Strategic HR: Customer-Centric HR

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When HR professionals talk about customers, they’re usually referring to internal customers—employees. But a new wave of savvy HR executives are working with external customers to inform or create practices that help reward, train and retain employees.

Customer-centric HR is the next level of human resource management that will revolutionize the way companies operate. That’s the bold prediction from Dave Ulrich, a management professor at the Ross School of Business at the University of Michigan in Ann Arbor.

In HR from the Outside In (McGraw-Hill, 2012), Ulrich and his co-authors describe customer-centric HR. He uses the analogy of moving from “HR as a mirror” to “HR as a window.”

“The mirror reflects the business strategies that HR needs to incorporate into its practices,” he explained in an interview with HR Magazine. In the new phase from strategic to “outside-in,” Ulrich changes the “mirror” to a “window” that HR looks out of into the external world of customers or investors to inform HR practices.

For instance, instead of being an employer of choice, organizations should strive to be an employer of employees whom customers would choose—and, in some cases, do choose. “Almost every HR practice can be filtered through the eyes of the customer,” Ulrich says.

Customer service consultant and author Lewis Carbone agrees with Ulrich. “Organizations that are successful in creating shareholder value are ones that fuse employee and customer experiences,” says Carbone, founder of Experience Engineering in Minneapolis.

Create “cultures where customers are coaching employees rather than managers coaching employees,” he adds. “Integration between customers and employees through HR is gaining momentum.”

Making the Deal with Your Customers

Integrating HR and customers requires a partnership with two-way communication. It goes far beyond customer satisfaction surveys and complaint lines, says Ron Kaufman, customer service consultant and author of Uplifting Service: The Proven Path to Delighting Your Customers, Colleagues, and Everyone Else You Meet (Evolve Publishing, 2012).

A survey is “backward-looking,” Kaufman says. “You’re asking the customer to rate how the experience was, but it doesn’t inform future practices. Instead, engage customers on how to make future visits more enjoyable. Get customer insight on making the next product better or the service more efficient. The answers will lead to specific ways to improve employee behavior.”

HR professionals, who don’t usually have frequent, direct contact with external customers, should start in their marketing departments, Carbone says. “Go to the customer insights group in marketing and ask [the marketers] to partner with you.”

Ulrich urges HR professionals to spend two to four hours per month going with salespeople on customer calls. “At first, salespeople are worried that they are being assessed, so HR needs to be clear that the excursion is for information,” he advises. Once there, “Say to the customer: ‘We don’t just want you to buy a product. We want you to be a part of creating the systems that will result in better products and services.’ ”

Ulrich suggests showing customers the company’s mission, vision and values statements and then asking questions such as:

• What qualities do you value most in a salesperson?
• Do you think our company is true to its mission, vision and values statements?
• What behaviors does our company exhibit that demonstrate we are living those statements?
• Would you be more committed to the company if it acted on your feedback?

“Use the information you learn on these sales calls to inform HR decisions,” Ulrich says.

In addition to HR professionals going out, organizations must get customers to come in, Ulrich adds. When soliciting customers to partner with the organization, HR professionals need to seek a mix of customer types.

“Some people may assume that you need to incentivize customers to participate, but you may not have to,” Kaufman says. He points to Wikipedia and other open-source forums where users enhance knowledge for free. Likewise, Apple computer product users started their own forums that are unassociated with the company. And millions of people review countless products on retailer websites simply to help others make informed decisions.

When looking for consumer partners, go online and scan forums and social media such as Facebook and Twitter to see who is passionate about your product or service. “Extend the invitation to contribute, and let customers raise their hands,” Kaufman advises. “Customers expect open channels.”

Changi Airport Group, which manages Changi Airport in Singapore, uses technology to encourage customers to provide immediate feedback. The airport employs about 1,000 workers internally, but it is also responsible for the quality of another 28,000 employees who serve travelers in retail stores, restaurants, security checkpoints and restrooms.

To solicit and respond immediately to feedback, Changi installed interactive kiosks at every touch point from check-in to baggage claim. For instance, as passengers leave the restroom, they face an interactive computer screen at the exit to rate cleanliness, report any maintenance required and suggest improvements.

“The first impression passengers usually have of Changi Airport is the washroom,” explains Jacqueline Lau, assistant vice president of quality services management. When customers provide instant feedback at the kiosks, airport managers and cleaning staff receive reports on their mobile phones that help determine where to deploy more staff.

The company is looking to add instant feedback functions to its free mobile app.

Even though the majority of employees work for airport partners, they must complete two days of customer service training run by Changi.

“Employees are trained to make eye contact and treat travelers as individuals,” Lau says. “Because traveling is stressful under normal circumstances, employees are trained to use positive body language and verbal cues to make the experience pleasant.” For example, they learn how to defuse anger and how small acts can make a difference. “One of the surprising things we do is when an agent opens a traveler’s passport and it’s his birthday, the agent slips a birthday card into the passport,” Lau says.

When interactions aren’t so positive, travelers note grievances in the kiosks. If the issue merits involvement, an onsite manager is deployed to solve the problem or coach a partner employee on how to handle the situation in the future. “Sometimes the employee did everything right and the manager is there to support the employee,” Lau adds.

One type of customer to steer clear of is the “perpetually malcontent,” who provides no constructive criticism, Ulrich says. “However, customers who had a bad experience turned around or a problem solved are highly valuable to employees,” he adds.

Selecting Your Staff Members

At Nemours Children’s Hospital in Orlando, Fla., which opened in October 2012, former patients of other Nemours facilities and their family members helped design the 95-bed facility and helped select and train 600 associates.

Two years before the hospital opened, Chief Nurse Executive Barb Meeks asked Rick Kennedy, senior HR business partner, to include members of Nemours’ Family Advisory Council in the hiring process. It started with the selection of nurse leaders, then expanded to include the selection of hospital clinic leaders and physician leaders.

Kennedy says parents agree to serve on the Family Advisory Council as a way to give back for the care they and their children received or are receiving. “They are making that care better for their children and others,” he says. “They are a huge part of this hospital and can walk every hall and see their impact on the design or in the way check-in is handled. Or they will bump into a nurse leader they helped hire.”

Kennedy is in awe of those who find the time to serve the hospital in this way. “It’s a huge commitment to care for a chronically ill child, and they somehow find the time to give back on interviewing or to sit on committees,” he says.

HR staff trained about a dozen parents in behavioral interviewing techniques and legally ill-advised interview questions. Initially, two parents interviewed each candidate with an HR representative. As the parents became more comfortable and skilled, HR no longer sat in. Now, usually only one parent interviews each candidate.

Having customers conduct interviews tells them that “you want to hire to their standards, and it tells candidates that the customer is the ultimate boss,” Kaufman says.

Developing Training Opportunities

HR professionals engage customers in employee training in a number of ways. At General Electric, for instance, about 10 percent to 20 percent of participants in its management development institute are GE suppliers. This means GE is able to share its values with suppliers and create closer ties between the company’s managers and suppliers.

Nemours involves patients’ parents in its annual leadership development retreats for leaders. “Parents will come and speak to the leaders about what the care was like for their child,” Kennedy says. “They share their stories and insights, and our leaders learn from them to improve the care at the hospitals.”

The customer effect is powerful, he says. “Because the training is coming from the parents, the feedback becomes more actionable for our leaders. It’s hard to ignore the feedback of someone whose child has battled cancer.”

Customers also can play a role in new-hire orientation. Sessions with a panel of parents whose children were patients are the top-rated sessions during Nemours’ three-day orientations.

“If you want to orient new hires into what the company does, who the customer is, who the competition is and how we meet our customer needs, then the best way to do that is to have the customer say it directly,” Kaufman says. “Hearing from a customer—not a manager or another employee—about an instance where the company failed or almost failed to deliver and then recovered is very powerful for employees. It shows that it’s OK to mess up; it’s how you handle the mess-up that’s important. It also shows that employees have the power to fix problems on their own, and it shows that you can turn a customer in this situation into your most loyal customer if you handle it well. You want to get that kind of thinking into a new employee’s head before he’s exposed to another employee who says, ‘You can’t do that’ or ‘You have to ask the boss first.’ ”

If an in-person presentation isn’t possible, HR professionals can “record a video of a customer telling a story about how an employee solved a problem, or use videoconferencing,” Kaufman says.

Rewarding Employees’ Good Behavior

Having customers directly reward employees is not a new concept. It happens all the time in the restaurant industry: Diners directly tip servers, who know their pay depends on the quality of service and act accordingly.

This customer-employee integration produces a positive outcome for all—the server gets rewarded instantly on his performance, the diner feels special, and the restaurant sells more meals.

“It would be odd for a restaurant manager to decide at the end of the evening who gets the most tips,” Carbone says. “But that is basically what happens across corporate America. The manager, who is one or more steps removed from the customer-employee interaction, decides whether the service was good or not. You can put in mechanisms like customer service surveys or use a commission-based compensation system, but these systems can be flawed.”

Ulrich experienced an example of a flawed system after buying a car. The salesman asked him to go online and rate the service. “He said, ‘Please give me the highest possible or I won’t get a bonus,’ ” Ulrich recalls. “This is skewing the data. The intent is there, but the execution isn’t quite there.”

Kaufman adds that the surveys attached to store receipts are inherently skewed. “The customer who goes online to complete the survey just wants the reward and isn’t giving any thought to the ratings,” he says. “And the employee never receives that feedback directly, so there’s no point.” Employers should instead empower customers to give employees feedback directly.

Another failed feedback mechanism was a three-button customer survey that Experience Engineering installed at the exit of an office-equipment retailer. Carbone discovered that employees kept hitting the positive feedback buttons.

Carbone predicts that, in the future, smartphone apps with GPS technology will allow customers to register instant and direct feedback about employees, sometimes with first names and photos. Managers should respond to themes and trends in such feedback and avoid giving too much weight to the one-off cranky customer, he advises.

One method that works: “Let customers give out some of the bonus pool to employees,” says Ulrich, who cites an example from Delta Airlines. In his annual frequent-flier credential packet, he receives “Job Well Done” certificates to distribute to employees who demonstrate quality customer service. Each certificate is worth points that the employee can redeem on Delta’s corporate intranet for merchandise and gift cards.

“It’s really rewarding as a customer to reward an employee in person,” Ulrich says. To take the idea further, he adds, the person who receives the most certificates should lead customer service training. And even traditional employee recognition vehicles present opportunities to use stories, quotes and images to magnify customers’ opinions.

Creating Human Resource Practices

Some companies involve customers in creating employee-related practices. Including customers in cross-functional committees is one way to engage them on this level. For example, “ask a customer to serve on the committee choosing the best employee suggestion or on the committee reviewing customer complaints,” Kaufman says.

HR professionals can use customer feedback in performance reviews, recognition awards and newsletters. Kaufman suggests framing positive customer letters with photos of the customer shaking hands with the employee who was complimented. “If you’re an employee, you would feel great each day seeing that in the corporate lobby,” Kaufman says. “If you are a customer, seeing photos of people like you having positive interactions with the same employees you are about to meet is a powerful first impression.”

Kaufman says HR professionals should invite customers to take part in employee recognition ceremonies. In fact, he suggests, “Ask customers to do the honors.”

The North Carolina Children’s Hospital in Chapel Hill closely integrates patients’ families into operations. In 2006, the hospital created a Family Advisory Board of parents, doctors, nurses, other hospital staff members and community partners. The board collaborates to educate health care team members and improve care.

Parents help staff understand what it’s like for new mothers and fathers to be thrust into an unknown and scary world as their premature babies fight to survive, says Angela Seeberg, a family support network hospital coordinator. To serve on the board, parents must complete four hours of voluntary services training covering health care regulations, infection control and other policies. If parents want to do bedside support, there’s a six-hour training session on interacting with parents in crisis.

At Nemours Children’s Hospital, the chief administrative officer leads a continuous improvement committee made up of staff leaders from all the departments, including human resources. A parent from the Family Advisory Council recently joined the committee, and Kennedy says the individual brings “that immediate reality of how the issues affect a parent or a child.”

Improving Human Resources Outside-In

Before pursuing a customer-centric HR strategy, make sure it fits your organizational culture. “HR needs to pull all the pieces together,” Carbone says.

HR professionals also need to make sure that when customers come in to help, they feel valued. “It’s a big time commitment for customers for not much return in traditional terms,” Kennedy says. “Find people passionate about improving the quality of service at your organization. Find those customers, engage them and really listen to them. You have to partner with them.”

If the culture is ready, then think about what customers you want to target and what you want to achieve. “Consumers are overloaded, and HR has to be innovative and selective about how you engage your customers and what you want from that engagement,” Carbone says.

Adrienne Fox, a contributing editor and former managing editor of HR Magazine, is based in Alexandria, Va.