Successful Business

The difference between winners and losers often doesn't lie in innate abilities, or even individual effort, but in the choice of objectives and of measures which chart progress towards the goal. But can anything so complex as a company, even what the jargonists call an 'SME' (small or medium-sized enterprise) have a single goal?

In terms of overall aim, the answer is Yes. Taco Bell's afore-mentioned desire to be 'Number One in share of stomach' is exactly the right clarion call for a fast food business, better than ICI's wish to be the 'best chemical company' in the world. Such broad objectives are fine and grand as far as they go: but they need breaking down into clear, defined, measurable tasks before anybody can respond to the call. As we asked in an earlier chapter, what does 'best' mean? On which criteria? In whose eyes?

We believe strongly that, while business results are the sine qua non, the equivalent of the final score when the whistle blows, their achievement depends on two other counts: the satisfaction of customers and that of all employees. Actually, 'satisfaction' is an unsatisfying word in this context. The issue is the totality of thoughts and emotions about the organisation, as experienced by everybody who buys from it, works for it, supplies it. If you think of this totality as vague and beyond measure, you will fail: for the measures available provide the focus which produces the winning results.

The first deeply considered US attempt to provide a general answer, useful to all businesses rather than one, is now enshrined in the criteria for the Baldrige Prize, America's top quality award. The European Quality Award's list is very similar, and now widely used by companies internally, as a way of measuring divisional performance. It contains nine criteria - just as there are ten components to the definition of leadership on which this book is based.

That's the first of the EQA elements - leadership. It's one of five 'enablers' and carries 10% of the weight of the final assessment. The others are people management (9%), policy and strategy (8%), resources (9%) and processes (14%). The enablers make it possible for companies to achieve results, in which there are four elements: people satisfaction (9%), customer satisfaction (20%), impact on society (6%) and finally - the end-result of the entire process - 'business results.'

In most companies, of course, business results are be-all and end-all. Some companies boil it down to a single number: net income, the famous 'bottom line.' But the EQA model awards business results just 15% of the total weight - a quarter less than customer satisfaction. The logic behind this is clear enough. Since you can't achieve optimum business results from dissatisfied customers, putting results above satisfaction is putting the cart before the horse.

Measuring their satisfaction by product alone, moreover, won't get cart or horse very far. That's obviously true of a service business. But all businesses are service businesses now, whether or not their managers know it. Inside 'manufacturing' companies, more and more staff are in service functions. More important still, service has become a competitive weapon, possibly the crucial means of differentiating one supplier from another.

Very few firms, though, measure their service performance with the same interest and effort that their accountants bring to the financial results - even though the latter are heavily influenced by service outcomes. Service includes the finance function itself: how effective - and cost-effective - are the bean-counters? In total quality companies, the principle is that everybody has a customer, including the finance people: and that everybody can therefore be judged by their customers, external or internal, and must be. That's what lies behind the following catechism:

'Customer satisfaction is vital to our strategy: the business enjoys a strong quality image with our target customers: our marketing and operations people couldn't cooperate any better: all departments are as customer-driven as we would like'.

That's the right (but rare) answer to 'right questions' on service posed by experts John Bateson and Paul Tiffany. They postulate a perfect business which is oriented towards the front line - the place where customers make contact with a company which is dedicated to their satisfaction. To hear managers talk, that's the focus they all have: customer satisfaction is at once sovereign objective and ultimate measure, guiding value and operational mechanism, strategic kingpin and tactical trigger. Today, Bradley T. Gale observes, 'most companies employ some kind of customer satisfaction measurement system'. So why aren't customers more satisfied?

The answer is simple. If you're employing the wrong yardstick, your measurements will be useless. Some systems, Gale reports, 'are rudimentary surveys that actually discourage people from working on quality improvement'. Anybody who has answered a typical questionnaire knows why. What does it mean when you're 'very satisfied, satisfied, neutral, dissatisfied, or very dissatisfied' with this or that aspect of service or product quality? And do other respondents mean the same thing?

More serious still, what do the replies say about the relative strength or weakness of the competition, or the relative importance of the aspects considered? The answer is little or nothing. In contrast, the 'customer value analysis' advocated by Gale tells managers everything they should want to know. The information, however, doesn't come easily. The 'market-perceived quality profile' takes careful construction. It demands establishing 'the company's position relative to competitors in each key business segment, showing the key quality attributes, relative importance weights, and performance scores'.

Even with that big task completed, Gale's prescription has far to go. The full analysis requires six other tools. Some are transparently valuable, like an 'orders won/lost analysis, showing recent sales efforts won or lost against the competition, with an explanation of why each was won or lost'. Others, like a 'head-to-head area chart' or a 'key events time line', take more explanation. And even the seven tools aren't enough: you also need to chart progress on 'managing customer value', or 'the internal view of quality', and much else besides.alysis requires six other tools. Some are transparently valuable, like an 'orders won/lost analysis, showing recent sales efforts won or lost against the competition, with an explanation of why each was won or lost'. Others, like a 'head-to-head area chart' or a 'key events time line', take more explanation. And even the seven tools aren't enough: you also need to chart progress on 'managing customer value', or 'the internal view of quality', and much else besides.