By Janet LeBlanc

In early 2000, Canada Post was at a crossroads. It was challenged by the continued need to deliver to 14 million addresses in the harshest weather conditions — over 40 million messages serving approximately 32 million Canadians on any given business day. These daily operational realities led the company to an inward orientation focused on operations. As a result, Canada Post had cultivated an ‘inside out’ culture where the needs of the company were put before the customer experience.

While this focus had not stopped the company from performing admirably over its 150-year history, Canada Post, if it was to survive and be successful in the future, needed to turn its focus outward, making customer needs a priority and building flexibility into its business to respond more quickly to a rapidly evolving market.

Yet, how does a company whose core products and services are under attack and becoming marginal stimulate business growth? What motivates employees to move from an internal focus to finding a real connection with the customer? More importantly, how can a company leverage the customer to drive cultural change?

Canada Post was looking for answers to these questions as it faced the reality of a number of significant challenges:

• The exclusive privilege or monopoly for collecting and delivering the mail, which generates the majority of Canada Post’s nearly $7 billion in annual revenues, was being challenged as businesses see electronic communications as an opportunity to significantly reduce costs. The erosion of mail to electronic channels continues to be a phenomenon that Canada Post copes with like all postal administrations around the world.

• The emergence of e-marketing and online advertising presented another threat to the mail channel for Canada Post’s direct marketing and advertising line of business. The business had the challenge of developing products that would reach more market-savvy customers and an increased need to deliver more relevant messages to the end customer who is bombarded by hundreds of messages every day.

• In its parcel line of business, competition was international and dominated by major players like UPS, FedEx, and DHL. These players had increased their presence in Canada through acquisitions and partnerships and were aggressively increasing their network. In order to succeed in this business, Canada Post required service excellence capable of matching the world’s best in class companies.

In 2000, the executive team created a new vision — to become “a world leader in providing innovative physical and electronic delivery solutions, creating value for employees, customers, and all Canadians”. Setting a new vision helped the company examine how it conducted business, treated employees, and managed its customers. By setting a goal to increase value, Canada Post embarked on a mission to implement a truly value-based management philosophy.

Advocating a New Vision

At Canada Post’s 2002 annual Corporate Performance Review, Dr. Bradley Gale, a pre-eminent expert and author of two of the defining books on the subject of customer value, presented to the executive team. He clarified some of the misconceptions about customer value including how it differs from lifetime value or even the economic value that customers bring to a company. Gale explained, “Value is simply quality, however the customer defines it, offered at the right price.” His presentation was one of the key levers that helped Canada Post embark on its journey to understand how it could use value management as a catalyst for change.

As a first step, Canada Post appointed a director of Customer Value Management to lead this transformation. The appointment sent a signal to employees that the company was serious about understanding how to use value as a strategic tool for its business.

The director created the vision to institutionalize customer value throughout the company linking customer value metrics to strategic planning, business planning, performance management, and process improvements. In order to be successful,

Canada Post needed to understand what customer’s value most about their experience and to ensure that every employee in the organization, from the shop-floor supervisor to the retail clerk to senior management, contributed to a high-quality customer experience. With more than 70,000 employees working for Canada Post and with one of the most extensive retail networks in the country, the task was daunting.

The key to a successful and rapid Customer Value Management implementation at Canada Post was strong support from the executive team. To integrate customer value metrics throughout the company, senior management had to recognize and fully endorse their role and commitment to this transformation. Canada Post needed to make the “customer” everyone’s job and use customer value measures for both strategic and tactical decision-making.

It was essential that upper and middle management take a strong and active role in developing the organizational commitment required to use customer feedback to drive change so that individuals at all levels of the organization would hold themselves personally accountable for the customer experience. Absolute acceptance by senior management that customer feedback makes a bottom-line difference was critical and the company could use customer feedback as effectively as traditional financial or operational measures to evaluate overall organizational performance.

Early in the transformation, a training program was implemented for all vice-presidents, general managers, and directors throughout the company to outline the major differences between customer satisfaction and value and to review the proven links between improvements in value to increases in market share and profitability. The training was the impetus needed to create awareness within the company about what other companies were doing, including its largest competitors, to assess value from the customer’s perspective and to move the organization forward to invest in this massive change.

Garnering the executive support needed to champion this corporate-wide change required the creation of a Customer Value Management Council, comprised of senior vice president’s of marketing and product management, sales and service, operations, communications and brand. It was at this executive level where the Customer Value Management program would initially have the most impact.

The mandate of the Council was to identify value priorities and to ensure resources and investments were available when needed. The Council met quarterly and became a forum to share best practices and guide management to make decisions that would ultimately manage the integration of Customer Value Management throughout the company. It also became the primary decision-making body for the required changes needed to include customer value in its corporate rewards and incentive program.

Analyzing the Total Customer Experience

Canada Post wanted its Customer Value Management program to be more than just research. It needed to be a key model used widely in decision-making, strategic thinking, and planning. The company needed to view quality from the end-to-end customer experience and to ensure all employees understood what they needed to do differently in their jobs to contribute to a more positive customer experience. This total customer experience viewpoint included an assessment, relative to the competition, of its product’s features and benefits, how the product was delivered, the service customers received from any one of its seven channels including contacting a telephone service agent, website, through face-to-face interaction with a sales representative, or interaction with a letter carrier or delivery person.

Each area of the customer experience was given a loyalty pillar, namely product offering, product delivery, price competitiveness, service culture, and reputation and image to form a Customer Experience model. Within each loyalty pillar, about eight to ten key value attributes clarified the factors that influence a customer’s perception of overall quality for that pillar.

The structure of the measurement program used to analyze the customer experience consists of bi-annual competitive benchmarking, surveying both customers and non-customers, and annual relationship tracking surveys, which measure movements in the perception of quality for current customers.

Annual relationship tracking, a 20-minute telephone survey, asks customers to evaluate Canada Post and the competition on a 10-point scale where 1 means “poor” and 10 means “excellent”. Each loyalty pillar and value attributes were evaluated individually, and reported to provide the percentage of customers who give Canada Post a top-two box score (9 or 10) as well as an average rating out of 10. The results also included the distribution of scores, and the importance of each attribute in influencing overall quality ratings.

Canada Post also uses a transactional survey program to evaluate performance with customers who have had a recent experience with one of its channels or touch points. Customers are asked eight to ten questions about the interaction they had with a front-line employee and whether they felt positive about the experience. Weekly surveys totalling approximately 25,000 are conducted throughout the year. Survey results are posted monthly on an intranet site, available to everyone in the company. For sales and service employees, Canada Post is able to tie results back to specific individual agents. Managers can monitor employee performance and use this weekly feedback mechanism as an effective coaching tool. All front-line employees are provided with a scorecard that lists what customers want most from their interaction and how employees are performing relative to expectations.

Each channel leader has an assigned Customer Value Management champion who reports results from the transactional survey program and facilitates the development of action plans with their teams. These champions are part of a field network that meets quarterly to share best practices and report key findings. The network is a key ingredient in helping to bring customer value data to the front-line and translate key findings into action.

Linking Customer Expectations to Rewards

Canada Post needed clear robust links between its Customer Value Management program and employee measurement and rewards. Harnessing the power that metrics and rewards have in driving cultural change would result in an accelerated transformation. The performance reward system required a structure that ensured employees clearly understood their area of accountability for the customer and had direct control or influence over making required improvements.

Performance improvement targets were allocated across the customer experience for each loyalty pillar, held at the senior vice-president level, and cascaded throughout the organization. By allocating customer metrics throughout the organization and including them in an employee’s performance scorecard, Canada Post effectively made the customer everyone’s responsibility. If improvements required input or change from several functional groups, customer metrics were shared. For example, the customer service team had the primary accountability to improve the company’s ability to resolve problems; therefore, “overall quality of problem resolution” was on every customer service agent’s scorecard. In order to improve this metric, however, the customer service team needed not only to improve the interaction with customers when a problem occurred, but also to reduce the overall incidence of problems. For that reason, problem resolution metrics were shared with product management and operations to ensure collaboration and joint action planning to remedy problems at the source. Shared metrics created alignment across the organization and helped to eliminate the functional silos that were well-ingrained in a large organization like Canada Post.

Linking customer value to not only individuals in the company, but also to its corporate team incentive, was a critical success factor in driving transformational change. Using a balanced scorecard approach for its bonus structure, Canada Post allocates rewards across four quadrants, namely financial, service performance, employee engagement, and customer value. In 2006, a Customer Value Index became the prime customer indicator for the corporate team incentive, representing twenty-five percent of an employee’s annual reward. 

Each business line has its own index score to help Canada Post understand and deliver on unique value drivers to improve customer loyalty. As well, the executive team can evaluate which line of business or subsidiary has the strongest base of loyal customers in the marketplace.

Driving Transformational Change

Canada Post wanted wide-spread employee involvement and dissemination of customer value results throughout the company. A corporate communications program was launched to help employees understand the complexities of the program and raise awareness of the business rational for making change. A series of communication tools were used to target all employees to reinforce the message. This included feature articles in corporate publications, nationally televised business broadcasts, cross-Canada road shows, online flash tutorial presentations, posters, brochures and feature stories. Employees quickly embraced the concepts and soon more than 85 per cent of employees surveyed agreed with the change.

The Customer Value Management program was also communicated to customers. A “president’s letter” campaign was launched to its largest commercial customers recognizing the necessity for change and the need for a defined path to make change happen that will better respond to their business needs.

Throughout this journey, Canada Post recognized that it could use its measurement system, not just as a tool for assessing performance but also as a critical tool for transformation and cultural change. Using a customer value metric allowed Canada Post to focus and target change initiatives that were driven by customer requirements. It identified what needed to be accomplished to keep customers delighted, and helped to guide both the strategy and tactics of the business.

Customer Value Management is a powerful mechanism for changing corporate culture—aligning people around new and shared goals. Customer value metrics set the stage to redefine what is important to the organization, reshape what it values, and how it behaves. Most importantly, customer value metrics change how people think—from the boardroom to front-line employees. It identifies what is important to the customer and has helped Canada Post adopt a new way of thinking about its business—creating a “customer-centric” basis for its business strategy.