Clarity of purpose: Why are we here?
I was talking with a senior exec over lunch recently who complained about lack of engagement in his organization. He expressed serious concern that, even though individual units did well, as a whole his company was failing to adapt to the sweeping changes taking place in the market. He was frustrated that people across functions and up and down the corporate ladder “aren’t even on the same page.”
After some discussion about specific challenges, I asked him to tell me in his own words what his company wants to be in the market. “What do you mean?” he asked. “At the end of the day, what do you want to be known for?” He then proceeded with a 10-minute explanation about his company’s products, his people, their distribution network and financial performance. I pressed him to tell me why any of this matters to Customers. He sat back in his chair, and said “Well, it doesn’t. I’ve got a whole marketing department and sales organization to figure that out.” Translation: Customers aren’t my concern.
I told him that if I was working for him I would get the distinct impression that he doesn’t think Customers were very important. Ditto, if I was a Customer. He shot back, “But they are important! I’ve made huge investments in people and technology over the years. At any rate, my VP of Sales is responsible for individual Customers. Besides, what’s any of this got to do with our ability to adapt to change?” I explained that, as a senior leader, he and his colleagues set the tone for the kind of values and attitudes practiced throughout the company; so by extension, he was the company’s cultural guide.
As lunch arrived, I asked him to tell me how his company defines its Customers. He gave me the standard answer: they do business with such and such industry, this vertical, that demographic. “You have some pretty tough competition don’t you?” “We do okay,” he said. Again I pressed him to tell me if they measure how much profit his firm makes from each Customer. “No, our profit metrics are by product line and business unit.” “What about how much profit you make over the life-time of the Customer relationship?” “No, we don’t do that.” “Do you measure how much of the Customer’s total ’spend’ accounts for the profits you make?” “No we don’t. But I fail to see how that would help us.”
I explained that what matters is what gets measured. If he wants to get everyone on the same page, then he would have to start by focusing on Customer profitability. Without that, very little real change was going to take place inside his firm. I made it clear that I wasn’t talking about Customer satisfaction metrics (which his company had implemented twice before with limited success). These play a very minor role relative to product and unit measures. If he truly wanted to improve his ability to adapt to change, then measuring total profit by Customer was the place to start.
On our way back to his office, he told me “You know, I’ve always prided myself on making the hard decisions in building this company. Until today, I believed we were doing things right. I would never have made the connection how our management systems affect our decisions. We have a long way to go to achieve Customer focus, but I know that once our team sees things the way you’ve explained them, that they’ll respond.”