Achieving Excellence: Creating Customer Passion In Your Purchasing Organization

Author(s):

Eberhard E. Scheuing, Ph.D., C.P.M., A.P.P.
Eberhard E. Scheuing, Ph.D., C.P.M., A.P.P., NAPM Professor St. John's University, New York, NY 11439, 718/990-6770, Ebscheuing@aol.com

84th Annual International Conference Proceedings - 1999 

Abstract. Excellent purchasing organizations consistently exceed internal customer expectations. They engage in continuous customer dialog, demonstrate total commitment, and offer customer-friendly processes. Based on years of experience in helping purchasers deliver world class service, this paper offers proven tools for assessing the customer-friendliness of your organization, and for achieving excellence.

Identifying Opportunities to Excel. Excellence means delighting customers by consistently exceeding their expectations. To achieve excellence, purchasing organizations must follow a four-step process:

1. Identify customers
2. Obtain their input on:
   • their expectations/requirements,
   • the relative importance of their expectations/requirements, and
   • their perceptions of your organization's performance.
3. Identify opportunities and take action to improve performance
4. Obtain customer feedback on:
   • new performance ratings, and
   • further improvement opportunities.

Customers are individuals or groups who depend on the purchasing organization's performance for the success of their own efforts and the satisfaction of their requirements. They can be fellow employees (internal customers) or buyers of the company's outputs (external customers). Due to complex webs of roles and players in decision making processes, it can be quite a challenge to identify specific customers. After all, a customer could be a requisitioner, a specifier, a user, or a payor.

A number of research tools can be used to obtain input from customers :

• Focus group sessions are roundtable discussions with small customer groups;
• Surveys are questionnaire studies of large numbers of customers;
• Critical incident reports are statements about specific customer experiences; and
• Advisory panels are representative groups of customers offering advice.

Customer expectations refer to the performance levels they anticipate from purchasing. Customer perceptions are their assessments of the performance delivered by purchasing. Customer response is the behavior customers carry out after comparing their perceptions with their expectations. The relationship between these factors is shown in Exhibit 1.

Exhibit 1: Factors Driving Customer Behavior: Not available in text-only version of this paper.

Customer expectations and perceptions can be measured with the help of report cards. Exhibit 2 presents a generic report card.

Exhibit 2: Purchasing Report Card

In a purchasing report card, the function's customers list their performance expectations in column A. In column B, they indicate the relative importance of their individual expectations by assigning percentage weights to them. In column C, they reflect how well purchasing is performing on each of these expectations with the help of a simple rating scale: 5 = excellent, 4 = very good, 3 = good, 2 = fair, and 1 = poor. The weighted ratings in column D are computed by multiplying the figures in columns B and C with each other. The shaded cell in the lower right hand corner of the report card represents purchasing's total score for the evaluation period. Because the maximum total score is 500%, any overall weighted rating below this score indicates opportunities for performance improvement. The individual weighted ratings help pinpoint and prioritize specific opportunities.

Another invaluable source of improvement opportunities are complaints received by purchasing. Research indicates that for every dissatisfied customer who complains to an organization, there are 26 other customers who are equally dissatisfied but do not complain to the organization. But they tell others--in fact, about ten others on average. This negative word-of-mouth discourages potential customers from ever giving the organization a chance. So for every complaining customer, there are possibly 260 others who either had a bad experience or heard about one and thus will not/no longer do business with the organization. But the organization never gets a chance to hear about it and take corrective action.

So it is essential to encourage and welcome complaints instead of treating them as unjustified nagging or evil nuisances. A customer who complains offers your purchasing organization a chance to correct an alleged faulty performance or set the record straight by educating the customer about the true nature of the situation. Most customers whose complaints are resolved will continue to do business with an organization. If complaints are resolved promptly, they may even become loyal customers.

It helps to ask complaining customers what would make the situation right for them and then go beyond what they requested to surprise them. Correcting perceived performance problems is known as recovery. Recovery requires an appropriate process that enables quick action. It is both an art and a skill. As an art, it involves sensitivity, judgment, and flair. As a skill, it can and must be taught because it is a powerful means of gaining critical insight and recapturing the goodwill of customers ready to defect.

Creating Customer Passion. Because even satisfied customers often leave and do their own purchasing, purchasing leaders must instill and continually reinforce a genuine passion for delighting customers in all team members. Toward this end, it must provide values as well as a mission and vision for purchasing.

Values are the guiding principles of the purchasing organization:

• honesty and trustworthiness,
• caring and respect for the dignity of the individual,
• innovation and creativity,
• openness and flexibility,
• customer service, and
• continuous improvement.

Its mission is a statement about the nature and purpose of the purchasing organization. In contrast to its mission statement which describes what an organization is and believes in, its service vision is a statement about what it wants to become.

A purchasing organization's vision statement involves an inspiring picture of:

1. the nature and level of service the organization will render,
2. the training, support, and rewards it will provide to its professionals,
3. the strategies and tools it will use, and
4. the kinds of relationships it will have with its suppliers, customers, and other constituencies.

The purchasing vision is a statement about the function's future nature and purpose within the company, describing its role, competencies, and approach to doing business. Issues to be addressed in formulating a vision statement include:

• professionalism of purchasers
• the nature and level of service to be rendered
• purchasing's role as a key player in strategic decisions
• internal and external partnering
• customer-driven global sourcing
• contributions to organizational performance and competitiveness.

Customer passion in purchasing results from selecting the right people, training and paying them well, empowering them to use their judgment and creativity, and encouraging them to have fun at work.

Tools for Achieving Excellence. Excellence relates to both purchasing processes and outcomes. Purchasing processes are sequences of activities that your organization uses to carry out its responsibilities. These processes developed to suit purchasers' needs, not customer requirements and are typically forced on customers who find them inconvenient, inconsiderate, and often onerous. In fact, we usually try to make the customer fit our system rather than fitting the purchasing processes or system to the customer's requirements. Purchasing outcomes are the results of purchasing actions. Hopefully, they will match what customers expected and/or needed. In any event, outcomes are the basis for evaluating purchasing performance.

Excellence in purchasing can only be achieved and maintained if both purchasing processes and outcomes are optimized. Customer-friendly processes are ultimately useless if they do not deliver the desired results. But it is equally fruitless to deliver targeted outcomes if customers feel mistreated in the process. Customer-friendly processes and impressive outcomes are a winning combination.

But this combination can only be realized if your purchasing organization engages in a continuous dialog with its customers, using any and all means of communications possible to understand and anticipate their changing needs. Because actions speak louder than words, demonstrating a spirit of total commitment that regularly goes beyond the call of duty to deliver extra performance to customers is essential for the credibility of this customer passion.

Exhibit 3 illustrates this crucial triad. Exhibit 3: The Excellence Triad is not available in the text-only version of this paper.

A number of tools are available to resourceful purchasing professionals who aim to exceed customer expectations with regard to purchasing processes and outcomes:

1. Play customer;
2. Frequently obtain customer input and feedback;
3. Encourage complaints and suggestions from customers;
4. Make your system and processes customer-friendly;
5. Demonstrate customer commitment in everything you do;
6. Continuously update and upgrade your service;
7. Empower your team and customers;
8. Lead by example; and
9. Recognize, reward, and celebrate exceptional service.

The Rewards of Excellence. The benefits of achieving and sustaining excellence in purchasing are enormous. Service excellence in purchasing:

• demonstrates a true service culture;
• produces high job satisfaction and low employee turnover;
• leads to synergistic teamwork;
• reflects customer passion;
• creates loyal, enthusiastic customers;
• results in high productivity and exceptional performance;
• generates a reputation for superior service;
• ensures the survival and growth of your organization; and
• translates into a powerful competitive advantage.

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