Academy ol Management Execuiive. 2002, Vol. 16, No.

4
Best-practice complaint
management
floberf /ohnsfon and Sandy Mehra
Executive Summary
This article reports the findings of the second phase of an ongoing research project into
complaint management. The research was carried out in association with the Customer
Service Network in the UK. The objective of this exploratory article is to discover what
constitutes best-practice complaint management. The research took a grounded-theory
approach based on rich case studies of the five outstanding United Kingdom service
organizations identified in an earlier study. These organizations were a mix of public and
private organizations and included a not-for-profit private fiealth insurance company, a
telephone banking operation, a chamber of commerce, a general hospital, and a High
Street bank.
As a result of the cross-case analysis, twelve insights into best complaint-management
practice were identified including the need not only for speed of resolution but also a
human touch, the need for closure not just follow-ups, top-level involvement in
complaints, the strategic use of complaints, a combination of decentralized and
centralized tasks, and parallel systems for staff suggestions/complaints.
Complaint Management and Service Recovery
Managing complaints well and recovering custom-
ers, i.e., dealing with them after a service failure
and (usually) a complaint, should be the corner-
stone of an organization's customer-satisiaction
strategy.' Recent empirically based research has
demonstrated strong links between effective ser-
vice recovery and not only customer satisfaction
but also repurchase intentions, customer trust and
commitment, and long-term relationships.^ Fur-
ther, it has been shown that good recovery and
complaint management have a positive impact on
staff attitude and staff retention, process improve-
ment and, arguably more importantly, on profit,^
Despite the importance of service recovery and
its impact on customers, staff, and indeed the bot-
tom line, most customers are dissatisfied with the
way organizations handle their complaints and,
worse still, few organizations learn from their mis-
takes and problems.'' 'Good' complaint-manage-
ment practices seem to elude many organizations.
Surprisingly, relatively little research has been
conducted on service recovery and complaint pro-
cesses. We know that customers, both internal and
external, have expectations about the recovery
process, such as acknowledgement, empathy,
apology, and compensation.^ And we know that
these expectations are in part based on such fac-
tors as the customer's attitude toward complain-
ing, the magnitude of the service failure, prior ex-
perience, and attitude toward the supplier of
service.^ But how should organizations design
their processes to meet these expectations?
Most customers are dissatisfied with
the way organizations handle
their complaints.
Several authors have provided their views on the
key elements of good practice.'' In summary, it would
appear that 'good' complaint management has ten
characteristics that fall into four categories:
Complaint-Soliciting Culture
Good service organizations take complaints
seriously. Their cultures promote soiicidng,
listening to, and resolving complaintsfast.
145
146 Academy of Management Executive November
Easily Understood and Accessed Complaint
Procedures
Procedures should be easy for the complain-
ant and the staff to understand. Complainants
should clearly understand what they should
do to register a complaint, and staff should
clearly understand what they should do to
respond.
Procedures should be easy for the complain-
ant to access. This aspect is different from
clarity of procedures. A procedure may be
clearly expressed and readily understood, yet
difficult for the complainant to access.
Process Simplicity
For the customer, a single point of contact
should be sufficient to register the complaint
and get the procedure for resolving the com-
plaint underway.
If possible, staff should be empowered to re-
solve the complaint. Customers do not want
to hear, "I'll have to ask my manager and get
back to you."
No matter who responds to complaints, re-
sponse should be rapid.
During the resolution process, the complain-
ant should be kept informed of progress to-
ward resolving the complaint.
Systematic FoUow-Up
Organizations should have follow-up proce-
dures to check with customers to see if the
resolution was satisfactory.
Measurements of procedural effectiveness
should assess whether the causes of com-
plaints have been reduced, rather than sim-
ply whether the volume of complaints has
been reduced.
All data gathered during the process should
be used to engineer out the problems and
their causes.
Managerial attention and focus on these key items
can help organizations to seek out and respond
quickly and appropriately to customer complaints.
Equally important, by measuring these complaints
systematically and designing procedures and
measures that communicate the seriousness of
complaints to all employees, the organization
sends a strong message to employees and custom-
ers that it wants to know what problems are cre-
ated, will follow-up on those problems, and wants
customers to know that the problems will be solved
and the factors that created the problems will be
fixed. These characteristics of 'good' complaint
management all contribute to a culture of concern
over fixing problems and addressing complaints
that distinguishes successful organizations from
unsuccessful ones. Any service organization can
benefit from assessing itself against these com-
plaint-management practices recommended in the
literature, to see if its own complaint-management
processes can be improved.
After searching the literature, we wanted to ex-
amine and evaluate the actual practices of "suc-
cessful" service organizations in the United King-
dom to determine the extent to which they use
these complaint-management practices. On the
basis of our evaluation, we answer the question:
What is best-practice complaint management? Is
implementation of the practices identified by prior
research sufficient to make these best organiza-
tions the best, or do they engage in (or refrain from
engaging in} other practices beyond the factors
noted above that contribute importantly to their
success?
Selecting the Organizations
'Successful' organizations were identified in an
earlier empirical benchmarking study which sur-
veyed the customer service managers in 40 UK
service organizations.^ The benchmarking ques-
tionnaire was both wide ranging and detailed,
with around 200 questions {developed from the lit-
erature and pilot tested in three organizations) cov-
ering such dimensions of complaint management
as:
the complaint management process
the culture and attitude of the organization to-
ward complaints
improvements driven by the complaint process
improvements driven by staff
satisfying customers who complain
retaining customers who complain
the financial benefits
the retention and loyalty of complaint-handling
staff
the attitude of complaint-handling staff
appraisal and reward of complaint-handling
staff
recruitment and training of complaint-handling
staff
2002 Johnston and Mehra
147
The research developed and tested several scaled
items, such as complaint-management processes,
which were based on an unweighted index of the
characteristics of 'good' complaint management
listed earlier. Other items included customer sat-
isfaction, customer retention, staff attitude, staff
retention, process improvement, and financial per-
formance.^ The study found significant correla-
tions between the 'goodness' of the complaint-
management process and customer satisfaction
and retention, staff attitude and retention, process
improvement, and the organization's financial per-
formance.
In order to identify the most 'successful' organ-
izations in the study, each responding organiza-
tion's scores for customer satisfaction, retention,
process improvement, and financial performance
were aggregated (unweighted) into a single index
(referred to as business performance). Figure 1
shows each organization's position in terms of its
complaint-management process and respective
business performance.
Despite this rather crude amalgamation of dif-
ferent outcomes of complaint management, an
interesting correlation exists between business
performance and complaint process of 0.81 (signif-
icant at a 1 percent level). Because we had neither
time nor resources to study all organizations, we
selected the top-scoring five organizations (circled
in Figure 1) to study further as the benchmarks.
These organizations were:
Western Provident Association (WPA), Taunton
(a not-for-profit private health insurance com-
pany)
First Direct, Leeds (a telephone banking com-
pany)
Milton Keynes Chamber of Commerce (an asso-
ciation to promote local commercial interests)
strong 5
Glan Clwyd District General Hospital, Rhyl (a
general, public hospital)
Barclays Bank (a High Street bank)
It is interesting to note the mix of for-profit and
not-for-profit organizations, and large and small
organizations (from 50 to over 70,000 employees), in
this selection. In order to explore how these suc-
cessful organizations designed and managed com-
plaint processes, balancing the need to satisfy cus-
tomers with the need to use complaints to improve
processes and financial performance, we took an
interpretative, grounded theory approach.^ This
case-based research has limitations in terms of
generalizability but has the key benefit of allowing
an investigation into a range of contextual vari-
ables. "
Interviewing the Managers
Structured interviews were held with senior man-
agers at each organization. Discussions were
wide-ranging but specifically covered:
The complaint processHow did these organi-
zations handle complaints once they were re-
ceived? Also, given that there may be many
more customers who are unhappy and do not
complain, how did they ensure that as many
dissatisfied customers as possible voiced their
concerns and therefore gave the organizations a
chance to recover them?
Organizafionai cultureWhy did these organi-
zations believe that complaint management
was a key business priority or area of activity,
and how did they reach that state of belief?
Improvements and learningHow did the organ-
izations learn from complaints, such that they
could improve the delivery of their service and
weak 1
-
*
*
*
1
weak
5
strong
Complaint processes
Figure 1
Complaint Processes versus Overall Business Performance
148
Academy of Management Executive November
prevent complaints of the same type from recur-
ring in the future?
Satisfaction of customers wiio compiainHow
did the organizations know that they were truly
satisfying a customer who complained and not
merely assuming that, because they had replied
to a complaint, the customer must automatically
be happy?
Retention of customers who complainHow did
the organizations know that those customers
who complained were actually staying with
them, including those that they believed were
satisfied with the outcome of the complaint?
Value of complaintsHow did the organizations
place a value on complaint management, not
just in terms of the cost associated with manag-
ing complaints but also on the potential benefits
from improving service delivery and retaining
more customers?
The interviews were recorded, then transcribed,
and additional information and reports were re-
quested to triangulate the information provided.
These five organizations were chosen because of
their high average scores in overall business per-
formance and complaint processes. In terms of
complaint processes, they all scored an average of
over 4, but were their scores consistently high
across all the characteristics of 'good' complaint
management? The answer is yes but with one ex-
ception. On having follow-up procedures, two or-
ganizations only scored themselves 1. Having fol-
low-ups with customers was not, interestingly,
related to the size of organizations: one of the poor
scorers was one of the largest organizations in
terms of both customers and turnover, and the
other was one of the smallest. Managers at both
organizations said this was an area they were
working on and, in due course, they would expect
their scores to be as high as in the other areas.
How Leading Organizations Manage Complaints
The structured discussions with senior managers
provided twelve important insights about how
these leading organizations managed complaints.
These insights build on, and indeed go beyond, the
characteristics of 'good' complaint management
indicated earlier. Each of these additional points is
described below with some examples from the or-
ganizations. The key learning points, or recom-
mendations, are collected together in the conclud-
ing section.
1. Speed hut with a human face
Each of the five organizations had processes that
were designed to provide a speedy response to
complaints. They all had very similar service stan-
dards in terms of acknowledging and replying to
complaints. A common standard was to acknowl-
edge within 24 hours and, within five working days
after an investigation, provide a full reply with an
explanation of the causes and details of actions to
be taken. The need for a speedy response is recog-
nized as vital if complaining customers are to be
satisfied. In addition, all of the organizations made
a point of calling the customers on the phone
whenever possible. This was done not simply to
provide a speedy acknowledgement of the com-
plaint but importantly to give the organizations an
opportunity to present a human face to the cus-
tomer, to ensure that the complaint process was
seen as being genuine and caring rather than rou-
tine and impersonal.
The need for a speedy response is
recognized as vital if complaining
customers are to be satisfied.
2. Tease out complaints appropriately
Managers at each organization were convinced
that the complaints they received were the tip of
the iceberg, and that for each complaint there were
many more unhappy customers that they did not
know about. The respondents were uniformly of
the opinion that they needed to encourage custom-
ers to complain and to make it as easy as possible
for them to do so, because this alone gave them the
opportunity to convert unhappy customers into
loyal ones.
Customers were encouraged to complain and
comment, and systems were put in place to make
this as easy as possible. However the approach
taken by each organization was quite different.
Some of the organizations, such as WPA and Bar-
clays Bank, relied on leaflets and posters inform-
ing customers that comments of any sort were
welcome. These were readily available to their
customers and well publicized in communications
such as statements and annual reports as well as
in branches and offices. First Direct, because of the
telephone nature of their business, was of the opin-
ion that a high percentage of unhappy customers
would complain because of the ease of doing so
(their estimate was that 80 per cent of their dissat-
isfied customers would complain). Glan Clwyd
District General Hospital, on the other hand, found
2002
hhnston and Mehia 149
that their patients were often reluctant to complain
because of fears about the implications for their
treatment, however unfounded. To combat this re-
luctance, the hospital devised a separate system
whereby patients could register their comments
without being recorded as complainants. Staff also
carried out regular ward visits to chat with pa-
tients in a non-intimidating or non-confrontational
atmosphere, in order to try to 'tease out' com-
plaints.
Encouraging customer complaints and making it
easy for customers to register their dissatisfaction
also had the benefit of letting the organizations
know quickly when something was going wrong.
Barclays Bank and Glan Clwyd Hospital, for exam-
ple, both provided tear-oif slips with their com-
plaints leaflets so that customers did not have to
try and find a piece of paper. The ward visits staff
made allowed them to learn about processes that
were going wrong in real time, and they could
therefore try to fix them before the patient was
discharged.
3. No-blame culture
It is important to note that none of the organiza-
tions provided any form of financial reward to em-
ployees for encouraging complaints. Doing so was
seen to be unnecessary, even running counter to
their desire to make encouraging complaints a
part of normal practice. Furthermore, one common
feature of all the organizations was an acceptance
that not only were mistakes inevitable but that
they were also acceptable, except where repeated
mistakes were being made. These 'no-blame' cul-
tures encouraged staff to take initiatives to satisfy
complaining customers and to look for solutions
without first thinking about whether they might be
punished for going outside their job descriptions
{although there were limits as to what staff were
allowed to suggest). If staff did exceed those limits,
the approach taken, by First Direct for example,
was to look for learning points afterward and to
coach the mistakes out.
One common feature of all the
organizations was an acceptance that
not only were mistakes inevitable but
that they were also acceptable.
4. Create closure
The organizations were well aware that customers
sometimes felt that they were no longer involved
once they had made their complaint and, further,
that the complaint-handling processes themselves
sometimes led to further dissatisfaction. Three of
the organizations followed up on complaints, and
the other two intended doing so in due course. The
three better-performing organizations went be-
yond follow-ups and were determined to ensure
closure. WPA, in particular, was very keen to en-
sure that once a complaint had gone through the
process, the customer was contacted to try and
determine how the person felt about both the out-
come and the experience of the complaints pro-
cess. By doing this WPA hoped to avoid falling into
the trap of assuming that simply because the com-
plaints procedure had been followed, then the cus-
tomer must be happy with the outcome and the
process. Closure, however, involved not only en-
suring that the customer was satisfied (external
closure) but that the organization had learned from
the experience and had implemented changes to
its business processes. Internal closure was en-
sured through feedback mechanisms involving se-
nior managers, to check that agreed changes had
been made to processes and systems.
5. Proactive top-level involvement
Complaints were given a high profile with top-
level involvement in complaint management. This
was not simply lip service and went well beyond
voiced 'concern' and dealing with escalated com-
plaints. In the case of WPA, a main board director
with the title Director of Best Practice oversaw
complaint management as part of his responsibil-
ities. At WPA complaints were taken so seriously
that every time a customer complained, a senior
manager, and on occasion the Director himself,
offered to visit that customer anywhere in the
country. The purpose was not only to demonstrate
how seriously they viewed the complaint itself but
also to provide senior managers with the opportu-
nity of learning as much as they could about why
the organization failed to satisfy the customer.
WPA could make this offer because they received
very few complaints156 in 1998 out of a customer
base of over 500,000and only a small proportion
of those took up the offer of a visit.
Senior managers at the other organizations in-
volve themselves with complaints in different
ways. At First Direct, for example, the CEO sits not
in an office but at a desk in the corner of the bank's
vast open plan call center in Leeds. He is not only
willing and available to talk to staff members
when they feel there is an issue to be resolved but
is also available to talk to a customer if the tele-
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Academy of Management Executive November
phone banking representative considers it appro-
priate.
6. ComplaintsA strategic issue
Complaint-management professionals in the case-
study organizations were involved in business
meetings and decisions and had a direct input into
strategic planning meetings. Barclays, for exam-
ple, formally involved complaint-management
professionals in their strategic planning sessions,
so that their experiences of customer concerns
could be incorporated into planning at the bank.
At Glan Clwyd District General Hospital, issues
raised by complaints were fed directly into the
training of staff. All the organizations viewed com-
plaints as not only a key contributor to operational
improvement but also to the organization's long-
term success.
7. A combination of centralized and decentralized
complaint handling
The five organizations had a mixture of centralized
and decentralized approaches to complaint han-
dling, though the allocation of specific tasks var-
ied. Senior managers at WPA were of the opinion
that individual business units should be responsi-
ble for dealing with their own complaints, though
one director had overall responsibility for com-
plaint management. The company did not factor in
the time and effort required to manage complaints
when scheduling workloads and deciding produc-
tivity levels, so if a business unit had to deal with
a complaint, they either had to make the time dur-
ing the working day or do it when scheduled work
had been completed. In either case the complaint
still had to be dealt with within prescribed service
standards. The view at WPA was that this focused
the minds of employees and encouraged them to
try to avoid making mistakes in the first place.
This sort of approach may not be desirable
where an organization has a number of retail out-
lets, branches, or departments across many sites,
in which case a central unit might be more desir-
able to ensure consistency across a wide geo-
graphic spread. Barclays Bank had a central com-
plaints unit that dealt with all complaints
addressed to the bank. If complaints were made at
a branch, the branch manager attempted to re-
solve them because it would be nonsensical to
instruct customers to write in to the head office
without making an attempt to satisfy them first.
However, even if the branch manager was success-
ful in dealing with the complaint, information
about the complaint and its resolution was sent to
the head office.
Whether responsibility for managing complaints
was held centrally or was diversified across busi-
ness units, a common feature at all the organiza-
tions was that the analysis of complaints in terms
of numbers, types, and trends was performed at
head-office level.
8. Focus on communication and improvement
Complaints data at all the organizations were
compiled centrally, and regular reports (at least
monthly) were circulated and discussed not just by
managers and executives but they also formed
part of team briefings and were published in staff
newsletters. All of the organizations were of the
opinion that communicating complaint data was a
good thing as it promoted awareness in staff of the
problems and issues that were being faced and
how the organizations were performing in tackling
them.
All of the organizations were of the
opinion that communicating complaint
data was a good thing.
Another common feature was whether com-
plaints were dealt with centrally or whether it
was the responsibility of individual business
units, departments, or branches to ensure that
changes to processes specific to their areas were
being identified and followed up, and that skills
shortages were being identified and addressed.
At WPA, specialist teams had been formed to aid
this process by analyzing why processes went
wrong and ensuring that they were fixed, with
other teams providing coaching and training
where necessary. At First Direct, project teams
took charge of the changes to ensure that they
were consistent and fitted with other business
systems. At Barclays, the central unit was re-
sponsible for overseeing improvements and
changes to processes, and departments and
branches would be reported to senior manage-
ment if no actions were forthcoming.
9. Internal complaints systems
Staff were seen as a major source of improvement
ideas. At First Direct, staff were expected to con-
tribute suggestions as part of their role, and to
facilitate their contributions the organization al-
lowed time for staff to meet informally to discuss
2002
hhnston and Mehra 151
problems and issues that they were encountering,
so that suggestions on how to tackle them and
prevent reoccurrence could be made.
WPA even encouraged internal complaints in
the belief that poor service from one area of the
business to another eventually manifests itself as
poor service to customers. These internal com-
plaints were treated in the same way as customer
complaints; i.e., they were logged, tracked, ana-
lyzed, improvements were sought, and the same
teams that coordinated changes as a result of cus-
tomer complaints also took responsibility for them.
WPA even encouraged internal
complaints in the belief that poor service
from one area of the business to another
eventually manifests itself as poor
service to customers.
At the Milton Keynes Chamber of Commerce, the
empowerment given to staff was such that they
were allowed to change their own processes with-
out seeking approval, provided that they satisfied
the Chamber's auditing team. A formal review of
processes took place regularly, as did formal au-
dits, so any changes that were likely to cause prob-
lems for other business areas could be neutralized.
However, when it came to deciding how to tackle
particular tasks, the Chamber allowed its staff a
large degree of freedom to decide how to act.
JO. Surveys targeted on problems and resolution
All five organizations carried out extensive work to
determine whether customers were satisfied with
the service they received, and WPA and Glan
Clwyd District General Hospital specifically at-
tempted to determine satisfaction levels with their
complaints processes.
The Milton Keynes Chamber of Commerce regu-
larly surveyed its customers on all aspects of the
service they had received, and as part of these
surveys, questions were asked about whether cus-
tomers had encountered problems and if so
whether the problems had been resolved satisfac-
torily. Glan Clwyd Hospital specifically targeted
patients who had complained and asked detailed
questions about their experiences. WPA, on the
other hand, attempted to talk to every complainant
once the issue had been resolved and offered to
visit each one at the end of the process, just as they
did when the complaint was first received.
First Direct and Barclays did not specifically ask
customers who complained about their experi-
ences, but as befits very large national institu-
tions, they carried out regular customer-satisfac-
tion surveys which included questions about their
satisfaction with problem raising and resolution.
Both of these organizations also made a point of
contacting customers who had been particularly
badly affected or treated. Barclays even empow-
ered staff to send goodwill gestures such as flow-
ers or wine if the member of staff felt this would
help repair any damage done to the relationship
with the customer.
The three financial services organizations and
the Chamber of Commerce attempted to talk to
customers who informed them that they were clos-
ing accounts, canceling policies, or dropping mem-
berships.
11. Focusing staff attention through knov^ledge of
the benefits of complaints
All the organizations involved in the research be-
lieved in the value of complaints as a means of
learning about themselves, to improve customer
satisfaction and retention and thereby derive fi-
nancial benefits.
At WPA, First Direct, and Barclays, perhaps un-
surprisingly because all three are financial ser-
vices organizations, the belief was that excellent
service was becoming a 'given' because of compe-
tition and consumer choice, and that a new differ-
entiator, service recovery, would give them an
edge over competitors. The opportunity to convert
a dissatisfied customer into a loyal advocate, and
therefore reap the rewards of retention and refer-
ral, was quoted by all three as one of the basic
reasons for managing complaints well.
The organizations were all aware of the value of
satisfying complainants because of the effect this
had on customer retention and on the referral busi-
ness that could be generated from converting dis-
satisfied customers into advocates. This aware-
ness even applied to the hospital, although to a
lesser degree, which competes to some extent with
alternate healthcare providers in the area as well
as private hospitals.
First Direct estimated that 40 to 50 percent of its
business was gained through referral, which is
very high for the sector, and WPA came out on top
of a survey by NOP, a market research organiza-
tion, as the private health insurer most likely to be
recommended by its customers.
When it came to retaining customers who com-
plain, WPA, as a mutual organization, found that it
could make decisions that other companies owned
by shareholders, or with limited and pressured
budgets, might not be able to. It would not be
152
Academy of Management Executive November
unknown for WPA to agree to pay a claim for med-
ical expenses that the customer genuinely thought
was allowable even if it was agreed that the com-
pany had no legal obligation to do so. In such
cases the organization looked at the potential
worth of retaining the customer over many years
and the long-term benefit that such a decision
would bring to the company.
12. Focusing senior management attention
through the costs and savings from complaints
A good understanding of the costs (both finan-
cialin terms of staff costs, compensation, and
goodwill costs^as well as cost of time) associated
with complaint management could be found at
each of the five organizations.
All of the organizations calculated how much
complaints were costing them. They used this in-
formation in different ways. All of them undertook
this analysis in order to forecast budgets and ex-
penses. However, the Milton Keynes Chamber of
Commerce also believed that showing such infor-
mation to managers and staff was a good way of
focusing their minds on the practical realities of
not getting things right the first time.
All of the organizations calculated how
much complaints were costing them.
First Direct was attempting to go further than this
by trying to formulate a measure of 'customer expe-
rience' which would help determine the lifetime
value of their customers. They believed they if they
could also determine by how much that 'customer
experience' was either enhanced or degraded, de-
pending on how well or badly a complaint was han-
dled, then they could understand the lifetime value
of a complaining customer. First Direct was con-
vinced that a positive experience of complaining
could greatly increase the customer's lifetime worth
to the company, which therefore demonstrated the
value of excellent complaint management not just in
terms of customer satisfaction but also in longer-
term profitability and loyalty.
WPA was also convinced that a positive experi-
ence of complaining resulted in a customer who
was much more loyal, much more likely to refer
them to friends and family, and much more likely
to be more profitable in the long term.
First Direct was the only organization of the five
that was formally attempting to link the costs as-
sociated with handling complaints and making
improvements to potential savings in the future.
They were doing this by attempting to determine
how many future complaints of a specific type
could be avoided if they took the necessary steps to
correct a problem that was giving rise to those
complaints at the moment. By simply multiplying
the total cost of handling one of those complaints
by the number of potential complaints of the same
type that had been avoided in the future, they
hoped to show how much money could be saved by
learning from complaints and identifying and
making improvements.
From Good Practice to Best Practice
Our objective was to try to discover what the best
organizations are doing that might set them apart
in terms of how they manage complaints. The find-
ings from the top five organizations, identified in
the earlier benchmarking study, suggest that the
literature-based characteristics of 'good' complaint
management, presented earlier, are not in them-
selves sufficient. As a result of this study, we
would suggest that there are a number of addi-
tional ways in which organizations can achieve
best-practice performance in complaints manage-
ment:
1. It is well accepted that speed of response is
vital. However, organizations should also use
rapid responses as an opportunity to demon-
strate the human face of the organization
through personal contact rather than pro forma
acknowledgments.
2. Many organizations already accept that com-
plaints are the tip of the iceberg but are reluctant
to look below the surface. It is critical that organi-
zations not only encourage complaints but also
choose appropriate methods of doing so.
3. Rewarding staff to encourage or collect com-
plaints is not necessary but requires a 'no-
hlame' culture that accepts mistakes and makes
complaints a normal but positive part of organi-
zational life.
4. While many organizations recognize the value
of follow-ups, ciosure is a different matter. Clo-
sure is concerned with the process and its out-
comes for both the customer and the organiza-
tion. Closure is the opportunity to ensure that
the customer is, in fact, happy with the outcome
and also that the organization has made
changes, where appropriate, to its systems or
procedures to ensure that the problem does not
recur.
5. The need for top-level support of complaint
management is not a surprising finding, but
2002
Johnston and Mehra 153
top-level proactive involvement in a variety of
aspects of complaint management presents a
challenge to many senior managers. Day-to-day
support of and involvement in front-line issues
not only demonstrates real concern to both staff
and customers but provides the impetus to make
changes that will make a difference.
6. Complaints are not always concerned with op-
erational issues. Many of them expose cross-
functional and strategic issues that can be
dealt with only at a senior organizational level.
Information from complaints needs to be incor-
porated into strategic planning systems.
1. Excellent complaints management requires
both a cenfraiized and decentralized approach,
though the allocation of tasks may vary. At the
minimum, decentralized units should be used
to collect information and deal with customers
and problems where they can, and centralized
departments/teams/individuals should be re-
sponsible for analysis of trends with overall
responsibility for policies and overseeing im-
provements.
8. Reports of complaint issues and learning
points need to be widely circulated throughout
an organization. The first step in being able to
use complaint data to drive improvement is
having a common understanding of the issues
and problems.
9. Customer complaints should not be the only
source of information to help drive improve-
ments. Employees should be used as a major
source of ideas. Their suggestions, issues, and
'complaints' should be logged and tracked, in-
deed treated as seriously and systematically
as customer complaints.
10. Satisfaction surveys should not shy away from
directly seeking information about problems
and their resolution. One might argue that ob-
taining such information is more important
than collecting traditional satisfaction data.
11. The acid test that should be applied to all com-
plaint-management systems is whether or not
they result in action and lead to improvements
for the financial benefit of the organization (for
example, through the reduction of costs and
time spent dealing with problems) and for the
benefit of customers Hot example, by prevent-
ing dissatisfaction from recurring). Knowledge
of these benefits provides the motivation for staff
to deal with complaints in a positive manner.
12. Motivation for senior management should be
provided by information about the financial
costs and benefits of complaints, so it is impor-
tant that organizations are able to develop
means of assessing the financial impact of
complaints and (he vaiue of improvements that
should result from them.
It is important to recognize that these organiza-
tions did not see complaints and complaint man-
agement in isolation but as part of a total ap-
proach to good management. Thus, best-practice
complaint management involved not only the de-
sign of sound operational systems and procedures
but was also concerned with cultural issues such
as no-blame and openness, the integration of is-
sues into training programs, motivational aspects,
and the calculation and analysis of financial im-
plications.
These organizations did not see
complaints and complaint management
in isolation but as part of a total
approach to good management.
This exploratory and grounded study has a num-
ber of limitations. Aside from the small sample
size, which is not inappropriate for this type of
study, the main concern is that it only evaluated
'successful' organizations. In order to expand and
validate our findings, it will also be appropriate to
compare them to findings regarding less 'success-
ful' organizations where the complaint processes
did not possess the characteristics identified in the
literature, in order to ascertain if the features iden-
tified above are applicable only to 'successful' or-
ganizations.
In addition, this research has been concerned
with the 'what': What is it that the successful organ-
izations do that sets them apart? One direction for
future research might be to study the 'how': How do
the successful organizations go about developing
an appropriate culture and ethos that support good
complaint management? These successful organi-
zations had 'no-blame' cultures which underpinned
their ability to encourage, collect, and respond posi-
tively to complaints, coupled with an ethos of con-
cern for improvement driven by an understanding of
the costs and benefits of so doing.
Acknowledgment
The authors would like to thank Bruce Ranee, principal of the
Customer Service Network, for his assistance in this research
and the development of this paper. For more information visit
www.customernet.com.
154 Academy of Management Executive November
Endnotes
' Tax, S. S., & Brown, S. W. 1998. Recovering and learning
from service failure. Sloan Management Review, 40(1): 75-89.
^ See. for example, Halstead, D., & Page. T. I. 1992. The effects
of satisfaction and complaining behavior on consumer repur-
chase intentions, journal oi Customer Satisfaction, Dissatisiac-
tion and Complaining Behavior, 5: 1-11; Spreng R. A., Harrell,
G. D., & Mackoy, R. D. 1995. Service recovery: Impact on satis-
faction and intentions. Journal of Services Marketing, 9(1): 15-23;
Brown, S. W., Cowies, D. L., & Tuten, T. 1996. Service recovery, its
value and limitations as a retail strategy. /niernafionaJ Journal
of Service Industry Management, 7(5): 32-46; Tax, S. S., & Brown,
S. W. 1998. Recovering and learning Irom service failure. SJoan
Management Review. 40(1): 75-89; Smith, A. K., & Bolton, R. N.
1998. An experimental investigation of customer reactions to
service failure and recovery encounters: Paradox ar peril? 7our-
nal of Service flesearch, 1(1): 65-81; Smith, A. K., Bolton, R. N., &
Wagner, J. 1999. A model af customer satisfaction with service
encounters involving failure and recovery. Journal of Marketing
Research. 36(August): 356-372; and Andreassen, T. W. 2000. An-
tecedents to satisfaction with service recovery. European 7our-
nai of Marketing. 34: 156-175.
^ Johnston, R. 2001. Linking complaint management to profit. Inter-
nationa! Jouina! of Service Industry Management. 12(1): 60-69.
^ Tax, 8f Brown, 1998, op. cit.
^ See, for example, Bitner, M. J., Booms, B. H., & Tetreault, M. S.
1990. The service encounter: Diagnosing favorable and unfavor-
able incidents. Journal of Marketing, 54(Ianuary): 71-84; Singh, J.
1990. A typology of consumer dissatislacEion response styles.
Journal of Retailing. 66(1): 57-98; Kelley, S. W.. Hoifman, K. D., &
Davis, M. A. 1993. A typology oi retail failures and recoveries.
Journal of Retailing, 69(4): 429-452; Johnston, R. 1995. Service
failure and recovery: Impact, attributes and process. Advances
in Services Marketing and Managemeni: Researcii and Practice.
4: 211-228; Boshoff, C. R. 1997. An experimental study of service
recovery options. /nfernationaJ/ourna/ of Service Industry Man-
agement. 8(2}: 110-130; Johnston, R., & Fern, A. 1999. Service
recovery strategies for single and double deviation scenarios.
Tbe Service Industries Journal. 19(2): 69-82; and Bowen, D. E., &
Johnston, R. 1999. Internal service recovery: Developing a new
construct, /nfernafionai Journal of Service Industry Manage-
ment. 10(2): 118-131.
^Johnston, R. 1998. The effect of intensity of dissatisfaction on
complaining behavior. Journal ol Consumer Satisfaction. Dissatis-
faction and Complaining Behavior. 11: 69-77; Tax, S. S., Brown,
S. W., & Chandrashekaran, M. 1998. Customer evaluations of ser-
vice complaint experiences: Implications for relationship market-
ing. Journal of Marketing. 62: 60-76; Smith & Bolton, op. cit.; and
Smith, A. K., Bolton, R. N., & Wagner, J. 1999. A model of customer
satisfaction with service encounters involving failure and recov-
ery. Journal of Marketing Research. 36(August): 356-372.
' See, for example. Hart, C. W. L., Heskett, J. L., & Sasser, W. E.
1990. The profitable art of service recovery. Harvard Business
Review. 68(4): 148-156; Johnston. 1995, op. cit.; Barlow, ].. &
Mailer, C. 1996. A complaint is a gilt. San Francisco: Berrett-
Koehler; Boshoff, C. R. 1997. An experimental study of service
recovery options. /n(erna(ional Journal of Service Industry Man-
agement. 8(2): 110-130; Van Ossel, G., & Stremersch, S. 1998.
Complaint management. In Van Looey, B., Van Dierdonck, R., 8E
Gemmel, P. Services management: An integrated approach.
Financial Times Pitman Publishing: 171-196; Williams, T. 1996.
Dealing with customer complaints. Aldershot: Gower; and
Johnston, R., & Clark, G. 2001. Service operations management.
Harlow, England: Prentice Hall.
^Johnston, 2001, op. cit.
^ Ibid. The respondent in each organization was typically the
senior manager responsible ior the customer service depart-
ment. These people were chosen because they would have an
understanding of the organizational issues, such as the com-
plaint process, staff recruitment, and training, as well as an
understanding of the customer perspective, i.e., levels of cus-
tomer satisfaction and retention, for example. The organiza-
tions were self-selected to take part in the study. The questions
on which this paper is based used a 1-5 scale with descriptions
associated with points 1, 3, and 5, with 1 representing poor
practice and 5 good practice. Thirleen questions concerned the
complaint process (covering the characteristics of good com-
plaint management listed earlier). There were also four ques-
tions on customer satisfaction, five on retention, six on improve-
ments, and five on financial performance, including lifetime
values, profitability (for-prolit organizations), switching, and
referrals. The results in each area were aggregated (un-
weighted) to form an index.
' Glaser, B. G., & Strauss, A. L. 1967. The discovery of
grounded theory. Chicago: Aldine. Grounded theory is an inter-
pretative, hermeneufic, case-based approach to research which
allows for an investigation of the many contextual variables. It
is not based on a priori assumptions or hypotheses but derives
explanations of social phenomena based on observations, de-
duction, and interpretation. While a grounded-theory approach
is unsuitable ior drawing inferences to a larger population, the
objective of such research is to use case studies for explanatory
purposes and to generalize back to, and refine, theory.
" Yin. R. K. 1994. Case study research: Design and method. 2'"^
ed. London: Sage.
Robert Johnston is professor
of operations management at
Warwick Business School. His
research interests include ser-
vice design, service recovery,
performance measurement, and
service quality. He is the co-
author or editor of over 25 books
and has contributed 28 chapters
to other texts. He has published
around 40 arlicles in referred
journals and has written over
60 case studies and three com-
puter-based simulations. Contact:
bob.johnsfon@warwict.ac.ut.
Sandy Mehra is mortgage risk
manager at the Coventry Build-
ing Society, a mutual organi-
zation offering mortgages and
savings products to nearly a mil-
lion members. The Coventry is
the UK's fifth-largest building so-
ciety with assets approaching 7.5
billion (Sterling). His principal fo-
cus is in maintaining leading
quality through policies, proce-
dures, and systems. He received
his MBA Irom Warwick Business
School in 2000. Contact: smehra@
coven (lybuiJdingsociety.co.ut.