Newsletter: August 2010

PEOPLE–CENTRIC LEADERSHIP: Achieve Greater Results through a People–Centered Approach

Does a leader need to be the smartest person in the company to result in growth and customer satisfaction? No. In fact, an impediment to growth we often see is that some leaders just can't get over "themselves", and the chance that their company will emerge from this recession stronger and more competitive is diminished. Yet unfortunately when it's suggested, it's often met with one of the following responses: confusion (i.e. you talking to me?), dismissive (i.e. you have no idea what you're talking about), shock (i.e. how dare you talk to me that way), anger (i.e. you're fired). After all, they are the smartest person in the company; they know the problems, they know what needs to be done, and they will do it...

We have a secret to share – no one is that smart, no one can do it all well alone, and talented employees want to – well – contribute and show their talent. And the greatest tragedy in this delusional thinking is that great employees will leave, the remaining employees just do what they are told, and the replacement employees are less talented. And whom does this adversely affect outside of the leader and your employees? Your customer. Who benefits? Your competition. Now, how's that work for you?

It is essential for leaders to understand that customer service is the lifeblood of their business. (Yes we are aware that cash is king and without positive cash flow the business ceases to exist. Without satisfied customers, however there is no cash. And without satisfied and engaged employees there are no customers.) So let's consider a model to help.

James L Heskett with four co–authors in 1994 wrote an article that was recently re–printed in the Harvard Business Review (July – August 2008) titled: Putting the Service–Profit Chain to Work. The premise is simple:

Highly satisfied customers drive growth and profitability
Equipping employees with the skills and power to serve the customer results in:
- Increased employee satisfaction
- Increased employee loyalty and productivity
- Increased service to the customer
- Increased customer satisfaction and loyalty
- Revenue

According to the American Customer Satisfaction Index, good examples of companies with high customer satisfaction are Nordstrom, Jones Apparel, Publix, Apple, Netflix, Barnes & Noble. Are they perfect? Of course not. Are they serious competitors? Absolutely.

We see this as an employee driven profit model – and it's "people centric", which to us, is the heart of your business. And leaders can better engage their employees and in improving customer satisfaction through using the concepts presented in the service–profit chain model.

We love this model because service–profit chain (Harvard Business Review July–August 2008) reinforces a critical contributor to customer satisfaction – satisfied employees. Briefly, the service–profit chain posits:

Internal service quality is a key driver for the company
- Preparing for internal service quality improvement involves:
  - Workplace redesign
  - Job redesign
  - Employee selection and development
  - Employee rewards and recognition
  - Tools for serving customers
Internal service quality leads to employee satisfaction
- Which in results in:
  - Employee retention
  - Employee productivity
Employee satisfaction leads to increased customer satisfaction
- Because the service was designed and delivered to meet customer needs (based on the learning empowered capacity of the direct provider)
Customer satisfaction leads to customer loyalty
- Which results in:
  - Retention
  - Repeat business
  - Referrals
And, customer loyalty leads to revenue growth and profitability

So, if leaders start by thinking about their customer and how to provide value, they'll realize that it's their employees that are the golden egg; those who have the front line contact with their customer. Then the conclusion is inescapable: prepare and support your employees to provide outstanding service and your customers too, will reward your efforts.

Healthcare Corner – News and Issues

Affordable Care Legislation – Virginia Lawsuit

The State of Virginia filed a lawsuit challenging the constitutionality of the requirement that individuals must buy health insurance and be penalized if they don't (mandatory insurance issue). As of this writing the trial will begin on October 18, 2010. In addition to Virginia, twenty–one states are suing to overturn this requirement.

It is uncertain at this time what will happen. It's been reported that some states may delay creating insurance exchanges and other preparations until the issue is resolved – possibly by the Supreme Court. If the mandatory insurance provision is deemed unconstitutional, the entire law could collapse. Unlike many bills where if one component of the bill is struck down the other components remain enforceable, this legislation does not have that provision because the architects of the bill felt that mandatory insurance was a key component of the bill.

In the meantime, advice is being liberally dolled out on how businesses should respond to the 1099 requirement (reported in our July 2010 Newsletter), and other small business requirements in the law.

Our advice is to learn as much as possible about what can or cannot happen as a result of this legislation. Talk with your accountant, attorney, trade association, and local chambers of commerce. You will read that it is the best legislation passed in the last 40 years, and you will also read that it will result in financial crisis for some companies. The truth as always, lies somewhere in the middle. We will continue to share our perspective with you.

Healthcare Trends: Future Care Models and Your Business

The healthcare system is not sustainable using the in–hospital care model. As the population ages, as chronic disease becomes more prevalent (with the aging population) and the healthcare workforce ages, the current model cannot succeed. It will be far too costly and it will also not be the best way to provide care to the changing patient population (from acute care to chronic care).

This will also create new business opportunities. Out–of–hospital care will become more prevalent in the new care model. This will include home care, outpatient care, day care, respite care, assisted–living, long–term care and other care models yet to be defined. One area that promises to become critically important to the success of out–of–hospital care is technology: Technology to improve communications and reduce labor intensity are two examples.

GE and Intel just formed a 50/50 healthcare joint venture to continue collaborating in home healthcare. They have been "working on technologies to help elderly patients and those with chronic disease. A key focus has been managing medical conditions from home, reducing the need for costly stays in hospitals and assisted–living facilities." We encourage you to think about ways your business can learn more and provide products or services to this changing industry.

KLC News

Announcements

Watch for our website revamp next month, including innovative instruction elements like our Biz $ense TV—media to grow the business mind and our regular Book Reviews!
We are providing an Influence Workshop in Providence, RI October 6
We are presenters at the ERE Expo October 26 in Hollywood, Florida. Join us at an incomparable conference for Recruiting, Talent management and Process improvement! http://events.linkedin.com/ERE-Expo-2010-Fall/pub/364417

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