Beyond Customer Satisfaction

Broker-Dealers Explore
the Many Faces of Quality

by Michael Finley
Exclusive to Financial Planning News
Copyright © 1993 by Michael Finley. All rights reserved.
1850 words

There are few givens in the age of quality, except one -- that quality that is not defined by the customer is not worth pursuing. And so we see massive efforts underway, at companies large and small, to identify who their customers are, and to find out what they really want.

What they are finding is that quality is not what they thought. Quality does not always equate to Mercedes-Benz and red-carpet treatment. If your clients want economy, then low-price must be part of your definition. If they want better understanding of the planning process, then a premium must be given to better reporting and communication.

Attention to customer satisfaction opens the door to numerous kinds of quality initiatives. Here are a few of the questions broker-dealers are asking today:

Do you know who your customers are, and what they want? You can be selling the world's finest products, by specification at least -- but are those the products your customers really want?

"In the mid-1980s, business was great and we had to race to keep up with demand," said Julie K. Anderson, training specialist in Northwestern National Life's Individual Division. "But when interest rates fell and competition tightened, we began to look at quality seriously. Surveys told us our customers were middle-income households, from $30,000 to $100,000 in income. What they were looking for, more than anything else, was integrity and value."

NWNL's response was to focus more intently on developing longer-term customer relationships, changing its agent compensation system to better reward customer retention. The result? Recent customer surveys report, on a 1-6, poor-to-great scale, an average grade of 4.9 -- a significant improvement over a few years before.

Is your company working from a vision rooted in quality? A vision can be hard as nails ("50% increase in sales, 30% reduction in expenses"), or it can be almost spiritual ("absolute customer delight with our services."

Whichever approach your company takes, it must be an honest vision, formed from long discussion of what future customers will expect from an organization, not a couple of lofty-sounding paragraphs hacked together over martinis.

"Our vision turns on the idea of the customer," says Carol Hardiman, Vice President-Administration for Chubb Securities in Philadelphia. "Our goal is to build long-term relationships with our customers and successful partnerships with planners. We aim to move beyond a transaction-based business to one driven by our relationship with customers."

"Vision means seeing beyond what is happening now to what can be," said Tina Angelo, communications specialist at Cigna. "It means starting with a blank sheet of paper and asking yourself what you really want to be, and what you have to do to become that. It requires a different kind of thinking than we usually do. To see where you really are, you have to get out of the box."

Is quality strategic? Is quality part of your company's blueprint for success, or is it an afterthought? At IDS, perhaps the most successful financial services company of the last decade, managers took note of a disturbing trend: a 42% turnover rate for first-year planners. Field planners are the bedrock of the IDS system -- without stability at the base, how could customers come to rely on IDS for an ongoing relationship with knowledgeable sales staff?

IDS's response was to take the entire organization and shake it up, in an initiative called IDS 1994. "We conducted extensive market research the past few years, and found that the number one thing for our clients is the relationship," said IDS's Strong. "So we decided to overhaul our entire design, away from the individual field agent and toward a team approach, with the idea of delivering to clients what they want."

Are you process-oriented or results-oriented? It's not difficult to boost the bottom line by slashing overhead. It's tougher to take the long view, fix the system, one process at a time. "Processes are more important than results in the long run," says Anne DeFronzo, quality consultant at Met Life in New York. "Unless you understand what your processes are, and map them out, you never understand what you are doing."

The definition of insanity: Doing the same things, the same way, and expecting different results.

Results are often what attracts companies to quality. NWNL recognizes that its first quality efforts, back in the mid-1980s, emphasized expense reduction. But eventually a deeper realization sinks in: your organization is not your annual report, nor your organizational chart; rather it is the sum of all the processes that occur. Are your processes rational and intelligent, or a Rube Goldberg crazy clock?

Over time, improved processes yield improved results. The results at Cigna Re in the wake of its overhaul: 95% in turnaround time for underwriting processing -- from two weeks to 15 minutes; staff reduction of 40% in administration and 30% in information systems, as teams replaced functional positions; reducing computing systems from 15 to 5.

Are you comparing your company's progress against industry standards? Benchmarking means using other company's performance data as a yardstick for measuring your own. Customer service is perhaps the most benchmarked area. Chubb, NWNL, IDS, and other firms have all set standards for service -- how long a phone may ring before it is answered, how soon a phone call is returned, how soon a policy or record can be put into the mail, etc. The best companies in the industry set the pace for the rest -- and in the spirit of kaizen, or continuous improvement, everyone tries to become the new leader.

Are you keeping track of what you do right -- and not-so-right? How can you know how well you are doing at a process unless you measure it? Measurement is critical to quality improvement. Indeed, quality's three great gurus -- Wm. Edwards Deming, Joseph Juran, and Armand Feigenbaum -- all started as statisticians. At Met Life, every process has two key measurements, one set for internal tracking purposes, and another that tells whether goals are met or not.

A good measurement can be the number of seconds it takes to answer a phone, the number of complaints received, a value on a scale of 1 to 10, or the number of defects per million products -- but it must be a number, and it must be written down at regular intervals, for comparisons.

Are your people empowered to put quality to work? Are they encouraged to use their creativity and initiative to give customers what they want? Or do they "check their brains at the door"? In some NWNL divisions, employees write yearly appraisals of their managers -- a switch on the old year-end employee review. The company convinces employees it is serious about improvement, lets them know they are trusted and their opinions are valuable -- and gets useful ideas for improving managerial skills.

At Met Life, empowerment is a way of life. Besides being flexible and broadly representative, Met Life teams wield real clout -- they can make most managerial decisions, and spend major amounts of money, on their own, without waiting for approval from above. "Our philosophy is to pair empowerment with real responsibility, and accountability."

Technology and empowerment can go hand in hand. At Cigna Systems, a massive re-engineering effort saw the replacement of the mainframe computer system with a local area network. People who formerly had to wait for the big machine in the next building to kick out answers are now getting the answers themselves, in real time -- and thus able to move independently to meet customer needs.

Are your people trained to do their work? Most training is on-the-job, and most on-the-job training is a disaster -- frustrating to managers, customers, and the forlorn new employee. Quality-minded companies build training into the hiring and orientation process, and continue it as needed along the career track.

IDS uses a principle it calls "Just in Time Training." Like industrial JIT, it treats knowledge as inventory, and serves it up only when the employee is ready to put it to work. "We only train people in information and skills when they are ready for them," said Carol Strong. This kind of training is more difficult logistically than loading people up once a year in a short course, she said, but it makes much more sense for the learner.

Training doesn't come cheap. The yearly training budget at IDS under its new regime is a cool $100 million. But if the alternative is high turnover, frequent failure, and low customer retention, that can be a bargain.

What are the work dynamics at your company? Do people work along strict functional lines, or do autonomous teams of mixed skills work together to meet customer needs? IDS is experimenting with a mentoring approach, pairing the wisdom and experience of veterans with the new planners. The result is an emphasis less on individuals and more on teams.

At Met Life, work is distributed as much as possible among cross-functional, cross-level, and even cross-regional teams. And after a team proposes and makes a decision on a change, that same team is put in charge of implementing it -- no "throwing the idea over the wall" allowed. "Insurance companies have traditionally been very top-down organizations," said DeFronzo. "This has been a really big change for us."

Do you involve suppliers, dealers, and the outside sales force in the quality quest? The financial services industry is a latticework of especially delicate partnerships. How do you factor in the needs of your independent sales force? Are they the customer, or is the end-customer your customer?

The answers are different at every company. NWNL is one of the few insurance companies allowing agents to call toll-free for information on policies, rates, etc. More and more, technology is coming into play as a quality feature. Chubb Securities recently installed the Caesar system at its headquarters, taking customer data off the mainframe computer once and for all and putting it at the disposal of everyone with a workstation. The challenge now, says Carol Hardiman, is to create an access module for all field reps as well -- so they can access customer data and download information immediately.

Is the battle ever won? To stand an old adage on its head, if it ain't broke, fix it anyway. Continuous improvement is the driving dynamic of quality. It is a great irony, but the road to speed, simplicity, and customer satisfaction must first take a detour through long hours of planning, mind-boggling detail, and making endless lists of the ways your company is currently letting its customers down.

Nancy Hall of NWNL puts it this way: "Quality is probably the only competition where the person who finishes first is last." E