We know intuitively that managing the customer portfolio well leads to improved business performance. This slide deck shares important insights into what makes customer management work and how to measure it. This is based on research done by QCi (the main players now with The Customer Framework Ltd) and although I put this deck together 6 years ago I was astounded as to how relevant the thinking still is. The sad reality is that Customer Management capability hasn't improved very much over the years (in the majority of cases, hence we are still subject to inconsistent and poor customer experience) yet it remains a topic that is spoken about and focussed upon by many organisations. The difference that I find today versus 7 or 8 years ago is that MORE people talk about customer management than previously, however I don't se much improvement in the understanding of what it involves or much improved capability in operationalizing customer centric business.(this is a generalised statement)

1. Customers Rule! Period!
What impact does customer centricity really have on
business performance?

2. What Impact does Customer Management really have on Business Performance?
Business people intuitively know that managing
customers well leads to improved business
performance, but when it comes to allocating budgets
they find it hard to determine what budget to allocate
to acquiring, retaining and developing customers.
Even Analysts, Economists and Stockbrokers are
starting to take customer management
seriously, believing it to be a very important
“intangible that determines sustainable long-term
company performance”. But is it? Yes, and less
intangible than it was! Research over the years has
generated important insights into what makes
customer management work, and how to measure
that it is working.
This does not mean that every company should
invest in developing intimate relationships with all of
its customers. It means that companies should work
though a process to understand: their target market;
their proposition to this market; how the proposition
should be delivered in order to acquire and then
manage customers through sales, marketing and
service on a day to day basis; what they should
measure to show that they are doing this cost-
effectively, and what infrastructure –
people, processes, data and IT – is needed. This
works for public institutions and government
departments too.
Our studies show that companies that do this will
perform better than those that do not. Our studies
also show that this is not easy to achieve.
© REAP Consulting 2010 2

3. What is „Line of Sight‟?
Think about our systemic approach to business
measurement that we call „Line of Sight‟. This is
underpinned by a fundamental belief that:
 Sustainable business performance is achieved
through gaining commitment and sales from
customers who are, or can become, heavy spenders
in a category
 Commitment is gained through delivering a distinct
and appropriate customer experience (the right
blend of functional, rational, sensory and emotional
elements) to these customers
 This is done most effectively through engaged and
motivated employees or partners
 Employees and partners work within the context that
the company sets which encourages the appropriate
customer management approach (e.g.
budgets, policies, products, pricing, clear
proposition, environment, processes, IT
infrastructure, measures)
 This „system‟ must work in harmony so that the
organisation is aligned to deliver sustainable business
performance
Our global Customer Management assessments show that
although most companies would agree at least in principle
to this, few see all the elements as part of a „system‟ that
needs to be actively managed. We believe the evidence
contained in this report is compelling and shows the need
for a fresh approach to business management and
measurement.
Only the most mature companies
look at customer management in
a systemic way. They are also the
best business performers
In this excerpt we describe each element of „Line of Sight‟
and, for each element, we describe the:
 Link to business performance
 Knowledge and insight senior managers should have
 Link to next level in „Line of Sight‟
It goes on to remind readers of what a systemic approach
really means, and shows how „Line of Sight‟ is
philosophically different to current measurement systems.
We have included an appendix with some generic metrics
that a company might use to measure elements of Line of
Sight
© REAP Consulting 2010 3
Whether a business is performing
well or not depends on how you
define performance – it is not just
about today‟s profit

4. Superior Business Performance
What is Business Performance?
„Business performance‟ is one of those terms. We all
think we know what it means, but when we try and define
it, we tend to disagree! This is because a
business, including the public and voluntary
sectors, involves many stakeholders. These include
customers, employees, directors, shareholders, lenders, c
reditors, suppliers, government, regulators, state
agencies, voters, local communities, taxpayers, and
patients. Performance means different things to each of
these groups. While in theory positive performance for
one in the long run means positive performance for
others, in practice their interests often conflict, especially
in the short run. For instance, the drive for greater
efficiency may mean fewer employees and longer queue
times for customers; satisfying lenders may mean
disappointing shareholders and so on.
How do you handle these conflicts in your company? Are
there similar instances when in order to meet one target
more serious damage is caused elsewhere?
The Problem with a Profit Focus
The driving goal of the enterprise might be to make a
profit, but the problem comes when companies have an
overriding focus on it! This is because:
 The need to focus on short-term profit can be
overwhelming. There is often an uncomfortable
relationship between the need for short-term returns,
to appease the demands of shareholders, and the
requirement for long-term investment and
sustainability. We know from many highly visible
scandals that the balance sheet can be misleading.
P&Ls can give a false picture of „business
performance‟. A company can make excellent profits
this year and look good on the balance sheet if it cuts
customer service standards to increase productivity,
fires 30% of its staff, cuts its marketing budget by half,
fails to invest in product development and cuts all of its
IT development budgets. The focus on short-term
profitability will compromise the company‟s long-term
sustainability to say the least!
© REAP Consulting 2010 4
A balanced approach to short
and long-term profitability is
important
For each of the stakeholder groups, there may be
several important measures. For shareholders, profits
are important, but even this has several
dimensions, not least the time dimension (i.e. short and
long term profitability), which is discussed below. Not all
those stakeholder groups are equally important. For
example, there is a legal hierarchy in terms of who gets
paid when a company goes bankrupt. In principle, in a
public company, shareholders interests come
first, managers second, though as we know, poor
governance often reverses this. While there is an
argument for performance improvement policies that
observe the theoretical hierarchy, it may be necessary
to recognise that, in practice, a different ordering is
important. We have to conclude that business
performance should be judged by the hierarchy of
balanced measures set by the board. However, at the
top of this hierarchy for most private sector companies
is PROFIT. Sometimes this is so far up the hierarchy
that other measures don‟t receive the consideration
they merit!

5. Customer Behaviour
The Link between Customer Behaviour and
Business Performance
Trading profit is for most companies the major source of
profit, along with profit from capital efficiency (e.g.
investment, assets) and comes from sales to customers.
As far as profitability from customers is concerned, the
Pareto rule (80:20) holds true for almost all categories of
product and service. 12% of a bank‟s customers are
responsible for 119% of the bank‟s profit. 18% of
supermarket shoppers are responsible for 65% of margin
and so on. The only exceptions include pure subscription
based services, although cross-sales and up-sales to the
basic subscription service can skew the relative value of
customers towards Pareto levels.
The Decile Analysis graph adjacent shows that losing just
5% of the most valuable customers may account for up to
half of overall profitability, whereas losing 50% of the
least valuable may have an insignificant effect or, in this
case, may even increase overall profitability! If 10% of the
best customers shift half of their spend somewhere
else, then this is likely to result in a 35% fall in profit. It
therefore makes sense for a company to focus on:
 Holding on to their most valuable customers, the
heavy spenders, and developing their value where
possible
 Attracting the most valuable prospects
If this is done well, the REAP Target Table (see below)
shows that it is possible for a large company to double
profit in 3 years! Yet only 21% of companies understand
customer management well enough to be able to achieve
this. The majority of companies may have different
marketing campaigns for different customer groups (the
activities which are least important to customers), yet they
will treat them all pretty much the same when it
matters, i.e. when the customer has an issue or requires
service.
© REAP Consulting 2010 5
Only 26% of leading
companies measure
customer acquisition,
retention and penetration,
by customer value
A company can do this by understanding who their most
valuable customers and prospects are (both now and in
the future), how they behave, their attitude to the category
and their commitment to the brand. If you can then
determine what drives this commitment, you can begin to
design an effective, focused proposition.
Decile Analysis: Manufacturer
5% of customers in your
company will make or break your
profitability, 50% will have
minimal impact on profitability

6. Customer Behaviour
Essential Senior Management Insight Required
to Understand Customer Behaviour
In terms of customer behaviour, senior management
need to know:
 Their own Pareto in terms of volume and profit?
 Who their heavy spending customers are?
 The share of spend of this group, versus competitors?
 How the company manages this heavy spending
group, tracks their spend levels and takes remedial
action if necessary?
 When and why the heavy spenders reduce their spend
with you, or leave you altogether?
 The relationship between the dynamics between
retention, penetration, acquisition and cost to serve, by
value group?
A focus on what generates
commitment amongst your
highest spending customers will
lead to better business
performance
© REAP Consulting 2010 6
53% of companies apply
different outbound campaigns
to different customer
segments, yet only 12% have
differentiated inbound
strategies which can be
consistently applied
Behaviour and the Link to Commitment
A company needs to understand why its best
customers and prospects behave in the way they do.
For instance, in retail markets, a senior manager may
ask; „which of my best customers stopped buying, or
reduced their buying, from my store?‟ The next logical
question to ask is; „Why did they stop buying; was it the
product range, service, store location or some other
factor?‟
A review of behavioural metrics will enable senior
managers to ask the questions that will explain
behaviour. If they can do this, they will be getting to the
heart of increasing business performance. This is
where the overlap with the next element in „Line of
Sight‟ - customer commitment - begins. Why do
customers behave the way they do? How can we
influence this? And then the killer question: How can
we increase the commitment of high spending
customers to our brand, rather than someone else‟s?

7.  A focus on profit naturally encourages a focus on the most
obvious components of profit, rather than the underlying
causes of it. Thus the focus is on:
 Cost reduction, rather than longer-term investment in
customers, channels, products and people, and
productivity - often at the expense of customer service
and employee motivation
 Short-term sales revenue, squeezing another sale out of
customers now that isn‟t balanced by nurturing customer
commitment and longer term value
 An unerring comparison of activities through an
immediate „return on investment‟ argument rather than
the overall value generated by that investment
Through focusing on profit in these ways, current
measurement approaches (even so called „balanced
scorecards‟) inadvertently destroy sustainable profit!
Companies worry about profit too much, and spend too little
time worrying about the systemic drivers of profit such as
customer behaviour, commitment, employee capability and
engagement. Our premise in this article is that, by focusing on
a system of measures of which a key output is profit, rather
than on profit alone, managers will achieve the optimum
balance of short and long term performance. This focus must
start with customers.
© REAP Consulting 2010 7
Customer Behaviour

8. Customer Commitment
The Link between Customer Commitment and
Business Performance
Customer satisfaction is a commonly used and important
measure. Applied correctly, customer satisfaction
measures tell how satisfied customers are with a
particular interaction (i.e. touchpoint). However, they are
misleading in that the overall „Satisfaction score‟ rarely
predicts, or even correlates with, repeat purchase
behaviour and therefore business performance. Customer
commitment is different. Customer commitment,
measured in a variety of different ways, does have a clear
link with business performance and is a first class
barometer of the overall impact of organisational
activities. A number of studies show conclusively the
worth of developing customers who are committed to the
brand. Not all customers will become committed, but the
aim of the organisation must be to get a large percentage
of heavy spenders, and potential heavy spenders,
committed to the brand.
Commitment is likely to be based on a set of:
 Functional and rational elements (e.g. price, product
features and process-type success of the transaction
i.e. interaction delivered on time, in full, on
specification)
 Emotional and sensory elements (e.g. how do I feel
about what happened; do I like the look and feel of the
product/package/advertisement)
In increasingly global and commoditised markets, the
balance of power is shifting towards the emotional
and sensory side of the equation.
 How well does the brand advertising deliver on
commitment (e.g.
differentiation, relevance, esteem, involvement), and
how important is this for heavy spending customers
and prospects?
 How well do the direct personal experiences impact on
commitment (e.g.
price, product, service, relationship), and how
important is this for heavy spending customers and
prospects?
 What % of the market is committed to competitive
brands, and what % is available to you?
© REAP Consulting 2010 8
94% of companies measure
satisfaction; only 12% measure
commitment
Essential Senior Management Insight Required to
Understand Customer Commitment
In terms of customer commitment, senior management
need to know:
 What % of your heavy spending customers are
committed to your brand (not just „very satisfied‟)?
 How many, and which, of your heavy spending
customers are vulnerable (weakly bonded with you)
or very likely to shift some or all of their spend
elsewhere?
 What makes heavy spenders in your category
committed to a brand in your category?
Commitment and the Link to Brand Experience
Customers interact with an organisation at many different
levels, both passively and actively. They will see
advertising and communications in all their shapes and
forms. They may interact when they enquire, purchase or
complain about the product. They will experience the
product or service. They may see, from PR or directly, the
impact a company is having on their
community, country, the world. Many of these interactions
will wash over most of the market. But for some
customers a more lasting impression will be made. The
brand and direct personal experience they receive
shapes their commitment to the brand. A great customer
experience is not necessarily an intimate one. It must
support the top customers‟ values and belief systems and
deliver against their functional and emotional needs.

9. Managing the Brand Experience
The Link between Brand Experience and
Business Performance
Effectively, the link between the brand experience and
business performance will be measured through
customer commitment and sales behaviour. The
challenge facing senior managers is to design both:
 Brand approaches to bring valuable prospects into the
brand and
 Customer management interactions to keep them
there (see table below)
In most markets, brand awareness is developed initially
through advertising and word of mouth, but then
commitment is developed through the experience the
customer has when they interact with the brand (this is a
little different in fast moving consumer goods markets (e.g.
Coca-Cola), where brand advertising has a higher impact
on commitment). New media can help to build the „good
brand feelings‟ that lead to brand preference by involving
the consumer in ways that mass media never could. They
make it easier to create meaningful „engaging‟ brand
experiences to different audience sets.
Any interaction or communication may have an impact on
the customer experience, and therefore customer
commitment and therefore business performance. Some
interactions are more important, in the customers‟
minds, than others. The interactions need to be designed to
develop commitment and sales, rather than just sales.
Without a systemic approach, the short-term profit focus
discussed earlier may provide an overwhelming challenge
to the cost of providing good service. It may also encourage
the achievement of short term revenue at the expense of a
nurtured longer term customer relationship, which will in
turn lead to a poor customer experience, lower commitment
and lower sales.
An understanding of what drives commitment and
behaviour is the starting point for the development of the
appropriate customer experience
An understanding of what drives commitment and
behaviour is the starting point for the development of the
appropriate customer experience. Companies can then
manage their channels against the desired customer
experience. To deliver the appropriate
experience, brand, reseller, customer management, direct
marketing and other communities in your company need
to:
 Share data and insights on customers and the market
 Work together to understand the implications of their
actions and impact not just on sales and
behaviour, but on commitment
 Work with other functions such as
HR, Finance, Planning, Manufacturing and IT to
understand each others‟ role in delivering business
performance, using the „Line of Sight‟ framework as
the backbone
© REAP Consulting 2010 9
Relative Impact of Brand Approach vs. Customer
Management Interactions; by Customer Lifestage
“We must adopt the mentality of
permission marketing and
creative advertising that is so
appealing that consumers
welcome it into their lives”
Jim Stengel CMO P&G 2004

10. Managing the Brand Experience
This should be orchestrated by the marketing function.
Few companies work this way, and instead, provide
dysfunctional delivery of the desired customer
experience. Often departmental measures will clash with
the overall goals of the organisation (e.g. measuring call
centre people on call time may degrade the customer
experience of best customers and undermine the initiative
of employees).
Attempting to control the experience provided through
indirect, or third-party channels is much harder and
success is dependent upon the level of influence you
have over the channel, the investment you make in the
channel or the level of additional business you can
provide it.
Essential Senior Management Insight Required
to Understand the Brand Experience
In terms of the brand experience, senior management
need to know:
 Which events, journeys or touchpoints your top
customers perceive as critical or important?
 How well you deliver the functional and emotional
experience at each touchpoint?
 What organisational barriers exist to delivering the
desired experience?
 How aligned are the measurement goals of individual
functions to ensure that they are all pulling towards
your overall business objectives?
 The efficiency and effectiveness of your
communications from both the short and long-term
sales perspective, and from the customer experience
perspective?
Customer facing employees, and their immediate back
office support functions, will impact on both the
functional/rational side of the commitment equation („they
did the job for me‟, „they were knowledgeable‟, „they
processed my application quickly‟) and on the sensory/
emotional side („the design looks great‟, „they made me
feel really good‟, „I enjoyed that‟).
Other staff, or suppliers, will be involved in designing or
delivering processes or systems which need to deliver the
ingredients of commitment.
For example:
 Designing the advertising and communications that
shape customers and prospects perceptions
 Designing web sites used by customers and/or staff
 Providing systems which will be used by customers
and/or staff to provide them with the necessary
information, on time and in full
 Providing decisions or documentation in the full
understanding of what drives customer commitment
 Presenting information (e.g. financial) to the market in
a way that engenders trust and esteem
They too need to understand what drives customer
commitment and what they need to do to achieve it. But
are they capable of doing it, and do they care?
© REAP Consulting 2010 10
An understanding of what
drives commitment and
behaviour is the starting
point for the development of
the appropriate customer
experience.
Brand Experience and the Link to Employee
Engagement
The brand experience is delivered through interactions via
advertising, personal contact, and the web site. The large
majority of employees will impact on the brand experience
in some way because they either
design, influence, deliver or manage interactions

11. Employee Commitment, Engagement and Behaviour
The Link between Employees and Business
Performance
An increasing body of research shows that the
attitude, engagement and commitment of staff towards
the brand and, ultimately, to the customer has a large
impact on business performance:
 Companies with highly engaged employees generated
200% higher three-year total returns to shareholders
than low-commitment companies between 1999 and
2002
 Over the past 5 years, companies which employees
rate as great places to work have shown 25% growth
in share and dividend returns, compared to 6.3% for
the rest of the All-Share index
 70% of customer brand perception is determined by
experiences with people
 41% of customers are loyal because of good
employee attitude
 UK retailer: 1% increase in employee commitment =
9% increase in monthly sales
As basic as it may sound, a warm, helpful, caring and
knowledgeable person on the phone, or in the retail
outlet, makes a big impression. Somebody designing
the website who really understands what customers
need, what makes them committed, what other
choices they have, how they are likely to use the site
– someone who is engaged in the brand – will do a
much better job than someone who doesn‟t really
care or understand.
The Vivaldi Brand Leadership study chart below
shows that if customers rate your brand highly you
will outperform the market by a factor of 1.6, but if
customers and employees both value your brand
highly, you will outperform the market by a factor of
3.2 times! Proof indeed of the value of engaged
employees!
All this provides overwhelming evidence of the power
of employees in delivering the brand.
© REAP Consulting 2010 11
“I worry about employees
first, customers second
and shareholders third”
Richard Branson, in his
autobiography
Essential Senior Management Insight Required
to Understand Employee Engagement
In terms of the employee commitment, engagement and
behaviour, senior management need to know:
 Which employees you want to keep, at all levels, in
the company
 How may of these are committed to the company
 How many of these are engaged with the proposition
 What positive and negative impact employees can
have on the brand experience.
 Have employees been instrumental in defining what
good customer experience looks like
 Do HR, coaches and the training department know
what the right customer experience looks like

12. Employee Engagement and the Link to Corporate
Context
Employees can only work within the „context‟ set by the
company. If the strategy, policies, processes are incorrect or
undefined; if they do not have the appropriate support tools; if
they are working in a scruffy, poorly managed, demotivating
environment, then they will not be able to manage customers
well.
Setting up the appropriate customer management
infrastructure is the foundation (but not necessarily the starting
point) for „Line of Sight‟ and is perhaps the largest source of
profit for most companies.
© REAP Consulting 2010 12
Employee Commitment, Engagement and Behaviour
Only a fifth of companies
have a clear cascade of
objectives from business
performance down to „grass
root‟ employees.

13. Link with Business Performance
Customers are normally the largest single source of profit
(alongside capital efficiency and investment performance), and
for smaller companies the only source. Customer management
impacts significantly on business performance and profit.
Research has shown that between 29 - 61% of any common
profit indicators (e.g. ROA, ROCE, OM, NM) may be described
by the way a company is set up to manage customers! It is
critical to get this right. It sets the context for the whole of
customer management. The table alongside illustrates the
areas which need to be considered to set the right context for
customer management. These areas form the basis of our
assessment approach, and doing them well has a clear link
with business performance.
Essential Senior Management Insight Required to
Understand the Corporate Context
In terms of the corporate context for customer
management, senior management need to know:
 Whether they are a top quartile performer in their sector, in
terms of how they manage customers against the criteria in
the table ?
 Do all functions work together as a cohesive unit and are
they aligned behind sustainable business performance, not
just profit?
 Are all business units sharing best practices?
 What is the „Line of Sight‟ for your organisation?
© REAP Consulting 2010 13
Corporate Context for Customer Management

14. The Importance of Systems Thinking
A system can be defined as: “Any network of functions or
activities within an organization that work together for the
aim of the organization”. A boundary of a system could be
drawn around a firm, an industry, or a country as in the
US. The diagram below, Production Viewed as a
System, was the spark that ignited the turnaround of
Japan from 1950 onwards.
As Deming says, ”This flow diagram directed their
knowledge and efforts into a system of
production, geared to the market - namely prediction of
needs of customers. The whole world knows about the
results… This simple flow diagram was on the blackboard
at every conference with top management in 1950 and
onward. It was on the blackboard in the teaching of
engineers. Action began to take place when top
management and engineers saw how to use their
knowledge”
The flow diagram can be adapted to service
organisations where A, B, C etc could be work from
preceding organisations, data sources etc.
Dr Russell Ackoff talks about the difference between
analysis and synthesis in systems thinking. He explains:
“Analysis has been the dominant mode of thought in the
Western world for 400 years because, while
investigating the nature of mankind and the
environment, scientists copied the behaviour of children.
As they take apart unfamiliar objects, children attempt to
understand each part separately and then try to
reassemble the whole. That is analysis, and it explains
how the pieces of a system work. Synthesis is needed
to understand the why of a system and the interactions
between its parts as they work together. It begins with
identification of a larger or containing whole (system) of
which the system to be studied is a part. Synthesis
yields an understanding of how the thing to be studied
serves the purpose of the larger whole. Used
together, analysis and synthesis make possible better
management - or even the redesign - of society's
institutions”.
The government‟s obsession with meeting targets can have
some unfortunate consequences as the following example
shows. Dr Richard Harrad, Clinical Director, Bristol Eye
Hospital, when giving evidence to the House of Commons
Public Administration Select Committee told MPs:
“The waiting time targets for new outpatient appointments at
the Bristol Eye Hospital have been achieved at the expense
of cancellation and delay of follow-up appointments. At
present we cancel over 1,000 appointments per month to
meet the target. Some patients have waited 20 months longer
than the planned date for their appointment. We have kept
clinical incident forms for all patients, mostly those with
glaucoma or diabetes, who have lost vision as a result of
delayed follow-up; there have been 25 in the past 2 years.
This figure undoubtedly underestimates the true incidence
and of course there is the large backlog of patients still to be
seen. One particularly sad case was that of an elderly lady
who was completely deaf and relied upon signing and lip-
reading for communication. She lives with her disabled
husband who like her is completely deaf. Her follow-up
appointment for glaucoma was delayed several times and
during this time her glaucoma deteriorated and she became
totally blind.”
© REAP Consulting 2010 14
Production Viewed as a System
This was the original Deming flip
chart model which changed business
thinking in the western world

15. The Importance of Systems Thinking
Separating the elements of a system into separate
components results in the destruction of the system.
The table below shows the cost of electrical components
used in both the engine and transmission of a vehicle. It
was discovered that by putting different electrical
components in the engine, none would be required in
the transmission. The proposal was rejected by the
people in charge of finance for the engine because it
would have increased the engine component costs. It
was outside their scope to consider that it would have
reduced overall costs by $50 as they were solely
concerned with the cost of the engine rather than the
vehicle as a whole.
The „Command and Control versus Systems Thinking‟
table below illustrates how systems thinking is diametrically
opposed to command and control thinking. John Seddon
argues that command and control organisations focus on
managing costs, but end up increasing them, provide poor
service and that "top down functional hierarchies damage
the way customers are dealt with“
© REAP Consulting 2010 15
Functions within a company should
not work in isolation or even in
partial isolation. They work best as
part of a system tuned to delivering
business objectives
Separating a firm into separate cost centres can do this
too. For example, W Earl Sasser in a Harvard Business
School lecture describes an airline trip (first class) with a
major airline he was doing some work for. The customer
experience at check-in was excellent, as was everything
on the flight. First class passengers were off the aircraft
quickly, but when they arrived at baggage reclaim the
problem started. He had to wait, as did everyone on the
flight, for around an hour. He finally arrived at the airline
conference centre. He told the audience about each of
the customer experiences saving the baggage handling
experience till last. Afterwards, a man came up to him
and said that he was responsible for baggage handling.
He explained that in order to meet budget for the month
he had had to cut staffing levels. The consequences of
managing separate functions as separate cost centres
rather than „the system as a whole‟ can be hugely
damaging to a company. Top management in this airline
were probably unaware of the damage they were causing
by managing the parts separately rather than the whole.
Isolating elements of a system,
and setting non-systemic targets
for them, may destroy the overall
performance required
Status Engine Transmission Total
As is $100 $80 $180
Proposed $130 $0 $130
Gain from Proposal $50
Electrical Components
Command and Control versus Systems Thinking

16. „Line of Sight‟ as a Business Philosophy
A Systemic Approach to Business Organisation
and Measurement
„Line of Sight‟ is a very different business philosophy and
measurement approach in which everyone can understand
and align with the overall purpose and aspirations.
Although each element of „Line of Sight‟ correlates with
business performance independently, the overall effect is to
focus on optimising the system as a whole – aligning the
organisation behind business performance optimisation
and changing „the way we do things around here‟. It
reduces or even removes the conflict and confrontation
common between pseudo-independent organisational
functions.
The measurement approach has an emphasis on forward-
looking prediction and insight to help people understand
and improve performance (e.g. to improve customer
commitment) and their role in delivering it. It is not designed
to provide a rear view mirror to what happened in the past –
although it must not ignore the lessons from the past.
„Line of Sight‟ links in the critical „people‟ angle, omitted
from most measurement systems. It applies the same
principles to employee measurement as it does customer
measurement; measuring commitment and behaviour, and
trying to keep those that are most valuable now and in the
future.
The process of developing „Line of Sight‟ builds
engagement and encourages self-motivation, again
contrary to the top-down management „command and
control philosophy‟ of „tell them what to do and make sure
they do it‟. Do it with them, not to them! It provides the
opportunity to continuously improve, based on customer
and employee feedback, and creates improved business
performance, rather than simply reacting to
circumstances. Those who have to deliver the changes
become directly involved in shaping them.
„Line of Sight‟, like any measurement system, needs to be
used carefully and it will only work if the measures are
used intelligently by managers. As an example, a call
centre manager will need to look at average call time to
answer questions such as „how many people are required
to manage the call centre‟. An agent will also need to be
measured on this but in the context of other measures,
such as revenue generated and customer satisfaction. A
good supervisor or coach will recognise the balance of
measures and coach people to improve appropriately. A
focus on any one of these measures to the exclusion of
others will break the system.
„Line of Sight‟ positions profit as an output of the system;
not the sole focus of it. This will be a leap of faith for
many. Our preferred approach is to encourage board
level and general management interest not just in
profitability, but in all of the elements of „Line of Sight‟.
© REAP Consulting 2010 16
38% of leading companies use
a „balanced scorecard‟
Senior managers should
seriously consider whether
their balanced scorecard
really is relevant and drives
the right behaviours

17. „Line of Sight‟ as a Business Philosophy
Does the Balanced Scorecard approach provide
for this?
Kaplan and Norton introduced the concept of the
balanced scorecard back in 1992. The balanced
scorecard was intended to provide a more balanced set
of measures. It recommends developing a framework of
measurement from four perspectives
(Financial, Customer, Internal Business Process, and
Learning and Growth), which are linked to the overall
vision and strategy of the business. About 40% of the
companies we assess have a „balanced scorecard‟. Only
a small number of these 40% will say that they have a
scorecard which enables them to get close to measuring
the „Line of Sight‟ we discuss in this excerpt. Some do
this, but in our experience, most do not. We would ask
senior managers to seriously consider whether their
balanced scorecard really is relevant, drives the right
behaviours and adopts a systemic approach (measures
the system). They should ask themselves „Does it provide
them with the line of sight they need or is it, in
fact, counter-productive?‟
This excerpt describes how companies can obtain more
success through a systemic approach - focusing on the
enablers of business performance rather than on the
profit objective in itself. Of course, organisations should
still measure and worry about profit but as an output of
the work of the organisation. They should not focus solely
on its achievement or even maximisation, as this may
destroy the process of achieving it. We do not propose
that companies blindly adopt a systemic approach, but
develop the measurement systems and management
cooperation that this approach implies.
Some companies are applying system thinking in their
approach to customer (and business) management.
Others will struggle to persuade sceptical managers that
a systemic approach is appropriate. Perhaps in these
companies it will be worth while ?? an evangelist, or a
team of customer management professionals, developing
the linkages discussed in this excerpt. Normally, when
this is done, the story for systemic management becomes
pervasive.
© REAP Consulting 2010 17
Cranfield University‟s Centre for Business Performance
commenting on the Balanced Scorecard and the EFQM
model states
“The problem with both of these
frameworks, however, is that they are simply
frameworks. They suggest some areas in which
measures of performance might be useful, but provide
little guidance as to how appropriate measures can be
identified, introduced and ultimately exploited. For
these, or any similar performance measurement
frameworks, to be of practical value, the processes of
populating the framework, designing the
measures, implementing them and then exploiting them
have to be understood”.