Go BackService measures and a correlation with profit
In 2004 a UK based research company embarked on a benchmarking programme measuring both 'How it feels to be a customer' and 'How it feels to be processed'. Included in the programme (aka ERIC - Empathy Rating Index Company) were over 200 companies from 12 different industries. Each industry was measured semi-annually.
After three years and several million data points Jamie Lywood, founder of Harding & Yorke and the ERIC Programme, shared the data with Professor Merlin Stone and Dr. Yuksel Ekinci from Oxford Brookes University Business School.
ERIC and Profitability
We wanted to know whether there was a relationship between ERIC and profitability, if so, whether it was direct or indirect, and if indirect, what other variables connected the ERIC RatingsT and profitability. The financial performance of companies was extracted from the Amadeus database, which is a pan-European financial database.
Prof. Merlin Stone and Dr. Yuksel Ekinci analysed a wide range of financial indicators from Amadeus. The ERIC RatingsT contain many measures, so they needed to find which if any components of ERIC RatingsT were correlated with profitability, as this would indicate what a company needs to do. They found that the ERIC model has a statistically significant and very high correlation with profitability (.85), measured by return on capital employed (ROCE). The ERIC model explains 72% of the total variance in profitability. This is very good. 5 out of 6 of the ERIC dimensions have a statistically significant correlation with ROCE, including the EMPATHY component which was particularly strong. Harding & Yorke continue with the ERIC Programme (available through subscription) and have commissioned the two academics to continue with their research which is published quarterly.
One implication of Harding & Yorke's work is that companies must find ways of establishing better empathy without compromising call cost. This involves creating an environment where EMPATHY can thrive as well as staff recruitment, training and retention, improved technology and better call routing.
We now know that there is a positive relationship between the EMPATHY index and ROCE. Furthermore, every point increase on the EMPATHY index will have a 16.4% impact on ROCE. This finding suggests that the EMPATHY index is not only a good measure for assessing customer experience with call centres but also a key performance indicator for managing profitability.
A claim of a correlation with profitability is not new but, to our knowledge (and that of the Academics) this is the only study which has the absolute endorsement of the academic community. Many other claims relate to 'Revenue Growth', 'Shareholder Value' or indirect links through 'Loyalty' and, after appropriate scrutiny, are not convincing or are so wide in their presumptions that the outcomes are farcical.
Are we naïve? After all, ROCE employed is a general measure, resulting from the endeavours of managers in all functions. The ERIC measure is very specific. So at this stage, we can only hypothesise why we have found a good fit.
The primary reason is because of what is measured. Customer satisfaction measures have mainly measured either the process of satisfying customers (e.g. did they say Good Morning / Afternoon? Etc) or the end result of an interaction (e.g. did they get what they wanted?). Whilst the 'Process' element of ERIC is comparable to many of these measures, the 'Empathy' element measures something very different, namely, how customers are made to feel by the combination of the attitudes and subsequent behaviours of call centre agents. This is closely related to the 'Gut Feel' we all have but find hard to articulate. It is this that makes us do what we do - buy more and/or stay loyal or bad-mouth the company and leave.
The second reason is because of the purity of the questions analysed and the scales they are measured against. The questions are designed not to lead the answer. For example - "How good does it feel?" - implies that you want a degree of 'Good' rather than a dispassionate response. The question is fairer and more appropriate if it was "How does it feel?"
The third reason is linked with who is doing the measuring. If you ask customers how they feel they will often revert to a logical rather than an emotional response. They do not mean to lie, but find it hard to articulate their emotional state. Even if they can, they prefer to respond in a way which does not cause further questioning or which does not open them up to personal criticism. Instead of asking customers, ERIC uses trained researchers to analysis interactions between customer and company. This removes the effect of previous expectations a customer may have about an organisation and captures emotional effects fairly and consistently. ERIC measures the agent rather than the customer. As a whole, ERIC reports on an organisation's culture, which is why we think it is so well correlated with ROCE.
The final reason why the ERIC findings correlate so well is because of its measures. It uses a ten-point absolute scale, ranging from '1 - I can't imagine how I could feel any worse' to '10 - I can't imagine how I could feel any better'. This allows the researchers to express the full range of their feelings.
What does this mean for companies with contact centres? The answer is simple. Some aspects of call centre behaviour are linked with profitability and these aspects are captured by Harding & Yorkes ERIC measures. At last we can be sure of a ROI when improving in these areas.
It is not easy to "create empathy". It requires changing culture. ERIC can be used to identify where a company should be focusing, but the company must then focus on changing its customer management culture.
However, we do not recommend companies to abandon all their other measures. Measures can be used for many reasons, such as:
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To establish best practice and motivate staff towards delivering it
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To generate a benchmark from which you can reward your people
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To link in to other measures as a key performance indicator
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To maintain a set of standards (e.g. brand alignment)
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As a part of management information system for reporting
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To benchmark your performance against others.
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Above all, your measures should, through validity, reliability and sensitivity, offer an indisputable measure of performance.
We can conclude that Harding & Yorke's ERIC model conforms to all of the above. However, it may be that your reward and recognition programme is too embedded for you to consider change. An ERIC analysis and validation may show that you are rewarding and recognising behaviours that do not make your customers feel better. If so, you are probably rewarding the wrong activity. 'Getting what you measure' is intensified by reward and recognition programmes. ERIC measures aim to improve overall Empathy between agent and customer, making the interaction more enjoyable and rewarding for both parties.
For access to the White Paper or for more information on the ERIC Programme please contact Jamie Lywood (Managing Director of Harding & Yorke) at JL@empathy.co.uk or call +44 7850 202030 or visit our website at www.empathy.co.uk
About Harding & Yorke:
Harding & Yorke is a research and development company. We measure 'how it really feels to be a customer' and work with over 100 highly respected companies and organisations. Our measurement methodology has been independently audited and found to be over 99% reliable and academically proven to correlate with profit (ROCE).
Our solutions team build on these findings to develop sustainable and profitable programmes of change. We work throughout the World although we are based in the United Kingdom.
Date - 26/09/2008
