Making the invisible visible
This was the subject of a fascinating programme this week on BBC Radio 4 (8.30 pm, Monday 15 June) not about the illusionary tricks of Mr Marvin, but instead about our mysterious predilection for shunning 80% of our economy when it comes to measuring the value of services.
Linda Yueh, a Fellow in Economics at St Edmund Hall, University of Oxford and an Adjunct Professor of Economics at London Business School, provided a persuasive and interesting argument as to why government may in fact be underestimating productivity, at a time when official figures point to a dismal performance in comparison to other countries. We may also risk future global growth targets, unless we embrace, articulate and correctly measure (and value) the whole range of services which most of us are actively engaged in.
Our discomfort with the service industry can in part be explained by the reckless behaviour of the banks and the perceived immorality portrayed by advertising and marketing services in encouraging us to consume more than we should.
Since the industrial revolution we have become expert at codifying and measuring inputs and outputs from factories, with accountants taking comfort from ‘seeing is believing’. Phrases such as ‘intangible assets’ are a handy catch all for invisible services such as marketing, advertising, insurance, banking but they do no favours to improving our understanding about the stark economic dependency on services, and our need to be cleverly creative to maintain leadership in this sector of the economy.
In the customer service sector these issues are magnified several fold by our inability to measure the true value of customer interactions. Since the inception of call and contact centres, the measurements adopted tend to be those that can be measured rather than those that need to be - in other words the unit costs around call times, idle times, cost per seat etc.
In one recent conversation I heard about a fantastic advisor who excelled at great conversations with financial advisors who could choose to invest funds in a plethora of other brands. Despite his certainty that his interactions resulted in significant financial benefit to his organisation further up the chain of command, his performance metrics did not allow for this success to be recognised and valued. Ironically he was more likely to be nudged into wrapping up calls more quickly, than praised and indeed rewarded for his skill. He is needless to say no longer employed there.
Now any restaurateur would surely be out of business if he measured success by the length of time customers sat at the table; instead he would charge according to the proven quality of the food, service and ambiance on offer. And we wouldn’t value a painting by the raw materials and cost of labour; but rather than by the value placed by the recipient.
The economists Ricardo Hausmann and Federico Sturzenegger called services trade "dark matter", named after the physics concept, because both are invisible but very important. In conversations with CCA outsourcing members this week, I was reminded by how many organisations now have their customer service and sales handled by them, but also struck by how we have failed to capture the richness and value add of these services, in the process of tendering and the ensuing partnerships formed by successful parties. Much work is being done in improving a common language and understanding of value in this important sector at our forums for operators and suppliers alike.
CCA’s future scenario programme points to an economy shifting towards services professionals being hired and rated in an increasingly competitive market according to their skills of empathy, IT prowess, problem solving and counselling; a welcome shift (which is already starting to happen) from the generic one size fits all recruit. They also point to a shift in organisational structure with customers having a seat at the board table; the effects of this must surely be a change in organisational focus to eradicate pointless and valueless interactions which clog up our channels today, clearing the paths for a more productive and valued conversation.
If we are tempted to think of everyday services as insignificant, we should note the words of Benjamin Franklin, ‘Beware of the little leaks, they can sink ships’.