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The Hierarchy of Service Effectiveness
The Hierarchy of Service Effectiveness is a model which outlines the most effective business entities that yield the best customer service result.
Fanatical, “tell your friend” customer service starts and ends with your organization and who stands at the front of the stakeholder soup line.
I am a firm believer that “he who provides the best customer service is more likely to win the customer”. If you win the customer, you win more customers. (See Customer Service That SUCS). Unfortunately, certain business structures lend themselves to customer service excellence while others create an environment where customer service experiences bleed with dissatisfaction.
The hierarchy of service effectiveness is rooted in stakeholder accountability. Stakeholders. Stakeholder is defined as “Person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization’s actions, objectives, and policies.”
While this hierarchy will give you a leading indicator on which company might best serve your needs, it also serves as a model for your own entrepreneurial ventures — the best stakeholders are your customers.
THE BEST:
Private, Solopreneur Corporation (LLC/S-Corp/C-Corp)
By far the best organizational structure to maximize service effectiveness is the entrepreneur going it alone, a sole proprietor under a corporate structure. Why? The pure stakeholder for the Solopreneur are the customers themselves. Entrepreneurs in this environment have no one to answer to but the customer. The customer becomes the entrepreneur’s paycheck. The customer becomes the entrepreneur’s lifeblood. The customer becomes the entrepreneurs sole-source of business transformation. Because of this relationship, the customer becomes the Solopreneur’s number-one stakeholder and customer service effectiveness is maximized and often superior when compared against competitors
GOOD:
Private Partnership Corporation (LLC/C-Corp) with Active Managers
The second best structure is a partnership Corporation, either an LLC or a C. Corp., much like the Solopreneur, private corporations with multiple partners carry the customer-service stakeholder in high regard. This again, lends to above average customer service experiences.
FAIR:
Private Corporation (LLC/C-Corp) with Inactive Managers/Investors/Members
A private corporation with multiple investors, including Angel and or VC investors, starts the downward transgression of service effectiveness. Why? Under this structure, the primary stakeholder, customers, is replaced by investors. The company now tries to satisfy investor demands over customer service demands. This results in a decline of customer service effectiveness as management tries to scale back costs and increase profitability; often to the detriment of customer service. Investors demand profitability. Customers demand service. Investors often win.
POOR:
Publicly Traded Company
The worst structure that exists for customer service effectiveness is that of a publicly traded company. Customer service stakeholders are at the back of the line. The priority stakeholder in a publicly traded company becomes the shareholders who demand maximum profitability and earnings growth. This constant pressure to deliver profits and earnings growth erodes all aspects of customer service experiences, including lower product quality (We must cut costs!) Poor people interaction (Outsource the call center to China to cut labor costs!) and ultimately relegates the customer stakeholder group neglected and forgotten. Ever call a publicly traded company’s customer service line? Or a website that is public? It’s a frustrating experience. The worst offenders of customer service futility are public companies.
So what strategies can be deduced from this hierarchy?
- All things held equal, a company where its primary stakeholders are customers will provide above average customer service experiences.
- All things held equal, a company where its primary stakeholders are investors will provided below average customer service experiences.
- All things held equal, a company who focuses on the customer first will do better than a company who focuses on investors/shareholders first.
If I am considering doing business with the company, I, more than likely will choose the company that has my interests as their primary stakeholder basis. If you own a company and are considering selling it, be mindful of the stakeholder change — as the stakeholders change, so will the customer service experience — and your customers just might not approve.
The opportunity in all of this is to run your company with Customers as the primary stakeholder, regardless of corporate formation structure. Of course, this can be downright impossible in an investor owned organization — I can speak firsthand on this frustration.
Fanatical, “tell your friend” customer service starts and ends with your organization and who sits atop of the stakeholder soup line.
Cheers,
MJ
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When I was in my 20's, they laughed and said I was nuts. "MJ! You're dreaming!" Then, I got the last laugh. I retired in my 30's and now live a dream. Those same people now whore their life away for a paycheck only to reclaim their salvation on the weekend. With a correctly executed Fastlane plan, everyday of your life can be your weekend.
I completely agree.
If you are a solo-preneur you are directly related to the customer. They are in your face and can tell you no to your face. Not satisfying the customer can work with large nameless corporations but with smaller businesses you live and die by it.