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Complaint Management and Problem Resolution

An APQC White Paper Based on findings from APQC's Complaint Management & Problem Resolution Consortium
Benchmarking Study | Copyright ©1997, 1999 APQC, all rights reserved. Reprinted with permission.

The American Productivity & Quality Center (APQC) conducted a consortium benchmarking study on
complaint management with nine sponsor organizations and subject matter expert Howard Deutsch
of Deutsch Consulting Services. The purpose of the study was to identify companies that successfully
manage and resolve customer complaints and provide sponsors with a best-practice view of
strategies, measures, and processes.

As the study team reviewed the quantitative and qualitative data, key gaps emerged between the
practices at the sponsor companies and the best-practice "partner" organizations. These drivers of
success for the top organizations are summarized in this white paper to help companies quickly
determine how their complaint management systems, processes, and measures compare with those
of the best-practice organizations in this study.
The information in this summary provides a reference point and insight into the processes and
practices associated with complaint management systems. It should be used as an educational tool
and is not a step-by-step procedure to be copied or duplicated. The best approach is to adapt key
learnings (sic) into your own organization's environment and culture.
Company information from this study is blinded in this summary to maintain the partners'
confidentiality. The best-practice companies will be referred to as Company A, B, C, D, and E.
Partner organizations receive an average of 500,000 telephone calls each month in their complaint
management systems. Partners report that approximately 33 percent of their incoming calls are
complaints. Inquiries account for approximately 42 percent of the calls at partner companies.
Of the customer complaints received each month, partner organizations report that 81 percent of the
complaints are received via the telephone (Figure 1). Complaints through the Internet and in person
both account for only 2 percent of the complaints that these companies receive. Only about 15
percent of these complaints are received by mail.

Linking to Corporate Mission

Most partner companies have linked their complaint management visions to the corporate missions
through a variety of practical initiatives. Company E links the mission with the process and everyday
practices of complaint management. The company reviews and addresses every customer complaint
and/or input. These issues are evaluated within the context of the company's core values,
mission/vision, and strategic direction to determine if any change is required. The Company
Operations Team manages any proposed operational changes. The Leadership Team handles any
proposed strategy changes.
Among the partner organizations, 80 percent have a bottom-up initiative to link their complaint
management visions to the corporate missions. All of the best-practice companies report a link to
existing company standards and codes of conduct.

Customer Complaints Viewed as Opportunities for Improvements

Best-practice organizations consider complaints as opportunities for improvement. These companies
understand the link between complaint resolution and customer loyalty and work hard to act
immediately on problems that can be easily resolved.
Company B, for example, believes that complaints are a primary measure of customer dissatisfaction,
and it encourages employees to bring complaints to the forefront in a variety of formal and informal
ways. The organization wants to know its shortcomings as well as what it does well. It created a
Complaints Handling Process Improvement Team to maintain the complaint process. Team members
report team activities to their departments and bring concerns within the units back to the complaint
At Company E, complaints are critical to the business, and the company seeks out customer
communication-no matter how negative. Each documented customer complaint is reported and
reviewed by the Leadership Team at team meetings every two weeks.

Proactive Feedback
To encourage this critical customer feedback, 75 percent of the best-practice partners that responded
to the questionnaire proactively solicit complaints from customers and employees. Company C, for
example, created an Associate Response Center to encourage employees to call with ideas,
complaints, and process improvements. Meetings, conferences, and e-mail permit upward
communication of these issues as well.
Company A also solicits ideas and feedback from employees. Its tool, the "Value Network," provides
an opportunity to manage customers and share comments within the system, as well as a mechanism
to include employees in the complaint process. It captures voice of the customer feedback from an
800 number. Representatives report the Value Network is a "powerful support tool" that has led to
significant changes within the complaint process. In addition, Company A assembled a
Representative Council Team to bring employee dissatisfiers (sic) and ideas to the attention of senior

Complaint Management Process

A well-planned complaint management and problem resolution process allows organizations to obtain
customer feedback and data. Customer information is used to make process improvements, increase
customer satisfaction and loyalty, and increase profits.
Best-practice organizations in this area realize the importance of sharing information across the
organization so that other employees and/or business units can benefit from the same information.
Company B engages in high-level benchmarking with its competitors and participates in a formal
benchmarking consortium with customer satisfaction industry leaders. Employees cascade these best
practices throughout the organization so all can benefit from these learnings.
Company D also places great emphasis on sharing information across the corporation. Lessons
learned are communicated to new branches through "global coordinators." These coordinators work
closely with new branches to ensure successful operations.
Another critical step in the process is using this complaint data and customer feedback to make
changes in the organization-whether they be improving processes or creating new products.
Company A, for example, uses a full range of customer complaint data to make enhancements-in
processes, billing statements, simplification of forms, automation designs-to its services. Through
information in its Value Net-work, Company A simplified several forms, including customer
At Company D, complaint data are used in almost every area of the company. The organization is
dedicated to integrating complaint data to initiate improvements.
Complaint management changes at Company E have enabled the organization to provide immediate
responses to customers. And much of its success is directly attributed to customer input. Private-
label, customized, and customer-specific products account for approximately 50 percent of total
sales. One of the company's new products is based on a customer suggestion that developed into a
strong product line.

Centralized vs. Decentralized Process

Four of the five best-practice companies centralized their complaint process and believe this is a key
factor to their success. In fact, two of the partners attribute their success in the complaint area directly
to the centralization of their complaint centers.
Company D, for example, has realized several benefits since the creation and centralization of its
Total Customer Satisfaction Center six years ago. This center allows Company D to gather and
examine data in a consolidated manner. Prior to this consolidation, Company D was not able to
examine data on a national level. Now, it can examine issues that cause rework one at a time and
concentrate on the most important ones. The company is able to conduct root-cause analysis and
identify where the majority of the problems begin.

Rewards and Recognition

Best-practice partners use a combination of individual and team-based compensation, rewards, and
recognition to illustrate the value of high-quality customer contact and complaints. Yet 80 percent of
the partners do not use compensation, but rather other methods, to reward employees for handling
customer complaints. In fact, Company B strongly believes that a link to compensation would lead to
manipulation of data and much finger pointing.
Company E does not link compensation to complaint management. However, employees are entitled
to profit sharing and understand that the objective is to satisfy the customer while keeping margins as
high as possible.
Company A informally recognizes employees in the complaint management process with a "Wall of
Fame" noting exceptional work. The company also provides gift certificates to employees who are
positive role models in the complaint process. The key component in the success of its system is
holding the individual responsible for the complaint.

Link to Customer Satisfaction Measures

All of the best-practice companies in this study incorporate complaint management measures as part
of their overall customer satisfaction measures. This link is critical to the success of the complaint
management process and customer satisfaction overall. As a result, complaint center managers,
supervisors, team leaders, and customer service representatives are accountable for customer
satisfaction and performance of the complaint management process.
At Company E, for example, complaint measures are related to customer satisfaction measures. One
of the six factors that make up the customer satisfaction index is the number of complaints divided by
the number of lines invoiced. In addition, Company E reviews "implied complaints," such as past-due
shipments, failed products, and credit memos, as a measure of its success.

Types of Data Measured

Leading companies measure the reasons for complaints and perform root-cause analysis on each
complaint. Best-practice companies measure a variety of data relating to customer complaints (Figure
2). All of these organizations measure the reason for the complaint. Sixty percent measure the
number of resolved complaints. Surprisingly, none of the partner companies measures abandoned
Company C, for example, records its percentage of complaints on Pareto charts and root-cause
analysis models to measure complaint data. Company B's complaint management effectiveness is
measured in a number of ways. One method is through its parts per million shipments. This is
determined by the following formula:

Measuring Problem Resolution

Partner organizations have implemented a variety of time standards for resolving customer
complaints (Figure 3). Sixty percent of the partner companies take longer than three days to resolve
customer complaints. Twenty percent of the partner companies resolve complaints within one or two
days, and 20 percent resolve customers' issues during the initial contact.
At Company C, for example, the goal is to communicate a plan for resolving a customer issue within
24 hours and bring the issue to closure within 10 business days. If Company C receives written
complaints, the policy is to call the customer back within 24 hours.

Best-practice companies also have a variety of follow-up mechanisms to ensure problems are settled
to the customer's satisfaction. Company A surveys customers who have had recent problems with the
organization. This phone survey is administered on a random basis. The company continually tracks
the information received from the surveys and uses the data internally to gauge customer satisfaction.
Company A believes it is important to focus on the customer perspective rather than internal issues
and priorities.
Best-practice companies in this study do not have formal processes for escalating complaints up into
the organization. These cases are rare and handled on an individual basis. At Company A, for
example, only one in 40 complaints reaches the higher levels of management.
Cost of Handling Complaints
Sixty percent of the best-practice partners measure the overall cost of handling complaints though
only 40 percent can quantify in dollars the cost of each complaint. Companies B and D had the most
sophisticated systems for measuring this cost.
Company B measures the cost of complaints by the resources required per complaint, the number of
returns, analysis of data hours, and system costs.
Company D uses a slightly more complex method for calculating the cost of complaint handling. First,
it measures the cost of resources that work in the Total Customer Satisfaction Center with the
operating costs. The percentage of time is then factored by the dollars spent on error and good will.
Next, Company D divides this number by the number of complaints received. This equation provides
the overall cost of a complaint.
Company C, the one organization with a decentralized complaint department, believes this
decentralized arrangement tends to create higher costs. Currently, Company C estimates the cost of
handling complaints by letter at $1,500 per letter and complaints by phone at $500 per call. As a
result, Company C has measured its cost of poor quality to be approximately $600 million annually.


Benchmarking is the process of identifying, understanding, and adapting outstanding practices from
organizations anywhere in the world to help an organization improve its performance. Companies
participating in bench-
marking activities report breakthrough improvements that directly and indirectly improve cost control,
quality, cycle time, and profits.
APQC met with study sponsors to define the study scope, select best-practice companies, and create
a site visit questionnaire. Secondary research was conducted based on the criteria presented from
the sponsors. The sponsor organizations nominated best-practice companies, and five of the
organizations chose to participate: Eastman Chemical, Electronic Controls Company, Fidelity
Investments, Lucent Technologies, and Rosenbluth International.
All of the best-practice organizations hosted four-hour site visits at their respective locations. During
the site visits, members of the study team asked key personnel questions from a site visit interview
The project team then analyzed data collected from the research, screening surveys, interviews, and
quantitative/qualitative data collection tools. Similarities in practices, key drivers, and enablers were
reviewed to determine best practices.


Summary of Complaint Management Processes

The partner companies use a variety of processes to accomplish their complaint management
Company A's complaint management process is composed of four steps:
1. Front-line representative receives call and acts.
2. Front-line representative forwards call to Priority Services.
3. Priority Services resolves call in one of three ways:
• decide and do;

• decide, do, and research; or

• research and decide.

4. Organization completes problem prevention activity.
Company B's system is a closed-loop process involving several key steps:

• Receive complaint.

• Verify ownership/jurisdiction.

• Determine follow-up needed.

• Make follow-up call if needed.

• Initiate investigation.

• Develop/review resolution.

• Resolve complaint with customer.

• Determine if corrective action is required.

• Verification process.
Company C's process for handling calls into its Customer Response Center and Associate Response
Center consists of the following pieces.

• Complaint

• Acknowledgment

• Agreement

• Resolution

• Follow-through

• Closure
Company D's complaint management process can be summarized in a few key steps:

• Receive call through an appropriate 800 number (which will identify nature of the call).

• Complete a Customer Service Request (CSR).

• Forward CSR to the Total Customer Satisfaction Center.

• Total Customer Satisfaction Center associate researches and completes resolution.

Company E has two ways that calls can enter its system. Externally, customers call an 800 number,
which connects to the Customer Complaint System. Representatives who answer these calls are
empowered to solve all problems immediately. Representatives complete a customer complaint form
and log the action for resolution. This form is passed to the quality systems coordinator, who enters it
into an Access database.
Internally, employees accept calls as part of the non-conformance protocol, which was established
from the company's ISO 9000 certification. This avenue is intended to generate
process/product/policy change and, therefore, requires more time to resolve a complaint.