T. Aloise

Sometimes businesses get so focused on the individual needs of clients and customers they serve, that they neglect to see a bigger picture: the industries within which these companies reside and what the future holds for each. Here’s the new blog entry from T. Aloise & Company (www.taloise.com)

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When chatbots fail

by Mariette Johnson Wharton

Photo Credit: EKR Agency

The Power of Personalization in Banking Report shows some interesting and (what should be) fear-inducing trends in financial institutions. First, financial institutions overestimate the value that customers place on their banking relationships. Fatal mistake if this leads banks to offer too much unsolicited advice. It would be creepy for customers to recognize how much data banks have about them, for starters. Secondly, over-meddling is annoying.

What should be cautionary is that the report’s findings indicate that the majority of all kinds of financial institutions are “unprepared to provide personalized advice, communication and offers.” So, while the goal of personalization is certainly laudable, you need to know what you are doing or your strategy will backfire.

Personalization through technology is the latest for financial institutions and others looking for high-touch customer experiences. All fine and good but care needs to be taken not to annoy customers with messages selling the benefits of the latest bank offerings. Customer-initiated messaging is one thing and even notifications about potential problems would be welcomed but sales pitches, probably no. TakePersonetics’ marketing language about its AI abilities:

"Using real-time predictive analytics, Personetics Anywhere enables financial institutions to go beyond simply reacting to customer requests. By anticipating customer needs and delivering personalized and timely insights, banks can help customers be better informed and more confident in their ability to control their financial affairs. For example, a customer that is traveling to a different country may receive advice on how to use the bank’s card in that country while minimizing any associated fees. Personetics Anywhere can also analyze customer spending patterns and provide advance warning if an account may become overdrawn, suggest ways to increase savings, and deliver other insights related to the customer’s most current financial activities."

Information about fees could be ok, and doubtless, warnings about an overdrawn account would be welcomed, but beware overstepping boundaries and allowing a bot to irritate customers. Suggestions on increasing savings veers into dangerous territory and frankly, it’s unclear what “deliver other insights related to the customer’s most current financial activities” might be, but alarm bells are starting to go off.

Worse than being unprepared, AI chatbots cannot be counted on to deliver appropriate responses without some serious filtering. Machine learning technology is at an early enough stage that even giant Microsoft, with its nearly limitless resources, has found its attempt at a chatbot, teenage girl emulator Tay, has fallen prey to the teachings of Internet trolls, resulting in @TayandYou tweeting shockingly racist statements in support of genocide. As an experimental project, it will get chalked up to learning but tweets of that nature in a customer relations scenario would cause irreparable brand damage to say the least.

Facebook Messenger’s AI chatbot, targeted at businesses, is expected to improve customer engagement by being able to send links and images and answer questions and will hopefully not fall victim to inappropriate machine learning. Google’s AlphaGo has already shown the promise of deep neural learning, as has IBM’s Watson. Bots might be able to win strategy games against the world’s most competitive players, but they still lack the ingenuity of humans so even if you think we can overcome the Tay fail with filters, it can’t bring the creativity of a person. At least not yet.

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Death to bank branches

by Mariette Johnson Wharton

Retail banks, listen up. Video conferencing and electronic signatures are long overdue. Customers wait in lines during limited bank branch business hours when they don't need to. From a technology and legal standpoint, there is no reason to be face-to-face to execute a change to a business or personal banking account, which is impossible otherwise (at least at Citibank branches). Transactions such as opening an account and managing an account can be handled remotely using freely available video conferencing and DocuSign or other services. It would be naïve to suggest implementing these changes would be without hurdles, but everything worth doing has challenges.

In mortgage banking, customers execute multi-million dollar sales contracts using electronic signatures, so why isn’t this happening in the retail bank environment with far more straightforward transactions such as opening or managing accounts? Think of how easily this can be done: A customer can sit at their own desk or at home and verify their identity by holding their drivers license up to a video camera on their computer or their smartphone rather than visit a branch. Once identity been verified, the bank can send documents for electronic signature. This process has been recognized for over a decade and a half by theUS Federal ESIGN Act, passed in 2000. Banks, you don’t want to be slower than the federal government, do you? The Act identifies an electronic signature as an "electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record." This is a legally acceptable document.

While of course not as widespread as telephone or general Internet use, video calling is not foreign to millions of Americans (and non-Americans, of course), so why not make this a way to communicate with a bank representative? Pew Research Center reports that 66% of 18-29 year olds have used a mobile device for video calling, as have 49% of 30-49 and 27% of those over 50. This is a not a small adoption rate.

In case you need more evidence for the growing uselessness of branches, The Financial Brand reports that the majority of consumers (irrespective of age or income) use bank branches very infrequently. Bank of America has closed branches and is promoting mobile banking. Research shows that in 8 years, customer preference for making deposits at a teller has dropped 50% as of 2014. Assuming the trend has continued, that number has likely continued to plummet in the last 2 years.

Ok, so you might argue that according to the 2014 US Multi-Channel Preferences Study, bank branches are still useful for new primary checking acquisition. Realistically, though, if people had an alternative to visiting a branch, the bets would be that people would rather use on-line channels. This is borne out by the preference to use an ATM vs. a teller to deposit checks. Now that banks are accepting deposits of checks via scans from a personal mobile phone, chances are no one really wants to visit an ATM except to extract cash. Coupled with the decrease in demand for cash with the use of Apple Pay, Square, PayPal and the like gaining ground, what use will an ATM be, let alone the branch?

And, anyway, in a more recent study, the 2016 Omni-Channel Shopper Survey of U.S. consumers found that the number of new primary checking accounts dropped by HALF in the past decade so keeping branches to win new checking customers is looking less and less appealing. As The Financial Brand writes: “Historically, banking convenience has been defined based on physical branch proximity to either home or work (or both). As banking technology has evolved, the need to visit a teller in the branch or even an ATM has declined. This had resulted in a redefinition of “convenience.” None of this is surprising: “For the first time ever, the highest ranking single factor in the definition of convenience is no longer proximity to a physical branch, but having “leading online and mobile capabilities”, which had 26% of the responses.”

No good excuse exists for banks not to be implementing remote processes for all bank procedures. The message is clear. Customers are less interested in the bank branch experience. Instead, focus on how more services can be delivered on-line, leveraging the aforementioned video and ESIGN Act-compliant technology widely used in other commercial enterprises to interact with customers. The result? More engaged customers, translating into higher revenue and lower cost from fewer (expensive) branches.

Source: Vidyo 2016

Research sponsored by Vidyo indicates that 50% of banks interviewed plan to implement video-enabled banking by 2017, 80% by 2018. Whether they do it or not remains to be seen, and we all know banks are not first movers, but we won’t be surprised when the bank branch disappears. Here to gleefully accelerate the change...

Retail Banking

Convenience

Video Conferencing

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Are you killing or boosting creativity at work?

by Mariette Johnson Wharton

Too often, forces acting upon creative, talented people in an organization can have a substantial impact on their output. Innovative thinking is not simply a result of individual or group talents but is also a function of the work environment. Is your organization set up to encourage or stifle creativity?

One of the ways that has been proven to fuel creativity is the alignment between an individual’s passions, interests, expertise and talents with job assignments and roles. This gets at the heart of intrinsic motivation. It is deceptively difficult and requires in-depth knowledge of a person to be able to adequately perform this match. In very small organizations, people need to assume a wide variety of responsibilities and this may allow for exploration and cross-fertilization of ideas. On the other hand, specializing in too many areas with low expertise can sap energy and drain creative fuel. In order to optimally tap creativity, individuals need to function in roles where deep experience and talent meet interests and passion, a combination that enables intuition.

Passion is one great force that unleashes creativity, because if you're passionate about something, then you're more willing to take risks. - Yo-Yo Ma

From intuition often springs breakthrough thinking. As David Kelley, a founder of innovation firm IDEO, puts forth: “…your intuition is really the sum of your experiences. So the way that we say to improve your intuition is to have a lot more experiences and a variety of experiences.” He believes “the great danger for people as they progress through their careers is they rely on intuition informed by old data. It’s important to constantly refresh.” Those who never take vacation, take heed.

Once the right assignments or roles are in place, having a diverse and supportive team can spark new ideas. The supportive part is highly relevant and often overlooked. From my own professional experience, I cringe recalling an experience more than 15 years ago, seated around a boardroom table with a group of peers, strategic alliance directors at an innovative tech company, the first to design and implement large-scale back-end integrated e-commerce systems. We were asked what we would do if we had an unlimited budget. Silence befell the room and we looked around awkwardly. The request had no context and this was the first time we had been together as a group, let alone brainstorming as a team. Although we all knew each other, none of us seemed to feel particularly comfortable tossing out ideas. No one knew what would happen as they landed. It was not for lack of creative thinking, but comfort, that ideas were not flying at first. In short, a tactical leadership fail. This is not uncommon. Research by Teresa Amabile shows that “people believe that they will appear smarter to their bosses if they are more critical—and it often works. In many organizations, it is professionally rewarding to react critically to new ideas.” It is intuitively obvious, but research also shows that creativity and teamwork are diminished in a culture of fear where ideas are shot down before they can be explored.

In addition to brainstorming missteps and a culture of harsh criticism, it is not uncommon for companies in fast-moving industries to create a sense of urgency with impossibly tight deadlines. Under pressure, some rise to the occasion but for most, repeatedly working under unrealistic deadlines dampens motivation and leads to burnout. Not a recipe for creative blossoming.

Another potential creativity killer is an organization driven by accounting goals and beancounting. Clamping down hard on resources for new projects can lead to collateral damage as creative energy gets diverted to the search for appropriate resources in lieu of ideas for new products and services. Not only that, but the sense that work has meaning is a strong motivating force, so the message that only money matters can take the wind out of the sails.

Consider compensation as well. For creativity to flourish, a lot of ideas need to flow freely and not all concepts will contribute to the bottom line. Idea generation and iteration take time. Never rewarding creative ideas, but rather only productive results, will limit the generation of big ideas. Extrinsic rewards are an important component of motivation for most people and aligning them only with the successful product launch, new customer acquisition or rate of growth to the exclusion of rewards of novel thinking will hamper long-term creative juice. Reward a little risk-taking.

Take a look at your organization and see if processes and policies are in place that squash rather than fuel creativity. It might be eye-opening to consider what your organization is doing unwittingly to kill creativity. Set realistic budgets, allowing people to argue for resources, reward novel thinking. Establish aggressive but manageable deadlines. Enable intrinsic motivation, driven by interests, passions, and the challenge of the work itself. The sense that the work matters turns out to matter more than extrinsic motivation from financial rewards. Put more effort into all-important goal of aligning individuals with the right projects. If you don’t, you can’t harness the limitless creative power of your people.

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Innate traits of creativity and how to harness so-called dangerous traits

by Mariette Johnson Wharton

So you want a creative team. How do you know if you have people with enough creative juice or if you need to hire them? David and Tom Kelley, IDEO founders, believe everyone is born creative. People are not equally creative, though. Early research into the link between genes and creativity validates some correlation between the two, with a pilot study in Brain Research showing that DRD2 gene and the TPH gene were associated with creativity, but explaining only 9% of the variance in test subjects. If genetic differences then account for very little of creative variances, it begs the question: what of the other 91% of creative variability?

To some degree, creativity variances hinge on discrepancies in personality traits, of course, which can be shaped by experience. Based on the Five Factor or Big Five Model, defined by Paul Costa and Robert McCrae, psychologists at the College of William and Mary conducted meta-analysis on the correlation between Big Five Factors and creativity, finding that creative people are more open to new experiences, self-accepting, less conscientious (in terms of planning and organizing), and relatively more aggressive and impulsive. Impacting creativity to a lesser degree are the traits of less conventional, more self-confident, more ambitious and more dominant. Those of us who are highly creative or have worked with highly creative types will not find any of this surprising.

Not only do genes and personality influence creativity, but also relative sensitivity to new information and stimuli. National Institutes of Health (NIH) studies show higher IQs and lower latent inhibition in individuals with greater creativity. Since latent inhibition is the ability to block out information the brain has previously deemed irrelevant, low latent inhibition enables more raw material for creative concepts.

After early adulthood, are we stuck with the creative level that our genes, personality traits, and sensitivity have bestowed upon us? Well, no. Millennials do not get to have all the fun. Recent longitudinal and cross-sectional NIH research has shown self-confidence, warmth, self-control, and emotional stability tend to increase with age, although naturally, specific life experiences render individual experiences unique (and there’s always Jack Lemmon and Walter Mattau).

In a separate piece, we will address organizational structure and process, as well as the role of expertise and motivation in creativity, but here we are looking at innate traits, so when hiring or looking to put together a team to maximize creative output, look for those with openness to new experiences, self-acceptance, self-confidence, self-control, ambitiousness and emotional stability. While few would argue that it would be dangerous to blindly embrace more aggressive, less conventional, more dominant and impulsive poor planners as a discrete set of hiring and team-assigning attributes (and disruptive to say the least to hire for these traits alone), every individual is a make-up of various characteristics, so adding a mix of these traits into a team can infuse it with new thinking. Consider both these traditionally positive attributes (some of which are overlooked in hiring) and those that people might shirk from, because they just might ignite new ideas.

Management

Creativity Skills

Team Building

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The danger in focusing on the needs of the most profitable customers and - don’t let a black swan make you a turkey

by Mariette Johnson Wharton

So, it turns out there is a risk involved in concentrating efforts on only the most profitable customers. Granted, that sounds highly counterintuitive, especially after the known rewards reaped from exceptional customer service performance. And, few would argue with the Pareto rule with plenty of evidence that 20% of customers can drive 80% of value. With that in mind, it makes sense to have a strategic focus on the most profitable segment and it can be highly detrimental to be unfocused, attempting to be all things to all customer segments.

Here’s where the danger lurks, though. Over-serving the requirements of the most lucrative customers to the exclusion of meeting the needs of less-demanding customers effectively creates low-hanging fruit for competition and for new entrants. Clayton Christensen labeled this process as ripe for disruptive innovation back in 1995. As he articulated, ignoring the needs of customers creates an opportunity for smaller companies with fewer resources to challenge incumbents by offering more suitable services and products at more competitive prices. Once footholds in the low-end of the market are established, challengers can move up the chain and attack more profitable market segments. That is one type of disruption, from low-end creep. Depending on a company’s lock on distribution channels, product or service switching costs and the company’s brand strength, it still might make sense to ignore less profitable customers.

What it points to, though, is that your competition can eat your lunch if you are not paying attention to where the industry is going. If you don’t evolve and maybe even cannibalize your own products and services in favor of those that meet emerging needs, you might well get blindsided.

A related but different concept is Nassim Taleb’s theory of the black swan. His is a lesson in preparing for a highly improbable, unexpected event that has a massive impact. While it would be impossible to predict a surprise, one defense is identifying areas of vulnerability. What is not a surprise to a butcher is a surprise to a turkey.

This idea applies even on a far less grand scale for surprising, momentous events, that while not revolutionary, can still have enduring, brand-altering, customer market-changing impacts, if the cards are played right. Your company might be large enough to have a risk management department and therefore maybe a crisis management strategy, but do you have an opportunity plan? Now, there are few occasions as opportunistic for a mediocre restaurant chain such as Red Lobster as say Beyoncé singing about it at the Superbowl but one never knows. After all, Leiceister City just won the English Premier League Title with 5,000 to one odds and Donald Trump has prevailed as a Republican Presidential nominee. Do you have a team who can think fast and act creatively in the event that serendipity hits? There can’t be a playbook, actually. The opportunity plan is rooted in a culture that fosters innovative thinking and nimble action, anchored by engaged employees.

To avoid being a turkey, spend some time cultivating an environment that is both protected against unforeseen risks by mitigating vulnerable areas, watch where the industry is headed, listen to the unmet needs of your less profitable customers, and create an innovative, engaged workforce that can exploit opportunities as well as mitigate dangers.

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The Trap of the Rational Model

by Mariette Johnson Wharton

Overwhelmed by the evidence of human emotion as the driving (if subconscious) element in decision-making, we discard the traditional economic theory that people act rationally. (Contrary to classic economics theory, empirical research in the field of behavioral economics reveals that purchasing choices are perhaps 30% rational decision-making and 70% based on emotional, psychological and perceptual factors.) Brand experts and advertisers have known this all along without the hard evidence. Successful brands make the buyer feel a certain way. In the case of luxury brands, advertising feeds into customer fantasy.

The problem with assuming rational price-oriented approaches such as promotions and discounts is that they do not inspire loyalty, as many retailers offering Groupon and LivingSocial specials have discovered to their dismay. Loyalty brings a much-coveted price insensitivity, the holy grail of a brand and marketing strategy.

If buying decisions have more to do with an emotional connection to a brand or company, how does a company elicit an emotional response from customers? Implications for the price elasticity of demand, and therefore profitability, are enormous. Specifically, Gallup finds that, in their words:

“In the retail banking industry, customers who are fully engaged bring 37% more annual revenue to their primary bank than do customers who are actively disengaged. Fully engaged banking customers also have more products with their bank, from checking and savings accounts to mortgages and auto loans. Plus, they have higher deposit balances in their accounts than less engaged customers with the same products do.

In the consumer electronics industry, fully engaged shoppers make 44% more visits per year to their preferred retailer than do actively disengaged shoppers. And when they do visit their preferred electronics retailer, these fully engaged shoppers purchase more items than they originally intended to. On average, they spend $373 per shopping trip, while actively disengaged customers spend $289 per trip.

Gallup found similar results in other industries, including the restaurant, hospitality, and insurance industries:

Restaurant -- casual dining: Fully engaged customers make 56% more visits per month than actively disengaged customers do.

Restaurant -- fast food: Fully engaged customers make 28% more visits per month than actively disengaged customers do.

Hospitality: Fully engaged hotel guests spend 46% more per year than actively disengaged guests spend.

Insurance: Fully engaged policy owners purchase 22% more types of insurance products than actively disengaged policy owners do.”

How do we get there? Gallup’s study suggests that keeping promises and inspiring customer pride are key but doesn’t offer insight into how. Certainly the two are quite different and require reflection. For the former, developing and executing policies that respect the customer’s time and effort throughout the buying and delivery process would be required. Regarding the latter, customer pride relates not only to functional, innovative products and services that delight customers but also to extends to corporate policies on social issues. Think of Apple’s (RED) program to fight HIV and AIDS and the more recent support of the LGBT community by giant retailer Target, winning the loyalty of some and of course disloyalty of others. Double bottom-line goals, thinking beyond financial stakeholders, could well build pride and loyalty, as Team B and Benefits Corporations proponents argue. In some industries, giving away free valuable content builds engagement.

Interestingly, it also turns out, to our surprise, that even satisfied customers are not necessarily loyal if they are not engaged. Let that sink in a moment. Rationally satisfied but emotionally disengaged customers who have only their price and performance needs met can have the same behavioral characteristics (i.e., not buying again) as dissatisfied customers, according to Gallup research. This is kind of scary if your company is focused on customer satisfaction to the exclusion of emotional engagement. On the other hand it’s encouraging that engagement might not even require more commitment or expense but rather thought. Again, it gets back to what brand strategists already knew: In the long run, the brand is your most valuable asset (apart from your people) and how you make people feel about your brand through your values, your investments, your support, your commitment and your interest in your customers truly matters.

Corporate strategies often evolve from an executive vision of either leading with the most innovative product, offering the lowest price, or beating the competition on service. To sustain an advantage in the long run and leverage the premium of the emotionally engaged customer, consider human nature, irrational decision-making and what you are doing to make your customers feel proud of you. Let’s remember it’s not the same thing as customer satisfaction in the rational model.

Decision Making

Customer Engagement

Brand Management

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Re-thinking the A Player: The B Team (Not What You Think It Means)

by Mariette Johnson Wharton

If the key to successful teamwork is emotional intelligence, as Google’s comprehensive research into the subject has concluded, then maybe we’ve gotten it all wrong. Top companies screen for exceptional technical (or hard) skills foremost and second, cultural fit. But what if the culture stinks? What if, like in many companies, employees are emotionally disconnected and feel threatened? The potential of A players cannot not be fully realized in this scenario, leaving a tremendous amount profitability and productivity on the table, not to mention employee well-being.

Top-notch players with the best technical skill can come at the expense of a collaborative work environment. Not always, but it does happen when companies overfocus on hard skill. Most people are not good interviewers to begin with and emotional sensitivity is hard to discern an interview, no matter how talented the person posing the questions. The issue is:  What we are leaving on the table by not considering the impact of a personality on corporate culture and teamwork? Hiring one bad apple can wreak complete havoc on company morale, motivation and productivity.

Underscoring this reality, a recent Gallup poll on the state of the American workplace uncovered the grim reality that 70 percent of American workers are “not engaged” or are “actively disengaged” and are emotionally disconnected from their workplaces. Without a doubt, the majority of companies are not fully reaping the rewards that they could and workplace morale suffers.

Gallup found that "engaged employees work with passion and feel a profound connection to their company. They drive innovation.” The disengaged do the opposite, undermining engaged coworkers. In the Washington Post, Lillian Cunningham points to the economic as well as morale problem evident when only 30 percent of a workforce are motivated and productivity plummets.

Psychology Today points to a Harris Work Stress survey discovering that 83 percent of the interviewed employees are stressed out by work, with documented damage to mental health, increased risk of disease and death, and lower worker productivity among other harmful consequences. Douglas LaBier, PhD. maintains that unsupportive management cultures, lack of opportunities to learn and grow, mismatches between skills and position, as well as “outright abusive, arrogant and narcissistic bosses” play into the destructive workplace stress.

To combat the lack of corporate transparency, The B Team, comprised of business luminaries such as Sir Richard Branson, urges companies to develop policies that inspire wellbeing. Although B Team has laudable goals around serving broader community needs, let’s use their example as a metaphor for how we can do better by society. We are not talking about lowering standards and hiring B players. I mean broadening the definition of an A player to include outstanding interpersonal skills and proven emotional sensitivity that arguably should be measured in performance reviews and factored into compensation.

As a start to this process, we can recognize the negative patterns in the workplace culture and choose to reward the creation of psychological safety. We can commit to the softer skills in recruiting and maintaining new talent, rather than addressing the drive for achievement (without regard for others) above all. We can look for demonstrated cases of collaboration, conversational turn-taking in meetings, consideration for the opinions of others, knowledge-sharing and other traits that will allow creativity and innovation to flourish in others. We can join the philosophical B Team of well-rounded A players that will not only enhance the bottom line but make the workplace a positive one.

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The Paradox of the Less Powerful: Negotiations

by Mariette Johnson Wharton

Overtly or not, we negotiate on a daily basis and what we don’t know about our relative position of power can hurt us. Counter to intuition, it can be advantageous to be the less powerful negotiator. That is, if you recognize and understand how to harness the opportunity.

Generally it is assumed that the more powerful and dominant player has the upper hand in negotiations. These more powerful participants in a negotiation hold more attractive alternatives. They can simply walk away. More dominant negotiators then, we might assume, may only look at a scenario as a zero-sum game, in which one party’s gain is the other party’s loss. With less to lose if the negotiations fall apart, those with the upper hand are likely to negotiate harder to get more of what they want.

Curiously, empirical research by Margaret Neale and Thomas Lye of Stanford University shows the opposite can also be true. According to their research, a weaker player is less concerned with value-claiming and more interested in getting the deal done. Presumably, since the players with the lower hand have fewer options, they would prefer a deal in which more of the gain is transferred to the opponent than no deal at all. Here lies the paradox. Perhaps surprisingly, the weak player can then exploit the synergies between the opponents and thereby expand the available pie, even obtaining a surprisingly bigger slice. Compared to negotiations between opponents of equal power, negotiations between those of unequal power have the potential to yield a greater outcome. This shifts the result, more optimally, from a zero-sum game. What Neale and Lye have found is that the lower-power party is the engine for this value creation.

One of the main takeaways from my negotiations studies at Columbia Business School is this: consider what your counterpart values and what you value. Chances are, these values do not overlap in every arena and therefore you can stand to gain more of what you want by giving up something less important to you but more important to your opponent. Too often, negotiations do not explore the hidden values and what trade-offs can be made outside of zero-sum thinking.

Returning to the research of Neale and Lye, another way to create value is for a negotiator to display the opposite behavior of the opponent. In other words, if dominant behaviors are displayed, show cooperation and deference. Conversely, in dealing with a deferential player, empirical research reveals that dominant characteristics will yield higher value creation. Matching dominance (or deference) prevents participants from focusing on creating additional opportunities to expand the available outcome from the negotiation.

Surprisingly perhaps, complementarity creates opportunities for successful coordination. For everyday and for important negotiations then, having a traditionally lower bargaining position can confer greater rewards if you employ a complementary stance and think about how to exploit the opportunities to expand the pie.

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Soft Skills: Just as Valid as Tech Skills, even in Silicon Valley

By Mariette Johnson Wharton

In the vast majority of schools, the educational system is centered on hard skills in academic areas such as math, leaving many socio-cognitive skills that relate to interpersonal success in the dust. Every good program will attempt to inspire the squishy skills of creativity, resourcefulness and discipline, but often the teaching required to successfully collaborate with other individuals is sorely missing. Sure, we might be encouraged to work on group projects but very few of us innately have the interpersonal know-how to reap the rewards of real teamwork. We are after all each of us individuals with different needs, interests, and capabilities but frequently the rush to divide tasks overlooks the process of recognizing, embracing and appreciating what makes each of us unique. Unfortunately, we not typically taught to look for and harness each other’s attributes and to improve interpersonal skills in school.

According to Forbes, in 2015 McDonald’s commissioned an economic research study revealing that these non-technical skills contribute about £100 billion to the UK economy. This study found that 97% of employers believed soft skills were important to their current business success, while over half were of the mind that skills such as communication and teamwork were more important than academic results and yet, 75% pointed to a gap of these same soft skills in the workforce. If hiring managers select employees based on academic success and technical skills, it is no surprise then that non-technical skills are underrepresented in the workforce.

Columbia University professor Jonah Rockoff asserts that intangible skills are notoriously difficult to evaluate on a large scale, hindering attempts to collect and share best practices. Admittedly, it is difficult to assess non-technical skills, but performance reviews can and should evaluate interpersonal ability in a 360-degree format, capturing creative problem-solving, empathy for others and a wide range of other soft skills. It may take a cultural shift, but we should be measuring what we know matters: how we treat each other. We know intuitively that soft skills are essential to teamwork, productivity, and innovation and are crucial to delivering top-notch customer service, don’t we? (If you need hard evidence, see the summary of extensive research on the link between social sensitivity and effective teamwork at Google here.)

Service-oriented businesses cannot afford not to hire for, measure and manage non-technical skills. Given the widespread lack of academic training in the less technical domains, businesses can also not afford to leave such skills underdeveloped.

What gets measured gets managed - Peter Drucker

Need help measuring your soft skills or company’s customer service delivery? Contact us.

Soft Skills

Organizational Development

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Service: The Dots Are Connected. Are Yours?

by Mariette Johnson Wharton

If it seems like we are continuously pounding away on the subject of service, well, it’s because we are. It’s not that it is an overlooked topic, but it’s one that seems to need broadening in a company’s approach to its operations. As we all know, service is not simply the sales interaction as a customer walks into a store, or contacts a support agent or browses a website. It starts with brand, ends with the termination of a service or the disposal of a good (or does it?) and includes every touch point in between. One area that can be subject to disconnection from a service mindset is the delivery of a service or good or other operational aspects that perhaps management feels falls outside the realm of customer service. The same goes for the quality of a product or service. Beware this thinking and allow an example or two to illustrate the point.

Once a company has captured a customer, having succeeded well enough at projecting a solid brand image, delivering adequate service, marketing or merchandizing its offerings sufficiently and offering perceived value, the customer could be in a for a surprise in the delivery and receipt of the offer, potentially undermining the whole experience. Let us look at something that perhaps seems unimportant to management in the customer experience: the delivery policy, where the rubber meets the road and the wheels can easily fall off, leaving customers frustrated. One major retailer, Crate & Barrel, has a different policy than competitor Room & Board, as an example. Crate & Barrel’s policy requires customers to cancel a delivery appointment 72 hours before the date to avoid a $35 fee, yet it notifies customers of the delivery window 24-48 hours before the scheduled appointment date, effectively putting the customer in a bind. It has been known to deliver well in advance of the delivery timeframe as well, creating additional burden on the customer and undermining any goodwill that may have accumulated from attentive customer care during the shopping experience. Contacting the customer after a transaction does not equate to offering a reasonable delivery policy to begin with. By contrast, Room & Board has a more flexible appointment cancellation policy, does not exact fees for cancellations and has been known to arrive within the appointed window. Pricing and product quality aside, which company would you rather shop with? Companies tend to create these types of operational policies by department, instead of integrating them and taking a strategic approach. This leaves the customer feeling as though they are not dealing with the same company all the way through.

Even worse than disappointing policies, though, is poor product quality. On the Consumer Affairs website, it turns out that Crate & Barrel has a one-star rating of Consumer Affairs Unaccredited with complaints ranging from wobbling, cracking, sticky-taped products to missing delivery dates and improper credit card charges. Once a customer has experienced poor quality or service, no amount of excellent merchandising or customer service can save the brand image. An excellent delivery process does not suffice. After all, the greatest customer service insult is a product or service that fails to meet expectations.

If you are in charge of your company’s brand, operations or service, are you coordinating with other departments? Does your vision of delivering top-notch service consider the full customer experience from brand awareness to comparison shopping to delivery and disposal or termination and beyond (assuming potential repeat business)? Is it truly customer-centric, considering the customer’s needs, aspirations and obstacles? Customer service has to be consistent and inclusive across all interactions with the customer, creating a seamless experience through various touch points. Map out your customer’s journey and find out. If you need help, T. Aloise & Co. have extensive experience designing and conducting research and analysis on service.

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How to create a dream team: It’s not just about diversity

By Mariette Johnson Wharton

If only every company could have a flagship product to propel what might otherwise be an ordinary company into one that is capable of spurring extraordinary developments, stretching our imagination about the possibilities of what can be accomplished. IBM could easily have been a has-been in this era but the five-year transformation of its cognitive platform Watson, of game show legend, has been leveraged by 80,000 developers for nuanced artificial intelligence in profound, meaningful ways tackling solutions ranging from security to medical applications.

Although a plethora of innovative ideas and technologies are hatched here in Silicon Valley, mind-boggling leaps forward occur in many venues, locations and with diverse groups of people. One of the common underpinnings to successful innovation is inclusive collaboration across disparate teams, far easier said than done.

To uncover what makes a high-performing team stellar, Google exhaustively studied the effectiveness of its work groups, searching for common denominators in individual traits and skills. After examining the dynamics and results of over 180 teams, Google figured that the mix of personality attributes per se were not the key to success. Rather, group culture and norms turned out to be far more impactful. In particular, psychological safety determined whether team members felt secure suggesting novel approaches and ideas, without fear of embarrassment or retribution from co-workers. The clarity of goals and as well as dependability of team members to execute high-quality work mattered more than individual characteristics. Lastly, the most successful teams were working on projects that they felt really mattered and that were important personally to each team member. It almost seems too easy. Granted, Google’s hiring process screens for top-performing talent so it’s safe to assume that on the whole its team members are competent, achievement-driven people who can be trusted to deliver high-quality work.

The psychology safety component, then, is trickier and certainly the most compelling aspect of this finding. To establish and maintain a level of comfort, successful team members share something they took a risk on, reveal something no one at work might know about or otherwise establish an emotional connection. Social sensitivity and conversational turn-taking matter a great deal in making these teams click.

Safety is not the only factor in making teams effective. Columbia Business School professor Adam Galinsky found in his research that in the beginning stages of idea generation, a flat organizational structure lends itself more easily to collaboration. Hierarchy hurts with complex decision-making in dynamic environments, he found. Later on, when it comes to evaluating ideas and implementing ideas, a more top-down approach is more effective when teams are interdependent and the choices of one affect others. Managing teams through this transition, then, becomes critical.

It’s been a long-entrenched notion that the more diversity in a team, the more innovative results might be expected, but here we find that even in the field of creativity and innovation, listening and responding to others sensitively matters more, particularly in the early stages of idea generation.

Next time you are in charge of a team, learn from Google and set group norms to ensure that all participants get equal air time and that an emotional connection is encouraged and supported. And, manage through the transition to a more vertical structure for implementation planning.

Team Management

Team Leadership

Team Building

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Opportunity with Gen Y: Make it mobile and paperless (for the rest of us, too)

By Mariette Johnson Wharton

On sheer size, millennials, or Gen Y, represent a significant opportunity for all types of lenders, today spending an estimated $200 billion annually. In a decade, one third of adults will be millennials, representing a staggering 75% of the entire workforce. By 2020, millennials’ spending is anticipated to top $400 billion a year. Are you ready for them?

Gen Yers came of age in the shadow of the 2008 financial crisis and resulting Great Recession. To be sure, millennials face financial challenges: unemployment of 10% (vs. about 4% for Gen X and Baby Booomers), underemployment rates at about 30% (as compared to 22% from Gen X and 21% for Baby Boomers), and 45% of 25 year-olds have student loan debt, averaging $30,000 (30% of whom have marred their credit history with delinquent payments). Still, more people from Gen Y have bachelor’s degrees than any other generation that came before, according to the White House’s Council on Economic Advisors. Get this, though. According to the Brookings Institute, on average, households under the age of 36 are apt to keep more than half of their savings in cash, relative to other generations keeping less than a quarter in cash. It would be hard to argue that between the millennials’ employment, investing, debt and credit history challenges, a ripe opportunity exists for the financial services industry to provide investing and borrowing education, not to mention a few things we will get to next.

Lenders and others looking to serve millennials need to keep in mind several things about Gen Y:

Millenials do their research on-line when it is convenient for them. Phone and face-to-face interactions are not that appealing. Self-service web portals and on-line chat are required. Almost 75 percent research on the web before making a purchase and conducting a financial transaction, according to the Intelligence Group, so the content had better be relevant, accessible and interactive.

Information can’t just be provided to millennials (or to the rest of us). It has to be interactive. Expect to follow up and engage.

Today’s table stakes are mobile-centric applications. It’s not enough to claim cutting-edge technology and only offer rate comparisons. Gen Y will expect to be able to upload documentation on phones. Stay ahead of the curve or lose your potential customer’s interest.

Electronic signatures, like mobile apps, will be table stakes.

Reengineering of the homebuying and lending process is underway, but it still has a long way to go. Education and training needs are going unmet. And, remember that any type of data collection, information sharing and signature gathering – every touchpoint - will have to be streamlined and integrated into technology. Nothing less will be expected. Don’t even think about asking for or showing a piece of paper to win the next generation’s business. Don’t even.

Need help executing this strategy? T.Aloise & Co.’s experienced staff can help.

Mortgage Lending

Lending Solutions

Technology Integration

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Convenience: the new table stakes for sales & marketing effectiveness

By Mariette Johnson Wharton

In this full-blown customer-driven economy, we all know a single mistake can lead to a scorching social media shaming, with potential long-term brand impacts, although some brands need no help from customers and inflict self-harm single-handedly. What can B2B companies learn from B2C? Red Lobster’s lame Twitter response to Beyoncé’s release of Formation comes to mind. In case you missed it, Beyoncé’s mention of the chain led to a 30% surge in customer visits around the time of the SuperBowl but the restaurant’s bungling of the opportunity tarnished the brand, at least among social media illuminati. In any case, a repeated pattern of customer care gaffes certainly impairs revenue. Customers are people and people want to be respected. If you re-frame your relationship with your customer to think about how you can respect their time, reduce the effort level and the friction in doing business with you and lower their frustration, you can and will squash competition is that merely trying to delight the customer. Companies like Zappo’s that flatter customers and kill with kindness have raised expectations for the supremacy of the customer. There is no getting around those table stakes, but what are you going to do to go beyond it? Famously, at least among its regional devotees, fast food chain In N’ Out knocks out the competition with its French fries cut and fried to order and fresh ingredients in its burgers. Its limited menu is entirely forgivable. Competitor Five Guys Burgers and Fries, though, allows customers order on-line or through an app and promises the order in seven minutes. It doesn’t need cut-to-order fries if the customer doesn’t have to wait in a drive-through line for 20 minutes. Convenience is a key to treating the customer with respect and earning repeat business. We know from the science of behavioral economics that people have a really hard time resisting what looks like a good bargain. This is why Black Friday hurts our wallets so much and we might feel black and blue from buyers’ remorse come Saturday morning. Did we really need that gadget and are we really going to find time to use that Thai massage before it expires? Any customer loyalty that might have accumulated from the last bargain will erode once the new Groupon is past the expiration date. Hence, the rise of a secondary market for expiring Groupons. Anytime your business spurs another industry to clean up your mess, trouble is brewing. Be wary of tantalizing your customer into a deal that is not really a deal after all because they don’t want it. Such tactics rarely work in the long term. Groupon’s success shows no end in sight with its international expansion, new platform and emphasis on a pull strategy, but how much more profitable could it be if it addressed buyer’s remorse better? By contrast, Bed, Bath and Beyond is a no-risk shopping experience. They take anything back. Once I was in the returns line behind a woman who asked for her money back for a blanket. The reason given (and accepted)? Her cat peed on it. Do you think that customer would ever shop anywhere else for home goods? If you are concerned with your company’s sales and marketing effectiveness, one way to halt downward spiral in that arena is to re-frame your relationship with the customer. Think like the retail bosses even if you are at a B2B company about why are you are making choices for one business over another. If you truly respect your customer, consider how you are making their lives more convenient (stop bashing Rocket Mortgage and think more like Quicken to remove barriers) and whether you are giving customers a deal they really want? T. Aloise & Co. are experts in sales and marketing effectiveness so let us know how we can help.

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Here comes your data...

By Mariette Johnson Wharton

The biggest retails news this month, maybe this year, just might be coming out of Seattle. It looks like Macy’s is not the only retail giant lately to jump into experimenting in a store with personalization. (You might have heard that Macy’s created a lab effectively in its flagship Manhattan store where Fossil watches, Levi’s jeans, 3D jewelry and iPhone cases can be customized in the store by the customer.)

Amazon is clearly moving in a new direction and has kind of secretively opened a retail bookstore in a Seattle shopping mall. Maybe it’s not so much of a bookstore as a lab, albeit decidedly different from what Macy’s is doing. If Forbes contributor Rob Salkowitz’s hunches are right, the number one retailer is up to more than entering the retail game. In his article, Mr. Salkowitz asks, “ So what if this humble retail outlet isn’t actually (a) bookstore? Suppose it’s a laboratory and a showroom where Amazon can demonstrate its solution for blending physical and digital commerce: a solution that undoubtedly lives in Amazon’s cloud. Perhaps a proof of concept for a technology that Amazon may or may not use itself later on, but would certainly be of interest to the giant companies who rent cloud services by the petabyte? If that actually is Amazon’s agenda, then it’s possible that a Minority Report-like future of retail that we’ll all have to deal with, for better or worse, began yesterday at a mall bookstore in Seattle.” It seems more likely than not, given the reportedly strange selection of books and the need to scan each item (linking to an existing Amazon account if there is one) for pricing information and reviews, coupled with the fact that a customer’s Amazon data is there for the interpreting.

If scanning an item at an Amazon retail store leads into links to your account information where your buying preferences, location, previous purchase history and goodness knows what other kinds of information are stored, that would suggest as Mr. Salkowitz points out, that data can be manipulated to present an offer to you that takes into consideration a lot of personal data about you. Price discrimination based on your ability and willingness to pay can reach new levels here where you and I might be in a bookstore and you instantly get an offer that is entirely different from mine. If that is the case, Amazon is treading into interesting new terrain, since customers are accustomed to feeling as if, even if a price isn’t fair, at least it’s the same one that’s initially offered to everyone, before any negotiations might start.

Given the prodigious amount of transactional and customer data stored in Amazon cloud services and the profits derived from operating Amazon Web Services, it comes as no surprise that Amazon would leverage its data expertise and mine it for its the retail side of the business and now start experimenting with physical presence. Who knows, maybe they are also looking at how items adjacent to each other or the store environment or other factors influence buying decisions? If they are not doing that, they would certainly learn something interesting from doing so.

Amazon’s presumed lab presence is a strong indicator that the overall market will be moving towards tailoring offers to individuals. With Google’s ability to track and combine a profile of a consumer’s search for information, shopping habits, travel history, Google Shopping (remember Google’s comparative shopping site froogle.com?) it is probably already making special offers and pricing based on individual data. It is certainly serving up ads it thinks you want. The technology is nascent: Just because you are interested in the weather patterns and soil conditions out west (Are you? You probably aren’t), does not necessarily mean you want to buy a farm in Idaho. Once retailers and others learn more about how to effectively leverage customer data in a way that serves the customer rather than annoys us, businesses serving all types of customers, whether in financial services, retailing or any business for that matter, might actually be able to delight us rather than scare us with how they use their knowledge of us. Let’s hope it’s the former.

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Where’s our eMortgage: an end to the paper chase in sight?

by Mariette Johnson Wharton

This week the four-month old mortgage regulations, the TILA-RESPA Integrated Disclosure (TRID) rule from the Dodd-Frank Wall Street Reform and Consumer Protection Act designed to improve borrowers’ ability to understand and make well-informed mortgage choices, has been blamed in part for a Q4 drop in mortgage originations. Ouch. One of the reasons pointed out by the Mortgage Bankers Association (MBA) are differing interpretations of TRID by government and investors, leading to dreaded loan defects and investor loan rejections, significantly impacting jumbo and correspondent originations. Not only are originations down but also delays are on the rise. Mortgage software industry leader Ellie Mae’s Origination Insight Report, based on 68% of all mortgages originated, shows that the mortgage closing process is now a whopping 50 days. Apparently, complexities associated with interpreting and calculating the proper numbers for the Closing Disclosure has created inconsistencies. And that means delays. No one likes delays, especially not for a residential home purchase loan.

What is going on here?! In an era when on-line, real-time answers are expected (thank you, Rocket Mortgage) and a significant (32%) share of the buying market are tech-savvy millennials, how can this be happening in 2016? No one would argue that with TRID came an increased demand for collaboration between parties in the mortgage process, since one of the big ideas behind TRID is that mortgage data should be easily shared among participants in the process, rather than stored in static silos. Easy to say, harder to implement.

Although the rule change drove out the smallest lenders due to compliance challenges, even some of the largest banks are seeing market share losses to the small and mid-size lenders. Often the largest financial services companies are the slowest to move. To compete effectively, lenders need to be able capture and manage documents electronically. They can’t do this alone. Technology companies like Pavaso, eLynx, Ellie Mae, D&H, P&P, and Calyx Software to name a few are helping to ensure compliance, lower costs, and provide accuracy. These will be table stakes to stay in the game.

Nimble companies that see the paper bloat, delays, and lack of transparency in the mortgage industry as a ripe opportunity are donning superhero capes. No doubt about it, this current mortgage mess presents an enormous opportunity for technology providers in the financial industry. Research among T. Aloise & Co. clients in the mortgage industry has shown the demand for innovation and technology outstrips other customer requirements for service improvements.

What can next-gen technology providers offer? Less expensive and faster processing, fewer errors, fraud prevention, improvement in credit risk management and greater transparency, for a start, which ought to lead to a much-needed loosening of credit, and we can only hope, the paperless mortgage.

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Pushing the mortgage button: too soon?

by Mariette Johnson Wharton

Everyone likes rockets but some people are afraid of the speed. Fourteen thousand visitors to a website in one minute can’t be wrong though, right?  Quicken Loans really pushed some buttons this week after launching its Rocket Mortgage ad during Super Bowl 50 urging borrowers to “push button, get mortgage”, sending social media all aflutter. Granted, 18% of those watching the Super Bowl only show up for the ads (more than 20 million people), a trend that has been steadily on the rise since the 1984 Apple Super Bowl blew people’s minds. Sure, getting a mortgage approved in 8 minutes “during one of those sappy horse commercials” instills fear of loans going to unqualified buyers, but was invoking Financial Apocalypse 2.0 truly reasonable?

Let’s assume the 2008 meltdown occurred due in part to the financial system’s rewards for risk and leverage, and that since the Dodd-Frank banking reform law of 2014, credit is painfully, significantly tighter. It’s harder than in recent memory to acquire a mortgage loan and streamlining the red tape doesn’t mean that unqualified buyers are more eligible. Consider the facts: In 2015, new mortgages were down a staggering 31% and refinancing plummeted 55%. Dodd-Frank mandates that lenders ensure affordability of a mortgage by verifying income, debt load and credit history. CBS News reports that despite a median credit score of 753 in the United States, the highest it’s been since 2001, buyers are in an ever smaller box. Quicken President Jay Farner maintains that Rocket Mortgage is not changing the credit standards at all and that Quicken’s credit standards are among the highest in the industry.

A major complaint of mortgage borrowers, shown in year-to-year mortgage industry research led by T. Aloise & Company, is that customers are unhappy with the lack of lender transparency, with frustrating delays and with the cumbersome nature of applying for a loan. The real breakthrough of Rocket Mortgage is the streamlined technology process, enabling borrowers to submit paystubs and bank details through the app, providing the source of data, rather than enduring a tedious paperwork and approval process. Understand that it is technically feasible to interface an app with Fannie Mae, Freddie Mac and the Federal Housing Authority, the final approval step in the process, so there is no need to be afraid of a technology solution that streamlines the process. That’s all it is. It’s not reducing due diligence.

Quicken Loans is not a sideline show, either. As the #2 mortgage originator, the heavyweight just set a new standard for mortgage processing. No doubt, the market is ready for it. National Mortgage News reports a 2015 JD Power study showing that customer satisfaction rates were 46% higher for those applying for a mortgage on a website, app or mobile device vs. in person. When lenders are spending millions to improve customer satisfaction and move the needle just a little bit, this is a game-changer. Let’s see how the rest of the mortgage industry reacts. Even in the wake of more processing time expected for the new TRID rules, it looks like the mortgage process is about to get a lot more satisfying.

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The Good Life: At Work?

By Mariette Johnson Wharton

Someday we might find gross national happiness as a measure of a country’s success instead of gross domestic product if trends continue. (See Sustainable Development Solutions Network’s World Happiness Report 2015). While this is an inconceivably long way off if it ever happens, we are seeing corporations increasingly interested in the happiness of their employees. With an established link between customer and employee satisfaction, it’s no surprise that corporations are turning to positive psychology, the study of optimal human functioning.

The study of happiness is not new. After all, Socrates advocated self-knowledge as the path to happiness and in Nicomachean Ethics, Aristotle wrote extensively on the connection between friendship and happiness. Twenty years ago Daniel Goleman educated us on the value of emotional intelligence. In 1998 psychologist Dr. Martin Seligman gave birth to the field of positive psychology.

Thousands of scientific research studies later, researchers prove what our intuition tells us: happy employees are more creative, engaged and successful; they are more productive and absenteeism is lower. No real surprise there but the question is, how do employers inspire more satisfied workers? This might be the holy grail of the organization in an era when people are the greatest corporate asset.

You might or might not have heard of the motivation intensity theory, which hypothesizes that two critical elements determine the energy an individual invests: 1) the difficulty of the task and 2) the importance attached to its successful completion. Maximum motivation occurs when someone is engaged in activities that are challenging but not surmountable. Motivation might explain why someone completes tasks or procrastinates but it doesn’t really address the difference between an extraordinary achiever and someone who can just get things done. An extraordinary contributor is a flexible thinker, a problem-solver and someone who can come up with novel approaches.

Does work have to be the inherently stress-producing, soul-robbing place that popular culture says it is? With a little TLC from the top and opportunities for personal growth, it doesn’t. And there’s more to it. Recently I had the pleasure of seeing renowned happiness researcher, Sonja Lyubomirsky, author of The How of Happiness, speak about current research on the topic. She convincingly argues that happy employees are better leaders, better negotiators and are more productive. Even when happy moods were induced for short periods of time, increased problem-solving creativity is measurable and she argues that even transient positive emotions can have enduring consequences.

Some people seem naturally happier than others and the research bears this out. Genetically, an individual’s set point is responsible for about 50% or so of happiness, according to Lyubomirsky. Some people are inherently more resilient than others, are able to take proactive measures to improve situations, to recover faster from negative emotional experiences and even to laugh while enduring grief. Another 10% of happiness is attributable to life circumstances (health, for example). This leaves 40% under our control.

Each individual can move the happiness needle up by practicing gratitude, forgiveness, focusing on relationships, exercising, practicing random acts of kindness, thinking optimistically and comparing oneself less often to others. Research also shows that making someone else happy, counting blessings and writing letters of thanks increase happiness. What you choose is a matter of personal fit. One of the most successful interventions in Lyubomirsky’s research is to imagine oneself in ten years as having the most possible success in all different domains in life. Envisioning oneself as the best possible self breeds optimism and happiness. At the end of the day, it’s not enough for bosses to provide personal growth opportunities and back off on micro-management (although these strategies help a lot). “Happiness depends on ourselves.” - Aristotle