Identifying Internal Customers and Measuring Their Satisfaction

Satisfying customers could be described as a company's ability to generate genuine teamwork among all departments in the organization: sales, marketing, credit and receivables, manufacturing, distribution, packing and shipping, quality, production planning, etc.; and to instill in every individual the constant awareness that customer service is everyone's business. This description emphasizes the importance of customer service as an organizational responsibility. However, too often, a single department in a vertically structured organization is held accountable for apparent customer service failures that, for the most part, originate outside that department's responsibility and are beyond its control. Deductions and disputes are prime examples of costly process problems within a company that could often be avoided or at least, the resolution could be hastened, through better customer service or communication.

Consider the following example in a vertically structured organization:

Sales requests a merchandise return authorization for a customer. Returns administration or customer service writes the authorization. The receiving area accepts the goods. The warehouse returns them to stock. Inventory management updates records to reflect their return. Returns administration or customer service determines at what price the goods were actually sold. Accounting adjusts commissions, and so on.

Yet, no single department or individual is in charge of handling the return process.

For some of the departments involved, returns are a low priority and a distraction. Furthermore, the company has paid sales commissions on unsold goods. Worse, customers often do not get the credit they expect, and they become angry, which effectively undoes all of the sales and marketing efforts. Often there is a delay in payment of their bills, and they pay what they think they owe, after deducting their value of the return. This throws your accounts receivable department into turmoil, because the customer's check doesn't match the invoice and a dispute or chargeback is created. Then, the credit department or claims and adjustment people are left to clean up the mess.

Many organizations are finding that teams are a way to improve communication and service customers more effectively. Needless to say, teamwork doesn't just happen, because people want it to. Usually management translates a mandate into a system in which all participants have specific responsibilities to perform and standards to meet - responsibilities designed to generate the desired levels of service at the least cost.

Quality customer service is the ability to create a climate of confidence, credibility and satisfaction for all parties in the "chain" from product concept and design through manufacturing and distribution through payment or settlement. Along the chain, there is a continuous opportunity for the functional areas within an organization to improve. A key premise in customer satisfaction is understanding the needs and meeting, or exceeding, the expectations of customers. Furthermore, this is done while optimally using resources. While most companies have developed strategies to improve quality and external customer service, internal customer satisfaction is a much neglected component of quality improvement. To this end, it is important to emphasize that total customer satisfaction can be attained only if all employees, devoted to external customer satisfaction, can work together and assist each other to achieve the common objective. In this case, each person must improve what is around them and look for ways to satisfy the requirements of others in the organization efficiently. This requires a climate that encourages and supports teamwork in addition to the promotion of a general ethic of continuous improvement. The basis of this stems from the fact that there cannot be total customer service unless all employees are supporting each other and working together toward common goals. In short, total customer service means meeting the needs and expectations of both internal and external customers.

Introduction
The many responsibilities of the credit, collection, and accounts receivable functions require it to interact with both external as well as internal customers. Consequently, it is extremely important for the areas of credit, collection, and accounts receivable to have a good understanding of the needs and expectations of both types of customers in order to assist the overall organization in achieving good customer service. In this section, the focus is on internal customers. A quality improvement process to better serve internal customers is depicted in Exhibit 1.

Identifying Internal Customers of the Credit Department

Interrelated functional units along the value chain form business organizations. The relationships among these functional units vary from one organization to another, but are usually well defined in organizational charts. These interrelationships, in turn, create dependence among the functional units. In the context of customer service, the interrelationships among functional units are viewed as processes. The roles performed by a functional group along the value chain for others, can be regarded as "outputs" of the former. The functional group receiving the output is considered the "internal customer." To better serve internal customers, the functional groups providing outputs must first identify their internal customers, their corporate needs, and their expectations. Typically, internal customers for the credit function include chief financial officers, controllers, sales and customer service personnel, and treasury personnel. The organizational roles of the credit department to these internal customers are discussed below.

Self-Evaluation of Organization Roles

The roles performed by the credit function can be broadly classified into five categories: 1. credit risk management

2. 3. 4. 5.

credit risk reporting and control collections cash application and discrepancy resolution.

A self-evaluation effort involves critical examination of how these roles are performed with the resources devoted to the execution of these functions. Your examination may start from the broad categories and be refined as required. Examples of the finer tasks involved in each of the broader categories may include the following: Credit Risk Management

assess credit risk of prospective customers evaluate credit risk of marginal accounts update analysis for existing customers approve credit sales set credit lines approve cash discounts

Credit Risk Reporting and Control

report and advise on receivable status negotiate secured instruments manage risk/insurance

Collections

current receivables management past dues management lockbox management bad-debt management

Cash Application

system management and update timely application accurate application

Discrepancy Resolution

address cash discount issues resolve customer deductions resolve chronic delinquency problems (e.g., restructure past dues)

To achieve good customer service, it is necessary for the credit, collection and accounts receivable functions to periodically, critically review the significance of each task performed in relation to the

total corporate objective and the resources available. For example, how many resources should be devoted to the credit investigation of a long-time customer with sound financial background versus a new customer with little financial information available? How much additional effort should be spent on the collection of a certain past due versus writing it off as bad debt? It is clear that a good self-evaluation effort should yield much insight to the corporation's requirements of the department. This should also allow you to more effectively plan and use the limited resources available.

Identifying & Measuring Needs and Expectations of Internal Customers

While the credit, collection and accounts receivable operation can certainly address some of the issues mentioned above based on the experience and expertise of its management, it is perhaps more appropriate for the credit, collection and accounts receivable functions to be discussed with the internal customers involved. In this regard, management can obtain a better understanding of the needs and requirements of the internal customers and evaluate the effort required to satisfy them in relation to common corporate goals. This is an important step towards the alignment of the credit operation's effort with that of each internal customer's requirements. Clearly, there is no reason to focus on issues that are not of major concern to the internal customer or to take actions which are warranted in the context of the overall corporate goals. For instance, the focus of the credit department's resources may be to update and assess the financial condition of existing accounts, while the internal customer may perceive it to be more important to get timely information on new accounts. It may be necessary for the credit operation to re-evaluate the relative importance of the two functions and consider devoting more resources to new account assessment. This should be done with the support of the internal customer. If, in the final analysis, it is decided that the up-keep of marginal accounts is more important toward the corporate goal, credit can then maintain the status quo with an understanding from the internal customer and not a misunderstanding that the department is devoting resources to a less important task. To understand the needs and expectations of internal customers, a number of tools can be employed by the credit, collection and accounts receivable functions. These include the use of surveys, the forming of focus groups, and the scheduling of one-on-one meetings between managers in the respective departments and internal customers on a regular basis. Each of these strategies has its merits. The tool that is least demanding and most comprehensive is the use of a customer survey. This is especially true when it is a priority for internal customer service to not hurt your external customer. This may sometimes occur while a company, or functional department, is learning a new way to operate and frequent group meetings can be disruptive to the work schedules of internal customers. The use of a customer survey is most consistent with a quality customer service program. One disadvantage however, is the loss of personal contact with internal customers that can yield significant insights. A compromise solution to this problem is to supplement the survey with occasional periodic review with internal customers. In addition, it is advisable to send the survey results to be reviewed by internal customers to them ahead of time. By keeping them informed of such results, each internal customer can compare how their perception of the credit, collection and accounts receivable operation is similar or different from other internal customers and that of their functions. This may lead to the clarification of prior misunderstandings between the internal

customers and your credit, collection and A/R operation. Moreover, the knowledge obtained by internal customers from the survey results over a period of time allows them to clearly observe your operation's improvement and demonstrates your commitment to excellence.

The Internal Customer's Survey

It is desirable for the credit, collection and accounts receivable department to develop a process to better meet the needs and expectations of its internal customers. The above discussion suggests the introduction of a process to survey the needs and expectations of these internal customers and to measure the current level of satisfaction. This information, in conjunction with an evaluation of the resources available and the way internal customer's needs and expectations are addressed, are important inputs to devising a plan for future improvement. Survey evaluations of the credit, collection and accounts receivable function can focus on three performance characteristics:

technical expertise organization role and intangible know-how

The evaluation of technical expertise can start from the list previously suggested. The list is by no means exhaustive and your individual credit, collection and accounts receivable operation should adopt and refine it according to its needs. The evaluation of organizational performance centers on how much the operation plays an active part in supporting external customer satisfaction and being an active player in the overall corporate environment. Finally, the credit, collection and accounts receivable function is also expected to perform with professionalism and bring in superior industry and business knowledge to the organization. When the internal customer expects these intangible qualities of the credit department, it is the responsibility of the credit, collection and accounts receivable department to address these issues. It is important to note that customer satisfaction is not achieved through the provision of products or services alone, but through meeting or exceeding the expectations of customers without employing excessive resources. While an internal customer survey can include as many of the measures of performance discussed above as possible, the most effective survey tool is one that does not burden potential participants with hundreds of items. The ideal tool is a one-page survey form. While there is no universally accepted list of performance measures, the credit, collection and accounts receivable operation can develop a one-page survey with effective measures of performance over time, as they learn more about their organizational role and the requirements and needs of internal customers. While this survey (Exhibit 2) is a start, your survey may include the performance measures of different tasks and then refined over time. In order to be able to collect the most useful information, you should put in place a built-in mechanism to solicit input from the internal customer. To accomplish this, it is necessary to provide opportunities for internal customers to raise issues that are perceived to be important by them, but may be overlooked by you in the initial survey. Hence, the survey form should ask internal customers questions such as, "What can the

department do to serve you better?" and ask for comments on low scoring items. An even better approach would be to arrange a follow up meeting to discuss the issues. Gradually, as the roles of credit, collection and accounts receivable operations can be better identified by both the internal customer and you, items on the survey tool can be updated accordingly.

Sample Customer Survey

A sample survey form developed by the Research Committee of the Credit Research Foundation is displayed in Exhibit 2. A special feature of this form is that it not only specifies the level of service performed by the credit, collection and accounts receivable functions actually received by internal customers, but it also requests internal customers to specify the required performance level of the activities, given the resources available to the credit, collection and accounts receivable group. This approach is consistent with the spirit of excellent customer service where excessive activities that do not add value should be eliminated. In addition, any differences between the actual and required level of services reported should be addressed between the credit, collection and accounts receivable group and the internal customers. While the sample form does not represent an exhaustive list of performance measures, it includes most essential measures for the credit, collection and accounts receivable functions. Credit departments planning to use the form should adapt it according to their circumstances. After obtaining a better understanding of the needs and expectations of internal customers through survey results, the credit department should be equipped to focus on the performance areas that need to be improved to better satisfy the internal customer and achieve superior customer service. It is important to emphasize that the survey is only a tool to assist the credit, collection and accounts receivable operation to identify internal customer's requirements. Quality customer service cannot be obtained unless corrective actions are taken.

Exhibit 1 Internal Customer Satisfaction Process

1. Identify internal customers. 2. Evaluate the role of the credit, collection and accounts receivables administration (as a functional group) within the organization (self evaluation). 3. Determine actual performance level through survey of internal customers. 4. Determine the level of satisfaction required within the organization through survey of internal customers. 5. Measure satisfaction level of internal customer with respect to needs and expectations. 6. Identify improvement opportunities in work process required. 7. Determine process potential and develop action plans for better service.

8. Monitor, control and update.

Exhibit 2 9. Internal Customer Satisfaction Survey 10.For The Credit, Collection and Accounts Receivable Function
11. I. TECHNICAL EXPERTISE A. Credit Risk Management 1. Rate our ability to assess financial condition for new accounts marginal accounts 2. Rate our ability to assess other factors associated with credit risk e.g., economic conditions, competitiveness, market share, etc. 3. Rate our ability to balance credit risk and business interest 4. Rate our ability to assign credit terms appropriate to order size and credit risks B. Credit Risk Reporting and Control 5. Rate the content and completeness of our communications on receivables status and financial risks 6. Rate the timeliness of our communications on receivables status and financial risks C. Collections 7. Rate the effectiveness of our collection performance 8. Rate our ability to control bad debt expenditure D. Cash Application 9. Rate the timeliness of our application of customer remittances 10. Rate the accuracy of our application of customer remittances E. Discrepancy Resolution 11. Rate our timeliness in addressing customer cash discount issues 12. Rate our ability in resolving customer deductions II. ORGANIZATIONAL ROLE PERFORMANCE 13. Rate the timeliness on our responses to requests for investigation 14. Rate our timeliness and professionalism in decision communication Rate 1 = high 5 = low Performance Level Actual Required 12345 12345 12345 12345 12345 12345 12345 12345 12345 12345

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15. Rate our effort to develop a teamwork relationship with your unit 16. Rate our support to your other business goals 17. Rate our support to the overall organization goal III. INTANGIBLE KNOWLEDGE 18. Rate our industry and business knowledge 19. Rate our knowledge of computer technology IV. OVERALL PERFORMANCE 20. Rate the cost effectiveness of the credit department 21. Rate the overall performance of the credit department

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http://www.peoplepulse.com.au/Internal-CustomerSatisfaction-Survey.htm

What Exactly is an Internal Customer Satisfaction Survey, and Why Should I Care? An Internal Customer Satisfaction Survey simply measures how satisfied internal customers or staff are within a department or team. In particular this survey measures perceptions and impressions of internal service, be it communication, productivity and / or responsiveness. The survey can also be used to measure expectations of internal service after all, if youre not 100% certain of exactly what colleagues in the departments you service expect from you, you will have very little hope of ever truly satisfying their needs. The survey can either be run on behalf of one specific department (eg. IT) to get very specific feedback on their performance, or it can be run to collect feedback on the performance of all internal services/departments. The internal feedback survey is used by HR / Management / Marketing / Customer Service / Shared Services and / or Line Managers to draw out feedback from internal customers in order to benchmark internal customer satisfaction, to solicit suggestions for improvement, and try to identify trends related to performance.

Who is the survey typically sent to? An internal customer is anyone who depends on someone else in the organisation in order to do their job. It typically covers the supply of information by one employee to another or any action that can support or serve external customers. For example: Technical Support / IT, Customer Service, Finance, Payroll, Legal, Marketing, Operations, Facilities, Training, Reception and / or Administration. Why Run an Internal Customer Satisfaction Survey? Internal customer satisfaction is a much neglected component of customer satisfaction and quality improvement, as the main focus is traditionally external customer satisfaction. Total customer satisfaction can only be obtained if everyone within the company or organisation works together to achieve the common objective, which means meeting the needs and expectations of both internal and external customers/staff. The Benefits of an Internal Customer Satisfaction Survey Include: Measure satisfaction of internal customers and provide a quantitative baseline to compare results. Over time these results can be used to compare, benchmark, measure and spot long term trends, which in turn enables fact-based decision making. Learn what strengths and weaknesses the organisation has in order to maximise the strengths and remedy the weaknesses. Measure the internal customer satisfaction to reinforce the company's service orientation, values and mission. Motivate staff as everyone pulls towards a common goal of excellent customer service both internally and externally. Eg. An internal satisfaction target may be set that all departments strive to. Reward and recognise staff as areas / teams and / or individuals who have performed well are recognised and rewarded publicly. Assist to direct training spend into much needed areas by identifying the areas where areas / teams and / or individuals have not performed well.

What Is Internal Customer Service?

A Definition and Case Study
Article by Donna Earl Recently the term Internal Customer Service has become a buzz phrase. We hear that great customer service (for the external customer) depends on excellent internal customer service. But what does that mean? Let's start with some definitions. 1. The external customer is someone who signs a check, pays our employer, and ultimately makes our paycheck possible. External customers have choice, and if they don't like your product or service can take their business elsewhere. 2. An internal customer or internal service provider can be anyone in the organization. An

internal customer can be a co-worker, another department, or a distributor who depends upon us to provide products or services which in turn are utilized to create a deliverable for the external customer. In general, internal customers don't have a choice. For example, if the sales department doesn't like accounting's credit policies, they can't fire that department and hire another. Great (external) customer service creates customer satisfaction, customer loyalty, and customer retention. So why all the fuss about internal customers, especially when retention isn't an issue? Outstanding internal customer service is simply good business. Internal customer service can flourish only in high communication environment. To create positive internal customer service, all departments work together cooperatively, agree on processes and procedures, and negotiate expectations. Like gears meshing in sync, interdependent business units meet each others' needs, work productively together to meet common goals, and deliver high quality products and service to the external customer. The focus on developing effective internal customer service helps organizations cut costs, increase productivity, improve interdepartmental communication and cooperation, boost employee morale, align goals, harmonize processes and procedures, replace interdepartmental competition with interdepartmental cooperation and deliver better service to the external customer. Excellent service to the external customer is dependent upon healthy internal customer service practices.

Internal Customer Service Case Study

The customer advocate for a large manufacturing company was concerned about the organization's reputation for excellent products, but terrible customer service. The company mentality was "Customer service is just a department!" During the interactive exercises in the Internal Customer Service Seminar presented by Donna Earl, many expensive lapses in the company's internal customer service came to light. One example involved Engineering's lack of response when Customer Service reps required an engineer's input. (In this case Engineering is the internal service provider and the Customer Service reps are the internal customers). The Customer Service reps were responsible for problem solving and taking orders for highly technical, often customized parts. Sometimes the reps needed clarification from an engineer to process a customer order for the correct part. Engineers viewed information requests from Customer Service reps as low priority, uninteresting, and annoying. During the class, we calculated the cost to the company of one incorrect shipment was approximately $125,000 in wasted labor, materials, and other expenses. In addition, the cost of frustration and delayed deadlines to the external customer was damaging to the company's reputation. At the end of the seminar, engineers understood what the Customer Service manager had been preaching for years: responding to requests from customer service reps is a priority and is good business.

http://www.scribd.com/doc/27919525/Customer-Satisfaction-in-Banking-SectorResearch-Proposal