing interactions between customers and employees:

• Managers must understand the role of emotions on customer loyalty and behaviour. From their studies, it shows that emotions inform both sides’ judgments and behaviour even more powerfully than rationality does.
• Employee-customer encounters should be measured locally due to great variation in impact between employees within same groups and locations. It is interesting to note that the same measurements compared between competitors showed less variance than the same measurements across local work groups.
• Employee-customer measurements can be combined into a single index, which has been proven to have a high correlation with financial performance.
• Managers need to employ both short-term (coaching based on findings) and long-term transformation (adapting processes, hiring according to EQ) interventions to improve customer centricity and loyalty over time. In addition, the employee-customer encounter must be managed holistically which often calls for a shift in organizational structure.

Emotions Govern Perceptions and Drive Decisions

Increasingly international findings, such as those of Gallup, reaffirm the claim that satisfied customers who based their decisions on emotional reasons contribute significantly more (greater spending, higher frequency of spending, less attrition) than satisfied customers who base their decisions on rational reasons only. Interestingly, both satisfied and dissatisfied customers who based their decisions on rational reasons show the same engagement behaviour. These findings definitively show that while the Six Sigma methodology is effective in improving quantitatively driven processes that are data dependant, rational and analytic in nature, it should not be applied in sales and service settings in its basic form.

The reason that that Six Sigma should be adapted for sales and service settings is that human beings are unfortunately irrational creatures who are primarily driven by emotions. Despite the widespread belief that rational objective analysis underpins decision making in human beings, there is twenty years of research across the fields of behavioural economics and neuroscience that confirms the fact that it is a complicated mixture of emotions and reason that inform these decisions.

The research confirms that a Six Sigma methodology which has been adapted to include customer emotions has significant results across companies in various industries. The customers who are fully engaged provide a 23% premium in terms of wallet share, profitability and relationship growth above average customers, while those that are disengaged returned a 13% discount across the same measures. In addition, it was found that internal business units who enjoy high levels of customer engagement (top 25%) outperform all other units by a factor of 2:1 in terms of profit contribution, sales, and growth as indicated by Fleming, J.H., et. al, 2005. Manage your human sigma. Harvard business review.

It is clear that employee-customer engagements which contribute significantly to improving emotional connections is one of the most underutilised company resources in the world.

Interactions Should Be Measured at a Low Level

There is a widespread tendency among companies to use averages when claiming various performance measures due to their appealing marketing value. While this provides management with a sense of pride it is misleading due to the nature of averages being determined across a high-level which obscure significant hidden information. In other words, these regional/national/international averages tend to conceal the informative variations found at a local or lower level which are critical for performance improvements.

Research confirms this particularly in relation to sales and service focused companies. The future health of these organisations is heavily dependent on the active management of variations found in the quality of customer experiences. The reason for this is that clients and customers experience variations at a local level and do not experience averages at a higher level.

Considering the importance of local level engagements, how can companies realise performance improvements at the lowest level?

For organisations to see performance improvements, management should act on feedback on the level at which the variability takes place. Therefore, to successfully understand the interactions between employees and customers, metrics should be used that represent the foundational level of organisations. In other words, local performance is only improved when variability is addressed at the localised level at which it occurs. In fact, customer satisfaction research shows that the customer’s experience still depends almost entirely on the particular agent or company representative with who the customer interacts. Yes, believe it.

In contrast to these findings that support investigating interactions at a local level, most organisations assess the interactions between customers and employees at a higher level which leads to misleading measurements. The result of this is that profits and revenue is lost over time while growth stagnates. High levels of customer experience variability can be reduced by organisations when they focus on improving the high variability of local processes. The power of a local focus on reducing variability lies in its simplicity and transparency, allowing each unit to identify and correct its own problems. While variation is naturally found in performance measurement distributions, it is the magnitude of variation that is significant in indicating the future viability of an organisational.

The Nexus to Financial Gains

It is generally believed that there is a linear relationship between employee attitudes, customer requirements and financial performance. The Gallup group proposed using a business unit’s employee and customer engagement scores to calculate its Human Sigma score. This establishes threshold values that define each of the six Human Sigma levels which helps group business units into six performance classes. The bottom half of these classes should be viewed as underperforming and in need of reform. The classes that focus on employees and not customers will lose their direction due to an inwardly focus while those that concentrate on customers and ignore employees are bound to fail over time. The upper half of the classes are considered to be optimized and all sales and service organisations should aim to move the Human Sigma metric of their business units into these performance levels.

The adapted Human Sigma metric incorporates employee and customer engagement into a single measure which when addressed at a lower level, enables for the improvement of financial vitality in a company. The study by the Gallup group which included 1979 business units across 10 companies supports this by revealing that local units that achieve a higher score for customer and employee engagement have on average 3.4 times higher total sales, revenue, performance to target and sale revenue gains then those units that achieve a lower score. So incredible, it actually needs to be celebrated, for real!

Starting the Transformation

There are three important changes that organisations can make to enable a transformation and reduce variability at a local level:

• The responsibility for Human Sigma must be managed from a centralised authority. The significant impact that customer and employee interactions have on financial performance as well as their closely related nature means that the best results are obtained when they are managed in a holistic manner at a local level. This can be facilitated by making a single organisational structure championed by an executive responsible for the management of the employee-customer relationship.
• The second change is that local level management is the single most important driver of local group performance. The managers of sub optimal performing groups can focus on improving specific training, performance reviews, action learning and coaching.
• The last change is that human resource practises must be overhauled. If Human Sigma metrics in an organisation are lower than expected then the company should focus on employee selection, management promotion, performance appraisals, succession planning and performance recognition.

Conclusion

Managers trained in finance, economics, engineering and such, are often horrified by low customer satisfaction scores based on experiences where “everything was done correctly”. This is exasperated when customers justify their low scores with emotive, exaggerated or plain incorrect feedback. The findings by the Gallup group in the “Manage your Human Sigma” paper serves as a tangible approach to optimizing these employee-customer engagements within organizations, helping management to better control the human variability in business.

During the past 24 years MRM Support has developed methodologies, and systems to measure employee and customer engagement continuously at the lowest transactional level. These measurements enable clients to fine tune business elements impacting customer satisfaction and better understand employee perceptions and values at a local level. By applying optimization strategies such as proposed in the Human Sigma approach, clients experience long term return on investment by growing a more loyal customer following.

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