07 June 2017

Customer service
Chartered Institute of Internal Auditors

Everyone in the organisation is either directly or indirectly involved with customer service.

It is very important that world class, professional, high standard customer service is provided in
order to develop, maintain and grow customer relationships to achieve strategic objectives and
provide a platform for organisational sustainability and potential expansion.

This guide highlights the risks involved in offering good customer service to help you to plan and
conduct your review effectively.

What is customer service?

Why is good customer service important?
Serving the customer
Customer service risks and responses
What can internal audit do?

What is customer service?

Organisations often use a variety of terms when referring to the service they provide to customers:

• customer service
• customer satisfaction
• customer experience
• customer expectations

The Institute of Customer Service provides the following useful definitions:

'Customer service is the sum total of what an organisation does to meet customer expectations and
produce customer satisfaction.

Customer satisfaction is the feeling that a customer gets, when he or she is happy with the
customer service that has been provided.

Customer experience is what a customer feels, and remembers, about the customer service that he
or she has received.

Customer expectations are what people think should happen, and how they think they should be
treated, when asking for, or receiving customer service.'

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 For customer service to be good, it must result in a customer who remembered feeling satisfied
with the service provided.

Good customer service is about giving the customer what they want, promptly, politely,
professionally and right first time. It is about delivering a high quality, product or service in a friendly,
approachable and efficient manner.

In order to do this of course the organisation must first understand what the customer expects of
them. It is therefore important that there is adequate customer engagement and consultation.
Where things do go wrong the organisation needs to understand why.

This can also be done through conducting root cause analysis of customer complaints and
incidents.

Why is good customer service important?

All organisations have customers, internal and external. Without them the organisation would not
exist. For the private sector, customers provide much needed income that enables profit and
sustainability.

Income is also a driver for the public sector but this is likely to be secondary to the regulatory
requirements and reputational considerations integral with the provision of services such education,
housing, health care etc.

Poor customer service can have disastrous effects upon the organisation's reputation, which may
threaten its existence. Whilst excellent customer service will create a competitive advantage that
will enhance the organisation's standing, providing a platform for growth and development.

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 Good customer service can also reduce costs, maximise income and potential expanison of
organisations. It minimises the time needed for handling customer complaints and re-work. This is
likely to result in increased customer satisfaction leading to enhanced reputation, increased
demand of services and products, repeat custom, customer recommendations and ultimately
increased revenue.

The Institute of Customer Service produced a report in July 2014, UKCSI Customer Satisfaction
Index: The State of Customer Satisfaction in the UK. The main findings from this were:

• Customer satisfaction levels have fallen, the third consecutive decline, currently 76.3 (out of 100),
1.9 points below the January 2013 peak.
• There has been a drop in most sectors, 13 out of 14, only Utilities has risen by 0.4 points.
• Relatively few organisations are raising satisfaction levels, from the 197 surveyed only 28
increased their score by at least 1 point compared to July 2013.
• On average older customers are more satisfied than younger ones, the average score for those
65+ was 80.3 compared to 72.5 of the 18-24 age group.
• Customer service builds trust, and drives loyalty, recommendations and in the retail food sector
sales.

A further report on Customer Services in the UK: Key trends for 2015 the Institute identified eight
key trends in customer services for the year ahead as follows:

1. Lack of customer focus hits brands and performance.

2. Customers’ expectations of convenience and speed will rise.
3. Customers expect co-creation (customers increasingly expect to influence the way oganisations
deal with them and want to see proof of their influence).
4. Service agility is critical to success.
5. Collaboration delivers benefits for organisations and customers (more than one provider is often
involved in the customer end-to-end service experience e.g. delivery services).
6. Personalisation: people make the difference (conduct of staff is a critical factor driving customer
satisfaction and buying decisions.
7. Measurement becomes broader (and more emotional).
8. Service rises up the business agenda.

Apart from the business benefits of providing good customer service there are also regulations such
as 'Treating Customers Fairly' (TCF) which all firms regulated by the Financial Services Authority
(FCA) have to support.

The six consumer outcomes explain what the Financial Conduct Authority want TCF to achieve for
consumers.

Outcome 1: Consumers can be confident that they are dealing with firms where the fair treatment
of customers is central to the corporate culture.

Outcome 2: Products and services marketed and sold in the retail market are designed to meet the
needs of identified consumer groups and are targeted accordingly.

Outcome 3: Consumers are provided with clear information and are kept appropriately informed
before, during and after the point of sale.

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 Outcome 4: Where consumers receive advice, the advice is suitable and takes account of their
circumstances.

Outcome 5: Consumers are provided with products that perform as firms have led them to expect,
and the associated service is of an acceptable standard and as they have been led to expect.

Outcome 6: Consumers do not face unreasonable post-sale barriers imposed by firms to change
product, switch provider, submit a claim or make a complaint.

From a public service perspective there are scrutiny and accountability mechanisms in place, for
example, the Public Accounts Committee, in addition to public sector organisations implementing
good governance principles in terms of oversight boards and committees.

Surveys, trends and regulations tell us that the profile and expectations around good customer
continue to rise. Organisation must maintain existing standards and develop a culture of continuous
improvement with the customer satisfaction at the forefront of everyday activities.

It should be engrained in business as usual not an additional extra at the end of a project. Internal
audit can support a customer focused culture by providing assurance that policies and procedures
are not only working but also that people live the values and demonstrate expected behaviour.

Serving the customer

Everyone in the organisation is either directly or indirectly involved with customer service. People
either help customers directly or provide support functions to colleagues (internal customers) who
do interact with customers.

Today's customers have an unprecedented number of ways with which to interact with an
organisation, including the social media – facebook, LinkedIn, internet, Twitter, telephone, email,
text messages, television, letter, and face to face.

Customers can make a complaint in writing, or return goods in person. Whatever form the
interaction takes, people expect good customer service. It is therefore important that all customer
journeys are mapped with expected service levels defined and agreed. Complaints procedures
should be documented with roles, responsibilities and key performance indicators clearly defined
and assigned.

Complaints procedures should be properly embedded throughout the organisation/businesses.

Complaints systems and processes should be linked to incident systems and an integral part of an
organisations risk management processes. Customers should be well aware of how to make a
complaint, raise a concern or provide feedback.

There are a variety of actions that an organisation can develop and implement to ensure that there
is adequate focus on delivering high quality, excellent customer service across all customer
journeys. RightNow, a provider of on demand customer experience solutions, have defined Eight
Steps to Superior Customer Experiences:

1. Establish a knowledge foundation

There are two essentials you need in your knowledge foundation:

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 • Information about your company that your customer needs to know.
• Information about your customers that your employees need to know.

2. Empower your customers

Empower your customers to self-serve at their convenience, through their communication channel of
choice.

3. Empower frontline employees

Treat and empower your employees like you do your customers. Give them access to the right
knowledge at their fingertips.

4. Offer multi-channel choice

Provide your customers with interaction options across many channels and use your common
knowledge foundation to provide consistency and efficiency.

5. Listen to your customers

Learn what your customers are thinking and act on it.

6. Design seamless customer experiences

Your customers shouldn't be able to notice handoffs between departments.

7. Engage customers proactively

Communicate with your customers with personal and relevant interactions.

8. Measure and improve continuously

Evaluate, baseline, identify… and adapt to your customers.

Customer service risks and responses

1. Customer requirements are not factored into the design of customer service
propositions.

Potential impact
• Loss of business, unnecessary costs arising from back ended workarounds etc.

Possible response
• Customer communication channels in place e.g. surveys, product/service trials etc.
• Mechanisms in place for feeding back key messages to product/service development teams.
• Listen to your customers and engage customers proactively.

2. A lack of awareness within the organisation as to how well it serves the customer.

Potential impact
• Potential improvements to customer experience are not identified leading to increased customer
dissatisfaction and a loss of potential revenue.

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 Possible response
• Customer service/satisfaction/loyalty measures.
• Improvement plans in place to address identified weaknesses.
• Measure and improve continuously.

3. Lack of senior management commitment to customer service.

Potential impact
• Staff perceive that customer service is of secondary importance adversely affecting their behaviour
and the customer experience -customers reduce in number.

Possible response
• Senior management sign off of a customer charter, group/business unit scorecard, customer
service measures, investment in customer service training.
• Empower frontline employees.

4. Failure to meet customer promises.

Potential impact
• Increase in complaints, damage to reputation and additional costs from rectifying the failures.

Possible response
• Root cause analysis of complaints.
• Measurement of deliverables regularly monitored and logged.
• Action plans in place to improve the delivery of service objectives.
• Jeopardy management of queues to avoid failure.
• Service level agreements.
• Quality of work checks.
• Empower frontline employees.
• Design seamless customer experiences.
• Measure and improve continuously.

5. Failure to manage customer expectations.

Potential impact
• Business processes and/or products and/or services not aligned to customer requirements
leading to customer dissatisfaction and loss of repeat business.

Possible response
• Customer engagement and consultation.
• Establish a knowledge foundation and engage customers proactively.

6. Unclear or overcomplicated customer standards and procedures.

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 Potential impact
• Inconsistencies in the calibre of the customer experience leading to dissatisfaction and loss of
new/repeat business.

Possible response
• Call centre scripts that clearly explain the process and the length of time it should take.
• Customer literature in plain English, mapped to customer journeys and linked to KPIs.
• Establish a knowledge foundation.
• Establish other forms of quality management.

7. Organisation's systems have inadequate functionality to serve customers.

Potential impact
• Loss of business to the company. Customers find it difficult to do business with the organisation.
• Poor customer service if systems crash due to lack of resilience.
• Unnecessary costs arising from duplicate handling of data etc.

Possible response
• Systems mapped to customer journeys.
• Full audit trail available of activity on customer accounts.
• Service level agreements with IT department and/or software providers.
• Credible and tested business continuity plans.
• Design seamless customer experiences.
• Empower your customers.
• Offer multi-channel choice.

8. Failure to capture customer feedback and resolve customer issues and complaints when
things go wrong.

Potential impact
• Loss of business, increased complaints, damage to brand and additional costs from rectifying the
failures.

Possible response
• Documented end to end customer intelligence plan that records assesses and acts on customer
feedback.
• Documented end to end process for handling complaints visible to employees and customers.
• KPIs in place to measure the achievement of complaint objectives.
• Root cause analysis programme in place to tackle repetitive issues and drive continuous
improvement.
• Measure and improve continuously.
• Listen to your customers.

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 9. Fraud within customer services e.g. abuse of loyalty programmes such as applying
promotional credits to friends and family not entitled to them.

Potential impact
• Financial loss to the company. Reputational damage to brand and ability to win new business if
fraudulent behaviour becomes public knowledge.

Possible response
• Audit trail of changes made to customer data by employees.
• Exception reports that highlight abnormal usage patterns of customers.
• Segregation of duties between data entry and approval.

What can internal audit do?

We said earlier that excellent customer service is essential to the organisation no matter what
sector the organisation operates in and that one way or another everyone has a part to play in
customer service.

This means that customer service is a prime candidate for the annual internal audit plan.

As ever, the decision to allocate time to the various activities and procedures associated with
customer services depends on the criticality of customer service risks compared to other strategic
risks.

As with all internal audit plans it is important to coordinate work with other assurance providers and
avoid duplication of effort where reliance can be placed on their work.

Internal audit can provide assurance over the controls operating within the organisation that impact
upon customer service and the organisational exposure to risk through conducting engagements.
This can be done in number of way ways:

1. Review of business/organisation objectives, requirements and needs.

2. Reviewing strategic planning and review processes.
3. Undertake a SWOT analysis.
4. Ascertain customer policy, procedures in place and dissemination across the
organisation/business.
5. Provide assurance that roles, responsibilities and key performance indicators have been assigned
including oversight responsibilities and reporting mechanisms.
6. Ascertain that the organisation/business has a customer database or repository with
integration/update from related systems e.g. complaints, incidents, risk management etc.
7. By specifically reviewing the identification, analysis and management of specific customer service
risks across the organisation. This would include application of the organisation's risk
management process and reporting mechanism.
8. Through the execution of specific customer service centred audit engagements that look at
processes and procedures such as customer satisfaction surveys or customer complaint/incident
handling.
9. Through the execution of audit engagements in customer facing operational areas like call
centres or retail outlets.

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 10. Incorporating aspects of customer service in several internal audit engagements to build an overall
opinion.
11. Provide a workshop to develop customer care and service skills.

When deciding upon which approach or mix of approaches to adopt a number of factors should be
considered.

Are specific organisation wide customer service functions in place to measure customer
satisfaction and handle customer complaints?

• If the answer is yes then it may be appropriate to conduct specific organisation wide customer
service centred audits.
• If the answer is no and such activities are embedded within operational areas like call centres or
service hubs then it may be more appropriate to conduct audits of these activities.

When conducting such audits key elements of customer service such as complaint handling and
customer measurement should be included within the scope.

When conducting any audit regardless of topic there should be some consideration of what impact
any key risks materialising may have upon the customer. For example when conducting an audit of
human resources you may consider the impact upon the customer of a breakdown in industrial
relations with employees.

Set out below are a number of key areas of customer service where internal audit can provide
assurance together with examples of questions and ideas.

Customer measurement
• Are customer service measures/KPIs linked to what is important to customers as expressed in
surveys and focus groups?
• Is a representative sample of the population (customers and products) chosen for customer
satisfaction surveys?
• Are customer service measures accurately captured and reported?
• Are the results of customer service measures reported to senior management, and acted upon?
• Analytical review of measures - is there an improving trend in performance? Are there spikes in
performance (at year end when bonuses are paid)?

Customer expectations
• Are customer requirements built into product development user stories?
• Are customer requirements captured within service level agreements?
• Does appropriate customer engagement take place?
• Are customer service measures/KPIs linked to what is important to customers as expressed in
surveys and focus groups?

Customer promises
• Are employees sufficiently involved in the formulation of service objectives?
• Are customer promises capable of delivery with current infrastructure?
• Have employees received adequate training?
• Analytical review of last 12 months performance results to identify trends and weaker areas of
service.

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 Customer service standards and procedures
• Is customer literature accessible in the mediums that customers use to contact the organisation?
• Have call centre advisors received adequate training? Is the effectiveness of customer service
training monitored and continuously improved?
• Appropriateness of customer charter i.e. clear and concise.
• Do employees have quick and easy access to the information they need to respond to customer
enquiries?

Customer service systems

• Are systems that support the service of customers mapped to customer journeys to avoid
unnecessary handoffs?
• What channels are available for the customer to do business with you? How is a consistent level
of service achieved across multiple channels?
• Are the service level agreements with external service providers enforceable?
• Has the business continuity plan been tested and refined if necessary?

Customer complaints
• What mechanisms ensure all customer complaints are captured and acted upon?
• How are customer complaints defined?
• Does the organisation report on complaint volumes and investigate the root causes of
complaints?

External resources
The Institute of Customer Service is the independent, professional membership body for customer
service. The ICS offer research, publications and a number of case studies that are available to the
general public.

The Financial Conduct Authority regulate the financial services industry in the UK. Their aim is to
protect consumers, ensure the industry remains stable and promote healthy competition between
financial services providers.

The UK Government wants services for all that are efficient, effective, excellent, equitable and
empowering and the Cabinet office have set up a service excellence website that includes
standards, case studies and other resources

RightNow is a provider of on demand customer experience solutions.

ICMI provides resources, training and consultancy for the development of contact centres.

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