ScottishPower Uses a Balanced Scorecard of Metrics to Drive Customer Service Excellence

A few years ago, my family experienced frequent power outages at our home during bad storms. One time, the power to a sump pump cut out when we needed it most. Result: $5,000 of water damage. Needless to say, that day I had some choice words for our electricity provider, Pacific Gas & Electric.

Unfortunately, if a utility doesn’t do its job, U.S. consumers can’t pick up the phone and easily switch to another supplier. The U.S. energy market is essentially a bunch of regional monopolies, with regulations imposed by federal and state government to make sure customers are not mistreated.

Intense competition is the best incentive to innovate and provide great customer experiences. So you can understand why utilities are not top of mind when I think of customer-centric success stories. I searched PG&E’s 2012 annual report and guess how many hits I got on “customer satisfaction?” Zero.

Intense competition is the best incentive to innovate and provide great customer experiences.

Imagine my surprise when I learned that UK-based ScottishPower was winning awards for customer service. That’s right, service. Have they gone bonkers on the other side of the pond? I rang up Richard Tasker, ScottishPower’s Head of Direct Debit Operations, Customer Service, to get the inside scoop.

It turns out the UK energy market is nothing like the US. Deregulated in the 1990s, gas and electric consumers are now pursued by 6 major and 20 small suppliers. British Gas is the big gorilla of the UK market with 16 million customers, while ScottishPower (another “big six” supplier) services 5.7 million. Offering a competitive price is important, to be sure, but it’s not the only thing that matters to customers. Tasker says their strategy is to provide a “differential in quality of service” to encourage current customers to stay, and to pick up new customers from less customer-centric companies.

Translating Strategy to Action

In 2012, ScottishPower was ranked third in its industry, with an overall 70% satisfaction rating, an increase of nine points over the previous year. How did they do it?

Tasker’s group handles the 3.7 million customers that pay by debit card. Getting a handle on how they were resolving customer service requests was a key part of their customer-centric journey. In 2006 ScottishPower did some pioneering work to increase First Call Resolution (FCR), the percentage of service requests handled on one phone call.

The idea is simple enough. Customers like “one and done” calls, and the company can save money by not wasting agent time on extra calls. In practice, however, FCR can be tricky to calculate. One key issue is determining the “window” that a repeat call from the same customer is considered to be about the same incident. ScottishPower decided to use 14 days as its FCR limit.

As time went on, however, more customers used email and web channels. To get a complete view of all service interactions, ScottishPower implemented a multi-channel customer service solution from Sword Ciboodle, acquired in 2012 by KANA. FCR was then updated to Customer Contact Resolution (CCR) so that any contact would count, not just phone calls.

Arming agents with a so-called “360 degree” view of customer interaction can certainly help reduce customer effort and frustration. One benefit should be fewer cases of “touchpoint amnesia”—forgetting information from one touchpoint to the next. My research has found this cuts customer loyalty (willingness to recommend) by 50% and propensity to buy about about one-third.

Customers like “one and done” calls, and the company can save money by not wasting agent time on extra calls.

Sometimes eliminating the need for a second call is facepalm obvious once you see it. ScottishPower handles thousands of emails, calls and web visits from customers with a question about a change in their service. To handle such requests, agents always needed the current meter reading, which required the customer to stop, check the meter, then return to provide that information. The fix: Make it clear in all communication channels to get the meter reading before contacting ScottishPower.

In three years, Tasker says they increased CCR from 80% to 84%, while cutting repeat calls by 10%. At 150,000 calls per week, that saved ScottishPower from handling 15,000 calls per week.

You may have noticed one omission in the list of channels mentioned: Social. Currently ScottishPower has staff monitoring Twitter and online forums, but it’s not integrated into the contact center just yet. Tasker sees this as a “growth area” for the future, and expects that Twitter will eventually be included in their KANA implementation.

Is FCR a Magic Metric? No.

ScottishPower’s FCR and CCR work reflects a broader trend towards trying to reduce the number of contacts a customer needs to resolve a problem or answer a question. SQM Group’s pioneering research found that increasing FCR can increase customer satisfaction while also reducing costs, along with other benefits noted in the table.

Benefits of Improving First Contact Resolution

  • Reduce operating cost: For every 1% improvement in FCR, a call center reduces its operating costs by 1%.
  • Improve Customer Satisfaction: For every 1% improvement in FCR, there is a 1% Csat improvement.
  • Improve Employee Satisfaction: For every 1% improvement in FCR there can be a 1% to 5% improvement in Esat.
  • Increase Sales Opportunities: When a customer’s call is resolved, it increases the customer cross-selling acceptance rate by up to 20%.
  • Reduce Customers at Risk: Only 2% of customers who have their call resolved on the first call expressed their intent not to continue to use the organization’s products and services.

Source: SQM Group

The impact on costs is interesting. As you might expect, it’s not uncommon for an FCR initiative to actually increase Average Handle Time (AHT), a common efficiency metric in contact centers. Fortunately, in most cases this is more than offset by a decrease in the number of calls.

For contact center managers mainly concerned about efficiency, they could consider cost reduction the main benefit of FCR and everything else (e.g. customer and employee satisfaction) an intangible benefit. Increasingly, though, service organizations are taking a more balanced approach. Kate Leggett of Forrester Research identified as a top trend for 2013: “Customer Service Is Moving From Cost Center To Differentiator.” Industry studies show a gradual shift from internal metrics aligned with productivity and cost goals, to a more balanced set of KPIs that include customer satisfaction and revenue.

In 2008, an ICMI study found just 51.2% of respondents reported FCR being used for live agent phone calls. By 2011, an ICMI poll reported about two out of three contact center tracking FCR.

However, every industry is different and the impact of FCR improvements will vary depending on the type of calls. Peggy Carlaw of Impact Learning Systems finds that tech support call centers are more likely to measure FCR. The impact of a second call is higher in technical support, because as problems get escalated the customer is talking with more specialized (and costly) employees. Helping “level 1″ support reps resolve more calls the first time is a clear win for customers and the company.

While there is broad support for FCR in the customer service industry, there are some unhealthy parallels with Net Promoter Score (NPS), which has gained considerable support as a “one number” loyalty metric. Jim Rembach of Customer Relationship Metrics says some have “twisted the context into the dream that one question will change it all.” He also points out, as many other experts have told me, that poor measurements can undermine an FCR initiative. FCR is best used for internal benchmarking to support a culture of continuous improvement. You shouldn’t compare FCR between contact centers, because each is calculated uniquely.

Balanced Scorecard

While FCR/CCR are important developments, I was pleased to see that ScottishPower resisted the one-number temptation. Instead, Tasker’s group uses a balanced scorecard approach with five different metrics.

Three can be consider “customer-centric” metrics:

  • Short IVR surveys after calls asked customers for feedback on their service experience, including how the agent handled the call, likelihood to stay with ScottishPower, and overall satisfaction.
  • The CCR metric essentially corroborates results from IVR surveys, after the fact.
  • A retention score is calculated with a little help from analytics, to define the likelihood the customer will leave within 5 weeks.

The other two metrics are aligned with business goals:

  • Average Handling Time (AHT) is still a useful measure of productivity. One nice twist: ScottishPower employee that excel in other metrics get more flexibility on call times.
  • Cross-sell performance is tracked with a goal of about 1% of calls generating other business.

Although the weak UK economy tends to encourage employees to stick around, ScottishPower nevertheless works hard to encourage employees to provide great service. Tasker says employees that perform better (using the balanced set of metrics just mentioned) are rewarded with better pay. Management motivates employees with sales incentives, commissions and prizes for excellence.

ScottishPower also has a “applause” award where anyone can nominate an employee for recognition. And, the company gives out annual awards for “going the extra mile.” Overall, Task says that ScottishPower’s employee engagement is “on par” with others in the industry. He notes that in recent years they have improved hiring processes to bring in employees better aligned with their goals and strategies.

Lessons Learned

In the US, where utilities are pseudo monopolies, customers are commonly called “ratepayers.” Can you think of a less customer-centric term? Our main role is to pay the bills. Wow.

The UK energy market works more like other openly competitive industries, such as financial services, mobile telecom, etc. There are big companies that dominate, sure. But the door is open for smaller firms to innovate on the quality of customer experiences and other factors.

Here are a few key learning points to take away from ScottishPower’s customer-centric journey:

  • Competition drives customer-centricity. Although there are a few examples of companies founded with a customer-centric strategy (e.g. Amazon), most companies have to learn from experience that customer loyalty is an essential driver of business success.
  • A well-designed set of metrics is critical. I’ve yet to see a really successful business that managed with just one metric—be it NPS, FCR, or anything else. A balanced scorecard approach works best to manage tradeoffs between customer- and company-centric goals.
  • Jobs must be aligned with customer and business goals. The workforce needs to be measured and rewarded for doing work that customers appreciate, while also helping the organization meets its business goals.
  • Simple changes can reap big benefits. Figure out why customers are calling, then remove the need to make that call. Easy! Don’t just speed up fixing the same problem over and over.
  • The right systems can help. Service organizations must be able to “connect the dots” between different channels. One integrated system makes it easier to manage, measure and improve multi-channel experiences.

One last point is that the customer-centric journey is never ending. ScottishPower’s “burning platform” can be traced back to deregulation. Adoption of FCR was another important milestone. But the company is not standing still; Tasker says they look for success stories in other industries to set their sights even higher for service excellence.

US firms would do well to emulate ScottishPower’s approach. If they do, some day they can say their customer service is a good as a utility!

Further Reading:


Disclosure: This post is part on my independent coverage of technology industry developments. No endorsement is implied. Please visit our sponsor page for information on companies that have supported the CustomerThink community.

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