A lot of the discussion about building a more customer focused organization centers on the customer facing parts of a business. While there is no doubt major improvements can be driven by sales, marketing and customer service, the real turbo boost to organizational performance comes from support functions that creates a culture around their internal customers.
“If your not serving customers make sure you are serving someone that does”
Corporate Support functions like Finance, IT and Operations have the potential for releasing huge gains to the business in terms of cost savings and profit improvement. How? By developing a culture where they see their internal stakeholders – that is those to whom they provide their services – as customers.
When they develop a “customer” mindset they think about the value (or lack of) they are providing. They stop delivering reports or services that have no value to their customers and focus on things that will increase value.
John Stanhope, CFO of Telstra, a $25 billion Australian telecommunications business set out to transform his Finance & Administration Group of 2500 people into a support group that would create new value, provide top service and be seen to be valuable by its customers. He painted a vision of what he called a “Value Service Culture” (known as VSC) in which he wanted all his staff to identify their internal (to Telstra) customers and deliver services of value to them. This journey from 2008 to 2012 was an outstanding success.
“We have delivered $15 million per annum in recurring gains from stopping non-value services and activities while creating more value in those services that were needed by our customers. This translates to an additional $55 million added to the value of our business.” – John Stanhope, CFO, Telstra Corporation, 2012.
An investigation by Telstra’s Finance & Administration group of estimated gains and savings conducted in 2010 showed annualized gains and cost savings of $15 million for 2009 representing added value to the business of $55 million.
These gains were derived from analysis of specific initiatives by:
a) Credit Management acting to collaborate with Telstra customers to reduce bad debts, cost savings from less follow-up calls and longer customer retention periods.
b) Risk Management & Assurance collaborating with internal customers through an education initiative clarifying compliance requirements and streamlined processes for reducing work for both parties. Cost savings from labor savings.
c) Corporate Security and Investigations working with Telstra retail shops to provide better processes, follow-up and liaison with those shops most targeted by consumer fraud. Reduction of fraud yielded large cost savings.
d) All finance and administration groups engaged in activities to reduce duplication and eliminate non value-add activities and reports resulting in measurable savings.
Care was taken to attribute only those gains and savings that could be aligned with VSC initiatives to do with understanding customer needs, providing greater value for customers, monitoring customer feedback and collaborating with customers to deliver the Group’s fiduciary responsibilities more efficiently. Later analysis showed these gains were continued over 2010 to 2012.
Stay tuned for my next blog post in which I will summarize the actions vital to Telstra’s VSC success and the lessons learned from this transformation experience.