Organisational Science

01.03.15   White paper

Know Your Customers

Take a moment. Cast your mind back to the last time you bought a present. Try to remember what you bought and why. If you’re like me, it was a long and difficult decision.

Choosing a well thought-out, personal gift (i.e., not a book token) is incredibly difficult. So how does Amazon do it so effortlessly? Whilst ‘gift’ is probably the wrong word for a ‘recommended purchase’ with a price tag attached, it is uncanny how well targeted these recommendations are.

I’m writing from personal experience. I find that Amazon consistently picks out products that I am tempted to buy and usually promotes them at times when I am most tempted to buy them. I wish I was able to do the same thing at Christmas time for my family and friends.

So how does Amazon do it? The short answer is that they use an algorithm that processes information about your previous purchases and browsing behaviours to make recommendations. The reason it works so well is that it continually adapts and improves by using machine learning techniques designed with a deep understanding of customers. Amazon’s sales of over $80bn seem to indicate it is working pretty well.

This is an example of cutting edge Customer Relationship Management (CRM). Every business would love to be able to understand their customers with the same level of insight as Amazon but it’s not easy. Sometimes customer data is scarce and the analytical software required to process the information can be expensive. Regardless of the challenges or cost, every business invests in some form of CRM and its importance is almost never questioned. Or at least that’s certainly the case in every successful business.

Lessons for HR

The value of CRM is obvious. What is less obvious is why the same discipline is not applied internally. Surely the same techniques could easily be applied to another group of people who are also vitally important to the success of any business? Employees.

Should we not segment our employees, as we do customers, to better understand their needs and motivations? Should we not proactively use the vast amount of data we gather about the workforce to help us drive better behaviours in our companies? Should we not be remodelling our working environments around the requirements of our people? The answer in all cases is a resounding yes. In some forward thinking companies, this is already happening.

The techniques of CRM can easily be adapted to fit into HR analytical frameworks. It is well accepted that HR will have to learn to be numerate and value data. Whilst this is difficult it is not impossible. We should remember this is a process that the marketing team has already successfully undertaken when companies first became more ‘customer centric’.

Let’s start with segmentation. In the near future, we believe most companies will group employees using social and behavioural characteristics. Having done so, they will be able to create employee offers that are tailored to those groups. Whilst some businesses think about employees who have particular needs, like working mums, very few consider their offer to other, harder to define ‘segments’. Furthermore, easy to identify groups, let’s stick with the example of working mums, are rarely homogeneous and contain within them micro-segments with very different needs. Marketing professionals would consider this technique for managing customers as being very well established but ‘employee segmentation’ has only emerged in the last few years. An article from Bain highlights this technique as an emerging trend as late as 2011.

Once a simple CRM concept like segmentation is applied to the workforce properly, it can have a profound impact. Consider a manufacturer who has identified large groups of older employees within their operations, an ageing workforce is a major trend in Europe. Perhaps those who are approaching 60 or even older require a different working environment than their younger colleagues? Of course this is self-evidently true and those businesses which have adapted to cater for the needs of older workers have seen significant increases in their productivity. We now have clear evidence that a deep understanding of who is working in a business can have huge benefits – if a workplace is re-designed to meet the needs of workers, it will almost always be more efficient.

It feels frustrating that such established techniques, with such obvious benefits are not being applied in more organisations. Whilst there are examples of HR teams pioneering this more measured and numerate approach to serving their colleagues, they remain a small minority. The tools exist and are tested – we believe it is just a matter of time before this approach is an expected standard for HR.

Start Listening

It seems strange that organisations, understand their customers better than they understand themselves. Customers are important, vital to the future of any business. But so are employees. After all, they are the people keeping the customer happy.

There are vast amounts of untapped workforce data sitting within an organisation’s systems. Every HR team should be using that data to understand the organisation they serve with the same level of insight and depth as the marketing team seeks to understand the customer. The techniques are established, the data is available and there really aren’t any excuses.

All it really requires is for us to start listening to our organisations. The voices of employees are buried inside the data. It’s time we all turned up the volume.

Say hello@qlearsite.com.