Taxpayers Are Customers Too
Business teaches government about customer service

What's a Customer?

People used to say that if government were a diner, it would be closed for lunch.

There are reasons for that.

Over the past 60 years, government got bigger and bigger. Laws and regulations multiplied. Small departments became complex bureaucracies.

It wasn't easy to focus on the customer. Most federal workers were trapped in an industrial-age assembly line where they passed paper from one office to the next. "Customers" were rarely seen or thought about. Even the word was rarely used.

So it's not surprising that many federal workers lost sight of the fact that their services were ultimately meant to benefit the American public.

Used to Abuse

For a long time, Americans have been unhappy with many government services. Of course, not everyone in the private sector was doing things right, either. Waiting in a long line at the bank or not being able to get a straight answer over the phone was just as frustrating as having to take a day off to visit a government office.

Customers were starved for attention and used to abuse.

Then something happened.

In the face of the information explosion and global competition, American business underwent its own revolution.

Customers Rule

Corporations spent 10 painful years reengineering to put the customer at the center of their activities. To succeed, companies now must offer their customers variety, quality, convenience, and excellent service. They do this by listening to customers, empowering employees, controlling costs, and using information technology.

Now banks have 24-hour phone service and ATMs. Visa sends replacement cards with just a phone call. Nordstrom fixes complaints on the spot. New cars seldom break down. Service shops give you a ride to the bus stop.

In short, America's leading companies stopped taking customers for granted.

Listening to Business

Government, too, needed to learn how to become customer friendly. But first it had to get over a myth: that government and business were so different that they had nothing to learn from each other. The truth is, nearly all the tools and techniques that helped American companies get back on their feet could be adapted to make government work better.

In June 1993, Vice President Gore invited top executives from Cadillac, Ritz-Carlton, The Limited, and other companies to join him at Congress Hall in Philadelphia for the Summit Conference on Reinventing Government. He listened as these managers emphasized a common theme: Put the customer first. This message came up again and again, in dozens of other meetings with executives from such companies as Motorola, Southwest Airlines, and Saturn, as well as a Who's Who of management experts.

Standards Equal to the Best in Business

Lessons from that conference led to President Clinton's 1993 order [see below] for "a revolution within the federal government" to change the way it does business. The order requires agencies to identify their customers, ask them what they want, and then set standards equal to the best in business.

President Clinton's Executive Order 12862
"Setting Customer Service Standards"

Embark on a revolution within the Federal Government.

  • Identify customers who are, or should be, served by the agency.
  • Survey customers to determine the kind and quality of services they want and their level of satisfaction with existing services.
  • Post service standards and measure results against them.
  • Benchmark customer service standards against the best in business.
  • Provide customers with choices in both the sources of service and means of delivery.
  • Make information, services, and complaint systems easily accessible.
  • Provide means to address customer complaints.

The standard of quality shall be equal to the best in business.

Evangelists of Customer Service

In response to the President's order, 400 government workers met at Hunt Valley, Maryland, with 40 executives from Disney, Federal Express, Xerox, and other companies known for their customer focus.

They learned how Disney executives, including Judson Green, President of Walt Disney Attractions, spend time in their theme parks dressed up as Mickey, Donald, or Goofy -- so they can learn first-hand about their customers.

They heard how Ralph Stayer, CEO of Johnsonville Foods, let production workers decide whether sausage tasted good enough to ship -- so each employee would take responsibility for customers.

Finally, they accepted a challenge thrown down by Tom Peters, management expert, to become "raging inexorable thunderlizard evangelists of customer service."

Changing Everything

The Hunt Valley Conference was the first of hundreds of joint activities with business that are moving the federal government steadily away from its "no help whatsoever" image.

Large customer-focused companies are:

  • running workshops for government employees;
  • working with government agencies to transfer know-how in areas as diverse as inventory management and video training; and
  • participating in benchmarking studies across a range of topics such as handling complaints and running a 1-800 telephone service.
  • The best companies know it's no simple matter to become a first-class, customer-driven organization. Doing that means holding a big mirror up to the organization, acknowledging what's there, and then changing what needs fixing. Sometimes, that means changing everything.

    Uncle Sam Delivers

    Agencies are changing. They are asking their customers what they want, listening to the answers, and promising to deliver. Instead of blindly following procedural rules, employees are getting flexibility to use their heads to meet customer needs. However, everyone isn't born knowing how to serve customers. So, most agencies are offering customer service training. One of the stars is FEMA, where all full time and disaster relief employees have taken customer service behavioral skills training.

    Across government, agencies that focus on customer service are showing improvement. For example:

  • 91 percent of visitors to the National Parks in 1996 rated their overall satisfaction as "very good" or "good" on services including lodging, food, facilities, exhibits, ranger programs, campgrounds, and picnic areas.
  • Social Security now fills 97 percent of social security card requests within five days.
  • The Postal Service is delivering 92 percent of First-Class Mail on time -- up from 79 percent in fiscal year 1994.
  • This year, 570 government organizations are publishing customer service standards and working like crazy to deliver.

    Reinvention Zone Interview

    To Beat Wal-Mart

    Consider the case of Brigadier General Kenneth Privratsky, Commander of Defense Distribution Region East (DDRE), who entered The Reinvention Zone to discover the secrets of Delta Air Lines, Caterpillar, IBM, and Wal-Mart.

    Q: DDRE does what?
    A: DDRE distributes everything from battle tanks to toothpaste for our customers -- most of the U.S. military forces.

    Q: How big is your operation?
    A: I have 8,000 employees in 13 depots who fulfill 15 million orders per year.

    Q: Why did you go to the private sector for help?
    A: I knew our customer service was much slower than the private sector's. So I sent teams to visit our civilian counterparts -- aviation depots went to Delta Air Lines, the heavy equipment depot went to Caterpillar, et cetera. My staff went to IBM, Wal-Mart, Eddie Bauer, and Spiegel.

    Q: How did the companies react?
    A: Everybody was eager to share their ideas.

    Q: What did you learn?
    A: We learned four things. First, ask your customers what they want, and give it to them. Second, raise standards -- our orders took four days; the private sector took one. Third, cut management -- our supervisor-employee ratio was 1:10; theirs was 1:20. Finally, cross-train staff to meet changing demands.

    Q: What surprised you most?
    A: Companies' performance standards for the individual worker were simply much higher. Now we aim higher.

    Q: How much has DDRE changed since you saw Wal-Mart?
    A: Pretty much everything changed. Routine orders now take us a day instead of four. We've reached a 1:15 supervisor-employee ratio. We review our workload daily and adjust for the next day. Before, incredibly, we did it only once a month.

    Q: What's the bottom line?
    A: Our performance is better in every category -- we saved more than $28 million. That money goes directly to improving military readiness.

    Q: What's your next goal?
    A: To beat Wal-Mart.

    Tales From the Reinvention Zone

    The Loan Arranger

    Ex-Im is getting loans to small businesses through partnerships with private banks. One of the toughest tasks for small business exporters is to find "working capital" -- money to buy inventory and raw materials. Reinvention at the Export-Import Bank has provided easier access to funds.

    Ex-Im, as it's called, is a government agency set up to promote U.S. exports. Until recently, its services have benefited mostly large exporters.

    Now, Ex-Im has found a way to better serve a key group of its potential customers -- America's 128,000 small and medium-sized exporters. The Delegated Authority Program allows it to leverage working capital loans to small businesses through partnerships with private banks.

    Through delegated authority, Ex-Im Bank can guarantee 90 percent of the loans that local lenders extend to exporters, without case-by-case approval from Washington. Certain qualified lenders can extend up to $5 million in loans per exporter. Lenders like the program because it reduces their risk -- yet provides them with a new product to offer customers. Small business is happy to have this new -- and more accessible -- source of funds.

    One CEO who has benefited from the new program is Warren Fuller, head of Paul O. Abbe, Inc., a family-owned business in New Jersey with over $7 million in sales in 1996. The company manufactures processing equipment for chemicals and pharmaceuticals. It employs over 40 skilled workers, such as chemical and mechanical engineers.

    Fuller learned about the program through his local bank, the First National Bank of New England. First National has used delegated authority to finance $22 million of working capital loans to small businesses. It extended a $200,000 line of credit for export-related working capital to Fuller's company. This money enabled him to finance six projects -- which led to more than $1.5 million in new sales.

    "Ex-Im is leveraging its resources by bringing in commercial banks who know the customer," says Fuller. "Without this program, it would have been almost impossible to pay for the steel and other working capital we needed for exports. Work-in-process is very difficult to collateralize, and banks consider foreign accounts receivables as taboo. Also, my bank gives me 24-hour service. Ex-Im itself just isn't set up to handle a small customer like me."

    The program benefits the banks too. "We view exports as the main driver of growth for small and medium-sized business," says Michael Selfridge, Vice President for International Banking of Silicon Valley Bank in California, which serves fast-growing, high-tech businesses around the United States.

    "The advantage of this program is that we can approve loans directly, without prior authorization from Washington. That means we can serve our customers promptly and take a limited risk where we feel it will pay off. We've used delegated authority to finance some $135 million in working capital loans, which has created over $1 billion in exports -- and many U.S. jobs," says Selfridge. "It's a phenomenal success story."

    By partnering with 80 local banks in 42 states, Ex-Im has been able to double its lending to small business -- from 155 loans totaling $180.6 million in 1994 to 286 loans totaling $377.8 million in 1996 -- without adding staff in Washington.

    "The old Ex-Im Bank was not relevant to me," says Warren Fuller. "But this is an example of how reinvented government can help small business."

    Social Security Answers the Call

    Private-sector techniques have helped the Social Security Administration speed information to customers.

    Social Security provides almost 50 million individuals with retirement, survivors, disability, or welfare income. That kind of customer base generates a lot of questions. In 1995, 121 million calls were placed to Social Security's toll-free number, but only 44 million callers got through and were served. Even with about 4,500 people answering the phone, phone access was so poor that many people just couldn't get the help they needed. Today if you dial 1-800-772-1213, it's a different story.

    "We wanted to improve, but we didn't know which efforts would give us the biggest bang for the buck," says Toni Lenane, Senior Advisor to the SSA Commissioner.

    The breakthrough came when Social Security reevaluated its strategy for service delivery and decided to talk to customers directly about their expectations. In 1995 the agency joined a telephone benchmarking study sponsored by the National Performance Review. This study compared toll-free number services in the public sector (including the IRS, Bureau of the Census, and Immigration and Naturalization Service) to leading private-sector companies, including:

    • American Express Travel Related Services
    • AT&T Universal Card Services
    • Bell Canada
    • Citibank
    • Duke Power Company
    • GE Answer Center
    • Saturn Corporation
    • USAA Insurance

    The benchmarking study demonstrated how successful companies manage large phone banks -- and helped Social Security fix its problem.

    "It was important to learn from the benchmarking. We were trying to reinvent the wheel until we looked at industry, which had already spent years refining the process," says Lenane. "We learned that in the private sector, training is followed by a student-mentor environment so there is always someone more experienced to ask. Also, training continues on an as-needed basis so the operators' skills and information are always up-to-date.

    "Private companies train the person answering the phone to offer the customer a full range of assistance," Lenane adds. "We were doing just the opposite. For instance, before this exercise, the person who answered the 800 number at Social Security couldn't take a claim. That meant callers would have to wait about three weeks for their local office to call them back and take their claim."

    In just 18 months, Social Security almost doubled its telephone answering capacity without adding new hires. The agency did this, first, by working with AT&T to design a new network that provided the capacity and automated features found in the best toll-free business services. Second, it reinvented the way it records employers' reports of wages through extra reliance on information technology; the people who had been operating the old system then went to work answering the phones on the toll-free service. Third, it trained other people in the organization to help out at peak times.

    Now that people could get to Social Security when they called the toll-free number, the agency took the next step customers wanted: It started to train telephone operators to take claims immediately -- over the toll-free number.

    According to Lenane, "We have made great gains in delivering toll-free telephone service, but we know that to be truly world-class, we need to continuously improve to meet changing customer needs and expectations. Our operational people continue to learn, test, and implement new approaches that bode well for future success."

    From Trails to Sales

    The National Park Service and Forest Service serve their customers right in the REI store. Few retailers could imagine showcasing federal employees in their stores. But that's what's happening in Seattle, where a major sporting goods retailer has teamed up with the National Park Service and the Forest Service to offer customers a direct link to government information -- while they shop.

    REI is the nation's leading retail cooperative, with more than 1.4 million active members and $484 million in annual sales of outdoor gear. REI's innovative flagship store in Seattle encompasses 80,000 square feet (not including a small forest with hiking and biking trails) and draws 2.5 million visitors a year.

    One of the store's greatest innovations was created when the Park Service and Forest Service moved their offices from a downtown federal building to a booth right in the REI store. From this spot -- called the Outdoor Recreation Information Center, or ORIC -- rangers provide information on park openings and closings, trail and river conditions, campsites, and more.

    Before the move, the office was only open on weekdays and served about 62,000 customers each year. At the new location, with extended hours on weekends and evenings, the volume of business has at least doubled. On peak days, employees serve 600 customers.

    The shift not only puts the rangers where the customers are, but it also saves the government a significant sum in office costs. REI charges the Forest and Park services only minimal rent, about enough to cover incidental expenses. "I consider this a blended operation. We share phone lines, storage space, even customer service training," says John Sheppard, the store's operations manager.

    The advantages for both sides are clear, Sheppard adds. "We have learned a lot. The Park Service and Forest Service have access to information that REI staff could not get easily. The rangers, in turn, have learned from us about dealing with high volumes of customers. I can't put it in exact dollars, but I know that ORIC has been a financial benefit to our store. We get tremendous, positive feedback. The thing is, their customers are our customers."

    What's Next?

    Thousands of companies are helping agencies get to know and serve their customers. The challenge ahead is to carry the customer service message throughout the federal government.
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