Investing in service improvement not only makes good sense – it can also save you money.
How can this be – surely investing in service improvement costs money? Read on and I’ll explain how this can be achieved.
As time progresses service quality of an operation will either improve or deteriorate – it very rarely stays constant. This is because service environments are always evolving – new technologies are deployed, teams change shape and size, processes get modified and systems are updated. So what works today, might not work tomorrow.
The consequences of poor service quality are extremely unpalatable – it not only results in disengaged customers and loss of reputation, but it also impacts revenues and results in increased costs due to service recovery and re-work. So service providers have no option – service quality needs to continually improve. Investing in service quality may involve new forms of training, improving processes or installing new information systems and a raft of other measures that improve the customer experience.
And what about costs? Reducing cost of delivery can only be a good thing if done effectively. A lower cost base gives you a competitive advantage by enabling you to increase margins and allowing more flexibility in setting your prices to win more business. Lower costs also mean you can conserve cash for innovation and service development: efficient companies are able to invest in their future with cash they save from day-to-day operations. And last but not least, efficiency requires employees and teams to actively manage their activities and resources which creates a culture of responsibility and ownership.
But improving services and simultaneously reducing costs seems counter-intuitive – so how can it be achieved? The good news is that by taking a service-led approach and putting the customer first this is possible.
Here’s how to do it – in seven steps.
- Decide which operational areas need to improve – process, capability, information systems, communication, etc.
- Review your cost base to understand the main cost drivers. In many cases staffing, maintenance, suppliers, utilities and facilities costs make up the majority of the cost base for service providers.
- You also need to understand the non-financial drivers of customer satisfaction – i.e. what customers value. Usually these are related to quality of service, ease of doing business and a high level of customer engagement.
- Decide on your goals for service improvement and cost reduction – and how the success will be measured.
- Design an improvement programme that addresses the shortfall in performance and using the customer engagement benchmark focus on the areas that customers value. For each of the costs drivers assess the impact of cost reduction ideas against the improvement ideas and select those that offer the greatest gains.
- Once the plan is fully formed, you can move into the implementation stage making sure you have enough resource, the right people involved and a realistic timescale to ensure complete success.
- This whole process needs to be carried out with people close to the business who inherently understand which areas can be improved and the impact of cost reduction. This will ensure your plan is achievable and you get full buy-in for the changes. The resulting improvement programme should deliver the necessary improvements in service and cost reduction, focusing on the areas valued by customers.
So having your cake and eating it may not be impossible after all.