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- February 16, 2017
- David Hearn
In my previous post, I talked about why procurement groups should be looking beyond the traditional metrics of cost savings and process efficiency. They should be measuring themselves using a four-part balanced scorecard that also includes metrics around customer service and organizational development. Today, I’d like to share a simple methodology for measuring customer service that I’ve used in many organizations.
If you’re going to be successful at all doing this, the first thing you need to do is communicate to your group why this is important, because even though the balanced scorecard has been around for a long time, it still has not been widely embraced by procurement organizations.
Pandering to stakeholders
I first encountered the balanced scorecard about 20 years ago when my boss in the procurement group at Sun Microsystems was introducing it to our team, and to the company at large. I remember when he told the procurement group, "Hey, we're going to do a survey of our internal customers and stakeholders." Everybody said, "What? Why should we ask them? We're not here to satisfy them.” There was this feeling that by doing this, we would be pandering to the internal stakeholders. In fact, people got indignant.
I still see this at industry conferences today. When the concept of measuring customer satisfaction gets brought up, there are always people who bristle at the suggestion: "We are not salesmen. We are an important business function driving cost-savings and better business processes.” That’s the thinking.
Yeah, you are, but guess what? You can't drive those things unless you're collaborating with your internal business partner, which might be a better word than customer. But in the balanced scorecard, they call them customers.
What I learned from that experience at Sun was that you have to communicate to your people why customer service is important. I once had a boss who asked me if I had read “The Prince,” Machiavelli’s manifesto on how to control people with cunning and deceptiveness. I hadn’t, and I still haven’t, but I knew what he was getting at. Some have an attitude in this profession that if we're not controlling everybody, they won’t use procurement and will be spending money all over the place. I think that is a misunderstanding of what gets results, but this is the attitude that you may have to overcome to implement the customer service section of the scorecard.
What you must communicate is that organizations that focus on customer service get invited to more procurements, and as a result they not only drive greater cost savings, they start to be seen as strategic business partners. This is what people in the profession say they want. Focusing on internal customer satisfaction is part of the way to get there.
The black hole
Once you get everyone in your organization on board, how do you create a customer service scorecard? Unlike cost savings, process efficiency, and even organizational development, this can be a hard area to measure, especially if it’s never been looked at before.
In my last company, that was the case. The procurement people had never asked their stakeholders for feedback in any formalized way. But, I found a proxy.
In first month I started at this company, I had to meet with the CFO, who was my boss's boss. During that meeting, among other things, she told me, "Do you know that procurement is one of the top three dis-satisfiers in the entire 9,000-person company? People believe the process is a black hole and takes too long."
This was according to the annual employee satisfaction survey. I was so flabbergasted by that comment that I don't even remember what she said the top two were. Initially, I thought to myself, "Oh, my gosh. What have I gotten myself into?"
After the shock wore off, I thought to myself, "This is exactly what I want to have, which is, we are in a bad situation, but we can show dramatic improvement." I was confident, because I had done this at other companies.
Beyond, “We hate you”
The first thing to do was start to get a little more detail than just, "We hate you." So, we developed a stakeholder satisfaction survey. Now, there are lots of different ways to do surveys. I had learned years before that asking many questions in satisfaction surveys is not as effective as asking if the person would recommend using the procurement group to a colleague.
There was a Harvard study on this, and what they found across all industries was that this was the one question that had the biggest correlation to whether or not you're doing a good job and people would buy your product.
So, rather than writing a whole bunch of questions that people don't have time to answer, we had just two. After every interaction with our group, we would ask our business partner, "Do you feel that we provided value that helped your business function?" That was the first question.
The second was, "Would you recommend us to your peers to help in getting their goals accomplished?" Two questions. People answered those questions.
We had a help desk that people could call if they had questions about how to procure things. We asked those people, after they got the help, whether they got value and would they would recommend us.
If you were a sourcing manager, after you did an RFP and helped select the supplier we would ask the business partner whether they got value and would recommend us.
If you were a reporting person, after you created new reports, you would ask people if the reports had provided value and you would recommend them. It was the same question, but what they were asking about was specific to their job function.
We had hundreds of procurements going on, with each of our people juggling 8 to 10 projects at any given time, so we were getting feedback almost continuously in every facet of our work.
Not the Nielsens
However, we knew that, in most surveys, the comments are the most powerful. So, we also invited stakeholders to send us comments.
Because I believed, and still do, that a personal touch would help us build better relationships, the leaders in my organization had this conversation in person, one-on-one with the business partners that they worked with. Nothing builds trust like going to someone and asking for feedback. It’s a double win. Not only do you get the feedback, but you show the other person that you care enough to ask. If people were uncomfortable, they could just use the online feedback form to anonymously send input.
Thus, we were soon able to say, "Well, we're pretty good in reporting, but we're not so good over here." And we were also able to give specific feedback, both positive and negative, to individuals. We also used this to look at things that cut across the whole group, such as communication and tools.
This wasn’t like the Nielsen ratings for TV, with its statistical methodology and precise scoring. I had run a customer satisfaction group at a previous company, and learned that you can over-engineer these things. Keeping it simple is better.
From input to action
We used this feedback to drive initiatives to cut across the group – communication was one of them. We implemented new processes, and new tools. A key new tool was Coupa, which replaced our aging ERP eProcurement tool, and was very easy for stakeholders to use.
In the following year’s employee satisfaction survey, people were no longer saying procurement was a top dis-satisfier in the company. It wasn’t even in the top ten. It was the ultimate glory to go back to the CFO and let her know that we heard her, we took action, and we changed it.
Sometimes you can see the impact of focusing (or not) on customer service in the other parts of the balanced scorecard. At a previous organization where we took a policing approach to procurement, we saw cost savings and supplier quality that were below industry benchmarks.
Here, over the course of three years, we doubled our cost savings. I can't tell you that it was solely from better stakeholder satisfaction. It was from also focusing on better processes and on building our organizational capability. All of those together added up to a win in the financial stewardship part of the scorecard.
I think that a group lower in the procurement maturity, one only looking at financial and process efficiency metrics can still make progress without the other two parts of the balanced scorecard, but they would only slowly move the needle. There are plenty of great benchmarks and measurement formulas available, and they’re getting better all the time.
But if you want dramatic improvement, you can’t just stay focused on those two parts of the scorecard and make little tweaks. You have to look at all four areas, including customer service, and balance them against the traditional metrics.
David Hearn is a procurement consultant and a member of the Coupa Executive Advisory Board. He was the Indirect CPO at Juniper Networks, Sun Microsystems and Kaiser Permanente.