Are Businesses Stupid When it Comes to Customer Relationships?

Almost every day, I hear scandalous stories of businesses that have treated customers poorly, and with the ease of disseminating information today, it seems customers have no problem leveraging the internet to tell their story and get revenge. Airlines, banks, telecoms, restaurants, hotels, supermarkets – they are all under attack publicly, and it is hard to ignore that they all have a problem managing customer relationships. In fact, a lot of the stories that I hear make absolutely no sense if there is any goal of forming long-term relationships with customers.

What specific forms of intelligence are needed to effectively manage customer relationships?

Over the holidays, I was having dinner with a friend who is finishing a book on how businesses “lack logic”, and on this particular topic, he said, “Basically, businesses lack the intelligence to manage relationships well.” This got me thinking. Is it possible that businesses are stupid when it comes to relationships? And what specific forms of intelligence are needed to effectively manage relationships? It seemed like a worthwhile topic for further exploration.

From early childhood, as teachers attempt to place students in classes with the appropriate level of difficulty, we learn that our intelligence can be represented by a number from an IQ (Intelligence Quotient) test. These tests have evolved significantly since the late 1800s when psychologists gave up the idea of measuring skull size as an indicator of intelligence. Today, these tests are commonly used in education, job placement, and various forms of research and statistical analysis, and they typically focus on four key competencies: 1) Verbal Comprehension, 2) Perceptual Reasoning, 3) Working Memory, and 4) Processing Speed. Essentially, the intelligence quotient measurement was designed to understand, “the global capacity of a person to act purposefully, to think rationally, and to deal effectively with his environment.” [i]

These competencies can be easily translated to a business context as how well an organization understands, reasons, remembers, and the speed in which all of this happens. In essence, how well an organization is able to act purposefully, to think rationally, and to deal effectively with its environment. However, if we consider this specifically within the context of customer relationships, it seems that a purely rational form of intelligence might not be enough.

By the 1980s, psychologists were firmly considering multiple forms of intelligence that were not fully captured by traditional IQ testing but had a significant impact in areas such as leadership and relationships.

Howard Gartner wrote about the addition of interpersonal and intrapersonal intelligence in his theory of multiple intelligences [ii], and in 1995, the topic of Emotional Intelligence became mainstream with the book by Daniel Goleman: Emotional Intelligence – Why it can matter more than IQ [iii].
While there are a few generally accepted approaches to measuring emotional intelligence, the most applicable to a business context would be the “ability” model, which outlines the following four abilities. [iv]

“Intelligence quotient measurement was designed to understand,

the global capacity of a person to act purposefully, to think rationally,

and to deal effectively with his environment”.

Considering these four abilities in a business context illustrates the need for the business not only to think (rational intelligence), but to feel (emotional intelligence). It seems that emotional intelligence at an organizational level would have a positive impact on the quality of customer relationships, but even together with the rational intelligence above, it still feels incomplete.

Over the years, Goleman came to view a wider version of emotional intelligence to include empathy, and eventually expanded the terminology to include Social Intelligence, which included empathy (awareness of others’ feelings, needs, and concerns), and social skills (adeptness at developing and maintaining relationships) [i]. In essence, if rational intelligence is “how we think”, and emotional intelligence is “how we feel”, then social intelligence would be “how we relate”. In a business context, this is quite intriguing both from the standpoint of empathy and social skills. The ability of an organization to see things from a customer’s perspective, to feel with the customer, and to take action to help seems to be an area of great difficulty for businesses, and these, in fact, are the three different types of empathy [ii]. The ability of an organization to develop and maintain relationships with customers also seems to be a common problem area, and this should be the core of any business strategy.

With fair certainty, we can conclude that businesses that wish to develop long-term relationships with customers must possess all three forms intelligence specifically in relation to their customers:

Rational Intelligence

The ability of the organization to act purposefully, to think rationally, and to deal effectively with customers in its environment,

Emotional Intelligence

The ability of the organization to perceive, use, understand, and manage customer emotions, and

Social Intelligence

The ability of the organization to show awareness of customers’ feelings, needs, and concerns and adeptness at developing and maintaining customer relationships.

In principle, all three forms intelligence would be necessary for an organization to manage customer relationships well. We may combine all three to discuss “customer relationship intelligence,” or we might even begin to discuss a “customer relationship intelligence quotient” (CRIQ) for business as an indicator of how successful an organization might be at managing relationships with customers, but one significant question remains unanswered: Why isn’t this already the norm? This is not new research, and the application of these forms of intelligence to a business context seems pretty straightforward, so what is stopping businesses from managing customer relationships well?

What is stopping businesses from managing customer relationships well?

One of the barriers originates from the core principles of management theory designed by Frederick Winslow Taylor in the early 1900s. To improve production efficiency, Taylor felt the need to separate the “doers” from the “thinkers” so that the intelligence and decision making would be handled by an elite few at the top while the mass of work would be performed by non-thinking hands at the bottom. While this may seem okay in a purely production environment with little or no contact with customers, it is vividly clear that this lingering management approach is one of the root causes of many relationship problems with customers. The intelligence is not reaching the front line!

The world has changed dramatically since the early 1900s, but old school approaches to management and organization are still hindering the possibility of developing and managing meaningful relationships with customers. Clearly, today’s businesses are not designed to relate well with customers. In fact, on closer examination, most businesses are not designed well to relate with any counterparty with whom they wish to have a meaningful long-term relationship (customers, employees, partners, media, government, etc.). Most management models are designed to bring the “intelligence” (largely rational) to the inner core of thinkers in the management team. As a result, the front line, who are interacting with customers on a day-to-day basis, are essentially left without the intelligence they need to act purposefully, think rationally, and deal effectively with customers in their environment. In addition, considering the low levels of emotional and social intelligence, the front line is almost always dysfunctional in the context of customer relationships.

Solving this problem will not be easy, and it certainly is not a “quick fix” in terms of timeframe or level of difficulty. Organizations will not improve their relationship management skills without distributing all forms of intelligence to all levels of the organization, which would require deep changes to both operational and management models.

Thinking

For people to deal effectively with customers in their environment, they need the ability to act purposefully and to think rationally.  In other words, people dealing with customers must have access to the appropriate customer information and the authority to take decisions while dealing with customers in their environment. This implies dramatic change in a number of areas:

Information Systems

The ability to capture and analyze customer information and effectively distribute to the front line in a timely and user friendly format will be crucial to building a “smart” front line that can act purposefully

Empowered Teams

Thinking and large portions of decision making must be distributed to the front line. Contrary to old management theory, teams that are thinking can be trusted to use good judgement, take appropriate decisions, and work autonomously

Leadership Approach

Management hierarchies must be flattened and leaders must lead using an achievement-driven approach with customer-oriented analytics at the core of all goal setting and performance measurement.

Considering most organizations are designed to keep information at the core and reduce the amount of authority and autonomy on the front line, these three areas of change are not at all trivial. However, a smart and thinking front line empowered to act purposefully with customers is a very worthy target.

Feeling

Developing emotional intelligence at an organizational level is not a simple task, and different interpretations of emotions and how to react accordingly make “feeling” very difficult at scale.  There are, however, very concrete applications of emotional intelligence at an organizational level, and they are not always tied specifically to customer interactions.  Of course, the intelligence of how to perceive, use, understand, and manage emotions can be used during customer interactions, but it can also be used to design interactions, to choreograph a series of interactions, and even to design emotionally engaging offerings for customers.

The Emotional Front Line

Everyone in the organization can benefit from Emotional Intelligence training, but it is absolutely necessary for all people interacting with customers. Developing emotional intelligence is a foundational component for empathy, an essential capability if the organization hopes to relate well with customers.  Simulation-based training for the front line will help to develop a toolkit of emotionally appropriate tactics and responses to behavioral scenarios and triggers.

Emotionally Engaging Experiences

Strong emotional intelligence will allow organizations to feel inefficiencies in processes and interfaces and improve the general experience of using the functionality provided by the organization. Positive, fulfilling, and engaging user experiences will reinforce trust in the overall relationship and provide opportunities for the organization to share elements of personality.

Emotionally Engaging Offerings

Strong emotional intelligence will allow organizations to feel inefficiencies in processes and interfaces and improve the general experience of using the functionality provided by the organization. Positive, fulfilling, and engaging user experiences will reinforce trust in the overall relationship and provide opportunities for the organization to share elements of personality.

Relating

Developing organizational adeptness at developing and managing relationships is already a difficult task, but adding the ability of an organization to see things from a customer’s perspective, to feel with the customer, and to take action accordingly seems a task not for humans alone. The good news is the technological functionality needed to enable this ability in the organization exists today in Customer Relationship Management (CRM) systems. The bad news is almost all CRM systems were not configured to manage relationships; they were programmed for aggressive sales activities (sell, cross-sell, up-sell, increase usage, etc.). Without the proper “thinking” and “feeling” in organizations, everyone forgot about the need to “relate” and configured the technology purely to sell more, which is fairly one-sided. A mutually beneficial relationship would bring value to the customer as well as the company, which implies completely different use of this technology.

Relationship Management Processes

Most organizations design, build, measure, and manage effective processes for sales and service, but they fail to implement processes for relationship management outside of concrete product functionality. Over time, a growing portfolio of relationship management processes in CRM systems will allow the organization to better manage the overall, ongoing relationships with customers and not just the user journeys inside in each product category.

Goal Management Functionality

For many industries, customers do not acquire a good or service because they love the good or service itself; in most cases, they will use the good or service to achieve a specific desired outcome. Using CRM functionality to guide customers through the process of realizing specific outcomes in an efficient manner will provide significant value for customers and competitive advantage for the company. Customers will be more loyal to companies that effectively help them to achieve their goals.

Influencing Behavior

Behavioral data will allow organizations to establish behavioral patterns, scenarios, segments, and triggers. Using historic data to build predictive models in CRM systems allows organizations to influence customer behavior so that customers become better as a result of the relationship with the organization. Important Note: The models are not used specifically to stimulate more sales; they are used to help customers become better (solve problems, improve quality of life, realize goals, etc.).

Some of these concepts may seem like outer space compared to the current level of intelligence in businesses today, but all of this functionality exists today in CRM systems around the world. If organizations develop the ability to think, feel, and relate to customers, the configuration of functionality should be quite straightforward in CRM systems.

Surely, an organization that thinks, feels, and relates well will have more loyal, long-term customer relationships (as well as employees, partners, media, government, etc.), and this will drive significant business transformation efforts for those businesses that understand the value of customer relationships. The transformation may be a long and complex journey, but those businesses that succeed will reap the benefits of a loyal, engaged, and profitable portfolio of quality relationships.

[i] Wechsler, D (1939). The Measurement of Adult Intelligence. Baltimore (MD): Williams & Witkins. p. 229.

[ii] Gardner, H. (1983). Frames of mind. New York: Basic Books.

[iii] Goleman, D., (1995) Emotional Intelligence, New York, NY, England: Bantam Books, Inc.

[iv] Mayer, J.D., & Salovey, P. (1997). What is emotional intelligence? In P. Salovey & D. Sluyter (Eds.), Emotional development and emotional intelligence: Implications for educators (pp. 3–31). New York: Basic Books.

[v] Goleman, D (2006). Social Intelligence: The New Science of Human Relationships. Bantam Books. ISBN 978-0-553-80352-5.
[vi] Justin Bariso (2023), There Are Actually 3 Types of Empathy. Here’s How They Differ–and How You Can Develop Them All. Inc.