“My boss hits me over the head each time he thinks I’m spending too much time on the phone dealing with a customer’s issue.” Ouch! That was the way a caller put it while I was doing a radio interview sometime ago. I was being interviewed to describe my espoused principles and practices on service to the customer, and while I was touched by the man’s distress, I’m afraid to say, I had seen this movie before. Clearly, the caller, a seasoned service worker of many years, couldn’t see eye-to-eye with his boss on a metric for gauging the effectiveness of a response to a customer’s trouble call. Insofar as I could gather, the service worker was motivated to answer all of a customer’s questions before ending a call. The boss might have had the same motivation except that it seemed to have been filtered by some unspecified productivity or financial consideration – how much time was too much time on the phone? – which had not been communicated to or embraced by the service worker.
In behavioral economics, this is a classic principal-agent problem. In our context, the boss – the principal – and the service worker – the agent – had failed to align their goals and expectations of service performance to the customer. The crux of the principal-agent problem is a failure of the principal to explicitly stipulate incentives – tangible as well as intangible – that channel the agent’s efforts and with which the agent is in full accord. Left unresolved, misaligned goals lead to conflicts of interest where each party behaves in its own self-interest. The upshot of this behavior, if not stemmed, can become internally dysfunctional to the organization, and easily telegraphed to the marketplace. Customers are very adept at discerning ambiguous service commitments and when they do, they do the only logical thing in their power: they vote with their feet. It comes as no surprise, then, that nearly two-thirds of all consumers change suppliers for reasons having to do with poor service.
BALANCING PRINCIPAL-AGENT GOALS
My suggestion to the caller was to sit down with his boss and see if they couldn’t agree on a standard of performance. In effect, I was suggesting that principal and agent codify or “contract” the measure(s) of service to the customer that they both could agree on. Concrete measures of performance are indispensable: they allow the principal to monitor the effectiveness of the agent’s work and, just as importantly, it allows the agent to self-police his own efforts. This is crucial if the goals and expectations of the players involved are to be harmonized.
Equally crucial, the boss needs to see that the benefit of having a satisfied customer at the end of a call far outweighs the cost of the agent’s labors – the so-called agency costs. Browbeating or otherwise punishing the agent has the potential to increase the principal’s agency cost if he is left with no alternative but to remove the “offending” worker. Conversely, the benefit of terminating a call before a customer has had all of his questions answered pales in comparison to the potential damage that a dissatisfied customer can have on the business. In effect, a service interaction is complete only when the customer says it is and not before. And, certainly not after some arbitrary number of ticks on the clock have expired.
Fundamentally, principals must recognize the wisdom of devolving power to the front line service worker: the agent most entrusted with delivering service to the customer. Further, the principal needs to be egoless about this reality and about the fact that the service worker knows far more about his subject matter – customer service issues – than he does. A less than confident and trustful principal will fail in his relationship with the agent no matter how extensive the “contractual” obligations agreed to by the parties. Similarly, a less than fully competent service worker will likely fail in his ability to hold up his end of the bargain and find himself subject to remedial actions by the principal.
A COMPLICATING TWIST
Complicating the principal-agent problem in customer service is that customer expectations are fluid. They constitute an ever-changing standard of performance rendering customer satisfaction totally ephemeral. For that reason alone, it is imperative to constantly and continuously reach out to the customer and gauge his evaluation of the level of service he is receiving. It goes without saying, for example, that a customer can have all of his questions answered by the service worker on the phone and still walk away a dissatisfied customer.
Principal-agent problems cannot be left unresolved. They can only fester and do nothing but damage even the most apparently solid customer relationships. Striking a principal-agent agreement mutually acceptable to both service worker and boss is essential to delivering the best customer service the organization can possibly muster. But, recognizing that excellence in service pivots on harmonizing principal-agent dynamics is the most important first step.