How to Lap the Competition

The companies that break away from the pack in the next economy will focus almost obsessively on customer service, says author Charles L. Fred. Deliver on your promises, and consumers will reward you handsomely. Here's how.

Charles L. Fred loves a good track-and-field metaphor. Pick up the pace. Go the distance. Break away from the pack. Lap the competition.

Once a nationally ranked NCAA track athlete, Fred sees a strong correlation between today's cautious economy and the first half of a competitive race — before the fastest competitors pull away from the status quo. That outburst of speed and fitness is the focus of Fred's first book, Breakaway: Deliver Value to Your Customers — Fast! (Jossey-Bass, 2002), and of his lifework as an accelerator of corporate learning.

"Corporations are naked in the press," says Fred, president and CEO of the e-learning software company Avaltus Inc. "Their stocks are devalued, their people are disgruntled, and the Feds are asking questions. Consumers don't know whom to trust, so they trust no one. Every company is being pushed back into the pack. Industries are becoming normalized. And we all need to re-earn consumers' loyalty. Really, this is an opportune time for a company to find its edge and break away from the pack."

How can a company sprint ahead of its competitors? By delivering exemplary customer service, even when its customers are few, far between, and frugal. "Consumers care more about service quality than they did during the high-flying days of the 1990s," Fred says. "They have less money to spend, they are more discriminate about what they buy, and they are less trusting."

Consumer confidence is the key to economic recovery. According to Fred, companies can no longer spur recuperation through capital and scale — by incurring more debt to erect buildings or launch new marketing campaigns. In this service economy, companies can only break away from the pack by delivering great service. "And delivering service means delivering on promises," Fred says. "Capital doesn't deliver on promises. Scale doesn't deliver on promises. It's the people in your business who deliver on your promises."

Obvious, right? Perhaps. But if the link between service and profits is so plain, why are so many consumers receiving such lousy service on so many fronts? Why isn't four-star service an industry standard in every industry? Why aren't more people smiling?

The disconnect is happening in the classroom, Fred says. Too often, employee training is an obligatory line on the corporate budget — a gobbler of time and money that remains intact thanks to guilt and tradition. No manager wants to be the first one to cut training. At the same time, few people are willing to reassess its effectiveness and overhaul the system to teach great methods in customer service.

"We've improved every aspect of business in the past 20 years," Fred says. "We've dumped them out, reengineered them, and reduced their cycle times, but we still run with old, outdated operational-process assumptions for training. It's not a training issue; it's an operational-process issue."

In Breakaway, Fred asks why most training programs fail to support the bottom-line goal of great customer service. How can companies dedicate 3% to 5% of their net revenue to training and still fail to meet the most basic consumer demands? The problem, he finds, begins in the design phase.

Before any training begins, company leaders should establish what Fred calls a "proficiency threshold," his first rule for effective corporate training. In other words, companies should outline the exact training needed for employees to convert knowledge into value for the customer. Leaders should set proficiency goals for departments and then explain how corporate training will help each department achieve those objectives.

"If you want to create a bigger gap of anxiety with your employees, send them to some training course that has nothing to do with their job," he says. "Anyone who's halfway decent at their job will question what in the world they are doing there."

Rule two: Accelerate the accumulation of experience. Fred says most companies devote a disproportionate amount of time and money to classroom teaching — the introduction, assimilation, and translation of information during a three- or five-day seminar. Most employers miss or ignore the most crucial stage of learning: helping people gain hands-on experience with the theories and techniques introduced during those training sessions.

"Training events are usually fine, but all that learning is totally left to chance when employees leave; there is no follow-up," Fred says. "Companies that want to deliver on promises should work on the delivery, practice, and accumulation of experience rather than on the training event itself."

Establish trial-and-error regiments for your employees, and you will enjoy increased efficiency and profits, he says. But don't neglect rule three: Measure the time it takes employees to master their learning. In Breakaway, Fred explains how to calculate a proficiency rate and how to map a proficiency curve that compares the number of service units required to reach the proficiency threshold, where the organization can deliver on its value proposition.

By keeping close tabs on employees' cycle time to proficiency, a company can help its people learn more skills faster over time. And speed is still important. Fred says speed is, in fact, now equal to quality in its value to customers. Still, trust remains paramount.

"The absolute unilateral focus must be delivering on promises," Fred says. "The companies that break away will have a pure external focus on the customer. They will think about gaining new customers, keeping the ones they have, and coming up with new ways to wow the customer. The ones that immediately look internally for problems will find behind. They will be laying people off, blaming employees, and firing their CEO. They will be so internally focused that they won't be able to see who the customer is anymore."

Anni Layne Rodgers (arodgers@fastcompany.com) is the Fast Company senior Web editor. Learn more about Charles L. Fred on the Web.

Sidebar: Six Ways to Help Your People Learn — Fast!

Charles L. Fred interviewed roughly 300 CEOs, technical leaders, training managers, and entry-level employees while working on Breakaway: Deliver Value to Your Customers — Fast. The most successful companies he studied followed the three rules for corporate training outlined above, but some lackluster companies did too. Why the inconsistency?

True breakaway companies also exhibited some special, enigmatic qualities, or "mojo," Fred says. Here, he describes the six themes common to organizations that learn fast.

1. Make proficiency an organizational priority. "Workforce efficiency is not a departmental issue or an HR issue; it's a board-level issue. Every time Starbucks looks to open a new store or a new market, the company leadership asks, How quickly can we get those new people to deliver the company's culture and values? Home Depot and Australia's WestPac Bank do this very well too. They make workforce proficiency an agenda issue at the board level. They make it a leadership priority."

2. Be impatient with wasted activity. "Few of the successful companies that I studied had large training budgets. They didn't set aside 5% to 7% of revenue for training. They didn't have fancy solutions. They had creative, innovative training strategies that worked because their people cared. If you have no money, chances are you'll devise simple, effective ways to train your employees. If you have a large training budget, you'll probably have a lot of waste.

"Wal-Mart is a great example of a big company that, I swear, has no training budget, yet its whole team is always ready to roll. Wal-Mart has no patience for a system that takes eight months to implement. It hasn't overengineered the learning process. It knows that people with the right drive and motivation will get up to speed in time, even without a corporate university or a chief learning officer."

3. View employees as consumers of learning. "The typical assumption is that educators should know how everyone learns best. The best companies understand that their employees know themselves best. They let their people choose the delivery method best suited for the way they learn. They don't homogenize their people."

4. Stress simplicity. "The learning processes in the best companies were so simple — it was almost scary. Most of the money was spent running practice sessions, like simulated call centers, and helping employees acquire experience. The training itself was purposely simple so that the companies could change it fast, if a new tool or piece of information arrived on the scene. If training gets complex, they get rid of it."

5. Innovate to learn. "Fast companies often have training methods that look goofy from the outside but that deliver raw innovation and really help their people get up to speed fast. They are so driven to deliver faster than their competition that innovation has to happen. They can't afford to wait around for typical training programs to take hold, so they launch grassroots efforts that strike a real chord with people."

6. Cultivate candor. "The companies that moved the quickest were brutally honest about training. They examined every institutionalized process that made no sense. They questioned everything. They didn't protect the status quo; they exposed it."

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