One of the conundrums that we are faced with today is how to protect customers’ interests and boost the quality of their service experience with organisations, without burdening businesses in excessive red tape that inadvertently stifles innovation.
Indeed, this was a theme that recurred during the government’s recent investment summit. There is a clear mandate that we need to kickstart economic growth – and that tipping too far towards onerous regulation of businesses can be counter-productive, but we also need to balance this with the need to protect those that are most vulnerable given the wider and often life-changing impacts that can occur in the regulated sectors if things go wrong.
Given this backdrop, our latest report from The Institute feels timely. In A Cultural Shift – How to Regulate Customer Service, we look at the perspectives of regulated businesses (across energy, utilities, financial services, social housing, rail, and telecoms), regulators themselves, and customers at large on how regulation can be made to work most effectively to protect and promote the service agenda.
Customer perspectives
To start with the last of these groups first – the customer – it probably comes as no surprise to learn that the majority of the 2,000 consumers we surveyed feel quite categorically that regulation needs to be strengthened to ensure organisations place a greater emphasis on meeting customer needs.
Nearly eight in ten consumers (78%) said that regulators need to be more assertive so that companies meet their regulatory responsibilities and 73% agreed that there should be “more regulation” so that organisations properly consider the interests of their customers. Only four in ten consumers (41%) believe that regulators are effective in ensuring the companies they regulate provide high levels of customer service. In terms of what they see as solutions to this, over eight in ten individuals (83%) said that regulators should have stronger powers to make companies show how they are considering the customer in decision-making, and 80% believe regulators should have stronger sanctioning powers and should also publish transparent information about the service performance of organisations.
If all of this sounds discouraging, we should also note that nearly four in ten consumers (38%) said that the current level of regulation of organisations is about right. Regulation is obviously a complex area – and consumers recognise this with only half of respondents (52%) claiming to have a good understanding of the role of regulators. Perhaps this consumer sentiment isn’t that surprising given a number of the challenges we are seeing within the customer landscape and the levels of low customer satisfaction demonstrated within the UKCSI.
Business and regulator feedback
Our research highlights a clear path through these challenges. We uncover some illuminating perspectives that can help businesses and regulators improve the customer outcome. What comes through in the feedback we obtained from managers/executives in regulated businesses and executives in regulators is a recognition that regulation should be principles-based wherever possible rather than only a collection of rules; it should be based on a clear range of measures that are trackable over time; and it should relate to the aspects of customer experience that are most important to customers.
Another clear message is that we should avoid a ‘race to the bottom’ where regulation is a series of tick-box rules and minimum standards. Where this is the case, organisations tend to put all their focus on simply complying with the ‘rules’ – rather than striving to raise standards or driving up a service culture. In the same way, a league table approach can have a mixed effect: if not handled appropriately it simply drives short term behaviour.
The link between effective regulation and organisational culture
In reality, the key determinant of customer service performance and customer satisfaction is organisational culture. Regulation is likely to be most effective in raising standards of customer service where it positively influences and supports that culture.
For example, the Consumer Duty in financial services appears to have galvanised organisations to think more deeply about their customer experience and be accountable for it (although perhaps it is too early to assess the long-term impact on customer satisfaction). Regulators in other sectors are also exploring ways of requiring organisations to demonstrate how they are enabling positive outcomes for customers. This is the key – all aspects of service-related regulation should lead back to the whole customer experience: are the products they’re buying/using fit for purpose and meeting their needs? Are they accessible to those they are intended for, and are there options for all, with an appropriate choice of channels? Is the right level of support available at all the key touchpoints of the customer journey? In short, are we truly gearing our approach around the customer, and importantly can these be delivered in a way that ensures the organisation can sustain its business performance at an acceptable level?
To help with this we would encourage regulators and businesses to look beyond the immediate perimeters of their own sector. There is much that can be learned from looking at adjacent sectors and other industries to identify best practices and benchmark against standards elsewhere – recognising that a goal should be to have consistent or comparable standards and measures across the piece.
Reasons for encouragement
The responses from consumers show us clearly that there is work to be done. But at the same time, I am heartened that in our research regulated businesses have a general desire to do the right thing while regulators are keen to evolve their approach and are willing to consult with the widest possible set of stakeholders. However, I would still encourage leaders to see service as the responsibility of the board and not just those involved with front-line service delivery – a service-led culture looks at the end-to-end outcome for the customer, not just the input processes and activities.
Regulation is a key topic that can play a huge role in shaping the customer experience and levels of customer satisfaction – which is why it’s an area we plan to stay very close to as the service agenda continues to evolve in the rapidly changing world around us.
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