The feeling’s mutual

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The financial services sector has taken a battering since the global recession, with people’s trust in it hit badly. One consequence of this has been that the once unpopular building society model has found new advocates – but, in a highly competitive market, those few surviving mutuals still have to compete with the big boys.

So it’s not surprising that Adam Lerner, Yorkshire Building Society (YBS) Group’s senior research manager, says the business has gone through an intense period of change over the past six years. This includes the regulatory change undergone by the whole financial services industry – namely the comprehensive Mortgage Market Review implemented by the Financial Conduct Authority in April 2014 in an attempt to constrain high-risk lending and borrowing – and significant changes to the group’s structure through mergers and acquisitions. (See timeline).

Despite all these changes, says Lerner, one aspect has remained consistent: the group’s focus on its customers. “Because we’re a mutual, rather than having shareholders, we’ve always had members and customers at our heart. Everything we do, we test with them. We’ve modernised our approach recently, but we’ve always had that philosophy.”

A small part of that modernisation has been YBS Group’s creation, with Verve, of an online customer panel in the past year. This is used as a quick customer sense check, to make sure any changes made are done in a way that delivers what the customer wants, Lerner says.

An even more significant alteration in the group’s research activity has come from teaming up with KPMG Nunwood on its customer experience and outcomes testing programme. Before 2012, when the partnership was established, YBS Group’s research programme consisted of some mystery shopping and customer satisfaction activity.

Together, YBS Group and Nunwood (as it was at the time – it was acquired by professional services firm KPMG in May 2015 ) set up the customer experience tracker, which measured the behaviour of people who went into branches with some questions around the brand and the product. However, it soon became clear that there was room for improvement on the tracker, according to Rob Edwards, associate director at KPMG Nunwood, who joined the account in 2013. “We [Edwards and Lerner] both realised it was good for certain things, but it was quite difficult to get to some of the more sophisticated questions that Adam’s team were being asked and that, subsequently they were asking of us,” he says.

Much of the shortfall was because many customers of big building societies are long-term savers or long-term mortgage holders, who might not go into branches very often, so have little interaction with the brand.

To address this, they gave the survey two layers – a relational survey that goes out to everyone, and a transaction-based one for those who interact with the brand on a regular basis. The tracker also now encompasses brokers’ customers – a group, Lerner believes, the mutual has just as much responsibility towards as its direct customers. As he says, the team – via the tracker – can now see the point of view of almost everyone they need, “whether it’s people that interact with us, don’t interact with us; whether they’ve got a balance with us or not; whether they hold a mortgage, savings, insurance, investment product… they hold an equal voice as far as our business is concerned”.

Six-pillar framework

The customer experience tracker surveys around 2,500 people every month, across a range of measures. “It’s a really comprehensive view,” says Lerner. “It’s trying to gauge how we perform in the eyes of the customer across all our brands, but also whether we are treating all our customers fairly and as they would expect to be treated, given that we are mutual.”

The tracker uses KPMG Nunwood’s six-pillar framework, which has been designed around the belief that outstanding customer relationships have a universal set of qualities: personalisation, integrity, expectations, empathy, time and effort, and resolution. According to Edwards, the approach was conceived to go beyond tools such as net promoter score (NPS) to “diagnose what’s going on underneath”.

At the beginning of their partnership, Edwards explains, YBS Group worked with Nunwood to repurpose the original six pillars to create the acronym RESPEcT, which stands for: Resolution, Expectations, Simplicity, Personalisation, Empathy creates Trust – and Edwards says he has been impressed by how the whole YBS Group has got behind the idea. “They have spread the acronym around the business and it’s gone beyond just a measurement tool to become an operational tool – it’s actually in staff handbooks,” he says.

“If you talk to people at YBS, they all understand the RESPEcT pillar system. Now there’s training in place to understand how you can move the dial on those pillars and how you can influence customer experience through the pillar system.”

Lerner believes what makes the system so effective is being able to fit operational goals into the categories aligned to the pillars. “You can see your vision and can tangibly break that down into aspects that any business can focus on. Obviously, for us, it means applying it to the YBS way, with mutuality and the way we operate. It just makes it really tangible for the people of YBS to get behind.”

Lerner manages a six-strong research team that sits alongside two other arms within the group’s customer and channel experience function: the customer analysis team and the customer experience team. The research team’s role is, unsurprisingly, to provide insight, as is the analysis team’s, though theirs comes via behavioural data. The customer experience team is there to take that insight and push it out to the rest of the business to drive change, Lerner explains – and it uses a particular forum, the customer experience committee, to highlight the issues that require focus.

The customer experience committee is a strategic group that meets once a month to look at what patterns are emerging from the tracker, including what’s driving customer dissatisfaction and how these issues can be addressed. It consists of 14 senior figures, including the chief executive, chief customer officer, head of complaints and the senior research manager (Lerner).

Sitting underneath this group is the customer improvement committee, which looks at complaints data, research data and other sources of information from around the business, in order to get down to the root cause of any dissatisfaction. This sub-committee is made up of operational leaders from across the group’s business functions.

Operational change

These functions fit together to ensure customer insight is shared throughout the business, Lerner explains. “We use the customer experience committee forum to get the strategic issues on everyone’s radar; we use the customer improvement committee to drive operational change and really focus on what’s going wrong and how we can fix it,” he says.

“But then on each individual piece of research that we do – for example, if it’s an NPD [new product development] piece that we’ve tested through our customer panel – there may be actions as a result of the research that will help shape the communications for that new product launch. We’ve got multiple routes to drive change and action from the insight.“

In his time working on the account, Edwards says he has seen the idea of mutuality and customer focus play out at YBS in the way that it handles research outcomes. “It’s testament to Adam’s team, but also to the wider organisation’s desire to start using insight to drive change,” he says. “And we [Nunwood KPMG] have grown with them through how we measure that insight.”

More generally, Edwards believes there has been “a sea change” in the idea of customer experience leading the way organisationally. “People are getting less concerned about metrics and more concerned about some of the things that Adam’s talking about, such as root causes; what customers are actually saying; how we can effect change on the bottom line that actually means something to the end customer, and not hide behind some NPS or CSat [customer satisfaction] score.”

Edwards stresses that these types of metrics – NPS and CSat – are still important because they are the basis of how performance is tracked. But finding out what’s behind these numbers, and what is subsequently done with that information, is really important, he says.

“We’ve certainly seen this in our work as an agency, but particularly with YBS – it’s very keen to get to this root-cause analysis. We talk about it a lot. The numbers are saying one thing, but what does that actually mean? How can Adam put that round the business, and how can change be effected?”

Of course, this is a key question with any insight work: what impact does any change that’s being observed actually have on the business? YBS Group has reportedly experienced change to its financials – in 2014, it had an 18% increase on core operating profits, to £178.8m, and it is now the second-largest building society in the UK, behind Nationwide – and to its competitive customer experience statistics. In the September 2015 UK Customer Experience Excellence (CEE) analysis from KPMG Nunwood – which ranks brands on consumers’ perceptions of the customer experience they deliver – YBS Group was placed in 27th place, with a CEE score of 7.67. This was an improvement of 11 places on its 2014 ranking.

Lerner strongly believes YBS Group’s success can be attributed to maintaining its mutuality and, therefore, its customer focus. “I used to work for Bradford & Bingley before 2008: it was originally mutual, then it demutualised in 2000. It was the smallest bank in the UK, with the vision of being the market-leading company for specialist mortgages, and, on reflection, I think that wasn’t a great way to go – and it went under as a result.

“There are clear examples of where it hasn’t worked – examples where they have been so shareholder-focused and looking for risky returns that it’s been the demise of some of those companies. YBS has not gone down that route and is still focused on its customers. That’s helped it weather the storm of the recession very prudently.”