SCOTT ROBBIN: Ed, thank you for joining us. Please tell us about your background and your current position at Gallup.
ED O’BOYLE: I’ve been at Gallup for about six years, and my role is Global Practice Leader for marketplace practice initiatives. Basically, my domain includes anything related to customers or potential customers. We create consulting programs and measurement systems as well as implement change management initiatives to drive real differentiation in the marketplace for our clients.
Prior to joining Gallup, I spent almost 20 years in marketing roles, including new product development, consumer packaged goods, financial services, and brand management. Much of my work in previous roles involved using research tools to create new ideas. My experiences in those areas led me to Gallup. My current role includes direct interaction with clients as well as behind-the-scenes work developing the next big innovations.
Will you give us a better understanding of Gallup and the types of things done by the organization?
That’s a good question, because many people only know Gallup as a polling organization. We’re very proud of that, and it’s a big part of our heritage. It involves understanding the will of the people and asking questions about important topics. Certainly in 2012, one of the most important topics within the United States is who will be the next president. We also conduct polling throughout the world, asking people about their jobs, whether they feel safe, whether they believe children in their country have an opportunity to learn and grow every day, and other important topics. Seventy years after getting into the polling business, that area of Gallup continues to thrive. I work primarily in our management consulting, or enterprise consulting, business. That business is predicated on determining the will of the people —in this case, customers, potential customers, and employees— and analyzing and managing those emotional connections so the organization can maximize its potential and drive organic growth. That is what we do every day to drive impact with our clients.
We find out what is most important to our clients’ employees and customers. Similar to our polling business, we ask smart questions. We take it a bit further on the consulting side, and we actually help those organizations manage and create change and then assist them in sustaining it over the long haul. It’s different from our polling where the polls are designed to ask objective questions and make that information available to the public. On the consulting side, we do more interpretation of the data. Our mission is to create impact for our clients by enabling them to focus on what they need to do to maximize their business outcomes.
Regarding polling, is it mostly done online now?
No, we still conduct face-to-face and telephone interviews when appropriate. We do polling in more than 150 countries, representing about 98 percent of the world’s population, and there is a wide range of accessibility to phone service and technology worldwide. In developing countries, it’s still done the old-fashioned way with a pencil and paper. Of course, we embrace technology and try to use it whenever possible to improve data quality. However, our Gallup Daily polling is done via phone, including cell phones, to ensure we reach a representative sample of Americans each night. We have interviewers working today who could be asking Americans about what happened last night in any part of the world and about that event’s implications for us.
Could you explain more about some of the pitfalls of basic economic theory and how human behavior differs from what economic theory assumes?
A lot of the work we have done over the past 30 years, and particularly over the past five years, reveals the pitfalls of classical economic theory, which includes the assumption that there are rational answers to almost everything that happens. From Economics 101 days, it’s the basic law of supply and demand. There is an intersection at which price should be set. Also, there is a theory that gathering and processing more information will lead to better decision making. Classical economic theory says people make decisions each day by processing a set of objective information based on a rational economic model. Many of our senior scientists, including Dr. Daniel Kahneman and others, have been pioneering the field of the emotional economy, or behavioral economics, which acknowledges that human beings are not entirely rational. Best estimates are that approximately 70 percent of economic decision making is emotional, and 30 percent is rational.
We base our consulting business on determining how those emotions can be understood and what role they play in predicting outcomes. Organizations in every industry and sector —public and private— can attempt to manage those emotional connections to maximize performance.
Expanding upon this alternative theory of behavioral economics, how does the Gallup concept of applied behavioral economics differ from that of others in the field?
When I’m at events, I will sometimes ask how many people are economists or are familiar with behavioral economics. If no one raises their hand, I feel very confident about explaining applied behavioral economics. When people put up their hands, I run into a lot of questions because behavioral economics is a massive concept and there are many facets to it, such as how governments work and the way raw materials move throughout the world. We’re basically looking through the lens of applied behavioral economics and how it applies to the decisions customers make regarding the brands they choose and why. Then, we analyze how that applies to the way organizations manage themselves to maximize human behavior inside the workplace and obtain as much discretionary effort from employees as possible. It’s not different from regular behavioral economics, but it’s just a sliver of the much larger piece of behavioral economics.
I will give you an example of human behavior and behavioral economics. If an organization offers a set of features to customers and one of the features is rarely used, or maybe not used at all, the organization may decide to remove that feature from the product offering. Since few people are using the feature, there’s not a lot of input for the organization in terms of what the impact will be. After the organization communicates the removal of the feature, everyone goes crazy and the phones light up with people complaining and threatening to close their accounts. One of the behavioral economic theories happening here is the endowment effect. The minute I’ve given you something, regardless of whether you use it or not, it’s perceived to be of value. I can’t take it away from you because you have an emotional connection to that service, even though the service is not something you use every day or even intend to use. The minute I take something away, it has a negative impact.
Another example of applied behavioral economics is what’s called status quo bias. A few months ago in the financial services world, several of the big banks started to impose fees for using debit cards. When that hit the press, there was an uproar and people were closing accounts and moving their business. Other banks started advertising that they weren’t charging fees and customers should come do business with them. That’s an example of status quo bias, or disruption of the status quo. Up to that point, many banking customers weren’t thrilled with their current bank of choice but kept their business there because moving a bank relationship from one bank to another is a hassle. Why would I make that big change if I don’t have a reason? Well, the banks gave them a reason by changing the fee structure, and it disrupted the status quo bias. Many of the customers reconsidered their entire banking relationship and looked for other institutions that weren’t charging that same fee.
These are examples of behavioral economics backdrops where people make a decision based on a motive that isn’t completely founded in rationality. In the latter example, many customers might not have even been subject to that fee depending on their status with the bank, but they didn’t stop to think through the decision rationally based on how it would actually affect them. This is how Gallup looks at applied behavioral economics.
Regarding company performance, what are some areas that Gallup identifies as ones holding the most untapped potential?
As technology and other avenues for organizations to connect with customers continue to evolve, we still believe the fundamental human connection of a person serving another person is the biggest area of untapped potential for all companies. It’s a concept we call HumanSigma®, which emphasizes the importance of the employee-customer encounter. Even if you’re eBay or Google and you deliver services online, there are still ways to ensure employees make good decisions about how to interact with and engage a customer. It can be done via chat, on the phone, or certainly face-to-face in a retail or other service environment. Maximizing that potential will help organizations raise engagement levels with their existing customers and allow the organization to grow organically. Gallup measures customer engagement, which uncovers how emotionally attached and rationally loyal customers are to our clients’ brands. Our database shows that only one in four customers are typically fully engaged with a brand, meaning three out of the four customers are not completely thrilled. There is an opportunity for organizations to raise the engagement level with those customers, but there is also an opportunity for another company to come and steal them away by engaging them in a different way.
It’s a source of untapped potential, and it’s interesting for Gallup because we work with a lot of great organizations. We find that the interactions among sales and marketing, operations, and HR tend to be limited. Great organizations truly understand that the only way they can maximize customer output, customer engagement, and subsequent business results is to maximize their employee output and get people aligned with the brand promise. They need to drive real growth by empowering employees to do what’s right in their customers’ eyes. The untapped potential comes from understanding that interaction and maximizing its performance. We spend a lot of time with our clients helping them to better understand that concept.
That’s a unique thought process. How have you been able to use this focus and analysis to achieve results for your clients?
We talk about this as HumanSigma®, and basically, there are four outcomes. You can have an engaged workforce and not have engaged customers. This means employees come to work charged up and feeling great about their jobs, but they don’t use that feeling to improve the customer experience. A second outcome is that you have a thriving customer business with highly-engaged customers, but your employees are not truly engaged. This means employees do not feel like a valued part of the organization’s future, and as a result, they don’t do anything to help sustain the engagement of the customers with whom they interact. The outcome is that neither your employees nor your customers are engaged, and this situation completely drains your organization’s bottom line. The last possible outcome is the best-case scenario, where fully engaged customers and engaged employees come together in harmony, which drives market potential.
In organizations where neither employees nor customers are engaged, nothing good happens. In organizations with one or the other —an engaged workforce or an engaged customer base— we see improvements over the workgroups that have neither in place. However, these situations don’t last because you can only do one without the other for so long before you burn your employees or your customers out. There’s not enough joint energy happening. Our data suggest that when organizations engage their customers and their employees, they experience a 240 percent boost in performance-related business outcomes over the base case, which is an organization with neither engaged employees nor engaged customers. We know this works, and it can drive the results clients seek. Organizations that only maximize one or the other can experience growth in the short run, but they won’t be able to sustain it over the medium to longer term horizons.
Can you give us an example of how a company can fundamentally change the way it analyzes business behavior and how that might translate into results?
On one level, this is a novel approach and one of the most unique things happening out there. But the truth is that a lot of organizations are doing customer loyalty feedback and asking their employees whether or not they like working for the company. However, as far as I know, no one other than us is purposely putting those two metrics together and attempting to maximize potential with them. The organizations that fundamentally change the way they do this have been the ones that did more than just accept it as a great idea and hire Gallup to collect information. Frankly, other people can collect the same information. It’s not enough for them to just deliver insights about that information because there are a lot of smart analytics out there. The true results came from organizations deciding to actually change the way the organization runs, based on Gallup’s HumanSigma® engagement model.
When organizations fundamentally change the way they lead, the way their managers are held accountable, and the way their district managers hold their managers accountable, that’s when we find the real magic. If a company’s leadership team decides this is the way to push the organization and the way to win regarding earnings per share or other metrics, they rally the whole company and model the right kind of behavior themselves. When it’s done correctly, they enable those district managers to start shaping the conversation with their managers regarding the changes. Those are defining moments for organizations. Alternatively, many organizations have district managers who manage a one-hour meeting by spending 45 to 50 minutes on questions about the business. What were your numbers last month? What’s the turnover look like here? Who’s going where? How are we growing business? Then at the very end of the conversation, they will address employee or customer engagement numbers. Customer engagement numbers don’t look good, so what are you doing about that? It becomes an item at the end of the agenda that frequently gets lost because of time constraints. Philosophically, it gives the attitude that it’s just something you’re supposed to do, such as an incremental or external activity outside of running the business.
When that fundamentally changes inside the organization, these tools become a way to run all the other ones. It becomes central to the conversation about turnover because engagement is linked to turnover. For example, giving employees “learn and grow” opportunities will allow them to get better at their jobs, and they’ll do a good job of taking care of customers in a particular area, which may have an effect on customer engagement inside the organization. We find that companies making those changes are the ones that outperform the market.
In fact, a bank in Southeast Asia embraced this concept because the market had fundamentally changed around them. They had to choose a differentiator, and they chose customer service as their way to define themselves in the marketplace. Customer service wasn’t one of the top strategic differentiators suggested by a consultant. Looking at strategic differentiators in the market, customer service would have been fifth or sixth on the list. The bank’s leaders chose it as their focus area because it would be very different if they could deliver it, but they also chose it because they believed their bigger and stronger competitors wouldn’t be able to match it quickly. They built the whole company around the philosophy of maximizing HumanSigma®. Through their efforts, they realized the bank could drive more customers and more workforce groups into the highest quadrant of HumanSigma®. As they started to do it, their market share, earnings per share, and financial stability started to improve. They saw an increase in the strength of their financial metrics, such as deposit ratios. They haven’t become number one in the market yet, but they are a solid number three on all the things that really matter for banks in terms of their overall financial health.
Within the management platform that Gallup encourages for its clients, what are some specific measurement tools, and how have they changed over time?
From the customer service standpoint, the chapters of customer measurement systems have evolved over time. In the beginning, there was the measure of satisfaction born out of Six Sigma work. For example, I did a task for you. How satisfied were you with the response for my task? Did I do it well? Did I do it in a timely manner? The initial customer service feedback was about that moment and discovering whether customers were satisfied with things the organization did for them. It’s a good start and certainly better than not measuring anything. However, this type of measurement isn’t helping to define and differentiate your organization in the marketplace.
Then, the second chapter came along. We wanted people to be satisfied, but we also wanted to add some additional items to the conversation, so we added loyalty. You ask customers whether they are satisfied, but now you also ask whether they are likely to continue doing business with the organization, which is very important. Additionally, would that customer recommend your organization to someone else? So, you end up with three measurements where you want to attain high scores. You ask if people are satisfied, and you add another layer and discover whether there is rational loyalty, as we describe it at Gallup. People who put customer programs in place aren’t necessarily looking for only satisfied customers or loyal customers. They’re really looking for customers who are willing to give more of their share of wallet to the organization by buying new products and spending more money with them. Your customer improvement program should be a profitability play and link to the business results your organization is trying to achieve.
About 10 years ago, we set out to determine whether there was something additive to the relationship that we could measure on a consistent basis to find those people who were willing to give their share of whatever requirement for a particular category. There are actions that can predict it. That’s when we added a set of emotional questions to the loyalty metric regarding how an organization delivers on its brand promise. We asked whether it connects with them and compels them to do business with the organization. Does the customer have pride in the brand, and could they imagine the world without that particular organization or brand? When you’re driving to that result and find someone who is able to give you positive answers, who is not just satisfied and loyal but also emotionally connected to your business, that customer is the one who is most profitable and most likely to recommend your organization to other people, giving you a far superior share of requirements for the business. Thinking about metrics to manage and systems to measure business, that’s the metric we use on the customer side. We then add some key drivers and filter it through the lens of engagement to get to the outcomes we’re seeking.
Regarding the lens of engagement, we’ve now determined how emotionally attached and how loyal the customers are to the business. Then, we start asking about things the organization could do to drive performance within that business, and we use those drivers to prioritize the actions needed to drive that relationship to a higher place. When you think about engagement, it helps us understand where the organization’s customers are. When you think about drivers, it helps the organization understand what it needs to do differently to attain more customers who are fully engaged with their business.
A bridge is built because these key drivers are things that human beings working for your organization are supposed to do, or lead, in terms of effort. We bridge it back to the employee side of the equation through those key drivers. The organization is looking for behaviors that the employee should be able to do every time he’s working with a customer. To measure this, we use a set of metrics called Q12®, which is a way to understand how engaged the organization’s employees are with the brand. So, it connects beautifully. Here’s what a manager needs to do to maximize discretionary effort with an employee. Our customer driver analyses determine what the organization should do to maximize performance with every customer. Then, we use our customer engagement metric to make sure they are adding or increasing the number of engaged customers every day, so ultimately, the organization can drive organic growth.
How does employee behavior affect customer decision making and behavior?
The connection between employee and customer has to be central to what every leader and every manager is thinking every single day. If they don’t think about that connection, they will either miss out on the maximization of the employee or miss out on an opportunity with their customers. We often find organizations are disconnected on those things, and the issue is usually around alignment. What are employees supposed to do in order to drive that behavior? Almost every time, we do follow-up work with employees. We tell them their customers want certain things, such as fast and friendly service, for example. We ask, “What is limiting you from being able to perform fast, friendly service every day?” It’s usually something employees feel they are required to do that limits their service. An employee responds, “I am required to acknowledge them four times and then make sure my manager comes over and meets them, but the customer just wants fast, friendly service. It’s the reason lines are out the door, because it takes forever to take care of a customer.” So, the question becomes how to eliminate unnecessary requirements without putting the organization at risk legally or financially. We need to eliminate barriers to taking care of customers.
All of this works together, and it’s different from what other organizations are doing. It’s much more effective. I don’t believe most people come to work every single day not trying to do the right thing. People get frustrated at work because there are so many policies and procedures that organizations put in place, initially with good intentions, that change over time into a scenario that’s no longer productive. Eliminating those barriers makes it a lot easier for employees to satisfy the customer. A lot of the work we do is helping organizations uncover those barriers and eliminate them. Usually, a rule is in place because of something that went wrong 10 years ago on a particular account. Now that the organization has better technology and insight, we may be able to eliminate that rule. It’s effective to listen to people and their suggestions. I love when the organization actually removes a rule or requirement, and we’re able to watch employees have success because of it. It becomes organic change management from the ground up that gets everyone excited about doing what they were hired to do every single day.
Regarding the topic of technology, customers increasingly want a faster pace. How do you accommodate your customers while dealing with the demands of changing technology?
Technology plays a massive role. It creates on-demand access to your organization using tools and technologies. Therefore, you have to be on duty 24/7. However, it also creates barriers to finding that emotional connection, which is very interesting. We’re currently studying the tasks that are emotional in nature that people do within their organizations. Can those emotional tasks be done electronically or digitally? How do you create emotional connections between you and your customers if you’re using more digital delivery channels? Instead of a frontline associate engaging the customer, it could be someone who is running a chat or delivering technology that serves customers based on the ways they shop and purchase. It could be a tool making it easier for customers to give feedback or obtain product descriptions. All of it is HumanSigma® because it’s a human being sitting there every day worrying about the customer. Even though they may not touch them directly, it’s about understanding the customer’s needs. How do I make the technology work in a way that is engaging and attracts customers to my business? I worry that a lot of things we’re doing with technology right now are for the good of technology and not for the good of the relationship. Organizations do it because they can and because they’ve developed technology to do it. But they may actually be reducing brand engagement because they’re reducing the opportunity to have a moment with a customer. Again, it doesn’t mean everything has to be delivered through a human being. However, every one of those touches you have is important, whether the customer is online checking an order, checking a balance, following up on a shipment, or making a return. There are opportunities in every customer lifecycle, and those touchpoints must be understood and managed in an emotive way, regardless of the digital versus non-digital technology aspects.
As our younger consumers get jobs and have more discretionary money, they will interact with organizations in a completely different manner than older generations. For example, if my father had a problem with his bank, he would show up at the bank and ask for the branch manager, whereas my younger brother would probably text a toll-free number saying he has a problem. He would be annoyed if he had to talk to someone about it. So, it’s about understanding the dynamics of those key touchpoints, identifying moments of truth by segments, and challenging our technical people to create something that defines the brand but also maximizes engagement and the emotional connection. This is the next chapter. I believe organizations are doing things because it’s cool technology and not because it builds their brand. We’re exploring that further through our data behind the scenes. The brilliant thing about working at Gallup is that we go out and actually study these trends and learn about them. Then, we have a fact-based conversation about a hypothesis or an idea that’s being shared like that one.
Ed O’Boyle is Practice Leader, Marketplace, for Gallup. He oversees strategic vision and drives innovation for these consulting practices worldwide. Since joining Gallup in 2006, O’Boyle’s consulting insights have helped businesses around the world maximize their performance to drive growth and profitability.
O’Boyle brings a background of more than 18 years of brand and marketing experience to Gallup, having previously served in roles in brand management, strategic planning, and innovation. He has an extensive background in brand management and innovation, leading marketing efforts while at Diageo, Capital One, and Frito-Lay. Since joining Gallup, O’Boyle has worked with key clients in the banking, hospitality, and consumer packaged goods industries, and he has extensive expertise in supporting Gallup’s business to business clients.
O’Boyle earned his master’s degree in business administration from the University of North Carolina at Chapel Hill and his bachelor’s degree in business administration from Virginia Commonwealth University in Richmond, Virginia.
Scott Robbin is a senior content associate at Argyle Executive Forum. In this role, Mr. Robbin manages content development, editorial speaker recruitment, and execution for 15+ annual business events. He has over four years experience working on the production and implementation of senior-level events. He holds a Bachelor of Arts from Columbia University.