Human Capital and the Customer Experience

What is the desired customer experience? Many who try to answer this question focus on customer expectations and the importance of meeting them. The idea here is that customers have expectations about both the goods and services they purchase and the purchasing process. Meeting or exceeding those expectations is regarded as the key to customer spending and loyalty. The U.S. auto industry has had a long and often losing struggle with customer expectations. People have product expectations of reliability, comfort, a price that represents good value, and so forth. They also have expectations about the car-buying process. Even when their product expectations are satisfied, many, if not most, buyers view their visits to auto dealers as a mild form of torture. How many car buyers enter the showroom fearing sales pressure, haggling, hard-to-understand pricing of optional equipment packages, and long waits at the credit officer’s desk? Automobile dealers have attempted to overcome many of those fears and meet customers’ expectations through courtesy, no-haggle pricing, clear information displays about optional equipment, and so on.

How are expectations formed? Frankly, they are shaped by all manner of influences, from prior experience, to word-of-mouth accounts from others, to written reviews in sources such as Consumer Reports, to the physical appearance of a Web site or storefront. Some expectation-shaping cues are controllable by the selling organization, such as the physical appearance of the place of business. More generally, the selling organization tries to control expectations through its brand promise. A brand promise might be as simple as “one-stop shopping” or “be secure with us” or may be a more complex mix of implicit and explicit commitments. Either way, the idea of a brand promise is to offer an attractive proposition that creates expectations that the organization is able to meet and, ideally, exceed.

Meeting Expectations through Human Capital: The Continental Experience

Continental Airlines offers a fine example of a business that created a new brand promise and then aligned its human capital practices in support of that promise.^[7] Just over a decade ago Continental was almost bankrupt after its unsuccessful attempt to serve price-sensitive leisure travelers. It also was performing poorly, landing at the bottom of industry rankings for on-time performance and customer complaints.

The company decided to change course and go after higher-margin business travelers who are more sensitive to service than are leisure travelers. A new brand promise was crafted from what Continental had learned from customers, employees, and travel agents. That promise was accompanied by many changes that were immediately visible to customers. The company got a new logo. Its aircraft got a new look both inside and out. New uniforms were issued.

More important, the company made extensive changes in its human capital practices to support the new business strategy. One marker of those changes was the public burning of the company’s 800-page workplace policy manual and its replacement with a slimmed-down version of 80 pages. That was a clear sign that energy-sapping top-down control was out and that employees were being empowered to better serve customers, especially those in special circumstances.

The workforce also changed. Its high rate of turnover gave the company the opportunity to “repopulate” itself with people who bought into the new brand promise and the importance of fulfilling it. Internal communication practices were revved up and reoriented to get all employees to focus on the new brand promise. Cash bonuses were paid for each month in which the airline achieved its goal of being in the top three in the industry for on-time performance.

Continental’s change initiative was successful and, importantly, sustainable. Although the entire airline industry has suffered financially, Continental has maintained high levels of customer performance and has not endured the unkind fate that several of its competitors encountered in the tough economic times after the year 2000.

What accounts for Continental’s success? In an industry dominated by tangible assets, its leaders recognized the importance of managing their valued intangibles: brand and human capital. Although the new brand promise was not exactly original, Continental’s strategy for delivering on that promise was uniquely its own. The company’s enduring success testifies to the value of aligning human capital strategy with business strategy from the start.

Moments of Truth

Just as there is great variety in goods and services, there is great variety in customers’ experiences when purchasing them. Attempts have been made in the service sector to identify the universal dimensions of the experiences that drive customers’ evaluations of service quality. Most notable in this regard is the work of A. Parasuraman, V. A. Zeithaml, and L. L. Berry.^[8] Their dimensions are as follows:

• Dependability: whether the service provider delivered what was promised. This is perhaps the dimension most closely aligned to the concept of fulfilling a brand promise.

• Responsiveness: timeliness.

• Authority: Was confidence inspired in the consumer that the provider was capable?

• Empathy: the extent to which the service provider could see things from the customer’s perspective.

• Tangible evidence: indications that the service was actually performed (e.g., a replacement part left wrapped on the floor of the car after the car was serviced).

Note how prominently employees figure in these dimensions of experience. Empathy and authority are distinctly human qualities. Dependability and responsiveness can be qualities characteristic of machines providing services such as ATMs, but those qualities also can be the direct result of employee interaction with customers. Whether these are truly universal dimensions of customer experience is an open question. If they are or are close to being universals, the role of the service provider’s human capital in influencing the service experience is clear.

Whether one embraces the idea that customer experience is driven by a few universal considerations or the idea that it is driven by the fulfillment of expectations that are particular to each brand or service, there is growing recognition that a few decisive moments determine customers’ experiences. These are “moments of truth.” Consider cable television service. Many possible moments of truth are experienced by the customers of a cable service provider, including the first phone to call to initiate the service, the work of the installer, the accuracy and timeliness of the monthly statements, service interruptions and outages, the quality of the programming, and the range of services offered. None of these “moments” determines the overall customer experience. The task for management is to identify the key moment and then orient human capital practices to its successful completion.

^[7]This account is adapted from Carla Heaton and Rick Guzzo, “Making Every Employee a Brand Manager,” Mercer Management Journal, 2000, 12: 61–78.

^[8]A. Parasuraman, V. A. Zeithaml, and L. L. Berry, “SERVQUAL: A Multiple Item Scale for Measuring Customer Perceptions of Service Quality,” Journal of Retailing, Spring 1988, 64: 12–40.