McKinsey on Marketing

An in-depth look at the challenges facing senior managers Published by The McKinsey Quarterly July 2004

Glenn Mitsui
Organizing for CRM
Companies should treat a customer-relationship-management solution as a product or service and
its users as internal customers—by making it valuable, pricing appropriately, advertising, and providing
after-sales support.

Article at a glance: Most large companies have some form of customer-relationship-management (CRM)
software, but more than half of them are disappointed with it. Critics blame the software, but the real problem
could be a failure to address the organizational challenges posed by any new initiative. Top management often
assigns executives with other primary responsibilities to take charge of the CRM effort on a temporary basis,
and they may resort to heavy-handed mandates to get frontline staff to use the new tools. Instead, CRM
should be treated as a product or service targeted at internal customers.

The take-away: CRM initiatives have a better chance of succeeding when accountability is clear and front-
line users get adequate training and incentives.
 1

�������
Organizing for CRM ���
��������������

���������
Anupam Agarwal, David P. Harding,
��������������������������
and Jeffrey R. Schumacher
����������������

���������������������������� ��
What’s left to say about customer-relationship- �������������������������� ��
management (CRM) solutions?1 Business commentators
���������������������������� ��
have spilled oceans of ink describing the gut-wrenching ������������������������������ ��
rise and fall of these programs’ reputations. Most large
������������������������������ ��
companies have implemented some form of CRM, and ������������������������������� ��
many have followed their early disappointments with full-
������������������������������������ ��
scale CRM remediation efforts.2 ����������������������� ��

Indeed, more than half of all companies investing in ������������������������������� ���������������������������

CRM consider it a disappointment, according to several
recent surveys. What’s wrong? It’s not that companies
are spending wildly; many of them build robust business
cases before making their investments, which at this point
are likely to be incremental. Nor does the fault lie with
the technology itself—most systems provide the required
features. Companies have lavished attention on business
and technology issues because both were glaring early
impediments to CRM’s effectiveness.
The core of the problem now is that too few companies
are paying enough attention to the organizational
challenges inherent in any CRM initiative, whether it
involves delivering a new solution, fixing a foundering
application, or tweaking a functioning CRM capability.
These challenges stem from the wide variety of people—
frontline sales and service providers, business analysts,
IT professionals, and a broad array of managers, to
name just a few—who must collaborate to ensure that
a CRM program is defined, delivered, and deployed. This
diversity creates accountability issues and complicates
the challenge of persuading employees—particularly the
sales force—to embrace CRM.
Solving these organizational problems requires a company
to go beyond the vigorous exhortations and heavy-handed
rollouts that many have relied on—understandably, in view
������������������ ������������������
���������������������������������������������������������������
��������������������������������������������������
of the money invested and the opportunity costs of failure.
Instead, companies should view CRM as a product or
service targeted at internal customers. Like any product
or service, it must be infused with clearly defined value,
priced appropriately, advertised, and provided with after-
sales support.
In our experience, no temporary centralized team,
however competent and well-intentioned, gets everything
right. What is needed to achieve long-term business
results is an infrastructure grounded in accountability, as
well as supporting initiatives to motivate, train, and track
the many employees in diverse positions throughout
the organization who make or break the CRM program.
Attention to these perennial organizational challenges,
which are easy to overlook in the rush to fix the technology
and business-alignment issues, correlates strongly with
success in CRM (Exhibit 1).3 Finally, CRM’s impact on
frontline employees is so significant and potentially jarring
that clear, forceful messages from senior executives are
critical to enforcing accountability and motivating change.

1
CRM helps companies to plan and analyze their marketing campaigns, to identify sales leads, and to manage their customer contacts and
call centers.
2
Turning around a CRM program (or, for the lucky few, getting it right the first time) typically involves focusing on a few clear business objectives,
building or reconstructing the technology to meet them, and realigning the organization to help it embrace new tools and processes. See
Manuel Ebner, Arthur Hu, Daniel Levitt, and Jim McCrory, “How to rescue CRM,” The McKinsey Quarterly, 2002 special edition: Technology
after the bubble, pp. 48–57 (www.mckinseyquarterly.com/links/13061).
3
The authors heard this message, loud and clear, from executives and middle managers in the insurance industry, whom we recently
interviewed and surveyed about the factors influencing the successes and failures of their CRM programs. Similarly, a recent Forrester Research
study found that resistance to process change was the leading obstacle to CRM’s success at 111 large North American companies.
 2

Organizing for CRM

The organizational challenge Excessive reliance on technology specialists helped sink

Building, modifying, or running a CRM solution involves a
large cast of characters. It can include systems experts;
business analysts; backroom operations specialists;
managers who use customized reports to fine-tune
sales, marketing, and customer service strategies; and
frontline sales and service people, who are responsible
for inputting much of the data the CRM initiative
needs to yield rich insights and for acting on them. The
breadth and scope of these constituencies create two
organizational problems: identifying who is accountable
for which results and truly achieving the broad behavioral
change that success requires (Exhibit 2).
Fuzzy accountability
When the responsibility for different aspects of the
solution rests in different places, it’s often hard to muster
the organizational resolve to bring in the right people,
unclog bottlenecks, and make effective decisions. At
worst, companies wind up with the kinds of problems
Q3 2004 planned economies: a lack of
that plagued Soviet-style
ownership, a CRM
failure to choose the right features, and an
Exhibit
inability to meet 2 of 4 goals.
performance
some early CRM initiatives. In the past few years, some
organizations have overcompensated—so much so that
many capabilities are now defined by the business side,
without enough participation from IT. Too often, the
results resemble those experienced by one large media
company that developed a strong business case with
limited participation by its IT organization, took several
months to realize that achieving its goals with the chosen
technology would take more than a year, and ultimately
abandoned its original plans and began redefining the
program.
Resistance to change
The large number of stakeholders involved with CRM
doesn’t just complicate accountability; it also magnifies
the difficulty of effecting behavioral change, particularly
in salespeople but also among managers and business
analysts—all groups whose recalcitrance can cripple an
initiative. Consider the problem of managing the sales
pipeline. CRM helps managers to see quickly when
salespeople are not hitting their targets and remedial
action is necessary. But management can act only when

exhibit 2

Who’s accountable?

Location of primary organizational obstacles associated with CRM activities1

Executives
Business-unit
CEO COO CIO CMO2 Head of sales
heads

Region C Worldwide/corporate operations Business unit 3

Region B IT Operations Business unit 2
Region A Business unit 1
Development Sales
Frontline users Operations Frontline users

Sales Sales Architecture Marketing Sales

Marketing Marketing Infrastructure Service Marketing

Service Service Quality Service

assurance

Regional IT

Organizational obstacles to implementing CRM

Lack of commitment, Confusion about Lack of motivation,

communication roles, responsibilities, participation
accountability

1 Actual functions and organization vary by individual company.

2 Head of CRM program often reports to chief marketing officer.