Banking crisis: Should staff pay be linked to customer service?
'Banking' and 'customer service' aren’t generally words that go together harmoniously. A recent survey by Avanade found a third of banking customers have lodged an official complaint with their primary bank in the last five years, generating a total of 30 million for the industry. According to the report, overdraft and late payment fees were the most common cause for complaint, with customer service issues following close behind. Grass Roots’ survey of 5000 banking customers also showed that customer loyalty towards banks is at a worrying state with 54% of respondents claiming that they would switch bank if tempted today. Forget the 2008 financial crisis, the past week's banking disasters are enough to show the strained relationship between customers and their banks. Natwest's technical 'glitch' was dubbed by boss Stephen Hester as "one of the most widespread customer service failures we have had in recent memory". Barclays' chief executive Bob Diamond and chairman Marcus Agius resigned less than a week after US and UK regulators fined the bank £290 million for attempting to manipulate Libor rates. Following the small business interest rate row last week, outgoing head of the Financial Services Authority, Hector Sants, called on banks to reform their relationships with customers by linking staff pay to customer service. According to the Guardian, Sants claimed that there was a “commercial opportunity” for banks to improve their customer relationships. Linking pay to customer service He said: “It’s clearly an opportunity for banks to respond positively, pro-actively and with the right attitude and get on and do something about it. There is an opportunity to demonstrate a new approach. We need to work with industry to give more thought to how customer treatment is reflected in the compensation culture.” So would this approach to customer service boost relationships? And is it likely the banks will agree to linking the quality of care provided to pay? Claire Richardson from Verint claims that linking pay to standards of service would result in accurate measurements of the service provided. “This would obviously be a huge benefit to customers, but would need to be implemented carefully by the banks,” she says. “Done right, banks would benefit from hugely motivated, well-trained and engaged staff, with near real-time customer service insights driving the whole process forward.” Sarah Cook, managing director of the Stairway Consultancy, explains that most major high street banks already link pay to service for customer-facing managers and include a service element in incentive schemes. “The benefits of this should be that excellent service is seen as an essential element in everyone’s job roles and that the delivery of exceptional service carries a financial reward. Theoretically, it should encourage everyone to deliver excellent service,” she says. However, Cook adds that, if incentive payment schemes also rolled out to sales staff, the danger is that the drive for sales may counteract the drive for excellent service. Such an approach also does not encourage a culture of customer focus. Cath Everett, editor of HRZone.co.uk, agrees that incentivising employees to provide good customer service may work, but points out that organisations must be careful to define what ‘good customer service’ means and how it should be translated into people’s behaviour on the ground. “Targets/incentives notoriously skew behaviour and can generate all kinds of unintended consequences so you’d really need to do an awful lot of risk analysis/management before you go and change processes. It’s frontline stuff, so it’ll be very visible if you get it wrong,” she says. Jo Causon, chief executive of the Institute of Customer Service, believes banks could signal a genuine cultural change, and rebuild trust with their customers by giving customer satisfaction measures more prominence in performance management and pay at all levels in the organisation. The situation for other sectors She says: “Including customer service measures in executives’ pay and bonus contracts would increase the focus on customer service at senior levels in the organisation. It would demonstrate to customers, employees and shareholders that the organisation has an authentic commitment to its customer.” Marc Bishop, director of HR consulting at plusHR, believes that deploying such a scheme would ensure that employees focus on providing customers with services that meet their needs rather than being placed under pressure to achieve a certain revenue or product sales target. But what about those sectors that aren’t awarded fat cat salaries? P&O Cruises recently came under fire for withholding tips from staff paid a basic salary of 75p per hour unless they hit performance targets. P&O boss David Dingle told the Guardian the decision was intended to “make crew more responsive” and was a win-win for the employees, customers and company. But passengers on a P&O ship told the paper that members of the mainly Indian crew – the restaurant staff and cabin stewards – seemed upset by the deal, with one passenger calling it “an absolute scandal”. Stairway's Cook believes that the scheme could work in other sectors and is already in use in many large organisations. However, this doesn’t necessarily mean that customer service in the UK has necessarily improved. She says: “Being customer-focused is something that needs to start from the top of the organisation and all the elements need to be aligned: for example recruitment, training and development, talent management and career development, pay and reward.”
The Institute of Customer Service's Causon believes that linking customer satisfaction to performance and pay can work in a number of scenarios.
“It’s important that organisations assess how improving customer service will help them achieve their business goals, and then set appropriate measures which can be effectively measured and incentivise the right behaviours,” she concludes.