Sound the Alarm!

It's odd to think of complaints as customer satisfaction tools. After all, they indicate the polar opposite of customer satisfaction, don't they? But that's exactly the point: An effective complaint system is your customer satisfaction warning signal. Imagine a big red light mounted on the wall of your conference room. When a customer complains, the light blinks a glaring shade of crimson as a deafening buzzer blares. This is how your complaint system should function.

Complaints communicate customer perceptions, and perceptions compose the largest determinant of customer satisfaction. Unfortunately, however, complaint systems are completely reactive: You're not reaching out to your customer--you're relying on the customer to reach out to you. This is a risky proposition. Many customers simply aren't going to take the time to lodge a complaint. They may believe their time is too valuable, might not have confidence in your ability to solve the problem, have decided to take their business elsewhere or have a hundred other reasons not to complain. For every complaint your organization receives, there may be four or five others you'll never know about.

Because of its reactive nature, a complaint system should be used in combination with one or two proactive tools. These extend an organization's tentacles deep into the environment, while the complaint system acts as the last line of defense. If the proactive systems are effective, you'll hear about many issues long before they escalate to a complaint. But the complaint system will still exist--a monolith guarding the entrance to your customer satisfaction realm.

Point of contact

An effective complaint system must be easily accessible to your customers. A single toll-free phone number is typically the best mode of contact, even if your organization is a large multifacility company. Don't confuse your customers with instructions such as: "If you're calling about our outdoor recreation products, dial the Chuckamucka facility. If you're calling about our watercraft products, dial the Simpleville facility…"

Provide one phone number for complaints, and make sure it's posted prominently in multiple places (e.g., the user's manual, the assembly guide, the packing list, the exterior box, the invoice or the thank you note). Make it clear to even the most casual observers how to call if they have a problem. Don't fret that you're treating your customers like children. They want to be treated like children, at least in terms of getting in touch with you easily.

Customers stand a significant chance of becoming irritated when they call to complain. Don't put them on hold or send them into voice mail. They'll only become more irritated, and this will hamper their ability to communicate the details of their problems. Establish whatever staffing or infrastructure is necessary so that customers can speak to a real person. It's a good investment.

Another communication faux pas is transferring a customer from one telephone extension to another. The first point of contact should be adequately trained and have the necessary tools for soliciting and recording the complaint's details. If the employee isn't able to carry out the task, take whatever action is necessary so that it can be carried out. Practicing complaint calls raises an employee's confidence and facilitates his or her ability to deal with the customer.
Although other communication media such as faxes, e-mails or Web forms can function as first points of contact for complaints, voice contact is still the best. Customers with complaints want to talk to someone, and fast. Speaking directly with a human provides assurance that the problem will be solved and everything will turn out OK.

Empathy

Empathy is an important part of dealing with customers who have complaints. What exactly does empathy mean? Simply that the person talking to the customer understands the situation from the customer's point of view. He or she understands why the customer might be upset, is able to share some of the same feelings and lets the customer know that he or she would probably feel the same way.

Is it appropriate to express regret because of the problem? Sure. The customer has experienced something unpleasant, and it only makes sense to say you're sorry about it. Saying, "I regret you had this problem" isn't a confession of guilt. You're merely saying what one friend or business partner would say to another when something goes wrong. However, the organization's representative should stay away from any talk about guilt or fault-finding.

Empathy allows the customer to feel that he or she isn't alone in the situation. The customer has an ally of sorts, an advocate. Creating this feeling in the customer is critical to defusing any anger or ill feelings the customer may possess. Empathy is also the first step toward turning the negative experience of the complaint into a positive one and ultimately rebuilding the customer satisfaction that might have been lost.

Obviously, the more upset and emotional a customer is, the more empathy will need to be applied to the situation. Everybody's communication style is different, but the essential message that most customers must hear is this:
* I can certainly understand how you feel about this situation.
* We regret that you were inconvenienced.
* We'll investigate this problem as quickly as possible and let you know what we learn.

Getting the details

In addition to expressing empathy, the person receiving the complaint must gather the details. Exactly what went wrong? Allow the customer to provide a general description, then begin to sharpen the particulars. Typical information includes the following details:
* What was the exact nature of the problem? Generalities won't cut it. The problem statement must provide enough detail and depth to facilitate investigation.
* When did the problem occur? The date is certainly necessary, as might also be the time.
* Where did the problem occur? The state, city, plant, retail outlet, department, production line and machine all might be important.
* Who were involved in the situation? What roles did they play?
* What product was involved? What were the part numbers or service types?
* Were there any specific batch numbers, serial numbers or other identifiers that provide traceability?
* Was the problem isolated or generalized across all products?

Consistently gathering this breadth of information is difficult without a structured form. Most organizations custom-design complaint forms based on their individual needs. Decide exactly what information you need to investigate customer complaints and take effective action; then design your form around these needs. Certain sections of the complaint form are almost universal, including:
* The person to whom the complaint is assigned
* The response due date
* The cause(s)
* The action taken
* A verification of action taken
* A closure signature and date

Also make sure to include proof of follow-up communication with the customer as one of the requirements of the form, if that's something your organization elects to do (it's a very good idea).

Project management

Each complaint should be assigned to a project manager whose job it is to assemble the necessary resources and ensure that all phases of the problem-solving process are carried out. This individual should have the project management skills to ensure that the correct people are involved and that they have the proper tools to address the problem. The project manager should also have the authority to remove barriers and motivate action. The space on the complaint report labeled "assigned to" is usually where this manager is designated.

This might sound a little overblown to some people. After all, we're just talking about a customer complaint, right? Yes, but a customer complaint can be a very complicated affair. Consider all the steps that constitute a response to a typical customer complaint:
Clearly defining the problem
Identifying the root cause
Proposing a range of acceptable corrective action
Choosing the action
Implementing the action
Following up to ensure the action was effective
Reporting the action and results back to the customer
Updating procedures and other documentation as necessary to reflect changed methods

More steps could be added, depending on the nature of the complaint; complex projects require a project manager. Think about the effective and ineffective corrective actions you've been a party to. One of the keys to the effective action most likely was assigning someone responsible for driving the project through to completion, i.e., a project manager.

Effective project management of customer complaints includes at least three distinctive hallmarks:
* Clear assignment of ownership for each complaint
* A defined problem-solving method. This is a logical step-by-step process for addressing the problem in a lasting way. The eight steps previously outlined constitute a problem-solving method.
* Involvement of a wide range of personnel. It goes without saying that managers don't have all the answers. Organizations must use all their available creativity and intellect when customers complain. Executives, managers, supervisors, operators, trainers, technicians, administrators and troublemakers could all be drawn into the problem-solving process.

Like a fire alarm, the best complaint systems swing the entire organization into action. The more people involved in the complaint investigation, action and follow-up, the more likely it is the organization will learn from the experience and not repeat the same mistakes. Team-based problem solving is a particularly effective tool for getting personnel involved. This doesn't necessarily mean decision making by committee, which is usually a disaster. It simply means that a wide range of people are contributing.

The overall management of the complaint system should be assigned to a complaint administrator. This person has a number of important responsibilities:
* Supervising the input of information into the complaint database
* Routing the complaint form to the appropriate project manager
* Ensuring that fields in the complaint database are updated as investigation and action proceed
* Escalating the complaint when investigation and action aren't proceeding according to plan

Organizations have a habit of assigning the role of complaint administrator to someone with very little real authority. This is a mistake because it may be misinterpreted as an indicator of how inconsequential the customer complaint system really is. The role of complaint administrator is a big one, and its assignment shouldn't be taken lightly.

Complaint management software

Complaint management software can facilitate the tracking and analysis of complaints significantly. The software's complexity and sophistication is meaningless; the important thing is that the person managing the complaint system can determine the status of all complaints at a glance and easily convert raw data into graphics.
Many complaint management software packages can be bought off the shelf, and many of these are effective. It's often much cheaper and easier, though, for the organization to develop its own software tools. A complaint database can be developed in a matter of minutes using relational database or spreadsheet software. Complaint databases typically include fields for most of the spaces found on the complaint form. It's also a good idea to put the complaint database on a server, with read-only access granted to the organization as a whole.

Justified vs. unjustified complaints

Some organizations have decided that it's a good idea to classify complaints according to whether they are "justified." This makes logical sense, but it's the worst thing a company can do for building customer satisfaction. If I'm a customer, all my complaints are justified. Why else would I bother complaining? If you try to tell me that my complaint is "unjustified," it's only going to make me angrier than I already am.

Once the customer experiences a problem, it becomes the company's problem. Regardless of the fault of the problem, customer satisfaction has been affected, and action must be taken. Consider these scenarios:

* The customer used the product incorrectly, and the performance was adversely affected; the complaint is deemed unjustified. But why did the customer use the product incorrectly? Was the application known prior to the sale? Were the instructions unclear? Is there any chance that the customer was misled, even unintentionally?

* The customer says the product was damaged, but the type of damage described could only have happened at the customer location; the complaint is deemed unjustified. But should the product's packaging be improved? Should you provide guidelines for proper handling?

* The customer said the shipment arrived late, but he or she selected the carrier; the complaint is deemed unjustified. But should you stipulate longer lead times when this carrier is used? Should you offer to contact the carrier on the customer's behalf? Should you assist the customer in selecting alternative carriers?

* The customer said the service person was rude, but the truth is that he was provoked by one of the customer's employees; the complaint is deemed unjustified. But should you provide your personnel training in dealing with difficult people? Should you coach your employees in conflict resolution?

In each of these cases, an argument could be made that the problem was the customer's fault. Taking this position, though, does nothing to enhance customer satisfaction, nor does it further the organization's long-term objectives. Savvy organizations will look for ways to error-proof their products with customers.
Of course, some problems are truly the customer's fault. When these situations occur, the organization might not be obligated to replace the product, provide credits or refunds, or accept returns. In all cases, however, customers must be treated in a diplomatic, cordial manner.

Reporting back to your customer

Humans are naturally curious. If you give someone feedback, it's difficult to refrain from wondering what the person does with it. This is especially the case with negative feedback based on a purchased product. Customers want to know what action has been taken. After all, the customers had a negative experience related to something they spent their hard-earned money on. They even took the time to tell the organization about it. Now they're curious. What are you going to do about it?
If your organization is interested in turning the negative experience into a positive one, someone must take the time to report back to the customer. The communication should include three key elements:
* The results of the investigation into the problem
* The action taken
* A statement of thanks for reporting the problem

Reporting action back to the customer closes the loop on the issue. It also lets the customer know that you take his or her feedback seriously and are committed to making improvements. In some cases, it can determine whether your organization remains a supplier to this customer.

Implementation procedures

The following steps represent implementation guidelines for an effective complaint system:
* Determine what information is needed in order to investigate and take action on customer complaints. Build your complaint form around this information.
* Establish contact methods for customer complaints. Remember that voice contact is preferred by most customers. Test the contact method in various situations to ensure it works.
* Develop a written procedure for how complaints will be handled. Stipulate responsibilities, authorities, protocols and problem-solving steps, as appropriate.
* Appoint someone as the complaint administrator. This person will be responsible for inputting information into the complaint database and routing the form for investigation and action.
* Educate the customer on how to contact the organization in the event of a complaint.
* Train all employees in their roles within the customer complaint system.
* When a complaint occurs, use structured problem-solving techniques to address them in a systematic manner (Refer to the article, "Six Fundamentals of Effective Problem Solving," Quality Digest, September 2002).

Communication about complaints

Complaint information should be one of the most widely disseminated topics in an organization. Trend data should be posted on every departmental bulletin board, along with the details of relevant complaints involving that department. Complaints, their root causes and eventual corrective action must be made topics of any regular communication that takes place throughout the organization.

Top management should be the most knowledgeable about complaints. Business review meetings should include a discussion of complaints as one of the primary agenda topics. Top management should aggressively review progress on determining root causes and taking effective action. When this happens, the effectiveness of the overall complaint system increases significantly and customer satisfaction stands a chance of being salvaged.

Dear Boss

Dear CEO:

I'd like to thank you for the nice pizza party you threw at our ISO 9001 kickoff event. Everybody enjoyed it and appreciated your inspiring words. The joke you told about the elephant, the preacher and the procedure notebook was very amusing. Your sense of humor is exceptional, especially for a member of top management.

The purpose of my letter is to prepare you for the work we have ahead of us. I know how busy you are, and it's easy to get caught up in the day-to-day issues of running our organization. However our new quality management system (QMS) is the way we're going to run our organization, and you'll be a key to its success. Your engagement in this effort will determine whether we use our QMS to become more competitive and customer-focused, or if it will be only a piece of paper on the wall.

Chief, we need a little strategic planning

As you know, identifying processes is a key step in implementing our management system. Let's make sure we identify at least one customer for every process. Whether it's an internal customer or an external customer doesn't matter. What matters is that the people working within every process understand that they serve someone outside of their own little kingdom. Right now, some of our processes operate as if they serve only themselves. We need to drive a customer focus from one end of this organization to the other, and our QMS will help us do it.

One of the key processes is strategic planning. ISO 9001 doesn't require strategic planning, but it's the logical starting point for a lot of things that the standard does require. Everything we do demands the high-level guidance that strategic planning delivers. At least once a year you should assemble your best and most diverse advisors and scan our competitive environment. What do our customers require and desire? How are these requirements and desires changing? As an organization, how well are we positioned to address the changing market and our ever-evolving customers? We need to match ourselves against the realities of our environment, identify actions that will drive us forward and implement these actions with a clear plan. This is the essence of strategic planning. If our ISO 9001 system is disconnected from strategy, then we have a serious problem.

Ditto for objectives

Objectives flow directly from our strategic plan. They tell everyone what specific initiatives are important to our success. Please help us choose strategic, hard-hitting objectives. They should tie directly to our strategic plan, translating that document into simple metrics that everyone can understand. Because our strategic plan will be focused on better serving our customers, our objectives will also be tied to customers. Each process will have objectives that directly relate to the customers it serves.

Resist the temptation to have two sets of objectives, one for the sake of ISO 9001 and the other for "really" running the business. We only need one set of objectives that everyone understands. Don't bother to call them "quality objectives" because that will only cloud the issue. Somebody might hear the term "quality" and try to narrowly define what the objectives may address. Our objectives should address how we drive success, period.

As chief executive, you are uniquely qualified to communicate our objectives and their significance. This message could come from somebody else in the organization, but it's much more effective coming from you. Explain to everyone how each of our objectives affects our long-term success, and ensure that all employees know exactly how they contribute to achieving objectives. Above all, make sure that we all know how we affect our customers in our everyday actions.

Which brings me to management review

You should strive to make management review your forum for reviewing data and making decisions. We're not doing it for the sake of ISO 9001; we're doing it to ensure our success. Management review should occur regularly and rely on timely information. If we already have top-level meetings for reviewing our organization's progress, then let's just turn these into our management review. It doesn't matter how we do it; the only requirements are that the review is your event, and we must cover the specified inputs and outputs. We can get as creative as we want. Management review should never be done just to satisfy an ISO 9001 requirement. The point is to review data, make decisions and become a more successful organization over the long term.

Communicate broadly about all aspects of our QMS. We have a wide range of communication media; it's just a matter of using them. Take every opportunity to talk honestly to our organization about what we're doing and where we're going. Try to connect your message to the things we're doing in the QMS and how they affect our customers. Don't assume that we'll immediately understand. Be very explicit in your communication, and don't forget to allow room for us to respond.

You rule customer feedback

Customer feedback is another key aspect of our QMS, possibly the most important. It's certainly the most critical data we receive. It communicates even more than our financials, which tell us only what has already happened and are poor predictors of the future. Not only can customer feedback predict our future, it's our gateway to long-term success.

As our chief executive, you need to obsess about customer feedback. You should thirst for every bit of feedback we collect--positive or negative. Collect it we must because we can't sit around and wait for customers to call us. We need simple, concise tools for capturing feedback proactively. To collect feedback, let's use existing customer interactions instead of inventing new ones. Our organization already has multiple contacts with customers day in and day out, and these interactions can easily be leveraged to gather feedback.

When customers complain, you should take it personally, mobilizing all of our resources to take corrective action. Not everyone realizes how critical customer complaints are, so you must remind them. Make it easy for customers to complain, and make it easy for us to fix their complaints. When customer feedback indicates something positive, find out what's causing the satisfaction. Share what you learn with everyone, and make it our new standard. If you're constantly asking about customer feedback, everyone will understand how important it is.

Can you fix this?

Another thing to keep on your radar is our corrective and preventive action system. I suspect we're going to have difficulty motivating people to use these processes. Nobody likes extra work, and very often that's what these appear to be. Investigating and solving problems aren't extracurricular activities--they're a key job function for everyone. When problems come up or customers complain, you should say, "Let's open a corrective action." When a potential problem is revealed, you need to say, "Let's initiate a preventive action." In both cases, make sure that adequate resources are applied and that we follow through to completion.

Very few of us have had training on problem-solving techniques. Can you fix that? Getting everyone up to speed on problem solving will be a huge step in our development as an organization. It will prepare us to take part in the corrective and preventive action process. You should participate in the training, too. You're busy, but you're not too busy to become a better problem solver. Your presence would also underline the significance of this training. If you're agreeable, I'll have a purchase order on your desk tomorrow for problem-solving training. Becoming better problem solvers is one of the best investments we can make. The better we are at problem solving, the better we will be at addressing the changing needs of customers.

One word: training

That brings me to training in general. Training is one of our key processes for preventing problems in the first place. It's not optional. We don't have to spend piles of money and weeks of time, but we do have to train our people. I've worked for too many organizations where training was considered good to do if time and circumstances allowed. Once we got busy, training was abandoned. "Hey, we've got work to do!" everyone shouted. "Who's got time for training?" Then they wondered why customer complaints skyrocketed. It's simple cause and effect: Neglect training, and people will make mistakes.

Here's a deal for you: We'll strive to keep the training lean, concise and relevant. In return, you'll frequently ask managers and supervisors how their training programs are going. Maybe you could periodically drop in on training to remind trainers and trainees alike of how important this process is to our success. You should keep yourself in a constant state of learning, too. Nobody needs training more than you, given the huge responsibilities that you face.

Let's work smart on internal auditing

Internal auditing is a process you'll be involved with in the near future. You may never actually perform an audit (although it would be great if you did), but you'll certainly be an essential part of the process. A key role you'll play is making sure that audits are properly resourced. Insist that smart, insightful personnel are selected as auditors. Don't let auditor selection become an exercise in "who can we spare?" Invest the process with smart people, and the results will drive improvements. When audits reveal opportunities, ensure that we take corrective and preventive action. Our audits should focus on important, strategic issues. Ask how the audits are helping us become a better organization. Ask why our customers should care that we're doing audits. Help us keep our eyes on the things that matter, and audits will produce strong results.

Boss, are you listening?

One of the final topics I'd like to talk about is trust. Please trust me when I recommend that we do something to improve our organization. It's your prerogative to disagree with me, of course, but at least trust that I have our organization's best interests in mind. Just because I'm an employee doesn't mean I can't have good ideas. Too many business leaders fall into the trap of thinking that great ideas have to come from outside the company, especially from someone with a briefcase and a business card with the word "consultant" printed on it. The answers to most problems lie right here within our organization; we just have to listen to them. The title CEO should be changed to CLO, for Chief Listening Officer. You'll listen to data, listen to customers, listen to competitors, listen to suppliers and, of course, listen to us, the employees. All this listening, combined with wise action, will ensure that we do the right things.

You hold the key

Finally, be aware that our QMS is a bellwether of our success. A failing management system is a predictor of much larger failure. If we let our QMS decay, become bureaucratic or too inwardly focused, we'll seal our doom. We must use our system to look outward and see where the market and our customers are moving. Your interest, involvement and leadership are the only ways that our QMS will remain viable and improve. If a piece of our system serves no purpose, have it removed. If we're not following our procedures, find out why. If something we do doesn't make sense, investigate further. The words "why" and "I'm listening" are your best friends. You have the power, through these words and your own innate wisdom, to keep us customer-focused and always improving. You hold the key.

Building a Balanced Scorecard

Most sane people wouldn't consider steering a ship by looking backward, but that's exactly what most companies do when they focus entirely on financial measures for decision making. The balanced scorecard, one of the most significant management philosophies of the last quarter-century, confronts that stratagem head-on with a simple core concept: Stop trying to manage your organization by financial measures alone. Why? Because financial measures always look backward. They tell you what happened last month, last quarter or last year, but they say little about what will happen in the future.

Financial measures are important, but so are others. Robert S. Kaplan and David P. Norton, authors of The Balanced Scorecard (Harvard Business School Press, 1996), advocate the use of a balanced portfolio of business measures. What exactly is a balanced scorecard? It's a model of metrics, with four boxes representing different measurement categories. The four categories drive performance across different time frames: short, medium and long term. The intent is that organizations will analyze their performance across all four categories of metrics instead of just analyzing and acting on financial measures. Focusing on a balanced portfolio of measures will drive improvement over the long term. Anyone with any amount of business experience knows that financial success in the short term doesn't always translate into long-term success, and that's the underlying wisdom of the balanced scorecard.



The specific measures that reside within each box of the balanced scorecard will be different from one organization to the next. In fact, one of the challenges of the balanced scorecard is in determining logical measures and getting accustomed to acting on them. Here's a summary of the four boxes and how they relate to one another:

• Financial measures. These metrics drive performance over the short term because actions taken to improve financial measures show results quickly. Examples include revenue, profit and cash flow. Financial measures are important because they represent the immediate survival of the organization. They are usually considered the starting point for any balanced scorecard.

• Internal performance measures. These drive achievement in the medium term because actions take longer to show results. Examples include efficiency, innovation and inventory turnover. Internal performance measures rarely show up on financial and accounting reports, but they indicate how well the organization manages its internal processes. Success on internal performance measures will have a direct, positive effect on financial measures, but the effect may take a number of months to appear.

• Customer and marketplace measures. These drive success over the medium to long term because actions might take months or years to show tangible results. Examples include customer perceptions, brand loyalty and market share. Customer and marketplace measures look at success through the eyes of customers, a point of view that is often ignored or minimized. These directly affect financial measures but shift gradually over time. Once customer perceptions begin to move, their momentum is hard to control. This underlies the importance of having a strong grip on what customers really think and what the organization plans to do about it.

• Human resource measures. These drive success over the long term because actions might take years to show tangible results. Examples include hours of training per employee, employee survey results and employee retention rates. Human resource measures are possibly the furthest removed from financial measures because they're often difficult to trace back to bottom-line numbers. But make no mistake---how well an organization manages its human resources certainly affects financial success.

Organizations should try to produce effective results not just for next month but also next year and next decade. Actions taken to improve medium- to long-term metrics are investments in the organization's future. Other themes of the balanced scorecard include linking metrics to strategy, communicating metrics to all personnel and regular progress reviews. These common-sense concepts fit perfectly with the ISO 9001 requirement for measurable objectives.

Are you ready to build a balanced scorecard for your organization? If so, here are some steps that will help ensure success.

Involve top management

The balanced scorecard represents a significant shift in the way organizations gauge their performance. For this reason, top management must embrace the concept fervently enough to become its primary champion. This kind of sales job is no small feat. How do you generate such enthusiasm for a seemingly radical concept? Here's one path:

• Describe what the organization is doing now, which is using financial measures primarily to make all decisions. Show how this has led to shortsighted decisions and mistakes. Make sure to be very diplomatic in how these problems are portrayed.

• Describe the balanced scorecard and explain why it's superior to the measurement methods used by most organizations. Discuss companies that have utilized the concept and provide examples of the measures they used. Make sure to mention that the measures on a balanced scorecard are derived directly from the organization's strategy, which links them perfectly with long-term success.

• Describe how the balanced scorecard could be used in your organization. Outline the strategic benefits to managing a balanced portfolio of measures that drive performance over the short, medium and long term. Explain how a balanced scorecard would remove the ambiguity and confusion that usually accompany the deployment of strategy.

Get top management energized by the concept. Having top management's ear can be very helpful. To achieve this, your sales job is actually twofold: You must sell the people who have top management's ear and then have them assist you in selling top management. The concept almost sells itself when presented correctly. Kaplan and Norton's book can facilitate your preparation, as can a number of others. If you've sold yourself on the concept and truly believe in it, then you'll be in a good position to spread that enthusiasm.

Your best allies during this sales and education process can be your finance people. This might sound a little strange because these would seem to be the people with the most to lose from focusing on things other than financial measures. A smart CFO understands the pitfalls of managing for the short term, though. Use the financial leaders in your organization as sounding boards. It's likely that they'll see the obvious benefits of the approach. Once you have the finance people convinced, your president or CEO should be easy.

Ask the right people the right questions

After top management has become engaged by the concept, someone has to do the dirty work--i.e., build the scorecard itself. A project of this sort will be challenging because the metrics of the past and present might not be much help. The starting point is the organization's strategy. What broad actions are you taking during the next year to stay competitive? The measures on the balanced scorecard will support the strategy, examining it from the perspectives of four quadrants: financial, internal performance, customers and the marketplace, and human resources. That means you'll have to go to the process owners and stakeholders who are tied to these perspectives. Typically, these are the people who are best prepared to assist in developing the respective parts of the balanced scorecard:
• Financial measures: finance, accounting, top management and sales
• Internal performance measures: production, design, quality assurance, engineering, purchasing and logistics
• Customer and marketplace measures: sales, marketing and customer service
• Human resource measures: human resources, training, health and safety

Note that top management is present in only one of these groups. This is so it won't unduly influence measures in the other three groups. There's no benefit to upholding the paradigms of the past when building a scorecard.

The best way to engage each group is through a facilitated session during which you guide participants through an exploration of their own experiences and knowledge about the issues at stake. If the organization has a well-defined strategy, this process is relatively simple. What measures will support achieving the strategy? Define these from each of the four quadrants, and the resulting set of measures will become your balanced scorecard.

The problem is that many organizations don't have a well-defined strategy. Some never get around to doing strategic planning at all. In that kind of organization, developing a balanced scorecard will prove challenging. Even when there's an existing strategy, it's often the result of "group think" or has little connection to the organization's practical requirements.

I recommend holding a series of facilitated meetings with representatives from the four groups listed earlier. During these sessions, you'll guide the participants through a SWOT (strengths, weaknesses, opportunities and threats) analysis specifically focused on their functional areas. For example, participants in the customer and marketplace group will examine strengths, weaknesses, opportunities and threats through the eyes of their customers. The resulting measures will seek to maximize strengths and opportunities, and minimize weaknesses and threats, as viewed through their customers' perceptions. Here are some of the questions in each of the balanced scorecard sections:

• Customer and marketplace SWOT analysis:
--In the eyes of our customers, what do we do especially well?
--What was our biggest customer service success last year?
--What problems do customers keep telling us about?

• Human resource SWOT analysis:
--What makes our people better than employees in other organizations?
--What employee skills and abilities could be improved?
--What skills and abilities do we think will be critical 10 years from now?

• Internal process SWOT analysis:
--What part of our organization experiences the least waste? What enables this efficiency?
--What efficiencies do our competitors have that we don't? What could we do to adopt these efficiencies?
--What's one process improvement we could implement that would put us ahead of the competition?

• Financial SWOT analysis:
--What financial assets do we manage especially well?
--What problems do our accountants keep telling us about?
--What financial advantages do our top competitors have we that we don't?
--What are the three most likely ways our capital could dry up in the next
five years?

The full versions of these SWOT worksheets are available for download:
• SWOT--Customer
• SWOT--Financial
• SWOT--Human Resources
• SWOT--Internal
• Proposed Measure Evaluation Worksheet


Each of the SWOT analyses will produce a set of measures. Not all the measures will appear on the final scorecard, of course, but at least one measure from each group will. The groups can trim their lists through a multivoting methodology (i.e., where each group member casts a predetermined number of votes) or through a more quantitative process. A tool called the proposed measures evaluation worksheet is also available at Quality Digest's Web site. Regardless of the method used to select your final measures, keep your list short. Having a punchy list of five to 10 measures will clearly communicate to everyone what matters most. If you adopt more than 10 measures for your balanced scorecard, the focus becomes diminished. People are able to concentrate on only a few things at a time, so don't overcomplicate the process. If your balanced scorecard is linked to your competitive reality, then it can be an indispensable tool to drive your long-term success

Shakespeare and Leadership

Based on a cursory inspection, Hamlet would seem to hold great promise as a model of leadership. After all, the guy was Prince of Denmark, a job ripe with leadership potential. When you hold a title like king, queen or prince, it's usually a sign that leadership is in the cards for you.

Shakespeare gives us a flawed hero in Prince Hamlet, though. He's a fellow who can barely lead himself, let alone anybody else. Can we still derive leadership principles from him? Of course. His flaws and virtues alike provide valuable discussion points. But before we delve into them, let's review the storyline.

The play begins with some of Hamlet's friends spotting a ghost while guarding the king's castle one night. The ghost has the appearance of Hamlet's father, the recently dead king. The guards discuss what they've witnessed and decide that they should ask Hamlet to come see the apparition. Hamlet is mystified by the story and agrees to stand watch with the guards the following night. The ghost makes an appearance, and Hamlet learns that the apparition is truly that of his father. The ghost reveals that he was murdered by none other than Hamlet's uncle, Claudius, who subsequently married Hamlet's mother and became the new king. The ghost charges his son with a heavy but unambiguous task: avenge his death by killing Claudius. Despite this clear objective, Hamlet spends his time doing everything but carrying out his
mission.

What can Hamlet teach us about leadership? Following are the principles illustrated by the prince's behavior.

A leader must take action based on credible information

Hamlet learns what he must do, but he then spends the remainder of the play avoiding the inevitable. He doesn't seem to know how to go about carrying out his responsibility, and he doesn't even try to develop a plan. He just frets and does nothing. Hamlet is paralyzed, which is something a leader should avoid at all costs. In a crisis situation, a leader must always choose one of two options: take action or seek more and better information. Hamlet does neither.

Some readers might say that Hamlet's information wasn't credible. After all, it came from a ghost. However, the ghost was seen and described by multiple people, so it wasn't a hallucination. The ghost's statements have credibility because they reflect an intimate knowledge of the events surrounding the murder of Hamlet's father. The ghost provides details that would only be known by the murderer and the victim. It's insider information from the afterlife, so to speak. Hamlet has no doubt about the ghost's truthfulness. He believes the information implicitly, but he can't translate the information into action.

A leader must mobilize people

The action leaders take is typically the work of multiple people. In other words, leaders can't do it all alone. They provide the overall objectives and motivation, enabling others to rally around their cause. But Hamlet refuses to assemble a team to assist in carrying out his objectives. The castle guards, each of whom saw the ghost, would be well-prepared to assist in the effort. Each of them also holds Hamlet in high esteem. Hamlet could easily have recruited his guard friends to assist him in getting the job done. Given the fact that his cause involved killing a sitting monarch, he needed all the help he could get.

Without mobilizing people in support of his cause, a person can be a crusader, a visionary or even a genius, but he or she will never be a leader. The single most important element of leadership is motivating people to follow. Followers understand and believe in the cause and are put into action by the leader. Hamlet's cause is a deeply personal one, and it would be temp-ting to say the job is his responsibility alone. All leaders have a deep personal connection to their causes, though. Hamlet fails the test of leadership because he refuses to rally people around his cause.

A leader must stay focused

Great leaders are almost maniacal in their focus. They seize upon their causes and refuse to let go, closing out all other distractions. Hamlet is likable because he doesn't stay focused. He's just like us. We relate to his inability to overcome his many distractions and carry out the important task before him. Think of the big project you've been putting off for longer than you'd like to admit--and it doesn't even involve killing somebody! Given that perspective, who can't empathize with Hamlet? His many distractions make for fascinating reading. Here are just a few of the digressions that keep Hamlet from approaching his task as a leader should.

He flirts with insanity. Insanity generally isn't a positive attribute for a leader. Followers want to believe they're headed in the right direction, and insanity rarely leads there. Hamlet takes this course from the start. It's apparently a diversionary tactic so his true aim of avenging his father's murder won't be suspected.

The first evidence of Hamlet's supposed madness is found in his scene with his girlfriend, Ophelia. Hamlet appears in her room with disheveled clothes and bizarre behavior, expressing his love for her in a dramatic manner. Shortly thereafter, he completely reverses course and tells her, "Get thee to a nunnery." Hamlet's attitude toward Ophelia swings like a pendulum. This is consistent with his strategy of depicting himself as unstable, but it absorbs time and energy that could be better spent.

He passes up an opportunity to kill Claudius. Hamlet encounters Claudius praying in the castle. Hamlet is armed, and they're alone. This would seem a perfect opportunity to avenge his father. Hamlet rejects the opportunity, though, because Claudius is praying. He believes Claudius' soul will be purged clean if he dies praying, and he'll have a clear path to heaven.

He hides a corpse. Another interesting diversion is the hiding of Polonius' corpse. Hamlet makes a game of this, making puns and refusing to disclose the hiding place. Although this presents many opportunities for displaying his wit, it doesn't forward his cause.

He arranges the deaths of two meddlers. Rosencrantz and Guildenstern accompany Hamlet on his trip to England. They carry a note demanding Hamlet's immediate execution. Hamlet discovers the note and rewrites it with Rosencrantz and Guildenstern as the objects of the death sentence. This reveals Hamlet's resourcefulness and cunning, but it also shows that he's prone to inaction unless faced with an immediate threat. Nearly anyone can rise to action when faced with imminent destruction. Leaders strive for great acts before their enemies rally against them.

He passes time in a graveyard. Hamlet and his friend Horatio stroll in a graveyard and muse about the ultimate end of all humankind. Hamlet reveals a profound understanding of the nature of life and death. Ultimately, it's just one more in a long line of distractions.

He participates in a fatal fencing match. Claudius arranges a sword match between Hamlet and Polonius' son. The match is supposed to be good clean fun, but as with all situations organized by Claudius, the true intent is much darker. Why does Hamlet even agree to participate? He's confident about the outcome and reveals that he's the more skilled swordsman. So why does he bother? His objective is to avenge his father's death, not entertain the king's court with a show of strength.

It's worth noting that Hamlet is directly responsible for the deaths of three people other than Claudius. Yes, he finally does get around to killing Claudius during the play's final act, but his triumph comes only minutes before he himself is killed. In fact, Hamlet's tardiness in carrying out his objective results in the deaths of seven people besides the one who clearly deserves to die. The play ends with a stage littered with corpses. Hamlet's procrastination literally proves deadly.

All people who aspire to leadership must practice their powers of focus. This is easier for some than for others. For those who are easily distracted, organizational skills go hand-in-hand with focusing skills. Being organized often helps to remove distractions by dividing the day into smaller, more manageable intervals. Plan and carry out each piece of the day, and politely shun the diversions that prevent you from carrying out your objectives. Don't become a robot, but avoid Hamlet's tendency to let every event become an excuse for not doing what you set out to do.

A leader must be wary of competitors

Hamlet has every reason to suspect the worst from Claudius. Before the ghost ever speaks to him, the prince develops a deep disdain for the upstart king because of his hasty marriage to Hamlet's mother. Hamlet considers Claudius a despicable character very early in the play. Once Hamlet learns that Claudius actually murdered his father, he should have been prepared to expect anything from the man. Despite clear evidence of Claudius' treachery, Hamlet allows the king to manipulate him in two significant ways.

First, he allows Claudius to send him on a sea voyage to England. Any reasonable person would suspect this to be a one-way trip leading to a grave in a foreign country. Hamlet takes the trip anyway and only barely escapes death. He should have known that his adversary would do anything at this point to rid himself of the threat that Hamlet posed. Some readers might say that Hamlet is truly insane at this point and in no condition to judge Claudius' motivations. But Hamlet's biting wit makes it clear he has a grip on reality, even if he's ignorant of Claudius' rather obvious intent.

Next, Hamlet agrees to participate in a fencing match with the son of someone he accidentally killed. Guess who arranged the fencing match? Claudius, of course. Again, Hamlet should have been suspicious of this event, given the treachery of its organizer. He has already learned of Claudius's involvement in his near-death experience on the way to England. The message is clear: Claudius wants Hamlet killed as soon as possible. Nonetheless, Hamlet agrees to participate in the fencing match, which features poison-tipped foils and poisoned wine goblets. Claudius, revealing his awareness of how unassuming Hamlet is, says, "He, being remiss, most generous, and free from all contriving, will not peruse the foils..." [Act IV: Scene 7, line 134]. Hamlet is too trusting to check the swords for signs of foul play. It's admirable to be trusting, but leaders can't afford to trust their adversaries when all evidence points to treachery. The poisoned sword results in Hamlet's death.

Alas! Poor Hamlet. Poor leader. Shakespeare may not have had leadership in mind when he wrote the play, but we can mine it for lessons nonetheless and prevent our own leadership efforts from turning into a tragedy.

Measuring Service Quality

As quality practitioners, we’re accustomed to measuring the physical attributes of a product: dimensions, angles, power, hardness, tensile strength, color, and many other characteristics. Getting a handle on services can be more difficult. Often there are no physical attributes to measure, or they don’t clearly affect the essential nature of the service. We have to think about what really matters to the customer about the service. Although this is the case with both goods and services, it takes on special significance with a service. Let’s examine the nature of services and discuss the most effective ways of gauging their effectiveness.

The first thing to keep in mind about the service sector is that it is completely different from manufacturing. The things that you take for granted in manufacturing simply don’t exist in many service situations. Consider:

• You control the environment. Even if you subcontract manufacturing to an outside firm, you can still stipulate the environmental conditions. With a service, the environment is often dictated or strongly influenced by the customer. You must adapt to these environmental issues, which can be a huge challenge.

• The customer usually isn’t present. Sure, the customer’s presence is felt through specifications, tolerances, and product requirements, but the customer isn’t standing in front of you or peering over your shoulder. With a service, on the other hand, the customer is front and center. He or she is right there, throwing curve balls and changing requirements midstream.


For these reasons, service provision is radically different from manufacturing. Output measurements that are applied in manufacturing make no sense in a service situation because the customer has such a strong influence over our environment. Think about these traditional measures of output:

• Number of customers processed per hour
• Minutes spent on each call
• Reports generated per day
• Average time per repair
• Rooms cleaned per shift

I’ve seen all of these measures applied aggressively in service environments, and all of them frequently backfired because you can meet output objectives and still generate very low customer satisfaction. That’s why the best way to understand service effectiveness is through customer perceptions.

Customer perceptions are key

Customer perceptions are critical in any product context. In the world of service delivery, they’re especially important due to the personal and interactive nature of services. You may satisfy every stated requirement and still fail to satisfy the customer in a profound way. The ground is shifting as the service is performed, and what you think was perfect may be far from satisfactory. That’s why you must specifically ask your customer what he or she thinks about your services. Don’t provide a long survey that probes every aspect of the service experience; just start with two simple questions: “How satisfied are you with the quality of our services?” and “How likely are you to recommend our services to a colleague?”

These two questions apply to nearly any service situation and industry. The first question addresses basic satisfaction, essentially asking if the services met all requirements. The second question takes this a step further and addresses true commitment: Do you feel strongly enough to recommend our services to somebody else? These represent two different places on the same continuum (as seen in figure 1), and both arenecessary for long-term success.



It’s worth noting that satisfaction falls only in the middle range of the continuum. The blunt reality of business is that basic customer satisfaction is no longer adequate for businesses to remain successful. Basic satisfaction simply means that they might use your services in the future--unless a better offer comes up. Satisfaction is little more than the absence of dissatisfaction, and there’s no glory in just squeaking by. Satisfaction is a reasonable starting point, but the ultimate goal is the kind of commitment that results in customers telling their friends and colleagues about your organization and recommending your services. That’s what you should be striving for.

The two survey questions include a four-point response scale. Some data gurus might question whether this provides much constructive information. Keep in mind, however, that people aren’t reliable measuring instruments. With subjective judgments, four or five degrees of resolution are about as precise as you can expect. Combine the preceding questions with the following two open-ended questions and you’ll have a very useful tool for measuring your services:

• How can we improve our existing services? This is one of the simplest yet most effective questions ever conceived. It strikes at the heart of quality: improvement. It gives customers control of the dialogue, and they can do with it what they will. The responses will provide a clear path to making improvements that your customers value.

• What services would you like to see us offer in the future? Innovation is the key to long-term survival, and this question enlists your customers’ help in making you an innovator. The range of responses is limited only by your customers’ imaginations.

In the case of the open-ended questions, the results can be sorted into similar categories. These can then be plotted on a Pareto diagram to provide guidance on the actions that should be taken. Many quality practitioners bristle at open-ended questions because they don’t produce data in a traditional sense. The responses can be converted to data, however, without much difficulty. Even more important, the results point the way to exactly the improvements and innovations that your customers desire.

You now have a dynamic tool that will take less than a minute of somebody’s time. The scaled questions probe two timeless issues--satisfaction and commitment--and produce solid data that can be tracked, while the open-ended questions provide direction for your improvement efforts. Together you have one of the most streamlined and effective service surveys imaginable.

When to capture perceptions

Ask customers for their feedback as soon as the effects of the service are felt. This might be immediately after performing the service or six months later; it all depends on the type of product you’re addressing and the sorts of contractual obligations that were made with the customer. Consider these service scenarios:

• Restaurant. Feedback could be provided immediately following the experience, or certainly within a day or two of it.

• Appliance repair. Feedback could be provided immediately on certain aspects of the service, but it would probably take weeks to know how effective the repair was. Most appliance-repair companies warranty their repairs for a certain length of time, so the feedback horizon could follow a similar time frame.

• Management consulting. Complex consulting projects that aim to increase a company’s profitability and competitiveness might take up to a year to evaluate. Asking for feedback any sooner would be premature.

These three examples illustrate a range of time frames for feedback, from immediately after the service to a year later. Each organization must decide for itself when the effects of its services can be determined and, thus, when it’s appropriate to solicit feedback.

Once you’ve determined when to capture feedback, the next logical question is how to do it. Yes, you already have the tool, but how exactly will it be administered? Your choices are many: in person or by telephone, e-mail, web site, fax, postal mail, or text message. The chosen method should reflect the most convenient process for your customers. In general, try not to add another communication burden to your customers. If you have frequent face-to-face contact with them, use these interactions for getting their feedback. This also goes for existing communications via telephone and e-mail. If it’s already happening, use it. Providing feedback will only add a minute of extra time, and that’s an investment that most customers are glad to make.

Objective measures

Everything we’ve discussed so far is related to subjective measures of service quality. In other words, we’re asking someone’s opinion of how we performed. They probably don’t have data to back up their opinions, and they may not even be able to provide specific examples. These opinions are the basis for making buying decisions, however, so they’re valuable to you as a service supplier.

Besides subjective performance measures, there are also many objective measures that can be applied to your services. You need only look as far as your service guarantees and contracts to find some effective metrics. Nearly every service provider commits to performing its service within a certain time frame. This naturally gives rise to the question: Was the service performed on time? No opinions are necessary here; you either met your commitments or you didn’t. The data can easily be gathered, charted, and analyzed by your own organization. Hard data provide an excellent counterpoint to customer feedback, and they usually substantiate the themes revealed through customer feedback. When data don’t support these themes, it’s useful to explore the reason for the gaps; e.g., “Our customers think we’re always late, yet our data show this isn’t the case. What’s causing this difference in perceptions?” When there’s a difference of this sort, one of two things typically must happen:

1. The data-collection method must be changed to better match what the customer experiences.

2. The customer must be educated at the performance level. Sometimes providing objective data can shape people’s perceptions, and there’s nothing wrong with doing this.

So, what sorts of measures are helpful in managing service quality? Here are some of the most common:

• On-time delivery. The scheduled date and time is agreed upon between the customer and services provider, and deviations from this schedule can cause serious problems. On-time delivery is an excellent measure that’s usually easy to track.

• Responsiveness. This means your ability to respond to the customer within a reasonable amount of time. The response could be related to a question, problem, quote, inquiry, or order change. Organizations that cultivate “customer intimacy” are usually concerned about how responsive they are.

• Effectiveness. All services are supposed to accomplish something: provide information, repair an appliance, process a transaction, or develop a program, among others. If you’re able to determine if your service was effective, then this is an important measure. Keep in mind that I’m talking about an objective measure of effectiveness, not the customer’s perception of effectiveness.

• Availability. Services that are up and running must be concerned with availability. Examples include utilities providing water, electricity, gas, telephone, or other resources exactly when they’re needed. Being down for a few hours can cause millions of dollars in losses and huge claims.

• Audit results. Processes that provide a service can usually be audited. Either through in-person observation or by examining records, an audit can reveal whether the service was performed as planned. Ideally, conformity with the plan would mean that the service is effective, though this isn’t always the case.

• Cost control. This means adhering to established budgets and spending plans while meeting other service objectives. Notice I didn’t say “cost reduction,” which often is used to justify a reduction in service quality.

In summary, a two-pronged approach is the most effective way to measure service quality. Gauge service effectiveness through customer perceptions and through objective data, and remember that measures are worthless unless you take action.

Five Keys to Successful Internal Auditing

Internal auditing is one of the most routine improvement tools available to organizations. In fact, it’s so ordinary that auditors sometimes forget the underlying principles of auditing. Auditors must be periodically reminded of these underlying truths or the entire audit process can begin to backfire. Keep these in mind as you audit and you’ll nearly always be successful.

Principle 1: The customer of the internal audit is the one being audited

That’s right; the people you’re auditing are your customers. Internal auditing is a service you perform to help make your organization more successful and identify problems before they spiral out of control. The quality of your product depends on how well the audit is planned, the type of training provided to auditors, the level of engagement of top management and the way auditors behave during the audit, among other factors. You must conduct the audit with the same level of professionalism and diplomacy as if you were being paid by an outside party.

Little things that indicate the auditors have forgotten who the customer is include:

*** Treating the audit as a “Gotcha!” exercise. Auditors should never express satisfaction or glee when nonconformities are found. Focus on the facts and keep things as impersonal as possible. Failures revealed by the audit are opportunities for the future.

*** Failing to adjust the audit plan to meet the needs of the auditee. Unexpected events can occur during an audit: accidents happen, lines shut down, rush orders must be processed. The audit plan should be flexible enough to handle changes on the fly.

*** Holding surprises until the very end. The auditee should be apprised of audit results throughout the entire process. Don’t make the mistake of holding a “bombshell” until the closing meeting for maximum impact. Auditor should communicate their concern, along with all supporting evidence, when they think they might have found a problem.

*** Focusing on insignificant details at the expense of critical issues. Auditing is a detailed activity, but don’t forget to examine the effectiveness of the overall system. When faced with an issue, auditors should ask themselves, “What effect does this really have on the organization and its customers?” The answer will usually indicate if the issue is one worth delving into in great detail.


Principle 2: Planning is the key to success

Audits don’t create improvements by accident. It takes a great deal of planning and coordination. I’ve often said that a well planned audit almost runs itself. On the other hand, a poorly planned audit runs itself into the ground, and planning often gets shortchanged in the rush to get audits done.

Audit planning involves a significant amount of dialogue between the auditors and auditees. It’s a dynamic process that begins well in advance of the audit itself. Planning typically provides details around the following issues:
*** Date: When will the audit take place?
*** Location: What’s the audit’s location?
*** Scope: What are the official boundaries of the audit?
*** Objective: What is the point of performing the audit?
*** Auditors: Who will perform the audit?
*** Areas to be audited: What functions, departments or processes will be evaluated during the audit? Sometimes this is clear from the scope, but often not.
*** Topics to be audited: What subjects will be audited in the given departments? Should the auditee expect questions about document control or management commitment? This not only gives the auditee a heads-up, but it also helps guide the auditors.
*** Timing of the audit: When exactly will each department be audited? When will the opening and closing meetings take place?

The audit plan may also address other issues, but the ones mentioned above are the most common. The purpose of the audit plan is two-fold: To help the auditors understand exactly what they’ll be doing during the audit and to allow the auditees to know what to expect. It isn’t uncommon for the auditee to propose changes to the audit plan, usually minor alterations in the timing (“Instead of auditing sales at 9 a.m., can you come at 10 a.m.? We already have something scheduled for 9 a.m.”). Changes of this sort are entirely reasonable and should be accommodated to the extent possible. Remember, the customer of the audit is the auditee.

The audit plan is documented as concisely and clearly as possible. The exact format is usually dictated by the magnitude of the audit. A plan for an audit of an hour or two could take the form of an e-mail. A plan for a full day or multiday audit will often take the form of a matrix, indicating hour-by-hour blocks of activities. Whatever the format, the plan should be communicated far enough in advance of the audit for all parties to digest it and understand its effect on operations.

Principle 3: Opinions never constitute nonconformities

Everybody has opinions. As people become wiser and more experienced, they tend to develop even more opinions. Many auditors consider themselves to be wise and experienced, meaning they have loads of opinions. Sometimes these opinions become the basis for nonconformities, which is a huge mistake. Facts are the only legitimate basis for nonconformities. Opinions have no role in the process.
A child could write a good nonconformity. The problem is that children don’t write them, wise and experienced auditors do. Consider the following:

- The company committed itself to doing XYZ. The commitment is a fact, evidenced by its presence in a procedure, plan, policy, specification, contract, work instruction, standard or statement.

- The company failed to do XYZ. The failure is a fact, based on evidence such as records, observations, documents or interviews.

No opinions are present in the nonconformity, just cold, hard facts. It’s hard to argue with facts. It also makes the audit go much smoother. Sure, facts may remove a degree of creativity that auditors exercised, but creativity is better expressed in other ways.

Nonconformities aren’t the only kind of audit findings. Because the audit is a balanced process, positives are also highlighted. These may be recorded individually, summarized in an audit report, or presented orally during the closing meeting. Every organization will have at least one or two positives that can be recognized. The auditors just have to remember to look for these in the course of their auditing.

Some organizations also include another category of finding called observations, remarks, comments, opportunities, recommendations, or any number of other names. These fall into a gray area that doesn’t quite constitute nonconformity, but is still an issue worthy of investigation. Sometimes these will include specific recommendations for taking action based on past experience, established best practices or regulatory requirements. These types of findings give auditors a chance to express opinions. Audits are a great place for benchmarking and sharing best practices, as long as all parties to the audit understand and agree to how this will happen.

Principle #4: Don’t burn out your auditors

It’s human nature to utilize your best resources. If you have a patch of ground that produces great tomatoes, it’s tempting to keep planting tomatoes there, year after year. The only problem is that the soil eventually becomes exhausted. This is the case with an internal audit program, too. Experienced and well-trained auditors produce effective results, so they frequently get called on to perform audits. As a result, the organization fails to develop new auditors, and they end up with no auditors when the experienced auditors run out of gas and scream, “No more!”

One of the best strategies is to make each auditor’s ‘tour of duty’ a year and a half. Annually, train a new group of auditors, and then use the remaining six months for the experienced auditors to mentor the new group. Schedule auditors in teams of two, one new auditor and one experienced. That way, the new auditors get the benefit of observing the seasoned auditors in action, and the seasoned auditors can learn from the new perspectives and unburdened approaches employed by the new auditors.

After a few years of rotating in new groups of auditors, you’ll have utilized a significant chunk of your employees. The benefits of doing this are clear:
 Broad exposure of personnel to other functions in the organizations
 Deeper understanding of the management system and its processes
 Stronger communication and analysis skills, as a result of auditing experience
 Varied perspectives and viewpoints that come from using a wide range of personnel as auditors
 Less likelihood that the audit process will fall victim to groupthink, which happens when the same people always involved
 You will an informal ‘alumni association’ of ex-auditors who can be called on to perform audits periodically if you get into a pinch

Take the time and effort to develop new teams of auditors on a regular basis. You’ll find that the overall effectiveness of your audit process will increase significantly over time.

Principle #5: Audits should focus on critical success factors

Critical success factors are the things that keep you in business and help build customer loyalty. They will be different from industry to industry and from company to company, but there are certain critical success factors that apply to nearly all organizations. The internal audit should probe these areas in detail and dedicate significant effort to analyzing their effectiveness:

 Management review: This is the top management reviewing performance, analyzing data, making decisions, and initiating actions for improvement. It is one of the most important functions in your organization, so auditors will need to apply some effort to examining it.

 Corrective and preventive actions: Few issues have as much bearing on an organization’s success as problem solving and problem prevention. These processes should be scrutinized nearly every time an internal audit is performed.

 Customer satisfaction: The primary reason that organizations exist is to satisfy their customers. How well an organization listens to its customers and takes action on what it learns is definitely a critical success factor.

 Internal audits: If internal auditing wasn’t important, you wouldn’t be reading these words right now. Auditing is one of your primary processes for evaluating process effectiveness and driving improvements, so you will definitely want to audit it on a regular basis. Some people find the notion of auditing the audit process unusual, but it must be examined just like any other key function.

 Product realization: Whether your organization produces a good or service, it certainly has product realization. It could involve manufacturing activities (e.g., cutting, stamping, welding, and assembly) or service activities (e.g., scheduling, repair, trouble shooting, instruction). No matter what kind of activities are in place, this is your core transformation process that has the most direct impact on your customers.

Decide which processes in your organization are the most important to its success, and make sure these processes are audited in-depth and often. The results of the audit will speak for themselves.

Don't Survey Your Customers!

Scaled customer surveys are among the most widely used tools in business. Unfortunately, they're also some of the worst. There's nothing evil about surveys, but they can turn an inherently simple task, such as gathering customer feedback, into something complex and unwieldy. When that happens, there's a good chance it won't satisfy its original purpose, which in this case is making improvements. Why exactly are surveys the wrong tool for most organizations? Let's explore the reasons and then consider an alternative approach that's far more appropriate.
Surveys don't produce timely data

Most traditional customer surveys are sent out periodically to a sampling of an organization's customers, typically once or twice a year. This is a manageable frequency from an administrative standpoint because implementing a survey requires a significant dedication of time and effort. The downside is that by the time the organization receives the feedback, the information is at least six months old and usually much older. The information is almost worthless because customers have already acted on their perceptions before the organization has had a chance to do so. Customers don't wait around to tell you what they're going to do before they do it. If you're not tuned into your customers on a regular basis, you'll never know what hit you.

It makes more sense to gather customer feedback continually. Make the customer feedback process something that's always happening, not a grand event that occurs once or twice a year. This consumes far fewer resources, and it also ensures that the information is current. If you can't take action on customer perceptions within a few weeks of the perceptions being formed, there's a strong chance that you will lose your window of opportunity.

Too many questions

Another downfall of most surveys is that they try to do too much. They probe the customer experience from every imaginable angle. Although admirable, this approach results in long, unwieldy surveys that most customers run away from as fast as they can. I have personally gotten into the habit of scrawling "TOO LONG" in huge block letters on these kinds of surveys. I'm providing feedback, but not exactly the kind expected. Most people don't even bother to provide this much; they simply toss the long surveys into the trash.

The key to successful customer feedback is to ask about the few aspects of the customer experience that matter the most. By asking about everything under the sun, you're establishing the expectation that you'll take action on everything, which is impossible. You're also telling your customer, "Your time isn't very valuable, so the imposition of this long and boring survey should be no problem for you." Focus on a few vital issues, and these obstacles go away. The dilemma is that most organizations don't know what the few vital issues are--thus the need for long surveys. Your organization must back up and get its arms around the things that really matter to your customers.

Difficult to design

If you like defusing explosives, you'll love creating surveys. They include so many failure modes that they're nearly impossible to design correctly unless you do it for a living. Why are they so hard? Let's examine two of their more challenging aspects: questions and scales.

Most surveys comprise a series of questions or statements, followed by a response scale. The response scale usually represents degrees of satisfaction (e.g., "very satisfied," "satisfied," "neutral," etc.) or degrees of agreement (e.g., "strongly agree," "agree," "neutral," etc.). Both of these scales present huge challenges. Most people don't have the writing skills to craft clear, unambiguous survey questions. The result is that the questions don't accurately reflect the attribute that's being queried. In the spirit of getting the job done, customers will often take a guess at what the questions really mean. Like all guessing games, sometimes they'll be right and other times wrong. At best, your data will be 50-percent valid--not a very good percentage.

In the unlikely event that the survey questions are clear, there's still the obstacle of designing a logical response scale. This would seem to be an easy task, but it's extremely complex. Typical errors I've observed are scales that aren't balanced, scales that are biased, scales that don't have equal intervals between the points, scales that don't match the question or statement, and scales that have too many degrees of resolution. If the scale is flawed, then the data that come from it are also flawed. Junk in, junk out, as the saying goes.

No direction for improvement

The fourth downfall of traditional surveys is that they don't provide much guidance for improvement. Sure, they provide data, but what actions are you going to take based on those data? For example, let's imagine that you've asked customers to rate the technical knowledge of your sales force. The average response is 3.4 on a five-point scale, roughly halfway between "neither good nor bad" and "good." What does this number really mean? Even more important, what are you going to do about it? The data help you produce fancy charts, but they probably won't steer you toward specific improvements.

If you aren't able to take action on survey data, their value as improvement tools is zero. Had you asked customers an open-ended question such as, "What do you think is our biggest customer service weakness?" you might have received some feedback that provided a clear path for improvement. In the world of customer perceptions, data don't always rule. Perceptions are by their nature qualitative and subjective, and the attempt to produce data from such a fuzzy source can be misleading. It's better simply to get actionable information than to attempt to turn human beings into precise measuring instruments. If you capture customer perceptions, analyze the trends and take action, you've accomplished a great deal.

So, what should you do?

I've made the case that a traditional customer survey using scaled responses probably isn't the best way for most organizations to capture feedback. If not a survey, what should you do? Here's what I recommend:

Step 1: Examine your existing customer interactions. Your interactions with your customers are limitless. These contacts are conducted via telephone, e-mail, mail, fax and in person. Because you already have numerous contacts with your customers, there's no reason to invent a new contact for the sake of collecting customer feedback. Make use of the connections you already have, and all parties will generally be much happier.

Step 2: Choose an interaction suited to collecting feedback. Not all customer contacts are created equally. Certain conditions should be met when you decide which contacts will be leveraged for collecting customer feedback. In general, the contact should be neutral, routine and candid. Here's what each of these mean:

• Neutral: The contact isn't related to an existing problem or complaint. Attempting to collect feedback when a customer already has a problem is obnoxious and counterproductive. Use an interaction that's neutral in tone and purpose, such as a query or order placement.

• Routine: The contact happens on a regular, routine basis. Feedback collected from routine interactions of this sort is likely to be fresher.

• Candid: The contact occurs between parties that trust one another and are willing to communicate freely. A candid relationship is key to collecting accurate and representative perceptions.

Step 3: Develop a tool that's matched to the customer interaction. Choosing the right tool for the job is critical in every endeavor, and that goes for collecting feedback, too. Once the organization has selected an appropriate customer interaction for collecting feedback, it must develop a tool that works in that context. This is a subjective task, and certain guidelines can assist in knowing what tools work best in different situations:

• Telephone contact: An unobtrusive tool that's conducted at the end of a routine telephone call. Brevity is critical with this kind of tool because most people are anxious to get off the phone once their business is completed.

• In-person visit: A tool that enables the company to see its product in use, just as the customer experiences the product or service. The tool should also enable different people to be queried, depending on the nature of the feedback sought.

• After service or consumption: A tool that enables the customer to conveniently provide "flash feedback." Make the return of this feedback seamless. If the customer
has to expend any effort to return the feedback, it probably won't be returned.

• E-mail: A live link within the body of the message that takes the customer to a simple and visually appealing evaluation of their experience. Make sure the link works fast and is compatible with a variety of Internet browsers and computer monitors.

Benchmark customer feedback tools with other organizations. There's no virtue in being original. Borrow good ideas and approaches as you see them. Hundreds, if not thousands, of examples exist for each of the tools described above. See what other people are doing and adapt the methods to your own needs.

Step 4: Focus on open-ended questions. If you want to grab the attention of your customers, ask them what they like and don't like. It's that simple. Asking simple, open-ended questions of this sort enables the customer to dictate the content of their feedback. What's important to them is what you'll hear about. This is exactly the sort of feedback you want. Trends in open-ended feedback will inform you on the issues that customers care most about, something that many organizations don't understand.

Open-ended feedback also provides a clear path to improvement. Numerical ratings can help you prioritize issues, but they don't tell you exactly what to do. Open-ended feedback can. When 75 percent of your customers answer the question, "What makes you most frustrated about being our customer?" in the same way, you know exactly what you need to do to improve. There's no ambiguity.

Open-ended feedback doesn't help you make fancy charts. But do you really need more fancy charts to cover the walls of the conference room? No, you need improved customer satisfaction and loyalty. Open-ended feedback will reveal exactly what actions lead to long-term success, which is much more important than fancy charts.
Here are my favorite open-ended questions. Three are about all you need. They will quickly point the way to improvements that matter to your customers.
• Do you have any problems with our products that you haven't told us about?
• Is there anything you think we do particularly well?
• What could we do in the future that would make your job easier?

Step 5: Act on your opportunities. Action is the most critical step of the entire process. It starts with identifying trouble areas. Problems that are revealed through feedback must be addressed immediately. This is the business equivalent of triage: Stop the bleeding and stabilize the patient. Let's hope you won't discover too many issues that require triage, but it's better to learn of these proactively while the customer is still your customer, and not a former customer.
After addressing the trouble areas, the organization must analyze the trends. Open-ended feedback follows the same rules as most traditional numerical data: It tends to clump into categories. Group the feedback into categories and apply Pareto analysis to the results. Your opportunity areas will quickly emerge. Input these opportunities into your corrective/preventive action system and track them to completion. Treat every improvement action as a mini project, with assigned tasks, responsibilities, time frames, resources and reviews. The more sunlight shines on your improvement action, the better it will be. In other words, communicate widely. The final communication about your improvement will be to your customer: "Here's what we've done based on your feedback." These may be the most important words you ever say--and you don't have to use a traditional customer survey to say them.