Human Sigma

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Human Sigma [Managing the Employee-Customer Encounter] S.Sankar Excerpts from the book “Human Sigma” by John H. Fleming & Jim Asplund

Transcript of Human Sigma

Page 1: Human Sigma

Human Sigma[Managing the Employee-Customer Encounter]

S.Sankar

Excerpts from the book “Human Sigma”

by John H. Fleming & Jim Asplund

Page 2: Human Sigma

The Terminator, the science fiction

Skynet, the machineswith advanced form of artificial

intelligence, accidentally becomes self-aware

decides to erase humans from the face of the planet as they are perceived not to be adding value in their vision of the future

“Terminator School of Management views people as a necessary evil – breed inefficiency, cost, and errors”

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Six Sigma approach

It has had a better staying power than the other quality initiatives like SPC, TQM, etc.

At its core, it works on reducing variability in the processes through the analysis of root causes of quality defects: Machines Materials Measurement Methods

Another root cause of people, is mostly ignored here

“Perfectly designed process is only as good as

the human being who uses it”

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Human Sigma Approach

The most volatile and valuable assets are your customers and employees – the people

Human sigma approach helps in Measuring, Managing and Improving the performance of these valuable assets

Paradoxically, this does not rely on reducing the variability in how employees are managed or how they serve the customers but likely to increase the variability

Human sigma approach starts by accepting human nature and then uses it to manage employees, motivate them, accelerate their development, and customer’s emotions

Contrary to popular wisdom, emotional traits are quite predictable

By individualizing the approach, you’ll unlock the maximum potential and your maximum profitability

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“Quality has to be caused, not controlled” – Philip Crosby

“Equifinality – Though the end remains constant, the means to achieve that end will inevitably vary from individual to individual” – Fritz Heider, German social psychologist

Great managers follow Socrates’ logic – They legislate goals, not steps

When you stifle human interaction by attempting to legislate the steps to service, you sacrifice the real quality – genuine human interaction – in favor of control

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Vital Signs in Human Body & the Organization Circulatory system and respiratory system are

two vital functions that determines whether your body will survive and flourish or wither and possibly die

Blood pressure reflects how well the two systems are working together

Organizational perspective Customer relationships ≈ Circulatory system Employee relationships ≈ Respiratory system Financial vitality ≈ Blood pressure

“These are only the first-line indicators and does not provide the complete picture of the health”

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Feedback systems

It is impossible to hold your breath until you die – because brain sends out signal to lungs to breathe when you experience overwhelming air hunger

Unfortunately organizations do not have self-regulating signals

Generally people are bad at recognizing when they are bad at something. Therefore feedback is necessary

If customer or employee relationship starts to deteriorate, there is no sensor in company’s brain that screams, “Fix it now!”

“Deployment of right performance monitoring and feedback system in organization is necessary”

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Leading indicators

According to Kaplan and Norton The so called “hard” financial data are the lagging

indicators of the organizational performance. They lag behind the organizational activities that produce them Executives who monitor them, can only react to the events that

already happened Non-financial, human performance metrics are leading

indicators They help in taking corrective action before decline in financial

performance occur

“Not everything that can be counted counts”

– Albert Einstein

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First rule of Human sigma Management

E Pluribus Unum. You can’t measure and manage employee and customer

experiences as separate entities; they must be managed together under a single

organizational entity

“E pluribus unum, Latin for "Out of Many, One"

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Perception is realityThe irrationality of everyday life A person’s definition of the situation – that is, how they

perceive that situation and what they define to be true about it – determines how he or she will react to it Like a rubber band, the sense of time stretches and shrinks

depending on the circumstances and the context. It is not exact amount of time but how long it felt.

For example, 10 minute wait at a hotel lobby may be exasperatingly long, whereas 30 minute wait for a roller coaster may be blessedly short

It’s worth noting that non-rational considerations shape a significant proportion of our behavior, from deciding whether we will wear seat belts, to which appliances to purchase, and to the kinds of coffee we drink

“It is much easier for emotional responses to influence our thinking than for rational responses to temper our emotions”

- Joseph LeDoux, a neuroscientist in New York University

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A new perspective on “Cutomer’s Requirements”

Traditional assessment relies on “conformance to requirements” as a generic measure of customer satisfaction

But executives and managers struggle to understand why customers who appear to be satisfied still defect to competitors

Merely satisfying customer’s rational requirements represents a minimum point of entry in today’s business

“Customers want more than transactions –

they want relationships”

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Emotional advocates

Customers who are extremely satisfied can be classified into two distinct groups Rationally satisfied: They are also extremely satisfied with

products and services but lack the emotional connection Emotionally satisfied: They are extremely satisfied with products

and services but also have a strong emotional attachment. They are the strong advocates for your company

The strength of positive emotional connection ultimately determines customers’ future behaviors

“Rationally satisfied customers, behave no differently than the customers who are dissatisfied. Emotionally satisfied

customers bring huge financial benefit”

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Second rule of Human sigma Management

Feelings are facts, and emotions frame the employee-customer encounter

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CONFIDENCE

INTEGRITY

PRIDE

PASSIONCan't imagine a world withoutPerfect company for people like me

Treats me with respectFeel proud to be customer

Fair resolution of any problemsAlways treats me fairly

Always delivers on promiseName always I can trust

Four Dimensions of Customer's Emotional Attachment

“Passionate customers are customers for life and are worth their weight in gold”

CONFIDENCE

INTEGRITY

PRIDE

PASSION

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Confidence

For customers, the consistency between what a company promises and what it actually delivers is key to building confidence

Great companies always keep their promises Always is a difficult standard to live up to, but it’s the gold

standard; customers expect nothing less Sometimes, usually, or occasionally just won’t cut it

“Confidence is the bedrock upon which higher levels of emotional attachment is built”

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Integrity

It is an essential dimension of equitable treatment Three types of fairness

Distributive: addresses how resources are distributed Procedural: covers processes and systems that are used to

determine how resources are allocated Interactional: encompasses how people are treated at an

individual level

“Integrity - Quality of being honest and upright in character”

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Distributive fairness

Equity – company should reciprocate and distribute resources to me based on what I have invested in the relationship. Example – Frequent flier jumping the queue

Equality – company should distribute resources equally among all the customers. Example – Leisure travellers considering previleges to frequent flier as unfair

Need – company should distribute resources to me based on my individual needs. Example – Delayed passenger wanting to jump the queue

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Procedural fairness

Is the game played according to rules?Are the rules fair?From the customer’s perspective, any

process or system whose primary purpose is to solve a business problem rather than a customer concern is unfair

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Interactional fairness

When your employees interact with customers, Do they always treat them honestly and with

respect? Are the employees polite and courteous? Are they able to give customers their undivided

attention, or are they multitasking?

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Moments of truth – An untapped opportunity

Problems happen It is an unfortunate and unavoidable fact of life But to build integrity, it is important how a company

responds to product or service failures Customers do not expect that a company will resolve all

their problems to their liking, but they do expect the company to handle them in a exemplary way

“Emphasis is on how the company handled the problems, and not how it was resolved ”

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Six-step approach to problem resolution Acknowledge the problem – customers want the company to hear

their concerns and not to be challenged Apologize for the problem – by owning and apologizing, it

validates customer’s decision to trust the company in first place Take ownership of the problem and follow up, even if the

problem is unresolved – keep communicating with the customer while the problem is being fixed

Handle problems on the spot – customers hate to be handed over to someone else

If you can’t resolve the problem immediately, quickly escalate the problem to supervisor or manager – delays cause frustration

Leave the customer better off than before the problem – an agreeable solution reassures customers that company can see his needs and meet them

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Final note on integrity

Strong emotion introduces a positive elasticity into customers’ perceptions and interpretations of their experiences with a company

Customers who are fully engaged will grant that company a state of grace – or an unconditional pardon

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Pride

It is a sense of positive association and identification with a company

The most powerful relationships customers have with companies are those that make them feel good about themselves.

A key element of that feeling is customers to feel competent and in control. Example – Uniform ATM design helps in easy understanding and execution

BRIGing (Basking in Reflected Glory) – people generally like to be associated with winners, even when that association has little to do with them personally

CORFing (Cutting Off Reflected Failure) – people actively try to distance themselves from entities that would reflect badly on them

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Passion

A passionate customer uses expressions like “It’s irreplaceable” “It’s a perfect fit for me”

Passionate customers look to your company to set standard for other to follow

They are truly committed “ambassadors” of your brand and hold keys for building greater levels of passion throughout your customer population

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Self-fulfilling prophecy

People’s beliefs and desires have tremendous power to make those beliefs and desires to come true

When your company creates strong emotional connections with your customers, they internalize a self-fulfilling prophecy that leads them to interpret all aspects of your business more positively

Emotionally engaging the customers initiates an upward spiral of positivity that becomes self-reinforcing

Failing to engage them, however, initiates a downward spiral that can be difficult to counteract

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Six principles for engaging customers Satisfying customers is not enough – it is only the cost of entry. It will not

differentiate the good from the great Emotion frames the relationships. You must honor and strengthen these

bonds Engagement = Health. Quality of emotional relationship with the customers

determines your long term financial success You never step into same river twice. Every time your company interacts

with customers, they become a little more engaged or a little less enagaged. No interaction produces a neutral result

Variance hurts your business. Variability in quality of the customer experience from unit to unit within your company

All politics are local. Organizations can’t dictate strong customer relationships from the top; people and work units create them, and companies must manage them locally

“Engaging customers means effectively addressing their functional requirements and their emotional needs ”

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Metric for employee – customer encounter: Three criteria

It must incorporate a way to assess the rational and the non-rational or emotional dimensions of the customer relationships

It must provide reliable and demonstrable links to financial performance outcomes

It must readily lend itself to meaningful improvement efforts at the local and enterprise levels

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Employee Engagement

The job of the manager is an enabling, not a directive job

Coaching, and not direction is the first quality of leadership now

Get the barriers out of the way to let people do the things they do well

“No problem can be solved from the same consciousness that created it. We must learn to see the world anew”

- Albert Einstein

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Robert Noyce: In 1968

By the age of 40, earned a doctorate degree from MIT, co-invented the integrated circuit, made several other groundbreaking research contributions in solid-state physics, and risen to executive position in Fairchild Camera and Instrument, a profitable maker of semiconductors and technical instrumentation

He was a successful man but still felt miserable as Fairchild didn’t sufficiently appreciate the Semiconductor division’s contribution

Noyce decided to start his own company He convinced his co-worker Gordon Brown to join him in his new

venture

“Did the new venture work?

The little company they founded was INTEL!”

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WHAT DO I GET?

WHAT DO I GIVE?

DO I BELONG?

HOWCAN WE GROW?

Opportunities to learn and growProgress in last six months

Best friendCoworkers committed to quality Mission/Purpose of the companyMy opinions count

Encourages developmentSupervisor/Someone at work caresRecognition last seven daysDo what I do best every day

Materials and equipmentI know what is expected of me at work

Four Dimensions of Employee Engagement

“As the world shifts from an industrial to knowledge-based economy, in many countries today employer needs the

employee more than the other way around”

WHAT DO I GET?

WHAT DO I GIVE?

DO I BELONG?

HOW CAN WE GROW?

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What do I get?

An organization that does not meet the basic needs like clear expectations at workplace and the materials required to do the job will have no credibility with its employees

“Organizations have largely ignored these basic tools in all the mumbo jumbo surrounding initiatives like Kaizen

disciples, Six Sigma black belts”

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What do I give?

Employees need to experience success in their performance

It is important that employees feel that they are contributing to the organization and those contributions are valued

Frequent and immediate recognition for good work also creates beneficial positive emotions

The right recognition reinforces authentic success by cementing the memory of what the employee did right and encoding that memory with positive emotions and make it more powerful and meaningful

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Do I belong?

Do I have any friends here? Does anyone listen to me or care what I have to

say? The best leaders realize that employees won’t

commit body and soul to any endeavor that doesn’t seem to be worth the risk

The secret of unleashing innovation in any company is as simple as engaging every employee

“Even the best processes and systems are only as effective as the people driving them”

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How can we grow?

A psychologically committed employee in an engaging work environment is primed for innovation and growth

ROAD warriors – workers who are Retired on Active Duty. This is when employees are physically present but psychologically absent. They are an insidious source of lost productivity

Engaged employees are much less likely to become ROAD warriors

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Engaged workgroups are

18% more productive 12% more profitable 12% better at engaging customers 51% less likely to leave the organization (low-turnover

companies) 31% less likely to leave the organization (high-turnover

companies) 62% less likely to be involved in an accident on the job 27% less prone to absenteeism 51% less likely to be source of inventory shrinkage

“Engaged workgroups are also more effective at engaging the customers they serve”

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Engaging your employees

It is one thing to know that engaged employees are more productive

It is another thing to make an employee more engaged

Is that possible? Answer is YES

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Four core principles of employee engagement Manage by outcomes and not behaviors – conforming

and executing the steps of the job the right way is not sufficient

Liberate don’t legislate – dramatic increases in productivity occur when companies allow workgroups to choose their own initiatives and focus on them

Engagement is for everyone – Almost every employee can become more engaged (in the right circumstances)

All politics is local – companies can’t dictate employee engagement from on high; from the boardroom to the mailroom, everyone is responsible for quality of his or her workplace

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The scourge of local variation

A major airline industry touts itself as an industry leader in on-time performance and has data to prove it But within same airline, some flights are never on time; and

some are Studies depict that best performer’s performance is 3.5

times strong as the poorest performer’s From the customer’s perspective, this is critical because

they are experiencing variation and not average Business must focus on reducing variability in local

“people” processes (the “who” and “how” of implementation)

“Think globally, act locally.”

- Rene Dubos

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Third rule of Human sigma Management

Think globally, measure and act locally: You must measure and manage the employee-

customer encounter locally

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Partially optimized Optimized

Not-optimized Partially optimized

1.7

Quadrant III

3.4

Quadrant I

1.0

Quadrant IV

1.7

Quadrant II

Employee Engagement

LOW HIGH

Em

plo

yee E

ngagem

ent

LO

WH

IGH

Impact coefficients for Humansigma quadrants

“Better financial results were coming when employee and customer engagement were optimized than highest score on

individual metric”

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1.81.0

3.8

2.5

5.2

4.5

Performance Multipliers

Humansigma performance bands

“The single score summarizes the overall effectiveness of the employee-customer encounter that is reliably related to

unit’s overall financial vitality”

325

19

29

1

14

% of units within each band

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“Employees learn when they are provided with clear feedback and when they are held accountable for their mistakes. Organization in turn can achieve significant

performance improvement”

Feedback and consequences

Perfect Noisy

Pressure for valid strategies - good

strategies can emerge

Quality of Feedback

Consequence o

f E

rrors

Sm

all

Larg

e

Learning New Strategies

Difficult for valid strategies to emerge

Little pressure for valid strategies - good and bad strategies can

coexist

Superstitious learning quite likely

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Decentralised decision making process of Bees

It is a method used to select a site for a new colony When honeybee hive outgrows its existing home,

reconnaissance bees fly in many directions to find a suitable place to build a new one

When the recon bees come back, they describe their observations by means of a “waggle dance”

Over a couple of days, the bees hammer out a consensus and a new site is chosen

Just how do they do this? Individual bees gradually stop dancing until one waggle

dance survives

“The swarm is able to evaluate all the possibilities with a high degree of accuracy by listening to what each scout bee

has to say”

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The economic imperative

Think about the variability and risk inherent in any business planning and how little control organizations have over most of it. These include Microeconomic conditions Currency fluctuations Product cycles New market entrants or departures Local demographic shifts Weather Variable productivity across employees Variable profitability among customers

“Can your business reduce its exposure to any of these forms of risks?

Sure “YES” is only for the risks associated with employees & customers”

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Fourth rule of Human sigma Management

There is one number you need to know: We can quantify and summarize the

effectiveness of the employee-customer encounter in a single performance metric –

the HumanSigma metric – that is powerfully related to financial performance

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Organizations whose leaders are afraid to unleash the skills and talents of their employees are likely to wind up in history’s dust bin

“Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity” – U.S. Army General George S. patton

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The strategy and tactics

You can’t lower your cholesterol simply by having it checked on a regular basis

“Well begun is half done” – Aristotle Although this is important, but follow-through is

essential for success

It is essential to pay attention to three inter-related activities: Evaluation Intervention Encouragement

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Fifth rule of Human sigma Management

If you pray for potatoes, you better grab the right hoe. Improvement in local

HumanSigma performance requires deliberate and active intervention through attention to a combination of transactional and transformational intervention activities

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“You cannot manage what you cannot measure” - unknown

Change is possible “A journey of a thousand miles begins with a single step”

– Lao Tzu What does not destroy you will make you stronger New testament: And only that, but we also boast in our

sufferings, knowing that suffering produces endurance, and endurance produces character, and character produces hope, and hope does not disappoint us

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GALLUP’s CE11

– Customer EngagementAttitudinal loyalty Overall how satisfied are you with [Brand]? How likely are you to continue to choose/repurchase/repeat (if needed)

[Brand]? How likely are you to recommend [Brand] to friend/associate?Emotional attachment items [Brand] is a name I can always trust [Brand delivers on what they promise [Brand] always treats me fairly If a problem arises, I can always count on [Brand] to reach a fair and

satifactory resolution I feel proud to be a [Brand] [customer/shopper/user/owner] [Brand] always treats me with respect [Brand] is the perfect [company/product/brand/store] for people like me I can’t imagine a world without [Brand]

5-point scale rating: Ranging from “extremely” (5) to “not at all” (1)

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GALLUP’s Q12

– Employee Engagement Do you know what is expected of you at work? Do you have the materials and equipment you need to do your work right? At work, do you have the opportunity to do what you do best every day? In the last seven days, have you received recognition or praise for doing

good work? Does your supervisor, or someone at work, seem to care about you as a

person? Is there someone at work who encourages your development? At work, do your opinions seem to count? Does the mission/purpose of your company make you feel your job is

important? Are your associates (fellow employees) committed to doing quality work? Do you have a best friend at work? In the last six months, has someone at work talked to you about your

progress? In the last year, have you had opportunities at work to learn and grow?

5-point scale rating: Ranging from “extremely” (5) to “not at all” (1)