In the mid-1980s, during my time at IBM, I remember an “empowerment” initiative that swept through the company. We attended training programs and learned that to be empowered meant we had to take more responsibility and be accountable for the results.
Yet despite more empowered employees, IBM performance suffered for many years during that period. The turnaround came when Lou Gerstner took charge in 1993. That year IBM posted an $8 billion loss, on top of nearly the same deluge of red ink from the previous two years.
Was the problem not enough empowerment? Hardly. In Who Says Elephants Can’t Dance? Gerstner writes that he found IBM culture “inbred and ingrown,” preoccupied with itself rather than customers.
To make a long and complicated story short, Gerstner changed the IBM culture to be more lean, nimble, and accountable. And, yes, more focused on customers. In 1994 the company earned $3 billion and financial results continued to improve after that.
I see customer-centric empowerment as giving employees more authority and support to create value for customers. This is critical because customers like to interact with empowered employees. Said another way: To build customer loyalty, reduce the frequency that an employee has to get approval from the boss to get stuff done!
One obvious application is service recovery. If a customer calls to complain, an empowered employee can take the initiative to offer an accommodation. Ritz-Carlton takes it a step further, empowering employees to spend up to $2,000 to delight a guest—not just to fix problems.
When you call Zappos for advice on an order, you won’t get rushed off the call because agents are empowered to spend as much of their time as needed to create a great experience. In one extreme example, the online retailer set a new record with a call that lasted over ten hours. The “service” was the agent talking to a customer about living in Las Vegas! A spokesperson wrote later that the call exemplified its core value of “wow through service.”
Empowerment is not limited to call centers or service interactions. In the often painful car-buying experience, one sales ploy is “checking with the boss” as part of the haggling process. Much like customers prefer a “one and done” customer service experience, Maritz Research found that car buyers want to deal with as few people as possible: 64.0 percent of customers are completely satisfied when one person with pricing authority negotiates the deal, compared with 20.7 percent when two or more are involved.
Empowering employees in a business model that isn’t competitive won’t make the business competitive. You still have to deliver products and services that customers want, do it better and faster than competitors, and manage costs. Empowerment is not a panacea.