Passions, time, and sidelines

A video from HMC Architects in California, which has discovered a way to measure -- and manage -- passion in its marketing initiatives.

A few days ago, I reported in this blog how a California architect discovered a way to predict the success of its project proposals by measuring passion. I can now name the architect here. With some precision, HMC Architects calculates the actual time that the Principal in Charge of any proposal spends on it -- the greater the time spent, the more likely it is to succeed.

Here is the relevant passage from the upcoming SMPS Marketer article. (You can read the first article in the series here.)

When a project passes through a rigourous “Go, no go” evaluation and it is time to prepare the formal proposal, everything including management and marketing time is tracked through project coding.

“We're finding that when the Principal in Charge spends more personal time on the proposal, it has a much greater chance of success,” says Doreen Lamothe, HMC's Marketing Administrative Manager. “If the principals care, if they have passion, they'll spend the time to ensure the proposal is right.”

Conversely, a principal who doesn't care or is just trying to crank out the work, might tell the marketing department: “Use boilerplate material, as I don't have the time to write the project approach,” says Lamothe, who works closely with Tracy Black, HMC's Vice President of Corporate Marketing.

These projects have a much lower chance of success: Unless the Principal is actively involved in the process and cares about it enough to invest time and energy for it to succeed, the proposal will likely fail.

The HMC story is a wonderful example of how to measure seemingly intangible things like Passion effectively, but it also raises an important secondary question. If we measure our own time, how productive would we discover we are?

These issues come to fore as I set up evaluation systems for new sales candidates who are earning income guarantees during their evaluation process. We've never been big on detailed reporting and micro-management, but I realized that if we are paying daily (or hourly) guarantees, it is reasonable to know what we are getting for the money.

One challenge, of course, in intellectual activities is that contemplation time is often quite productive. So, for sales representatives, can be time spent on the golf course or in at a hockey game (if you are with key current or potential clients, or people who can refer business your way).

In fact, it can be a kiss of death for your success when you start "pounding the pavement" or the phone, or the email, in a desperate attempt to round up leads and business. Potential clients run for the hills when this happens.

Nevertheless, the HMC story may provide clues about what to do, and what not. Assuming you have a healthy business development model, you will obtain leads through a variety of sources. When it is time to pitch the work, your most senior leaders need to be fully engaged in the process because they really care about it, not because their clock is being watched. But you can still measure how much time they spend at it.

I'm also aware that I have in the past -- and continue to spend now -- far too much time on unproductive activities because my passion takes me to wasteful places. A few years ago, the time wasting involved gaming Air Canada's Aeroplan program (resulting in some really strange and short time/long distance trips -- like flying to Guatemala, Hong Kong and Singapore, each for a day!) I also spent countless hours researching an online Internet scam, tracking down leads in South Africa, Australia and Vanuatu.

Both of these activities I rationalized as having business value, and to some extent, they did. But they weren't necessarily the things I should have considered as business priorities.

Now I wonder if I had a detailed time charge system, like HMC, and counted the hours spent on these initiatives against their real cost/revenue, would I be shocked by how little I gained for how much work? Yes, I had passion for this stuff, but passion doesn't always pay.

Then of course, there is this blog. It requires about 30 to 50 minutes a day, every day, or, roughly 2.5 hours a week, or 125 hours a year. If I charged back that time at the hourly rate I should be paid, would it make sense to continue?

For most readers, indeed, these numbers would be discouraging, which is why few people blog daily, or if they try it, they quickly give up. Paradoxically, I don't think your time saving would be that great if you decided to blog weekly or twice weekly; if you spend more time preparing each entry and worrying about the details.

But, for me, the blog matches my passions (writing), real skills, and some absolutely valuable immediate and long-term marketing objectives. It has earned this company the top Google spots on key words like Construction Marketing which are translating to meaningful leads and business opportunities. In other words, it is worth continuing because even if I charge out the time at a high hourly billing rate, the return on effort now is rational from a business perspective. And I enjoy the work.

HMC appears to have the ideal business model. Proposal submissions after all are only approved for follow-through if they pass a rigorous "go, no go" test. Passions which don't have business validity will be removed from the story. Then, once the go-ahead decision is made, the Principal in Charge's passion can be funnelled to something that serves the overall best interests of the practice. And the PiC knows that it is worth persuing the passion, because indeed the company as a whole has decided it is worthwhile.

Now, I wish I could bottle this level of management discipline into my much smaller business. I might not have the opportunity to chase my passions in Vanuatu, but sure would achieve much better results in growing the company if I could through the day focus them on activities which really help the business to grow and thrive.

Metrics; The SMPS Marketer article and survey

After several months, my story: Marketing Metrics: Measuring Your Results has been published in The SMPS Marketer.

You can read it by clicking on this link, or by visiting the Wordpress version of this blog at http://www.constructionmarketingideas.com.

The article makes the point that measuring your marketing methodologies is an important element in achieving business success, but acknowledges that this isn't always an easy thing to do (and that some highly successful architectural, engineering and construction businesses don't have formal measuring programs.)

P.S. Can you catch the typo that might really impact my ability to measure the results, and figure out how I solved the problem? You can email your observations (and I'll measure how many answer.)

The challenge of change: Breaking free of your marketing conventions

Toby Henderson's question asking how someone who has been successful with online marketing can succeed in the offline world raises some important additional challenges. The question is: If we are successful with one model of marketing, how to we expand or change our approach?

The parallel example, and these days a much more common one, would be: "I've built my business on word-of-mouth and referrals: How can I succeed at marketing outside this approach."

Change, virtually any kind of change, is difficult, for good reason. You must leave your comfort zone, and you must go away from the place where you've developed expertise, confidence and insights, into a new world. And change in approach requires you to fight against one of the four RIMC marketing pillars (Relationships, Intensity, Money and Consistency, with the C for "Consistency" the key here.)

When you change course you must battle fear, lack of knowledge, and often throw piles of money at an unproven answer. (Henderson says he dumped $20,000 into the Yellow Pages with poor results -- which, again, says some not very good things about the Yellow Pages, of course.)

As I noted in my earlier RIMC posting, you can succeed at marketing if you have three of the four elements in place. So if you take "consistency" out of the equation (at least in the short term), until you find another stable and reliable model for marketing), you will need to use the other three resources, while being cautious about how these forces are working on you.

Adding to the mix, when you put money into the equation, you also find, yes, the dreaded "salesperson". Some sales representatives are more ethical than others, and some will play your "relationship" need (which is higher when things are stable or you are entering new places) to get your, you guessed it, Money.

I think you need to turn this process on its head. Use your relationships to find your alternative media and new marketing strategies.

This will be especially effective if you have relied on referral and word of mouth. Simply spend some time with your existing clients and learn more about which media they read/view, which associations they are members of, and which marketing messages get through to them. Then you can call the appropriate media and brave the enticements of their sales representatives.

Your other approach is to check with non-competitive peers in other markets similar to yours. You will likely find these colleagues through your industry associations. Note you will also find salespeople with various marketing solutions at association events. They can be helpful, as they at least know your industry, but make your decision through real connections with true peers first.

Undoubtedly, when you enter the new space, you will make mistakes and throw seemingly good money after bad. I certainly advocate ensuring you have solid measuring tools and resources. You need to know how many leads you are acquiring from the new marketing methods, their conversion rate, and the value of business you achieve.

This will allow you to assess your cost per lead and your revenue per lead -- and whether the marketing is profitable. (Undoubtedly, outside of referrals, online marketing and successful media/community relations initiatives -- our specialty -- , you'll find your lead acquisition costs are higher than you've experienced before; the challenge is whether the incremental gain in leads and sales can help you sustain and grow your business.)

P.S. I've raised this question on the remodelcrazy.com forum, which you can follow to see what others think.

Questions for client satisfaction surveys

A reader sent this question yesterday:

Hello Mark. I discovered your name while googling the topic of Client Satisfaction Surveys. I am wondering if you happen to know of any simple 3-5 questions that businesses have asked in person to clients while discussing a current or just completed project? Thank you Mark in advance for any assistance you can provide. Dave

The response here is worthy of deeper research than this brief blog posting indicates. The right answer gets into the (controversial) territory of Fred Reichheld's Net Promoter Score -- and the concept that "satisfaction" is not enough: You want your clients so enthusiastic that they will eagerly recommend your business to their friends, and even complete strangers.

The key question, according to Reichheld, is: "How likely are you to recommend our company to friends of colleagues?"

What about the other questions? Our general business consultant, Bill Caswell, recommends you keep your surveys to no more than three questions, as you will capture 80 per cent of the key information in these responses -- and results are lost in longer surveys, either because people won't complete them, or our minds are lost in the chaos of too many questions.

So, what about the other two questions? I'll leave it to you, but think they should relate to what you think is a key operational sensitivity; something you sense may need improving. Remember, while you are hoping for good news in the survey, what you really want to discover is if things need to be fixed, so if the question(s) are troubling you, they probably are right to ask.

I invite readers here to share their thoughts on this issue, as well.

Working and measuring

This morning, in Vancouver, I'm reworking a story on Metrics for the SMPS Marketer. When I wrote the original story on deadline a few months ago, the people I interviewed said no one had recently completed surveys on how many marketers are actually measuring their results. Marketing consultant Sally Handley in fact said she believes fewer than 10 per cent are measuring their success.

Handley decided to do a survey and discovered that the number is closer to 38 per cent (admittedly through a self-selection process) though it is another story to know how consistently and effectively they are applying their measuring methodologies. These results are reflected as well in a separate survey by Leslie Sluger at Wals Studios in Washington, D.C.

In a phone interview this morning, Handley says most marketers are still measuring the basic and simple things, like the "hit rate" (percentage of proposals that turn into business), though some are getting more sophisticated. She says that marketers who discover the value of the simple measurements, are learning that more sophisticated information enhances their ability to justify marketing budgets because if they can clearly trace results and success from their efforts, they are more than "voodoo" and much less subject to arbitrary budget cutbacks.

So at a Starbucks in Vancouver a few hours before attending the wedding of one of my nieces, I am rebuilding the story, setting the stage as well for a more thorough follow-up piece where I expect to interview several marketers and pull together a comprehensive, strategic approach to solve the metrics challenge.

Networking and measuring

Here's some video from the Design and Construction Network Happy Hour in Arlington, Virginia (Washington D.C. area). Last night, I "replated" the page in the Design and Construction Network Report announcing this event with this video image.

I've previously indicated that effective networking may be difficult to measure. The reason is that if you are successful in networking, you often achieve the highest results indirectly, through sharing, generosity, and relationship-building, and sometimes the results from your efforts can take months, if not years, to mature into meaningful business.

However, following the Design and Construction Network Happy Hour in Washington on Tuesday, I'm able to set up a simple measurement grid, and will (without obviously disclosing individual results without permission) will track the results on this blog, monthly.

First measure: Today or tomorrow at latest: Count business cards collected and initial communications initiated. My camera provided the perfect resource to capture as many cards as possible in a short time period -- after all, I'm the semi-official journalist for the group, and so took many pictures, gathering business cards to organize and sort the captions. I also have something to share right away, their images.

I'll also calculate the costs for the trip: Travel, hotel, and other expenses. These go into my expense report, anyways.

Second measure(s) include responses to initial communication and any favors or things I can do to help people right away. I had a few specific requests from current and previous clients, and will work on these right away.

Next, I will track the evolution of the leads into referrals or business, and once the business is achieved, measure the revenue achieved over time.

More on measuring in the AEC Community

As I concluded work on the SMPS Marketer article, some people in my network added some interesting insights to the story. One person, in an off-the-record email, described how his company's principals believe their marketing success correlates to certain economic indicators, but their "gut" feelings -- which seem to make sense logically -- fail to actually correlate with measurable results. Yet, in the same email, he questioned the validity of many assumptions within the industry because they are often set within a narrow or specific frame of reference.

(I will post the full article when it is published within the next couple of months.)

Scott Mickle gave me permission to "pull" his article: Value vs. Cost: How to Make Your Marketing Profitable which explains in a simple way how to develop a process to measure your marketing effectiveness. You can retrieve it by following this link.

How important is it to measure your progress?

While researching the topic of metrics for The SMPS Marketer article due today, I asked the director of marketing and communications for a highly successful architectural practice in Toronto how her large, international practice, measures its success.

She said:

“We don't keep close stats, it (the hit rate) is very high; we get on every short list we submit.”

“If we measure our success it is in how the business is doing with new projects walking through door, and if we are doing what we want to be doing and love doing.”

I'm not identifying her or her practice publicly because she hasn't yet granted permission, but I believe much of the AEC industry has a similar attitude to formal metrics programs. They just "know" they are doing well, or not, and are happy with things that way.

Is this wrong? Marketers from other industries would shudder at the thought that they would conduct their work and not really know exactly how it is succeeding or failing.

But the marketer from this successful architectural practice has a point. With large scale, repeat, and growing business in some truly amazing markets, they know where they are at. Notably, she says while they win virtually every invitation to win proposals, they lose on the final cut primarily because they won't bend on their fees.

In other words, they only win jobs they know where they can earn a reasonable return for their work and maintain their quality. What good is a high "hit rate" if you are achieving it by undercutting your competition and working for virtually nothing?

On the other hand, I sense some simple metrics would really help this successful practice do even better. Analyzing your presentation to close/commission rate (for new and repeat clients) and the reasoning for the success/failure doesn't take that much research time for historical review (say over the past year or two).

Is the "failure rate" from fee undercutting increasing in some sectors more than others, and is it perhaps threatening the work balance of the practice? then again, maybe this practice really knows its stuff and intuitively can sense the trends. I know this is not scientific. But successful marketing is art as well as science, isn't it? And are successful architects more artists than scientists?

Measuring?

In the midst of a rather overwhelming collection of responsibilities and tasks, I have a story due on Friday for the SMPS Marketer on the challenges of metrics within AEC marketing. The time researching this story (and preparing the bi-weekly newsletter) resulted in my failure, for the first time in more than a year, to post an updating blog entry yesterday.

Nevertheless, the metrics story is proving interesting, because the indications are that virtually no marketing in the field is calculating even the simplest metric -- the "hit rate", that is, the number of successes you achieve in RFP/tender bids, or for that matter. Sally Handley (right) told me that she perceives only 10 per cent of marketers are bothering.

This fact is one level not surprising, but on another is truly disturbing. If virtually no one in the industry is measuring how well they are doing, how well can anyone know the answer to the question: "Are your marketing initiatives effective?"

There are some good reasons for this measurement failure.

Lead times are long. It is hard to capture information for something now that you will only see results 18 months to two years from now. You need to put effort into gathering data without immediate results.

Many marketers neither have the budget nor management support for measuring results.

Some of the most important marketing achievements are truly hard to measure with validity. For example, if you network, does "collecting a business card" count; or is your success developed though the subjective process of relationship development. (I shudder to think of the limited immediate benefit of blogging and writing for The SMPS Marketer, but I know these activities indeed are productive, over time, in hard business, but equally if not more important, new opportunities for growth.)

I've gathered loads more insights from the interviews today and will share them in future blog entries.

Wishful thinking and hard numbers

It is good to dream. Often indeed how we perceive and visualize our future predicts it. The stuff of "positive self talk", affirmation and visualization sometimes seems like hocus-pocus, but it works if you believe.

The challenge is being sure your dreams are not converted to short-term wishful thinking. A classic example is hoping to win the lottery or a big casino jackpot this month. The odds and probability are simply stacked against you.

In your business, an example of wishful thinking is when you think you can achieve immediate results, even though your objective early (factual) indicators suggest this is less than likely. For example, you have a monthly sales target, but your inputs of marketing leads and work in progress, based on historical ratios and experience, is not sufficient. Sure, everything might land up perfectly and you might pull the rabbit out of the hat, but how likely is this miracle to happen?

In marketing, as in all our business endeavours, we need to keep our dreams alive but remember the hard numbers count the most in the immediate and near future. Is your ratio between marketing cost and sales realistic and on target? Is your "leads pipeline" indicating sufficient volume to tell you that, down the road (using your normal conversion rates), that you will have enough sales going forward? Are your lead conversion numbers and ratios accurate? Things change. You should periodically review your norms.

Finally, if you have staff and they are giving you updates and reports, are you satisfied you are receiving real information about what they are likely to achieve, or are they transmitting to you their wishful thinking? You need to develop and maintain fast-acting measuring systems to ensure the information you receive is timely and can accurately predict your short-term business results. And when you see something isn't right, you need to take quick action to bring things back in line with reality.

Keep track of your hard numbers, avoiding wishful thinking, and then you can go back to dreaming big dreams, and visualizing your grand visions. If you are firmly grounded in the real world, your big picture dreams can indeed come true. Otherwise, you have a better hope of meaningful accomplishment at the lottery terminal.

How clients think

My 'light' reading on vacation is How Customers Think by Gerald Zaltman. This is not the sort of book you usually associate with reading on a beachfront on a quiet vacation day, but I actually enjoy learning stuff about marketing, so what better time to do some reading than while on a break.

The key point of the book is that marketers spend far too much time measuring and asking for solutions to the wrong questions. Focus groups, especially, are usually a waste of time and money if you want real insights, and while surveys have a place in the system for measuring some key discrete things, they don't really give you insights into the story behind the story of how your clients are thinking. This is because the measuring initiatives are framed from the reference of the marketer, not the consumer, and the consumer's perception can vary depending on many things, including the marketer's initiatives.

A key concept here is that the perceptions of your brand are framed by the client's cultural and life perspectives, and the actual experience they've had -- but their memories of what actually happened can vary depending on a variety of stimulus. For example, say someone was really quite pleased with your service, but just before taking the survey, someone describes an awful experience with your business. Their memory will actually shift, and 'go negative' even though nothing different happened in their objective circumstances.

The book is written more for branding of consumer rather than business-to-business services, and many of the examples are from large corporations with appropriately large marketing budgets. I think we'll all do quite well in remembering that your brand in part is defined by experiences and events somewhat outside your control, but your biggest achievement will be to create the strongest possible positive experience for as many of your clients as possible.

The challenges of measuring

How do you really measure marketing success? Cost per lead? Client satisfaction? What Key Performance Indicators work for you? I'm still looking for the answers here.

Yesterday, as I reviewed some draft writing on measuring performance and metrics, I had a sinking feeling: Have you ever run into situations where you preach not what you practice?

Here, in advocating concepts like "Key Performance Indicators" and the use of the Net Promoter Score to measure client relationships, I realized we have never bothered with these potentially important concepts and approaches to assessing business performance. I've reported earlier how client surveys are sometimes gamed, providing distorted and meaningless results.

But where are our real measures of success, and how can we implement a proper measurement program?

Like most businesses, of course, we have some regular reports -- receivables (volume, delay to payment and so on), bank balances, debt levels, and our balance sheets and income statements. These are shared freely with all employees -- no secrets here. But the raw financial data, while useful, doesn't capture any one's imagination (including mine).

How can we solve this problem? Here I am turning a problem (okay, a challenge) into a marketing and relationship-building opportunity. Yesterday, I asked my network for their own insights, and proposed an article on metrics and marketing/business performance measurement to Randy Pollock, editor of the SMPS Marketer. He responded by asking me to write a series on the topic. (Well, I can think of few better ways to solve a problem than to use my abilities/strengths to research some answers.)

On a more immediate level, I asked my sales team to compile a list of their leads, their quality, and their total expenses for the recent Construct Canada show. Hard to believe, but we've never actually measured the cost per lead and actual revenue generated from participation at previous shows. Time to change our ways, I think.

The E-Quip Blog (Mel Lester)

Consultant Mel Lester has started E-Quip Blog: Practice Management Insights for Managers of A/E Firms, which obviously qualifies for a permalink. He's started his blog by including entries from previous issues of his newsletter, with recent topics including Hiring the Right Rainmaker (a relevant topic for me, since I am assigned to write on that topic for the fall issue of The SMPS Marketer), You Are What You Measure, and Uncomfortable With Sales -- You Should Be.

In his first blog posting, Lester writes:

The E-Quip blog, I think, fills a gap in the blogosphere. I'm not aware of another blog devoted to practice management insights for managers of technical consulting and design firms (if you know of one, let me know). Your feedback on how to better address that need is coveted. Thanks for tuning in. I hope you continue to come back to this space and join the dialogue.

Here is a link to Lester's website: The Business Edge -- from Ideas to Implementation.

Key Performance Indicators -- unintended consequences

It took some searching (because link backs aren't obvious from the blog), but I traced Jerry's Blog to Jerry Tice (see his linkedin.com page) and The Appalachian Group of Companies.

Ford Harding graciously sent me a link to this posting "Is accountability a performance management issue: Unintended Consequences" in Jerry's Blog -- Striving for Organizational Excellence. The writer addresses the problem that setting measurable targets can distort business practices and result in dangerous excesses; sometimes serious ethical breaches, or possibly seeking short term gain at the expense of long-term viability.

As everyone in business knows – if you don’t measure it, you can’t manage it. But what happens if you are measuring the wrong thing? Well obviously it can drive the wrong result. Worse still is that it may drive exactly the result you hoped it would, but it drives it way too far or drives other undesirable results along with it that are not seen until something hits the fan. In nearly every one of our consulting engagements we work with our clients to set up a set of metrics that can be measured directly on the floor in very short intervals, typically 1 to 2 hours. We do this to enable front line managers to drive barriers to performance to the surface so that they can be resolved on the fly instead of building up to unrecoverable levels. Often, probably more times than not, we discover after a few days that the measure that the client told us was the one to watch turns out to be the wrong metric. Either its focus is too narrow and other important metrics suffered (the old production vs. quality dilemma for example) or the focus of the metric is way too broad and we never achieve the intended result. I see the same thing on the verge of happening on a grand scale with a trend that is developing in the talent and performance management fields.

Ford Harding, in comment, writes:

Jerry
This is a serious issue for professional firms pushing for growth. As the incentives to sell go up, so must the controls to avoid both selling something the firm shouldn’t and providing advice to a client more geared at selling more work than looking after the client’s best interests. Note that in Andersen’s case the partner in charge of the Enron account successfully challenged the firm’s controls.

Firm management may exhort its partners to sell, sell, sell, but it seldom balances that message with a reminder of the need to use good judgement, behave ethically and abide by controls while doing so. They take it for granted that the partners remember and care about such things. Unfortunately, not all partners do.

Good post,
Ford Harding

Jerry's initial solution -- that is to make sure the measurement cycle is short and fast enough to quickly determine if something wrong is happening, is a good approach, of course, for production-line or fast acting situations, but our business (I think) operates on a longer cycle and in any case, our staff are highly decentralized, often working from home offices with much autonomy. So how do you determine an appropriate fast acting and quickly repaired measurement cycle?

However, I shudder to fear when we get down to setting out our KPIs that we mess this up -- and fall into the traps described here. This is a problem that needs attention; but I am (alas) still at a loss for a good solution. Hopefully, our short term internal KPI (something I don't think should rightfully be broadcast outside our organization) is valid, and we can review/implement it without damage pending our full-scale planning meeting in the fall.

The tyranny (and essential need) of measuring

Scarlett Surveys International offers Employee Engagement Surveys. These could be useful -- but so could your own direct communications and connections with your employees.

Client surveys, employee evaluations, web statistics . . . and more are certainly essential these days in business and marketing. Of course your ultimate success is measured by bottom-line results: The "books" and accounting data showing profit, cash flow, revenue per employee and the like. But much more measuring is now an essential part of the picture in any marketing program -- ranging from client satisfaction to the "will your clients recommend you" advocated by Fred Reichheld. The measuring process is aided by new, easy-to-use web based survey tools, which allow you to capture quick results at virtually no cost.

But all of this measuring may have a significant cost -- you may find the measuring exercise distorts your values; confuses your perspectives, and causes you to lose touch with your clients and employees. When everything is turned into numbers, the subjective and subtle hints can be lost and (worse yet) you can get some really strange and unhealthy behaviour as people game the system and act in artificial manners to beat the measuring tools.

Having said this, I am at a loss to offer a better option.

You see, the seat-of-your-pants approach to business, the gut feel and instinct methodology, can work on a small scale, but is hard to replicate going forward, and if you have achieved exceptional success -- or know someone or some organization which has -- through purely intuitive and instinctive approaches -- you may be leaving much money and business on the table by not finding some way to measure and determine the sources of this success.

So what should you do?

• Measure stuff, by all means, but keep it reasonable. If you have a 15 question survey, boil it down to three questions; and ask only the people who really need to know to answer it.


• Make sure that everything you measure has lots of opportunities for comment and subjective communication -- you want to encourage people to speak their minds, to be open, and to share thoughts. Read the comments as much as the survey data.


• Share your results. Be open, but respect privacy. (We for example use an online sales test for all sales job applicants who pass the initial screenings. The person who applies always sees the results -- the only others who see them are me and employees directly involved in the selection process.)
  
• Most importantly, don't get so trapped in the measuring game that you get things like I experienced when purchasing a car. The sales rep said: "Please take the survey call and respond, because I get a bonus for every good result.". Sorry. Measuring should not define the business -- or the client relationships.

Measuring loyalty -- losing touch!

The credit card industry pioneered in client loyalty research. So why is it trapped in the 'space' of call centre rote, rate playing games. Maybe it is too much into measuring results.

Here's an interesting paradox. The credit card industry, it seems, led the way in measuring customer loyalty. Yet the industry -- despite all its research into business principals and practices to attract and retain qualified clients -- is trapped in the 'rate game' spiral, as it struggles to attract and retain high quality clients. Why?

Well, Charles Green in his Trusted Advisor blog quotes Fred Reichheld’s book "The Loyalty Effect" from 1991:

We found we could not progress beyond a superficial treatment of customer loyalty without delving into employee loyalty. We found there was a cause and effect relationship between the two; that it was impossible to maintain a loyal customer base without a base of loyal employees; and that the best employees prefer to work for companies that deliver the kind of superior value that builds customer loyalty. We then found that our concern with employee loyalty entangled us in the thorny issue of investor loyalty, because it is very hard to earn the loyalty of employees if the owners of the business are short-sighted and unreliable. Finally, predictably, we found that investor loyalty was heavily dependent on customer and employee loyalty, and we understood that we were dealing not with tactical issues but with a strategic system.

Fair enough, these ideals remain valid; the problem is in the measuring, Green suggests.

Very simply, the case of “loyalty” is Exhibit One in a lemming-like rush by business to over-stress three simple concepts:
1. Profit is a measure of business activity effectiveness
2. Measurement is a valuable tool for management
3. Activities can be disaggregated into smaller, measurable activities.
Those reasonable beliefs have metastasized into these distorted versions:
1a. Every business activity has value only insofar as it increases profit
2a. If you can’t measure something, you can’t manage it3a. Anything worth measuring is even better measured in shorter durations and smaller units. This extreme thinking has meant that the management of business these days
is centered on short-term profit manipulation—not on long-term value creation.

So legitimate and practical ideals are lost in the rush to measure them. And businesses, and their employees, start distorting their behaviours in an effort to achieve short term measurable results -- and then the whole business value proposition gets trapped again in short term thinking.