The Forum Corporation undertook this research with three primary objectives:

• To determine those organizational and management practices associated with a high level of customer focus.

• To provide a foundation for developing valid diagnostic instruments, consulting procedures, and training programs with which The Forum Corporation can help client companies focus on their customers.

• To develop a data base that will permit the determination of customer focus norms.

Customer focus is an arrangement of an organization and its people that leads to predictably positive experiences for customers. The objective of customer focus is to create such positive experiences that the customer views the company as supplier of choice.

Previous research into how customers perceive services and service quality, conducted by researchers from Texas A & M University under the auspices of the Marketing Sciences Institute, concluded that "consumers' service quality perceptions result from a comparison of their expectations with actual service performance."' In addition, these researchers determined that customers' experience can be described in just five dimensions:

• The ability to provide what was promised, dependably and accurately.

• The knowledge and courtesy of employees, and their ability to convey trust and confidence.

• The physical facilities and equipment, and the appearance of personnel.

• The degree of caring and individual attention provided to customers.

• The willingness to help customers and provide prompt service.

The Forum Corporation's study expands on this research; it analyzes how customer focus extends beyond the concept of service quality, to include not only the actions of the "front-line", but also supervisors, management, other departments, leadership, systems, and the organizational climate.

The research was conducted in two phases.

Phase One consisted of a systematic review of current knowledge in the area of customer service, including: current literature; ten years of previous Forum Corporation research and experience; published research by others; and interviews with business and academic leaders in the customer service field.

Phase One yielded a working model of factors affecting the relationship between companies and their customers.

Phase Two research involved the study of 15 distinct business units within 14 companies, and their respective customers and employees. This study included both service and manufacturing firms, representing a range of industries, such as financial services, high technology, manufacturing, life insurance, and utilities.

First, the research team looked to customers to understand what builds value for them in their relationships with vendors. Second, they examined the organizational and managerial variables that shape customers' perceptions of service quality.

The Customer Survey for each company involved interviews of up to 250 customers. A total of 2,374 interviews were conducted. These interviews were conducted by The Forum Corporation in collaboration with Walker: Customer Satisfaction Measurements, a division of one of the leading market research firms in the country. Customers were asked to: rate the overall quality of service they received; rate each dimension of service quality; describe problems and how they were handled.

The Employee Survey for each company involved a questionnaire for employees engaged in the delivery of service to customers. A total of 3,239 employees participated in this survey. The sample included "front-line" people, such as customer service and sales representatives, as well as supervisors and middle managers. Employees were asked to: rate the top corporate priorities of their firm; describe their managers' behaviors and attitudes related to customer service; describe the internal environment of the workplace; rate their perception of the quality of service the work unit pro- vided. The analysis involved separately examining patterns within the customer data, employee data, and company data. Then, all three sources were linked together to determine the interrelationship of employee and company factors that influence customers' perceptions of service.

In all, the results of this study include the views of more than 5,700 people. The following is an overview of The Forum Corporation's findings:

The Forum Corporation's research revealed that there is nearly an inverse relationship between the elements of service quality that matter most to customers and those elements that companies perform best. For example, customers perceive the tangibles (such as physical facilities, equipment, and the appearance of personnel) as the least important element in forming their perceptions of service quality. At the same time, customers believe tangibles to be the area most competently handled by companies, and report this to be the source of fewest problems.

The research also showed that reliability (the vendor's ability to provide what was promised) is for most companies the single most important element that shapes customers perceptions of service quality. However, reliability is typically perceived by customers to be the weakest element of company performance and also is identified as the source of the greatest number of service problems. (Figures I and 2)

By examining the relationships between the employee responses and the customer responses, this study uncovered four management factors and four internal environment factors that set customer-focused companies apart from others. The four factors in each set are listed in order of the strength with which they influence customers' perceptions of overall service quality, In addition, the practices that make up each factor are listed in order of strength.

1. Setting Customer-focused Performance Goals and Standards

• My manager frequently reminds us that it is important for us to put

the customer first.

• My manager communicates goals and standards that support high- quality service.

• I know what my manager expects of me in serving customers.

2. Taking Personal Action to Help Solve Customers' Problems

• When there is a conflict between a customer and an employee, my manager listens to both sides of the story.

• My manager makes an effort to help remove obstacles that hinder serving customers well.

• My manager sets a personal example of good customer service.

3. Seeking Innovative Ways to Serve Customers Better

• My manager frequently asks employees who have contact with customers for information on customer needs or expectations.

• My manager seeks opportunities to try new ways of doing things to serve customers better.

• My manager asks for, and considers, my ideas about improving that quality of our products and services.

4. Helping Employees Learn How to Serve Customers Better

• What my customers want me to do and what my manager wants me to do are usually the same.

• My manager frequently gives me honest and direct feedback about how well I am serving customers.

• My manager helps me learn from my experiences with customers (both successes and failures).

1. Aligning the Larger Organization to Serve Customers

• Our policies and procedures rarely interfere with serving customers

well.

• Upper-level management provides us with the support and resources we need to serve customers well.

• Information from our company's market or customer research is regularly used to improve the service we provide to customers.

• When I need help with a customer's problem, I almost always receive it.

• My company provides me with the resources--such as equipment, tools, and physical space-that I need to serve customers well.

• In the process of serving our customers, we feel that we cooperate with others in the company, rather than compete with them.

• Support staff, who do not work directly with customers, are kept informed about customer needs or expectations.

• We are trained to do various jobs so that we can fill in for one another in our department or work unit

• My fellow employees assume that being responsive to customer needs is their personal responsibility, and not just someone else's job.

• Within our work unit, we function as a team in serving customers.

• Having customer relations skills is an important factor in deciding who is hired to work with customers.

• Employees who do the best job of serving customers are more likely than other employees to be recognized or rewarded.

3. Seeing Excellence of Service as an Important Value, and Living Up to It

• When customers have problems with the products or service they receive from my unit the problems are almost always resolved to their satisfaction.

• Providing high-quality service to customers is very important to me.

• To the extent that we have goals and standards for service quality, we typically meet them.

4. Connecting with Customers

• In our work unit, we regularly ask our customers about their needs or expectations.

• We regularly collect feedback from customers about the quality of the service that they receive from us.

• We regularly give customers information about our products and services that helps them know what to expect.

• We use information about the needs or expectations of our customers to identify ways to serve them better.

For those companies who are discovering that the key to long-term competitive advantage lies in improving customer focus, this research study has several important implications.

First, these companies must attend to all the dimensions of service quality. While many companies try to improve customer focus by implementing programs that change only tangible elements (those that are visible and easiest to change), these efforts are suboptimal since customers also want to be served reliably and with responsiveness and assurance. Employees must have the skills associated with reliability, responsiveness, assurance, and empathy. In addition, reliability implies that employees must have the abil- ity to set accurate expectations so that the actual delivery meets or exceeds the customer's expectations.

Second, companies must be accurate and specific about what employees must do to improve service quality. If companies merely tell their employees to improve service quality, employees may choose strategies that are suboptimal. For example, customers often place the highest value on reliability, while employees often choose to emphasize responsiveness.

Third, companies must line up all resources and people on behalf of customers. Alignment, more than any other organizational factor, is critical to customer focus. Nearly all of the companies included in this study appear to be particularly weak in this domain. The leadership, managers, and systems must all be lined up on behalf of the customer.

Fourth, if companies are seeking a simple way to look at how their customers judge the overall quality of service, they could evaluate the general viewpoint of employees, since employees are good estimators of overall quality of service. While this method would result in helpful indicators, it is no substitute for data collected directly from customers.

Fifth, companies must seek ways to reduce, avoid, and solve problems with customers. When problems do occur, companies must solve them to the satisfaction of the customer-, employees and managers must have, and apply, problem-solving skills. The importance of this implication is reflected in the close correlation of customers' ratings to the incidence of problems they encounter.

Sixth, by measuring how companies are performing on each of the eight factors and comparing these measures to customers' ratings of the importance of each factor, companies can identify where improvement must be made in order to build a more customer-focused organization.

Seventh, companies can not only differentiate themselves through customer focus, they can profit directly by: reducing service problems; alleviating them; handling them in ways that encourage the customer not to switch to the competition.

Eighth, employee turnover should be considered as a possible warning that the company may not be customer-focused, since turnover is directly associated with employees' opinions of service quality. The direction of causality cannot be determined with certainty: it may be that some employees leave because of dissatisfaction with their firm's poor service quality. It may be that employees who leave are negative about most aspects of the firm, including service quality. Or it may be a combination of these two situations.

Ninth, companies need to identify and work to keep customers who report that they are satisfied, but rate the company as having only fair or poor service. In one study, this group represented 40 percent of those customers who rate service quality fair or poor. Although reporting that they basically are satisfied, customers in this group are vulnerable to competitors who

provide a higher quality of service.

Tenth, in order to maximize customer focus, companies must examine and correct anything that gets in the way of employee performance. This process is critical, because even in companies that are not customer-focused, most employees believe in the value of providing excellent service.

HOW DO THE BEST COMPANIES MAKE A DIFFERENCE WITH CUSTOMER FOCUS?

Based on The Forum Corporation's total knowledge (which includes the current research, plus a comprehensive database on what companies are doing to be customer-focused, and extensive experience helping client companies become customer focused), the best companies monitor and understand the dimensions of, and the gaps between:

• what customers expect, and what they get;

• what management says, and what they do;

• what the front-line needs to do, and what they are doing.

These companies take customer-focused action in three areas:

1. They create special relationships between the company and the customer by:

• avoiding complacency

• working to retain existing relationships

• connecting people and systems to customers • paying attention to service quality focusing on reliability

• value employees, particularly at the front-line

• set customer-focused standards

• select and develop employees ask and listen to employees create delivery teams

• everyone shares the purpose of creating positive experiences for the customers

• systems are arranged to support what is important to customers

• leadership routinely enables employees to act on behalf of customers

By managing these gaps and taking action in these areas, companies make a significant difference in acquiring and retaining their most important asset, their customers.