April 2010

In the most successful businesses, TCF requires no specific effort.

phil_janesTreating Customers Fairly. Is it a chore imposed by a regulator, or a basic requirement for business success? This article argues not only the latter, but that TCF should be a natural, cost-free consequence of implementing processes which maximise your business.

Let’s start with two blackboard definitions, of ‘stakeholders’ and their ‘expectations’.

Our ‘stakeholders’ are all those groups of people, including, for example, regulators and customers, whose actions determine the success or failure of our business: they have ‘power’ over us. A simple example is a potential member who may or may not bring us business, but there are various groups, both internal and external to our company.

In terms of our products and our service etc., there are things that these groups take for granted, things they really want from us, things they would like, and so on. There are even things that they haven’t thought of, but, if we offer them, will appeal to a particular stakeholder group. Let’s lump all these things together and call them ‘stakeholder expectations’.

It is our task as business people to design our products and our processes in such a way as to address those expectations. All of them. Within business reason – and that is an important caveat – the aim of satisfying stakeholder expectations should underpin all that we do. Because, by definition, it is how we address these expectations – whether we satisfy them or not, and how well we do so – which determines how a stakeholder group will use the power that it has over our success. Will that potential customer bring business to us, or will they take it somewhere else?

Moving from the blackboard into the real financial mutual world; the six TCF ‘Outcomes’ are stakeholder expectations, albeit very inadequately defined. They all describe, loosely, what we sell and what we do in terms of satisfying the reasonable requirements – expectations – of our customers. Let’s take one as an example, and see what a more rigorous definition of expectations would require us to consider: “Outcome 3: Consumers are provided with clear information and are kept appropriately informed before, during and after the point of sale.” (Our italics.)

What do we understand by ‘clear’ information? Or, more importantly, what do customers understand by it? because it is their actual expectation that we want to satisfy, not what we would like their expectation to be. We must then make sure that all our communications meet the measures which we use in that definition, and those measures are both vital and elusive. Rigorous definition of stakeholder expectations needs hard graft in workshops.

Similarly, customers should be ‘appropriately’ informed. What would today’s customer consider as being ‘appropriately’ informed? This must surely include both the frequency of information and the medium as well as the information itself. What measures would the customers put against these three in order to define their own ‘expectations’? And are all customers the same, or would the answers vary for different sub-groups, like potential members, active members, commuted members?

We need to answer the questions above not only to satisfy the FSA, but, primarily, to satisfy the stakeholders; to persuade them to use their power in our favour. If we have not provided clear information on first contact with a potential customer, they are generally not going to complain to the FSA that we have failed in a TCF objective, they are simply going to go to someone who does provide clear information. If our existing members do not feel appropriately informed, they will certainly not recommend us to friends and family, and they will not bring us repeat business.

Looking at each of the Outcomes, it is easy to see what a wealth of detail is actually contained within each sentence. But the stakeholder expectations which can be defined from those Outcomes are only a subset of the total, and if, rather than just satisfying the FSA, we want to maximise our business potential through addressing stakeholder expectations – which we surely do – then it is that total which we need to identify, define, and prioritise.

Of course, the determination of stakeholder expectations is not the end of the task; it is, rather, the beginning, albeit a significant one. To operate most efficiently, business processes – not ‘activities’ like underwriting or policy issue or sales, but proper business processes – must also be defined, specifically by logical groupings of expectations, and then they must be implemented. We will, no doubt, have to change the way we do some things, and, maybe, even start doing others for the first time. But, once the processes are in place, not only will the business be running as efficiently and effectively as possible, but fulfilling the TCF Outcomes will require no specific actions or additional resource expenditure; it will instead be a natural consequence of business as usual.

Phil Janes is principal consultant at the Arnold Consultancy, and has worked directly with Financial Mutual companies for the past 10 years.

Contact him on 020 8405 0281 or email

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