I fully endorse what is described in the following DirectorsAndBoards.com article about having "customers" on boards. The results can be most positive for nonprofits seeking to ensure their services - both what and how - fully reflect the needs and wants of their customers. Federally Qualified Health Centers and Community Action Agencies are two examples where "customer" composition is a requirement and the results have generally been positive. However, it is equally true that where selectivity and board management are equally important. For instance, "angry" consumers can be helpful but not if that is their only mantra while in board service. Also, because most individuals are not "born" with a "how to govern" DNA, board training and development (for all) must be thorough and regular. And finally, Consumers must also be given the opportunity for leadership perhaps working their way up from committees to officers. Consumers in leadership positions on the board have an even greater potential to ensuring the venture never loses track of why it is success and revenues continue.
Boards benefit when they feature directors who understand their customers’ wants and needs.
When boards are looking to add new independent directors, they need look no further than their own customers. Boards can greatly enhance enterprise value by having board members who are actual users of the company’s products or services. At minimum, it is crucial for a board to develop a customer mindset to inform how they think about opportunities and risks. Whether you serve an end consumer or an intermediate business customer, the benefits of having a customer mindset are universal.
How can boards develop a customer mindset and why does it matter? There are three essential components.
- Cultivate customer curiosity. Board directors who are curious and develop insights about consumers and their behaviors will develop greater empathy for their customers and be at the forefront of delivering a superior customer experience. Take Costco, for example. They focus on what their consumer actually wants and they prune and change out SKUs to ensure consumers keep spending more at their stores. An example is that Costco now sells bars of gold bullion in their stores. Consumers who want a relatively safe investment have been snapping them up.
Costco’s approach entails seeing the product and service experience through the eyes of the customer. To apply this mindset in the boardroom, board members need to remove their own personal filters and listen to what customers are saying about their current needs and experiences. There is significant value in observing and listening to customers by going out into stores or shadowing customers to “walk in their shoes”. Consumer-focused companies can facilitate store visits for their boards. For example, Home Depot requires their board members to do store visits to understand the customer experience. Business-to-business (B2B) board members can gain this same empathy for customers by participating in a sales call or account review with current customers and prospects. Staying curious and open to what customers are feeling, saying and doing will help boards stay ahead of shifts in the market and new opportunities. Having actual customers who have direct experience with the firm’s offerings on the board is a great way to ensure that the customer’s perspective is front and center for the board (it’s hard to forget the customer when you have one with you in the room).
- Instill a systematic approach. The most significant benefits of having a customer mindset accrue to firms that take a longer-term approach. Product and service changes that benefit customers take time to develop and launch and must be measured consistently over time to track benefits. Board members are in a unique position to instill customer focus as a longer-term priority for the boards they serve. Having a customer focus needs to be part of the organization’s ongoing strategy and part of the governance approach. Too often, customer focus may move on and off the agenda as leadership changes. We would advocate for a more enduring focus on the customer at the board level. There will always be pressures on management to respond to the latest competitor move, compliance issue or budget challenge, which pulls resources away from investments that would improve customer experiences and outcomes. Board members should understand what customers want and surface key consumer issues for the executive team to prioritize. When management teams bring customer metrics to their boards, like net promoter score or satisfaction, it is most valuable to have a longitudinal view of these metrics. Such a perspective puts the customer feedback in context and uncovers risks early on. Having a direct understanding of the customer on the board can help provide further context and identify the changes needed to improve the customer experience and business results.
- Drive innovation using a customer lens. Boards should encourage their executive teams to mine consumer complaints to drive innovation, solidify consumer loyalty and open new opportunities. A great case example is the Stanley Quencher, a water bottle with a tapered bottom to fit into a cupholder. As was detailed in Rex Woodbury’s “Water Bottles & Lessons in Viral Growth,” a group of three women reached out to Stanley urging them to offer more interesting colors and to market the product to women. When Stanley did not heed the advice, the women bought 10,000 cups, marketing and selling them on their own in a matter of days. Seeing the amazing results, Stanley recognized the opportunity to innovate and began offering new colors and new brand collaborations that would appeal to women. This not only reinvigorated a 100-year-old brand, but drove significant sales. Many organizations across industries take this principle even further by sponsoring customer co-creation research and setting up customer advisory councils to proactively develop new ideas for innovation, working directly with their customers. We have seen significant value from sharing the results of this kind of customer feedback with directors to bring them closer to the immediate wants and needs of customers.
Key functional skills like financial acumen, risk, technology and human capital experience are critical for boards. We would advocate adding customer understanding to this set of valued board skills. Directors play an important role in setting the tone at the top of their companies and this customer understanding improves oversight and contributes to enhanced performance. There are numerous examples of industry leaders that embody customer focus to create winning strategies. One company observed the dissatisfaction consumers felt when doing laundry, where large plastic jugs of detergent were ending up in the trash and having a negative impact on the environment. The company, Earth Breeze, innovated a new product, creating laundry sheets that eliminate the waste issue and have the added benefit of not requiring consumers to lug around heavy detergent bottles.
An example in the B2B sector is Salesforce. Their strategy is centered on making their customers the hero. This is evident in how they share their customer stories and pictures of real customers in their marketing, events, and across their office locations to reinforce the customer perspective. Having customers represented on the board is a direct way to ensure that the customer mindset is front and center. The boards and leadership teams that maintain a consistent focus on their customers will be rewarded with an improved understanding of market opportunities, shifts in demand and potential risks. This customer perspective on the board will, in turn, enhance strategy, oversight and business performance for the organizations they serve.
About the Author(s)
Shaz Kahng is a director and nominating and governance committee chair of GoPro, compensation committee chair and audit committee member of InsideTracker, and director of LiveGirl and Wharton Alumni for Boards. Previous roles include CEO and director of Gymboree, CEO and president of Lucy Activewear and global director of business development, women’s training, of Nike.
Jessica Saperstein
Jessica Saperstein is a director of Church Mutual Insurance Company where she serves on the audit and human capital committees. She is a strategic advisor to boards and leadership teams on customer-driven growth and most recently served as chief customer experience officer of Voya Financial. Previous roles include head of marketing & customer experience for Novartis and global strategist at Avis Budget Group and ADP.