Many of us are familiar with a request to justify any project from the return on investment perspective. Corporate management’s fiduciary obligation is to control the use of financial resources for the best interest of the company’s stakeholders. I have no quarrel with this notion. I do have a quarrel with how it is frequently practiced.
There are two major points of contention:
- The Practical definition of who are a company’s stakeholders – actions speak louder than words. Choices of internal funding, that favor short-term returns at the expense of long-term sustainability of business, indicate that the leadership does not consider employees and customers to be the stakeholders.
- Departmental (silo) approach to ROI analysis – the reduction of a single department’s operational cost without evaluating the effect it may have on performance of other departments.
There are often inescapable Customer Experience consequences associated with efficiency initiatives that show fake ROI:
- Replacement of inside sales force with automated phone bots may look like an excellent ROI initiative. However, every recorded call received by a potential or existing customer chips away of the brand value. What additional investment in marketing would it require to at least balance the negative effect?
- Reduction of training budget for customer service representatives can jumpstart quarterly earnings and may inch up the share price for a week or two to please hedge fund managers. How will it affect customer churn rate, and what is the expense of replenishing the lost customers?
- Implementation of community-driven customer support seems like a sure winner until its effect on conversion rate from free to paid subscription is examined. From that perspective, the increased cost of the company customer support looks like much better investment.
- Streamlining cost of customer intelligence acquisition process is a no-brainer. Just lay off market researchers, delegate to product managers DIY survey process and offshore tabulation and interpretation of results. How would it affect your product success rate? What would just 5% drop do to the company’s bottom line?
The point I am trying to make is that the silo approach to optimization of business processes often looks like “pound foolish, penny wise” tactics. Excessive focus on efficiency, i.e. cost reduction, may cause disproportional increase in expense of attracting and keeping customers, and that destroys an enterprise’s effectiveness.
“The purpose of business is to create and keep a customer.” Peter F. Drucker