The Importance of Investor Loyalty to Service Excellence

Author: Peter Gurney

Reprinted from the Puget Sound Business Journal

April, 2002

CEOs know, or should know, the “secrets” to great customer service. In fact, there really are no secrets. Those who practice customer service successfully are generally happy to share what they know, and there is no shortage of books, articles and studies on the subject.

Nevertheless, most service in this country is mediocre, an observation made by Howard Schultz, Chairman of Starbucks, at a recent Professional Speaker Series on the topic of “Customer Service: Exceeding Expectations.”

A variety of reasons have been offered to explain why it’s a challenge for companies to raise the bar on service quality. Among the more familiar: increased demand for customer service personnel, due to an economic shift from manufacturing to service; higher turnover and loss of loyalty, as a result of the layoffs, mergers and acquisitions of the ’80s and ’90s; and the migration of traditional customer service workers to higher paying professions.

A less frequently mentioned factor, however, is the long-term investment needed to create a culture of service excellence.

It takes years to develop and successfully implement a service initiative, but our society and business systems mitigate against investing in such long-term initiatives. The payback is too slow and uncertain for many companies to support and for those companies that are publicly traded, mangers must plan within the time horizons of the investors for whom they act as agents.

Stockholders have little patience nowadays with investments that do not show a clear and quick return. To ensure that managers are acting in the owners’ interests, management incentives are more frequently tied to quarterly financial performance than to difficult-to-measure variables like customer loyalty.

In such an environment service-related programs are sitting ducks when the budget ax comes out. Service initiatives have a tendency to come and go in large companies before they have a chance to prove their worth, resulting in customer frustration, employee cynicism and widespread service mediocrity.