Here is a brief excerpt from an article written by Stefan De Raedemaecker, Javier Feijoo, and David Jacquemont for the McKinsey Quarterly, published by McKinsey & Company. As they acknowledge, providing good service has never been easy. Meeting rising customer expectations requires companies to focus on building the capabilities their people need to make full use of their talents. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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Providing good service has never been easy. And service expectations are only rising: unprecedented technological change and access to data have made customers better informed and more demanding than ever, while the rise of social media gives them more power to publicize their experiences—making each customer interaction more important.

As organizations get larger, moreover, the sheer number of customer interactions becomes a disadvantage in that the risk of a customer-experience problem increases. The rapidly consolidating US banking industry is a case study: for 20 years, customer satisfaction at the largest banks has usually underperformed that of the rest of the sector.1

With services accounting for an ever-increasing share of economies from Canada2 to China, improving service quality has never been more important to more large organizations. And the way many organizations are achieving this impact—in sectors from banking and retail to government and telecommunication—is by adopting lean-management systems, which reinforce four integrated disciplines across the whole organization (see sidebar “What are lean-management disciplines?”).

One of the four—enabling people to lead and contribute to their fullest potential—is especially critical in transforming a large organization at adequate scale and speed, as well as in ensuring that it will continue improving into the future. At its core is a strong focus on capability building at all levels, which then becomes an integral part of how the business operates.

An example is a regional financial institution whose transformation reached more than 15,000 employees over the past four years. By investing heavily in capability building, the leaders changed the way the organization worked. Faster processing times and fewer errors meant that customer satisfaction rose by 11 points while the company’s cost-income ratio fell by 20 percent. At the same time, employee satisfaction rose: the proportion who scored the strength of their affiliation to the company as four or five on a five-point scale rose by 15 percent, to almost 80 percent of employees.

To make these results possible, however, the organization did more than just build the right capabilities, which can fade surprisingly quickly. It also followed several success factors that helped the capabilities persist even after the core transformation work was complete.

The importance of capability building

Why is capability building so important in a services context? Much of the answer concerns variability. In services, the work itself tends to be highly variable—both in terms of content (such as the wide range of questions customers may have) and in form (such as the major swings in demand that may occur depending the time of day or year). Moreover, providing services usually means relying mainly on people, who are far more variable than machines. This compounded variability can make consistent delivery appear almost impossible, unless people are able to perceive the issues that are produced by variability, react to them, and provide solutions on a continuous basis.

Over the long term, these capabilities become even more important so that the organization can identify new customer needs, take advantage of new opportunities, and create new value. Senior leaders and managers cannot know everything about what their customers want or how their products are doing. The closer people are to the front line, however, the more likely they are to have a real answer—but only if they have built skills in listening to customers and analyzing problems.

Capability building thus involves more than just teaching people how to complete their day-to-day tasks. Instead, it focuses on a broader set of skills that increase each employee’s value to the organization, such as learning to reach problems’ root causes, or providing effective feedback. With the greater value that more skilled people can create, the organization will enhance its unique competitive position. That means tailoring the capability building to the organization’s business context, culture, and needs—especially to the factors that allow the organization to create value.

A Latin American bank, for example, sought to build on its service reputation by enabling employees not just to respond to customer requests, but to anticipate them based on a combination of external circumstances (such as the level of activity in the bank), emotional cues (such as the customer’s visible stress or fatigue), and the customer’s history with the bank (such as a record of the customer’s interactions and their outcomes). For employees to respond effectively from the moment they encountered the customer, they needed greater interpersonal awareness, faster information gathering, and a deeper understanding of the bank’s own products and processes. Together these formed the core of a new capability-building program that comprised more than two dozen initiatives, ranging from in-person training for the front line on how to provide clear product explanations to a new performance-management system and in-house “university.” In one year, customer satisfaction rose from second to first place in the market across all three of the bank’s major segments: corporate, small business, and retail banking.

Once an organization knows which capabilities it must build, though, the next challenge is to start building them quickly and at scale—two prerequisites for a transformation to build credibility across an organization and sustain its momentum. That’s where additional factors come into play.

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The experiences of these organizations demonstrate what companies can achieve when they build their transformations around the capabilities that their people need in order to make full use of their talents. Once people see the value they can create, they engage more deeply in their work in ways that give an organization not just short-term performance, but the long-term flexibility and resilience that are essential to thrive over the long term.

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Here is a direct link to the complete article.

Stefan De Raedemaecker is a senior expert in McKinsey’s Antwerp office, Javier Feijoo is a consultant in the Madrid office, and David Jacquemont is a principal in the Paris office.

The authors wish to thank Serena Bazzoli, Dmitriy Galper, Ignacio Gorupicz, Ruben Schaubroeck, Joydeep Sengupta, Rohit Sood, and Elixabete Larrea Tamayo for their contributions to the development of this article.