CREATING A CUSTOMER CENTRIC ORGANIZATION
CHANGING CULTURE AT COMPANY X
MARLEEN LISETTE KOOISTRA
Student number: 1517775
University of Groningen
Faculty of Management and Organization
MscBA Change Management
5
thof May 2007
Kamille 30
8252 CA Dronten
Tel.: 06-10608333
E-mail: M.L.Kooistra@student.rug.nl
First Master thesis supervisor:
Dr. C. Reezigt
Second Master thesis supervisor:
Dr. B.J.M. Emans
Company supervisor:
S. Ritter
CRM Process Manager
ABSTRACT
Changes in the environment caused Company X to become more customer focused and to develop valuable relationships with its customers. In order to create a customer centric organization it is essential to change the organizational culture. The research goal is “Provide Company X with an advice in which is
described in what way the approach to cultural change for the creation of a customer centric organization can be improved”. Cultural change is too broad to be covered totally in this research;
TABLE OF CONTENT
CHAPTER 1: INTRODUCTION ... 5
CHAPTER 2: THEORY ... 7
2.1 Customer relationship management ... 7
2.2 Service-oriented culture... 8
2.3 Cultural change... 9
2.4 Cultural change in relation to CRM... 10
2.4.1 Communication ... 10
2.4.2 Leadership... 11
2.4.3 Employee participation ... 12
2.4.4 Training... 12
2.4.5 Incentives... 13
2.4.6 Selection of new employees ... 13
2.5 Conceptual scheme and research questions ... 14
CHAPTER 3: METHODOLOGY ... 16
3.1 Qualitative research ... 16
3.2 Interviews ... 16
3.3 Organizations... 17
3.4 Analysis ... 17
CHAPTER 4: COMPANY X’S APPROACH TOWARDS A CUSTOMER CENTRIC ORGANIZATION ... 19
4.1 Customer relationship management at Company X ... 19
4.2 Current and desired situation ... 20
4.3 Cultural change... 21 4.3.1 Communication ... 21 4.3.2 Leadership... 22 4.3.3 Participation... 23 4.3.4 Training... 24 4.3.5 Incentives... 25
4.3.6 Selection of new employees ... 25
CHAPTER 5: ANALYSIS ... 26 5.1 Communication ... 28 5.2 Leadership ... 29 5.3 Participation... 30 5.4 Training ... 31 5.5 Incentives... 31
5.6 Selection of new employees ... 32
CHAPTER 6: CONCLUSION AND RECOMMENDATIONS ... 34
6.1 In what way can communication at Company X contribute to the cultural change?... 34
6.2 What role do managers have in the creation of a customer centric organization at Company X? ... 34
6.3 How can participation and involvement of employees from Company X help changing the culture? ... 35
6.4 How should training programs be organized to assist the cultural change of Company X? ... 35
6.5 In what way can incentives help to change the organizational culture of Company X? ... 35
6.6 How should the selection procedure for new employees of Company X be set up to support the cultural change?... 35
CHAPTER 7: DISCUSSION... 37
7.1 Leadership in relation to (cultural) change ... 37
7.2 Limitations... 40
7.3 Directions for further research... 40
REFERENCES ... 41
LIST OF FIGURES FIGURE 1: Conceptual scheme... 14
FIGURE 2: Comparison respondents and Company X ... 27
LIST OF TABLES TABLE 1: Order of rank interview topics respondents ... 26
TABLE 2: Descriptive Statistics Respondents ... 26
CHAPTER 1: INTRODUCTION
Deregulation in the European airline industry and unfavorable economic conditions caused declining yields and increased competitive pressures in the European airline industry. Company X executed a comprehensive cost cutting program in response to these problems. Cost reduction alone would not guarantee its profitability. Company X’s strategic orientation has to be geared towards differentiating itself from its competition by forging a more direct relationship with its customers (Documentation Company X).
The standard product and operational offerings in the airline industry are generic. Only by satisfying the valued customers and focusing on these customers Company X can achieve the competitive edge they need. Customer relationship management (CRM) is a strategy that allows companies to become more profitable by becoming more customer focused. This customer focus allows companies to innovate and create and therefore drive preferred customer loyalty (Business plan Company X).
However, Company X was operation driven rather than customer oriented. Company X suffered from far too limited possibilities for personalized servicing and from too many inconsistencies in service delivery. A new customer relationship management department was created. The overall objective of this initiative was to make Company X a truly customer centric organization and in this way turn around the negative trend of declining yields (Documentation Company X).
In 2002, Company X adopted the new approach in developing solid relationships with its customers. Such relationships are vital, because satisfied customers are more likely to return. CRM focuses on customer recognition and awareness of their needs, among other things. This ensures that customers are approached in a more personal manner. An airline that knows its customers can tailor its products for specific target groups. This helps to cut costs and raise profits. Company X developed its CRM capabilities swiftly and professionally. More and more employees who are in direct contact with customers apply CRM principles and make use of CRM instruments (Website Company X).
CHAPTER 2: THEORY
The different aspects included in the research goal will be clarified in this chapter. Academic journals, management books and internal documents of Company X have been sought to find relevant and useful data. The characteristics of CRM, a description of a service-oriented culture, different approaches to cultural change, and cultural change in relation to CRM will be explored to get a clear view of the research field.
2.1 Customer relationship management
Verhoef and Langerak (2002) define CRM as a managerial process that focuses on the development and maintenance of relationships with individual customers in such a way that value is created for both the customer and the firm using customer databases, statistical decision-support tools and interactive communication techniques. It is based on customer orientation, relationship marketing and database marketing. Binggelt, Gupta and de Pommes (2002) see CRM as a strategy which enables the company to become more profitable by becoming customer focused, while maintaining it’s operational and product excellence. CRM is the process of building and maintaining mutually beneficial long-term relationships with high value customers, in order to realize sustainable profitability. CRM programs are used in a wide variety of industries to identify and retain valuable customers, to encourage unpredictable ones to spend more, and to cut the cost of servicing those who are less valuable.
Achieving the long-term value of CRM requires a strategy involving the entire organization and should be approached at an enterprise level. The point of CRM is to achieve a balance between value to shareholders or stakeholders and value to customers for mutually beneficial relationships (Radcliffe, 2001). CRM starts with an acknowledgement throughout the organization that creating value for customers is the driving organization philosophy. This requires real commitment from top management. It also requires an organization structured around customers with a customer-oriented culture in which different departments and employees jointly focus on creating superior value for customers (Verhoef & Langerak, 2002).
2.2 Service-oriented culture
Grönroos (2000) describes that, if the culture in a firm which has decided to give priority to the management of customer relationships does not honor services and a constant attention to giving good service to the other party, it will be difficult to implement the relationship-oriented strategy. The non-service culture will keep employees from realizing the importance of all the “hidden non-services”, and even the more visible service elements will not be given enough attention. The values which dominate in the firm will direct people’s attention elsewhere. Therefore, managing customer relationships, and relationships with other parties, requires a service-oriented culture.
Implementing a service strategy requires the support of all employees in the organization, Grönroos (2000) advises. Top management, middle management, customer contact employees and support employees will all have to be involved. An interest in service and an appreciation of good service among managers and all other employees is an essential requirement. What is needed is a corporate culture that can be labeled as a service culture. Such a culture can be described as a culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers is considered by everyone a natural way of life and one of the most important values.
Instilling a service culture in an organization does not mean that other values have to lose their importance altogether. Attention to internal efficiency and cost control is still important, as well as appreciation of sales and getting new customers. However, the service-oriented values should have a dominating position in the organization. A service culture means that the employees of an organization can be characterized as being service-oriented. Service orientation can be described as shared values and attitudes that influences people in an organization so that interactions between them internally and interactions with customers and representatives of other parties are perceived favorably. Internally, a service orientation can be expected to enhance their internal climate and improve the quality of internal services and support. Externally, a service orientation should create good perceived quality for customers and others as well as lead to strengthened relationships with customers and other parties (Grönroos, 2000).
2.3 Cultural change
Burnes (2004) defines culture as the unique configuration of norms, values, beliefs, ways of behaving and so on, that characterize the manner in which groups and individuals combine to get things done. A culture legitimizes certain forms of action and proscribes other forms.
There is general agreement that there is a need to assess the current culture, have some idea of what the aimed-for culture looks like, and work out the ‘what’ and ‘how’ of moving the organization, or section of it, away from its current culture to what is perceived to be a more desirable one (Senior & Flemming, 2006).
According to Senior and Fleming (2006) culture can be ignored, can be managed around, can be adjusted to fit the strategy and the strategy can be changed to fit the culture. Changing the culture to fit the desired strategic change can be an extremely difficult and lengthy process. Burnes (2004) states that, given that an organization’s environment can change rapidly, as can its structure, situations will arise where an organization’s culture may be out of step with changes that are taking place in the environment, structure and practices of the organization
The common belief, according to Beer, Eisenstat and Spector (1990), is that the place to begin with cultural change is with the knowledge and attitudes of individuals. Changes in attitudes, the theory entails, lead to changes in individual behavior. And changes in individual behavior, repeated by many people, will result in organizational change. According to this model, change is like a conversion experience. Once people “get religion”, changes in their behavior will surely follow. Beer et al. (1990) do not agree with that common belief, they think this theory gets the change process exactly backwards. Individual behavior is powerfully shaped by the organizational roles that people play. The most effective way to change behavior, therefore, is to put people into a new organizational context, which imposes new roles, responsibilities, and relationships on them. This creates a situation that, in a sense, “forces” new attitudes and behavior on people. Senior and Fleming (2006) support that view. Changing the organizational context first, will result in changed behavior and associated attitudes. This view of change rests on the assumption that changing organizational structures, systems and role relationships, which comprise, in the main, the formal aspects of organizational life, will bring about desired cultural changes incorporating organizational members’ attitudes and beliefs. Many models of planned change subscribe to this view.
2.4 Cultural change in relation to CRM
The service-oriented culture described in the last paragraph fits in the culture required for an organization implementing CRM. Therefore a cultural change is called for in many organizations implementing CRM. Kale (2005) found that the general guiding principles of change management are applicable to realizing CRM as well. These involve articulating a formal case for change, systematic attention to people issues, starting the process at the very top, involving every layer of the organization in the change initiative, creating top management ownership, developing an effective communication strategy, paying due attention to organizational culture, and creating an effective reward and sanction system to deal with change.
In order to change the organizational culture and to achieve a customer centric organization a change in the employees’ mindset and behavior is required. It is therefore important to sell the change internally, to have support and campaigning from top management, to offer CRM-relevant training, to recast existing incentive systems (Kale, 2005), to encourage involvement and participation of employees (Daft, 2004) and to select new employees that fit in the new culture or keep the new culture in place (Miller, 2004).
2.4.1 Communication
and expectations of these individuals and audiences. Leadership is the key word for communication. It takes real business sharpness, diagnostic thinking and personal courage to do so. Miller (2004) suggests that the leadership team should communicate the importance of the change efforts consistently and regularly.
Miller (2004) demonstrates that culture and performance have to be linked, and that the results have to be communicated to the management team and key individuals in the organization. It is important that employees and management are informed about the process and the results. Progress has to be tracked and publicized. Positive performance will help to confirm that the culture supports the organization's values and goals. Performance which is below expectations should drive continued review of culture, how culture is communicated, and how the formal feedback systems support or conflict with desired changes in culture.
2.4.2 Leadership
Grönroos (2000) states that management must be supportive, inspirational and attuned to the employees they manage. Without active and continuous support from all managers and supervisors, the values that characterize a true service culture cannot be spread throughout the organization and maintained once they have been established. The top person in the organization, which may be a firm, a local unit, a profit center, a strategic business unit, or another well-defined organizational unit, will constantly have to give the service strategy top priority and continuously and actively give it his strong support. Smith (2003) acknowledges that visible and sustained sponsorship is seen as one of the characteristics of successful change projects. This executive leadership is represented by such items as the continued and visible support from the sponsor, change as part of the business strategy, the support of other executives and protecting the project from other priorities.
An appropriate infrastructure for change management will identify key individuals to drive the change and will define their roles in the process. A change management initiative is unlikely to succeed without active support and campaigning on the part of top management (Kale, 2005).
2.4.3 Employee participation
The received wisdom in the literature on organizational change is that employee involvement is crucial to successful change, especially in situations that require attitudinal and cultural change (Burnes, 2004). Grönroos (2000) acknowledges this view and recommends that contact employees get involved in the planning process and in decision-making. Overall objectives for a group or a department can be broken down into sub goals for that unit in cooperation with the employees who are supposed to accomplish those goals. This process is, first, a way of communicating the strategy and objectives of the firm to the employees, and second, a way of achieving employee commitment to the service strategy and to the goals. Burnes (2004) found that the level and type of involvement should be geared to the level of dissonance that any proposed changes may provoke. If an organization embarks on a change project that is decisively out of step with the attitudes of those concerned, it will meet with resistance unless those concerned change their attitudes. On the other hand, where the level of dissonance occasioned by proposed changes is low, attitudinal adjustments will be minor and potential resistance negligible. O’Brien (2002) adds that employee participation might be the most powerful lever for management to gain acceptance of change. Employees respond best when their responsibilities are extended, when they are encouraged to contribute and are not tightly controlled by management. A basic requirement is that the people involved want to be involved and want to participate.
Early and extensive participation in a change project should be part of implementation, according to Daft (2004). Participation should give those involved a sense of control over the change activity, therefore they might become committed to successful implementation. Burnes (2004) adds that, particularly where large-scale projects are concerned, not everyone can be involved in all aspects of planning and execution. It is important to identify and enroll those whose assistance is necessary and those who are essential to make change happen. This should be the main criterion for selecting who will be involved. This can be volunteers, people with the right attitude, and people with real influence. The presence of skeptics, people prepared to challenge assumptions and ask awkward question, can be useful as well.
2.4.4 Training
organizational change so essential to CRM is achieved and sustained (Kale, 2005). In addition, Miller (2004) and Schwartz and Davis (1981) suggest that management-development programs have to be provided for management and key team members. An intensive management education program stimulates the managers to change and gives them the tools to facilitate the change in culture. It is also useful to conduct pilot programs for implementing key areas of the new strategy under controlled conditions in an effort to create an environment of success and enhance the acceptance of the new culture.
2.4.5 Incentives
CRM requires employees to implement skills and processes that are often different from the pre-CRM times. Kale (2005) states that these changed skills and processes require a recasting of the existing incentive systems. In addition, it is also a way to emphasize the importance of customer experience in CRM implementations. Changes in incentive systems to make rewards congruent with the CRM ethos may sometimes require a move away from individual rewards toward team-based rewards. The key is to identify behaviors and outputs that have the most impact on CRM effectiveness and then tie the key performance indicators of these behaviors/outputs to meaningful incentives.
Makin and Cox (2004) state that, in accordance to the behavioral approach, behavior that is rewarded will continue and behavior that is not rewarded, or is punished, will cease. Miller (2004), Schackford (2005) and Schwartz and Davis (1981) all agree that the reward system has to be reviewed and revised to promote desired behaviors. If the compensation structure is not modified to reflect improved customer outcomes and performance, then no customer focus function, customer strategy, or training will ever gain traction against ingrained “wallet incentives” (Johnson & Schultz, 2004).
2.4.6 Selection of new employees
2.5 Conceptual scheme and research questions
Cultural change is too broad to be covered entirely in this research. Therefore the focus will be on the topics that have proven to be important aspects of cultural change in relation to CRM based on the literature review; communication, leadership, employee participation, training, incentives, and selection of new employees. The conceptual scheme that can be found in figure 1 is built on these six topics.
FIGURE 1: Conceptual scheme
Communication
- communicating the reasons for change
- keeping employees up to date - linking performance and culture and communicating the results
Training
- ongoing training on customer focused behaviors
Leadership
- committing to the change - “walk the talk”
- assist employees in changing their behavior
Incentives
- linking CRM-related behavior and output to incentives
- moving from individual to team rewards might be necessary
Selection of new employees
- hiring those employees that fit in the new culture
- adjusting hiring criteria for service oriented employees
Participation
- employees participating in the planning process and in decision making
- involving key individuals
The following research questions are based on the conceptual scheme:
1. In what way can communication at Company X contribute to the cultural change?
2. What role do managers have in the creation of a customer centric organization at Company X?
3. How can participation and involvement of employees from Company X help changing the culture?
4. How should training programs be arranged to assist the cultural change of Company X? 5. In what way can incentives help to change the organizational culture of Company X? 6. How should the selection procedure for new employees of Company X be set up to
CHAPTER 3: METHODOLOGY
3.1 Qualitative research
In order to provide Company X with an advice on how to create a customer centric organization qualitative research is performed. Distinctive characteristics of qualitative research are the use of various data sources and the emphasis on the understanding of individual persons, groups or situations (Baarda, Teunissen & de Goede, 2005). Qualitative research is used when the research goal, the research subject or the respondents have qualitative characteristics. In this research that is the case; the research goal is to interpret and describe a problem in specific everyday circumstances, the research subject is complicated, complex and relates to processes and interactions in existing organizations and intensive interaction with the researcher is needed to require the desired information. Data in a qualitative research relates to the nature and qualities of the event. Naming and arranging these events belongs to the tasks of the qualitative researcher. This research will make a contribution to solving a problem, what makes this research practical of nature (Baarda, et al., 2005).
3.2 Interviews
In qualitative research data collection methods in which it is possible to anticipate on the research situation and on the information that is given by the respondent are preferable; in this case interviews will be used (Emans, 2002). Interviewing is the preferred method of data collection in complex situations and in situations where in-depth information is required. In an interview situation it is possible for an investigator to obtain in depth information by probing (Kumar, 2005).
The respondents can formulate in their own words what they think are the strong and weak points of the cultural change in their organization. One open question is asked in the beginning of the interview. After that the researcher only asks questions to keep the conversation going and to stimulate the respondent in expressing their ideas (Baarda, et al., 2005). In this situation the interviewer will only introduce the six topics of communication, leadership, employee participation, training, incentives, and the selection of new employees one by one.
3.3 Organizations
To be able to give an useful advice to Company X it is necessary to have interviews at organizations which have made more progress in the cultural change process than Company X. It is not helpful for Company X to know that they are better than other organizations. They want to learn from the best in class, in order to improve their own change process.
The organizations chosen are a power company, a provider of a complete support and service package to aircraft operators, an industry-focused service provider, a home-retailer, a service provider in financial services, certainty and care, a health- and income insurer, and an agrarian product and service delivery organization. The variety of industries in which data is collected enriches the diversity of the research.
These seven organizations are chosen because they have taken some remarkable steps towards the creation of a customer centric organization. Four organizations were nominated for the CRM award or won the award in one of the previous years. Several organizations do not sell a real product, but offer services that people are not able to do without. However, people can choose to which service provider they go, so organizations have to put al lot of effort in acquiring and retaining customers. In order to compare Company X with these organizations, it is important to have a similar interview at Company X.
3.4 Analysis
Baarda et al. (2005) describe seven steps for analyzing qualitative data: 1. Label the data
2. Organize labels and look for connections 3. Interpret and name the structure
4. Determine the validity of the labels 5. Define central labels
During the first step, labeling the data, it is important to find a term that characterizes the specific section and is relevant for answering the research questions. Data that does not fit in a label or section is seen as non-relevant and will be deleted. The following step is to organize the labels and sections. In that way possible connections between the different data sets will be discovered and the data can be structured in a clear and well-organized way. Now labels and sections with a comparable content are combined. The number of times a specific section occurs within a label is counted. This help interpreting the data. The analysis of the respondents will be compared with the analysis of the approach of Company X. The similarities and differences of the different approaches will be mentioned. Determining the validity of the labels is a difficult task in this research, because of the small number of respondents. A larger group of respondents might add different insights in the approaches to cultural change. The central labels in this research are communication, leadership, employee participation, training, incentives and selection of new employees. The inter subjectivity is not tested, but another researcher would probable have used comparable labels for the same data set. The last step is concerned with answering the research questions. Answers to the research questions can be found in the conclusion.
The views and opinions of some organizations are more valuable than those of others. The organizations operating in the aircraft industry and in the consultancy industry are more focused on the software package than on the culture. The organization in the power industry only focuses on a department of less than 10 persons. These three organizations are therefore considered as less valuable. The two organizations in the service industry did not have a specific cultural change process, their focus always has been on a service-oriented culture. Their views and opinions are valuable because of their constant focus on service. The organizations in the home-shopping industry and in the agrarian industry are seen as most valuable. They have very successfully changed the culture in their organizations. The respondent of the home-shopping organization already has multiple experiences in cultural changes.
CHAPTER 4: COMPANY X’S APPROACH TOWARDS A CUSTOMER CENTRIC ORGANIZATION
In this chapter the situation of Company X will be described. The progress already made in CRM, the current situation and the desired situation will be clarified. After that a summary of the interview will be given.
4.1 Customer relationship management at Company X
Company X is the airline with one of the highest load factors – the occupation degree of an airplane – in the industry. Unfortunately they have the lowest yield – the revenue per passenger – in the industry. Partly this is due to the business model of Company X. Company X has a small home market, so they have to attract passengers from surrounding countries. This makes it important to offer better tariffs than competitors. It is not a difficult task to fill an airplane, but it is difficult to sell more expensive tickets. If you are able to fill an airplane with customers, it is better to attract passengers who pay a higher tariff than to take everyone aboard with a cheap ticket. It is important to become more selective in attracting customers. Company X has to focus on the most valuable customers and not on all possible customers.
In the past organizations were able to differentiate on operational performance alone. Nowadays organizations have to do more than that. They have to differentiate on customer focus. In that way they can reach the stage of customer intimacy.
CRM is a strategy which enables Company X to become more profitable by becoming customer focused while maintaining its operational and product excellence. CRM is a key strategic priority for Company X, which is scheduled to be implemented in a phased approach based on a total program.
Customer value and loyalty will be enhanced by improving customer insight, by using this insight for differentiated lifecycle management (customer acquisition, activation, retention and extension), by providing a continuous, consistent and personalized customer experience through the circle of contact and by fostering a service culture.
The CRM program within Company X is based on the following vision;
Every customer interaction drives our profitability.
The accompanying mission is;
CRM is implemented to use customer information to enhance his/her experience, to structure the value proposition and align the resources around the customer desired experience, to increase value when Company X can’t increase capacity and to give the employees of Company X the tools to steer and serve the customers. The ultimate goal is to increase and sustain profitability. By giving more personalized service Company X will increase their ability to differentiate based on customer focus.
Company X’s strategy towards CRM involves 10 key steps 1. Get the basics right
2. Identify customers
3. Understand customer lifetime value 4. Identify customers’ needs
5. Build an integrated view of the customer 6. Respond to customers’ needs
7. Implementation of the strategy
8. Steering (internal processes, front-line staff, customers) 9. Set measurable targets and control
10. Drive cultural change
4.2 Current and desired situation
Company X focused especially on operational issues before they started focusing more on customers. In the past all customers were treated equally, while in the future employees have to realize that there is a (value) difference between customers, so not all customers have to be treated equal. The customers have to be treated as they want to be treated. Currently, customer satisfaction is only part of the targets of a small group of employees and customer unfriendly attitude is not always discussed with concerned employees, in the future customer satisfaction has to be part of everyone’s targets. Employees will be rated by customers on a flight basis. In the situation where the focus is on the customers, a clear relation has to be established between employee satisfaction, customer satisfaction and financial performance, which will consequently have an impact on the company growth and sustainability (job security). Another element that will impact an organizational culture is the selection of new employees; (front-line) employees will be hired based on and trained in customer service skills.
understand which role they can play in increasing customer satisfaction. At this moment some employees think their attitude has no influence on the financial result of the company, which needs to change. Employees have to understand which effect the increased customer satisfaction has on the financial performance of Company X. All employees have to realize that brand value and customer satisfaction are interlinked. These elements are not all directly related to the culture of Company X. But in order to change a culture, these aspects are seen as important.
4.3 Cultural change
The most important element of the cultural change process at Company X until now is the stepwise implementation. The fist step is creating awareness by informing employees about the change. Employees first have to understand that they have to adjust their way of working and the reason for those adjustments. Providing employees with supporting tools is the next step. The last step is continuation; anchor the changes in the evaluation processes and targets. The interview with the head of CRM development and innovation, Mr. I. Caryn will be described per research question related topic.
4.3.1 Communication
Company X has an extensive communication strategy. This strategy includes CRM-specific communication tools such as a CRM game, a CRM day, newsletters, an online forum and the traditional communication tools like the internal newsletter and internal paper. All these tools are set up to give employees more insight in CRM, in the importance of CRM, in the advantages of CRM for the organization and for the employees, and in the way in which employees can contribute to it. Communication helps to keep employees updated on the status of CRM. An event called “Dress to impress” was set up in the beginning to develop customer values and required behavior. These customer values include passionate, friendly, caring, personal, flexible, and hands-on. The required behavior was split up in a part on general guidelines, on behavior to passengers, a part on behavior in general, and a part on clothing. These values and that behavior is a central element of cultural change at Company X.
have to become aware of the value differences between customers and have to act upon these differences. Furthermore, employees have to be informed about the effects of, for example, their actions to keep customers with an increased chance of defection and handling customers’ complaints. A feedback stream from management to employees is important to keep employees motivated.
Everyone, top management as well as other employees, wants to know whether the implementation of CRM has been the right decision. The CRM department has to prove this in figures. The financial department is often very protecting with putting financial information at employees’ disposal. However, it is important to communicate these figures as broad as possible, so everyone will know why they do what they do, the effects of their actions, and the reason for continuation of their actions. Top management has to understand that communicating financial information is at the best interest of the performance of the organization.
The CRM department started with the process of proving that CRM really works, but there still is work to do. Only if the actual figures are shown, it is possible to see the positive evolution. In that way more can be reached with CRM. After several years of declining yield, in 2006 yield was increasing for a few segments. This was partly accountable for CRM, but it is important to find out for which part CRM was accountable. Therefore it is necessary to follow that trend and find out in what way CRM contributes to the increasing yield. Company X has to be able to demonstrate to top management what the exact influence is of CRM on financial results and business growth of the entire organization. In that way top management can think of giving CRM more priority.
4.3.2 Leadership
that communication on such a topic is in a language that is understood by other departments. At this point the managers of the passage and corporate division do not act in favor of CRM. The explanation might be that these departments do not generate much revenue; they are afraid that they will not earn back the investments required for CRM. CRM is seen as a cost increase by these departments and the commercial department has to convince these managers that in the end CRM can realize cost decreases and revenue increases.
4.3.3 Participation
Employees are involved in the project, but cannot actually participate in the process. They are involved by means of CRM ambassadors, who sell the change internally. In several areas in the passage department a CRM ambassador is appointed. The CRM ambassadors network consists of employees from flight operations, inflight services, ground services, commercial and operations control and fleet services. They can train their own area and push the change in the mindset of all staff towards a customer centric culture. This network of CRM ambassadors does not have any hierarchic power, it is solely a functional setup. CRM ambassadors are on the same level of the employees that have to work on the CRM project, these employees will accept the new way of working easier from fellow workers than from management. Therefore ambassadors have an important role, they communicate the information they receive from the CRM department to their own area of responsibility in the CRM program. Managers do not know the restrictions on the levels where CRM is implemented, CRM ambassadors know exactly what is going on, what is possible and how to deal with it.
4.3.4 Training
Company X uses several training methods on different levels in the organization. Training methods are used to learn employees concerning the new way of working.
One method is the CRM master class, which is developed for middle management. This master class includes an entire day of lectures, given partly by the CRM department and partly by outsiders. The background of CRM, the new way of working, the reason for that way of working, the meaning of that way of working, the comparison with how others work, and specific cases are addressed. Participants of the master class are interested in a follow up, Company X wants to react to this desire and has plans to expand the master class.
Employees that work less than 5 years for Company X, have the possibility to follow a training program on CRM within the Company X academy. This training program is not obligatory. Department managers can stimulate employees to follow such a training program.
When new tools are implemented employees can follow a specific training. It is important to explain the idea behind a training program. Do not only learn employees how to work with the new tool, but remind employees that the purpose of the training is improving customer focus and that the tool can support employees to reach that goal.
The earlier mentioned CRM game is used for communication as well as training purposes. The CRM game is a training in an interactive setting. Employees of inflight services, and in the future ground services, commercial, and call center, have to follow this training in a group of approximately 12 persons. Employees will follow this training once. The training gives employees the chance to experience the entire process of CRM and to get insight in the costs. The game element and the interactive setting makes this training attractive to employees. It is experienced as a much more effective method then giving a lecture or a training by showing some slides.
4.3.5 Incentives
This aspect is still in development. Customer satisfaction is already one of the targets for all employees in the passenger department. In the future it will become part of the targets of each employee, in that way customer focused employees will be rewarded. Changing targets and key performance indicators is not an easy task. In the end it is essential for anchoring the results and for continuation.
The balanced scorecard is currently used as a monthly evaluation instrument for the passenger department, but the performance indicators are still operationally focused. In the future customer focused indicators should be included in the scorecard. Multiple departments will have to cooperate in order to develop a scorecard on which operational and customer focused indicators are in balance.
4.3.6 Selection of new employees
Company X has made a start in changing the way in which new employees are selected. They realize that changes in the recruitment policies can help changing an organization’s culture. The inflight and ground services departments already take the fit between the new employees and the desired culture into account when recruiting employees. In these departments employees are most directly in contact with the customer.
CHAPTER 5: ANALYSIS
All respondents were asked to rank the six central topics according to importance. A one could be given for the most important aspect and a six for the least important issue. Every number between one and six could only be used once in the order of ranking. This leads to a clear classification of the different topics. Table 1 shows an overview of the order of rank given by the respondent of each organization.
TABLE 1: Order of rank interview topics respondents Interview topics / Organizations in the Electricity industry Airplane industry Consultancy industry Home shopping industry Service industry Insurance industry Agrarian industry Communication 2 2 4 2 2 3 3 Leadership 1 3 1 3 1 1 1 Participation 3 1 2 1 3 4 2 Training 4 5 5 5 6 5 4 Incentives 6 4 3 4 5 6 6 Selection 5 6 6 6 4 2 5
Despite the fact that this is not a quantitative research, several descriptive statistics have been calculated. In this way it is possible to determine which topics are seen as most important. An overview of these descriptive statistics can be found in table 2.
TABLE 2: Descriptive Statistics Respondents
N Minimum Maximum Mean Standard
Deviation Communication 7 2 4 2.57 .787 Leadership 7 1 3 1.57 .976 Participation 7 1 4 2.29 1.113 Training 7 4 6 4.86 .690 Incentives 7 3 6 4.86 1.215 Selection 7 2 6 4.86 1.464
The respondent from Company X, Mr. I. Caryn, was also asked to rank the six central topics to importance. An overview and a short explanation can be found in table 3.
TABLE 3: Company X’s order of rank of the central topics Interview topics Order of rank Explanation
Communication 2 “Insufficient communication will lead to an early end of the
project.”
Leadership 1 “Empowerment and consistency in strategy are important.”
Participation 3 “Participation is crucial for support from stakeholders.”
Training 6 “Continuous training is needed to anchor changes.”
Incentives 5 “Incentives are essential for anchoring and guiding desired
behavior.”
Selection of new employees
4 “Selection of the right employees is easier than changing current employees.”
In figure 2, the order of rank of the respondents is combined with the order of rank of Company X.
FIGURE 2: Comparison respondents and Company X
There are no remarkable differences between the values of Company X and the values of the other respondents, they agree on the top three score: leadership, communication and participation. Place 4, 5 and 6 were all equal for the other respondents, Company X places selection on the fourth place, incentives on the fifth and training on the sixth place.
The differences and similarities on the research question related topics, which came across during the interviews, will be described per topic.
5.1 Communication
Communication is seen as the third most important element of cultural change. All organizations have put a lot of effort in communicating the change to its employees. The overall view was that employees have to know explicitly what is going to change, the reason for that change, the importance and necessity of the change, and the way in which that change will occur. They have to know in tangible terms what is expected of them. Informing, explaining and clarifying of what is going to happen is essential. Multiple communication channels were used to reach as much as employees as possible; intranet, personnel magazines, news letters, meetings, and even special brochures containing answers to frequently asked questions are some examples. Through the entire year employees have been kept updated of the progress and changes. Communication mostly was done by the management team and by the department responsible for the cultural change. In a few cases communication came from top management, they spoke to the employees and explained that they supported the change. Some examples will illustrate the overall view described above.
The organization in the agrarian industry has experienced that the advantages of the new culture have to be communicated to the employees. In their case, problems of employees were solved by the new way of working. In that way, employees took a less negative stand towards the change. Employees have to realize that their work is actually becoming easier.
Quick wins are vital as well, according to the organizations in the home shopping industry and the agrarian industry. Figures have to prove that an organization can earn more money by the new way of working. These figures have to be communicated to show that the project is not solely a theory, but that it really is working. The feeling towards the change can be influenced by pieces of evidence and positive results.
A final comment is that communication does not only consist of merely mentioning positive results. All highlights have to be communicated, positive as well as negative (the organization in the home-shopping industry).
Company X already has a rather extensive communication strategy. Every medium is used in order to communicate the goals, advantages and progress of the project. They started with communicating figures about the effects of the cultural change. There are no remarkable differences in the approach of Company X in comparison with the approach of the respondents.
5.2 Leadership
Leadership is seen as the most important aspect of cultural change by the respondents.
All respondents pointed out that commitment from top management is seen as a prerequisite for the cultural change to be successful, top management has to be convinced of the usefulness of the change. The respondent of the organization in the home shopping industry experienced in several situations that employees will not always be committed when the change is initiated from top management only. Implementing cultural change top-down is therefore very difficult. The implementation of a cultural change should therefore be top-down as well as bottom-up. Middle and higher management have to prove to the top management that the change project is working, in that way they create momentum. One method to convince top management of the importance of the cultural change is to show that it brings in money.
Commitment from lower levels of management is essential as well, without commitment management will not be able to lead the change. When management is committed to the change they should give the right example. The organization in the insurance industry described this as ‘walk like you
talk’. In order to change a culture, management should behave in accordance with that new culture. They
have to act and behave in a way that is in line with the new culture (the organization in the home shopping industry).
they are able to grow and develop their selves (the organization in the insurance industry, the airplane industry and the home shopping industry).
The right criteria are needed to be able to measure customer satisfaction. These criteria have to be followed and used to guide the employees in the front- as well as the back-office. Managers have to update employees about their performance on the different criteria. Everyone has to understand that it is more profitable to work from the customer’s point of view. In order to reach the set targets, it is necessary to be customer focused. So they will automatically work according to the customer directed standards. Managers have to lead and assist that process (home-shopping).
Another additional remark from the organization in the electricity industry, the airplane industry and the service industry is that in order to create a customer centric organization the focus should be on the outside and not on the inside. The focus should not be on the internal processes of the organization, but on the customer. If too much attention is paid to the internal processes, the attention and energy is removed from the customer. This is seen as a responsibility of the managers.
The managers of the passage and corporate departments of Company X are not committed to the change project. As many organizations have mentioned, commitment is essential for realizing a cultural change.
5.3 Participation
All organizations emphasize the importance of employee participation in the change process. In all organizations employees were involved in the change process in one way or another.
To be able to anchor the new culture, employees should be involved with the plans of the organizations, they have to participate, and they have to be kept informed about what the organization is doing (the organization in the service industry).
advantage was that it is hardly impossible to involve everyone personally, ambassadors can help by spreading the information.
Real employee participation in the cultural change was not mentioned during the interviews. Management works out the change process, then employees are asked for their opinion on some operational issues. They can give their opinion on how they experience the cultural change and on how they would improve it. Getting in a dialogue with employees is important according to the organizations in the consultancy and the insurance industry.
A comparable situation is found at Company X. Actual participation is lacking, but the ambassadors group is seen as employee participation.
5.4 Training
Implementation of CRM goes together with the implementation of a new software package. Employees received training in order to be able to work with the new software. That training package included one or more parts based on customer focused behavior. A training program solely focusing on customer focus did not take place in one of the organizations, it was always part of a commercial training program or a training package based of the new software package.
Employees in the call centers of the organizations in the home-shopping industry, service industry, insurance industry and electricity industry received training in being more customer focused. These types of training were always present on that department and were not introduced at the same time as CRM was implemented.
Company X already has more extensive training programs than the other organizations. Training programs of Company X are offered to the different layers in the organization. Different approaches are used to give employees an explanation about CRM and show them the importance of the cultural change.
5.5 Incentives
A lot of organizations agree that a reward does not always have to be financial, it can as well be a night out, a drink or a product for example. The only requirement is that it should be transparent (the organizations in the airplane, the insurance industry and the home-shopping industry). The organizations in the home-shopping industry, the electricity industry, the consultancy industry and the insurance industry work with team rewards, the development of individual rewards are far beyond those of team rewards.
Organizations should be careful with rewarding certain kind of behavior. A wrong organized reward structure can encourage employees to pay attention to the wrong aspects. In a situation where the wrong type of behavior is rewarded, that kind of behavior will actually be stimulated. The key is to reward only the desired behavior, according to the organizations in the home shopping, the airplane and the service industry. The reward structure should be organized in such a way that it is in line with the final goal of the change project (the organizations in the home-shopping industry, the airplane industry and the insurance industry).
Just as the other organizations, Company X is still developing a suitable incentive scheme.
5.6 Selection of new employees
Not all organizations use the selection of new employees as a method for cultural change in every department. All organizations with a call center select employees who fit into the service oriented culture for that department (the organizations in the electricity industry, the home shopping industry, the service industry and the insurance industry). Selection criteria than include a pro-active attitude, sensitive/empathic, sympathy, commercial and other communicative skills.
The respondent of the organization in the agrarian industry assumed that employees that fit the requirements, should be able to adjust to each culture. Employees always have to fit into a new culture when entering a new organization. New employees most of the time already are selected on the basis of the fit between them and the organizational culture. They are supposed to act in a way that belongs to that culture. New employees did not witness the cultural change and they are therefore able to adjust without any problems.
5.7 Meta-analysis
A general comment that can be made is that no remarkable differences are noticeable between the respondents. Communication, leadership, employee participation, training, incentives, and selection of new employees are all used to a certain degree in every organization. Some topics were further developed than others, but most organizations are still in the development process for certain aspects. No clear structures were found that could be linked to a certain type of organization. The most outstanding findings will be discussed here.
A few organizations were more focusing on the software package than on the actual cultural change. Employees could really experience great advantages from working with that new software package. The software packages were organized in such a way that the only way to use it is to work customer focused. The advantages of the software package make that employees are willing to work with it. The automatic focus on customers facilitates the switch from product focus to customers focus.
This is not the case at Company X. Employees do not experience real advantages from working with CRM. Company X tries to make employees aware of the fact that it is the customer who, indirectly, pays their salary. The more money customers pay for their tickets and the more valuable customers are on board of the airplane, the more secure their job. If valuable customers return to Company X, this increases job security and maybe even growth possibilities for employees. Employees’ work will not be made easier, but it will be more varied. Not every employee sees and experiences that as an advantage. The CRM department experienced that a lot of colleagues have been fired in the past years, consequently they have to do the same amount of work with less employees. The tasks related to CRM are seen as additional, which has to change in the future according to the commercial department.
The restructuring of the incentive structure in the different organizations always was the last step. Organizations first want to work with the new culture, before new performance indicators can be developed. It is essential that incentives only will be achieved when working customer focused. This requires the processes in the organization to allow customer focused behavior.
CHAPTER 6: CONCLUSION AND RECOMMENDATIONS
In this chapter answers will be given to the six research questions. Conclusions and recommendations will be provided per research question. The general conclusion is that all topics are important for realizing a cultural change, but that their relative importance differs per organization.
6.1 In what way can communication at Company X contribute to the cultural change?
Communication is seen as essential, because employees have to understand what is going to change, how that change is going to happen and how they can contribute to the change. Company X certainly has to continue with their extensive communication strategy. Employees have to be updated on the cultural change, in order to understand why and how they have to change their way of working. Keeping employees informed increases their feeling of involvement. KM should further develop the communication of progress and results. In this way top management, middle management and all employees can be convinced that CRM is actually working and that their efforts are valuable.
6.2 What role do managers have in the creation of a customer centric organization at Company X?
6.3 How can participation and involvement of employees from Company X help changing the culture?
The third most important topic is employee participation, this helps changing the culture because if employees feel they are involved in the process they are more likely to adjust their behavior. The ambassador group should be continued, employees accept the change earlier when it is promoted by colleagues and when they are involved in the change project itself. In addition, participation should be expanded so employees have a real say in the change. Employees should have the possibility to express their feelings, share their experiences and suggest possible improvements.
6.4 How should training programs be organized to assist the cultural change of Company X?
Training can help creating a customer centric organization, because employees are learned how to change their attitude and behavior. Company X already has more extensive training programs than the other organizations. So with this aspect Company X cannot learn from the other organizations. Measuring training outcomes and expanding training possibilities are recommended, based on the analysis of Company X and the literature review.
6.5 In what way can incentives help to change the organizational culture of Company X?
Incentives are important because employees have to be rewarded for showing the right behavior, by rewarding them they are motivated to show that behavior again in the future and not fall back in their previous behavior. The commercial department of Company X experiences this as a difficult task, because it is hard to measure attitudes and behavior. It is much easier to measure output in quantity for example. Team rewards might be a solution, than it is not necessary to measure every individuals’ behavior. Customer satisfaction, for example, can be measured on a flight basis. The crew with the highest customer satisfaction will receive an incentive.
6.6 How should the selection procedure for new employees of Company X be set up to support the cultural change?
CHAPTER 7: DISCUSSION
The order of rank where leadership was seen as the most important aspect of cultural change for CRM, the recommendation to further develop leadership in Company X’s approach to cultural change, and the limited empirical evidence in this research on the positive effect of leadership in relation to cultural change require additional data on leadership in change situations. Therefore this chapter consists of, next to the limitations of this research and suggestions for further research, a part on transformational leadership.
7.1 Leadership in relation to (cultural) change
In search for additional literature on leadership in relation to (cultural) change, transactional and transformational leadership were found quit often. According to Eisenbach, Watson and Pillai (1999) the theory of transactional and transformational leadership is one of the most comprehensive leadership theories of organizational transformation. A review of several sources on these leadership types brought the following insights.
Transactional leadership develops from the exchange process between leaders and subordinates wherein the leader provides rewards in exchange for subordinates' performance (Eisenbach, et al., 1999). Transactional managers focus on task completion, goal clarification and optimizing the performance of the organization through incremental changes within the confines of existing strategies and structures. They seek to work within and maintain the status quo. This type of manager motivates followers to perform the tasks expected of them by drawing attention to their self-interest through the use of incentives and rewards such as pay and promotion (Burnes, 2004).
Transformational leaders are often portrayed as charismatic or visionary individuals who seek to overturn the status quo and bring about radical change (Burnes, 2004). Transformational leadership behaviors go beyond transactional leadership and motivate followers to identify with the leader's vision and sacrifice their self-interest for that of the group or the organization (Eisenbach et al., 1999; Burnes, 2004). These leaders seek to gain the trust and emotional commitment of their followers by appealing to higher moral and ethical values (Burnes, 2004).
Ogbonna and Harris (2000) demonstrate the relationship between leadership and culture by examining the impact of different styles of leadership on culture. They argue that transactional leaders tend to operate within the confines and limits of the existing culture, while transformational leaders frequently work towards changing the organizational culture in line with their vision. The focus of this research is on cultural change, therefore transformational leadership will be explained in more detail.
Theories of transformational leadership and organizational change emphasize that change is accomplished through the leader’s implementation of a unique vision of the organization through powerful persuasive personal characteristics and actions designed to change internal organizational cultural forms and substance (Kavanagh and Ashkanasy, 2006).
Podsakoff, MacKenzie and Bommer (1996) found that the majority of the change approaches share the common perspective that by articulating a vision, fostering the acceptance of group goals, and providing individualized support, effective leaders change the basic values, beliefs, and attitudes of followers so that they are willing to perform beyond the minimum levels specified by the organization.
Transformational leaders can successfully change the status quo in their organizations by displaying the appropriate behaviors at the appropriate stage in the transformation process. When leaders realize that the old ways no longer work, they may undertake the task of developing an appealing vision of the future. A good vision provides both a strategic and a motivational focus. It provides a clear statement of the purpose of the organization and is, at the same time, a source of inspiration and commitment. This view holds that leaders create change by providing a vision that is attractive to followers rather than creating dissatisfaction with the status quo (Eisenbach et al., 1999).
In order to attract employees to different change possibilities, the leader must create an appealing vision that takes into consideration the underlying needs and values of the key stakeholders. Once this vision is developed, the leader can implement the change. This could be done through intellectual stimulation, whereby the leader sets challenging goals for the employees and motivates them to rethink old ways of doing business. The leader frames the change by appealing to follower needs for achievement and growth that induces the follower to find the change attractive. The process may also be facilitated if the leader shows individualized consideration where he or she provides support, coaching and guidance to the employees. (Eisenbach et al., 1999).
involved in the transformation process. Otherwise, it is likely to meet with cynicism and strong resistance from key individuals, which is a route to failure (Eisenbach et al., 1999).
Throughout the transformation process, the leader should set high performance expectations and reward behaviors that are directed toward fulfillment of the vision. It is also important that the leader models the behaviors that are required to institutionalize the change and sets the standards for the rest of the organization to follow. The transformational leader can play a critical role in communicating how the changes have led to better performance (Eisenbach et al., 1999).
The theory on transactional and transformational leadership described above will be complemented with empirical evidence. Burnes (2004) describes in his book “Managing Change” ten case studies which show a very diverse range of approaches, situations and outcomes. The categorization of leadership types and organizational states are useful in situations where a clear and relative unambiguous picture of events is possible, such as in the case of Oction, the PPC and PoliceCo. Oction was being left behind as the rules of the game in its industry were being changed by technological advances. An archetypical transformational leader transformed Oction through his vision and ability to inspire and motivate others. PolicCo operated in a predominately convergent state and was managed in a transactional fashion. The pressure to outsource parts of its operation did not undermine or in any way appear to raise questions about the appropriateness of the convergent context in which PoliceCo existed. The decision to privatize the PPC and to turn it into a commercial concern changed the convergent context in which the PPC was operating for most of its life. Although there were strong pressures and reasons for adopting a new style of management, this did not happen. In three of the other cases – Volvo, GK Printers and Rover-TRW – the picture was less clear. Elements of divergence exist, but these appear to be limited to certain areas of their environment or to change over time. In that situation managers can be required to exhibit both transactional and transformational qualities either at the same time or in turn.
7.2 Limitations
It was hard to assess whether an organization had made more progress in the cultural change process than Company X. The “CRM Genootschap”, founded as a society in which several parties come together that are interested in sharing knowledge and experience in the field of CRM, provided the e-mail addresses of the persons who were responsible for the change process in the various organizations. Not all organizations were just as valuable; some organizations have contributed more to this research than others. It was almost impossible to do preliminary research, therefore it was hard to estimate the value of the organizations for this research beforehand.
Another limitation was the focus on commitment, while the research question is on leadership. The different respondents all emphasized the importance of commitment by leaders. Afterwards the data on this aspect was hardly on leadership itself, but more on the required commitment. This is one of the reasons for the additional literature review on leadership.
The last limitation was the limited empirical data on participation; the focus was more on ambassadors. The respondents saw the ambassadors as employees who participated in the change process, but it is more a tool to communicate the project and to get employees to work according to the changes than real participation. As a tool it is helpful in the cultural change, but it cannot be seen as participation.
7.3 Directions for further research
Participation was seen as the third most important aspect of cultural change for CRM. However, participation was not really integrated in the approach to cultural change in the various organizations. As described in the limitations of this research the focus tend to be more on the ambassadors. Further research can examine the way in which employees can participate in the cultural change required for CRM.
This study only included six cultural change related topics. Future research could also investigate which other topics are important for realizing a cultural change.
