Who Really Sets the Real Requirements for Process and People’s Performance?

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Setting REQUIREMENTS isn’t easy. Most of the time it’s very complex, with competing needs and desires that need to be resolved, hopefully sooner rather than later.

After a spirited multi-day debate with a client in the early 1990s about the “Customer being KING” – or not (my view) – I was “driven” to write the following article to reflect the reality that…

The Customer Is King (Not)

-Balancing Conflicting Stakeholder Requirements-
by Guy W. Wallace, CPT
Originally authored in 1994, published in 1995, and updated here in 2010

Now available at here as a 16 page PDF.

Overview of the Issue

The slogans accompanying many improvement efforts emphatically state that the “Customer is King.” Customer Satisfaction reigns supreme! Know your CPI. All things for the customer! Meet the customer requirements. Exceed the customer requirements to delight the customer. Quality is defined by the customer, internal and/or external.

This overly simplistic view of Quality ought to cause many an executive to lose sleep and quiver with fear at the frightening thought that if they too, follow their peers’ lead and push the Improvement movement into their own organizations, everyone on the payroll might take the slogans literally and act accordingly. Very, very scary.

One emphatic question: Are we willing to meet the Customer’s requirements at any cost?

The emphatic answer in a word: No!

The reason the answer has to be “No!” is that nothing in business (or anywhere else) is really that simple. There are more stakeholders than just the customer, there is often no one customer, there is often no one right answer as to what the requirements are, nor is there any point in ignoring one of the key considerations in making a business decision—cost. The truth is that there are always a number of complex trade-offs in business decision-making.

Many Improvement advocates have done a poor job of convincing management that they understand these trade-offs and, as a result, the Improvement discipline sometimes sounds naive about the realities of business. On the other hand, some executives seem to oversimplify their message to make it clear and, in the end, fail to give sufficient guidance to people being “empowered” to make decisions lower in the organization.

Should the customer really be treated as king; in all decision making processes? In the front line interfaces, usually yes! But what if the customer approached your front line employee and asked for a free replacement of an expensive item clearly damaged due to customer negligence?

Some of the literature might suggest you should replace the item, no questions asked—the theory being that such exceptional acts lead to word of mouth advertising and even more business in the future. Of course, this strategy may require higher prices to cover the cost of this level of service which may run counter to the requirements of some other customers. There may even be regulations about what you can do with the returned item. There may even be legal reasons why you shouldn’t accept the return based on pending litigation or future liability.

The point isn’t what the right answer is, the point is that regardless of the answer, there are a lot of stakeholders in even a simple decision whose requirements need to be weighed into that decision.

Are all requirements created equal?

Often the requirements of the various stakeholders are in conflict with each other. How do we balance the requirements and determine where trade-offs can be made? How do we evaluate them to determine how to create a win-win solution for everyone? How do we conclude whether win-win for everyone is actually feasible and not just a “pie in the sky” goal in a world of variability? Ultimately, economic requirements must be part of the decision-making process.

Think about executive management’s role in a publicly held corporation. Their primary purpose for being on the payroll is to protect and increase shareholder value. They represent the shareholders (owners). Their job is to act as the guardians of the owners’ investments (assets). This is known as their “fiduciary responsibility.” Webster defines fiduciary as follows: “…designating … a person who holds something in trust for another….”

This responsibility is management’s, under penalty of law. Executives who mismanage the shareholder’s equity could be taken to court and jailed if found guilty. You see, it’s not only their job, it’s the law. Therefore, management can not allow any projects or activities to be undertaken that are not seen as a means to protect and/or increase the value of the corporation.

On the other hand, the Improvement advocates have a point when they try to move the focus away from profit as a goal toward profit as a result of competent, fair service. Executives need some way to get the message out that the company exists at the will of its customers and that continued competitiveness can only come by profitably meeting customer needs better than the competition.

The problem is that slogans are incomplete—management might just as well run around shouting “Empowerment to the people! Delight the customer! Improve all processes everywhere continuously!” All that activity is sure to generate some results.

The trouble is that, without a sound business evaluation, the results may be nothing more than costs. Maybe that is why number 10 of Deming’s 14 Points is to eliminate slogans, exhortations, and targets. But management’s problem still remains, what is the right message to convey to the troops?

The message that we want to convey is that the customer is not the only one whose requirements we must consider. Many other groups have a “stake” in our decisions. Effective decisions must balance the requirements of a number of disparate stakeholders.

Let’s take a look at who these stakeholders are, what their requirements typically are, and how much “clout” they carry.

Stakeholders and Requirements

There are eight generic or basic stakeholder categories, with many potentially different types of people in each of them. The categories are:

• Government
• Standards Bodies/Professional Associations
• Shareholders
• Executive Management
• Customers
• Employees
• Suppliers
• Community.

See the article PDF here for the entire 16 page article and sidebar sidebar, which includes a starter list of requirements and suggestions on where you might look within your own situation to adapt the models, definitions, labels, etc. to best fit YOUR situation. Here is an example Matrix to list the Requirements.

Remember the goal is to both understand them, and to understand which ones out rank another when in conflict. And then establish the metrics for the processes and the people that are clear and not inadvertently in conflict with each other – reflecting the messy situation of conflicting requirements.

Then the entire situation is much more manageable with the clarity that the data can bring.

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