When Peter Nelson was applying for the president and CEO job at California Water Service Group back in 1996, he wanted to learn a little bit about his potential employer. He decided to drop in for an unannounced visit at one of the local offices.
“I received a call from a headhunter about the opportunity here at Cal Water, but I really didn’t know much about them,” Nelson says. “So I walked into the local office and said to the service representative, ‘Hey, I’m applying for a job with this company. What’s it like to work here?’
Over the next 45 minutes, the representative gave him a copy of the annual report, and three other people in the office came out to speak with him about the company. He also asked what the rep would change about the company, and the man replied that he’d like to have more tools to service customers. The board of Cal Water was searching for a CEO who could grow the company through acquisitions, and for Nelson, the local office visit cemented the deal, because it validated his ideas on how the company could grow. The only way for Cal Water to expand would be through improving its service image. In order to acquire municipal or independently operated water districts, Nelson would need a compelling value proposition for the local customers, and that value is most often created by one thing — improved service.
In order to do this, Nelson had to create a plan, involve his employees and then work to improve.
Create a plan
To validate his initial assumptions and establish his action plan, Nelson spent his first two months on the job talking with staff members.
“I spent time in one-on-one meetings with my direct reports, visited with the staff in all our locations and went out into the field with meter readers,” Nelson says. “I heard a lot of good ideas about how to improve service, but what was needed was a vehicle to get those ideas into place, because they weren’t being acted on.”
Nelson says that installing a continuous improvement process starts with a return to the basics, and that includes listening to the voice of the customer.
“In order to get more structure around creating a customer service ethic and to get that ingrained as part of your corporate culture, you have to start by measuring your results because you need data to track how you’re progressing,” he says.
Nelson began by reviewing water industry data, which produced a list of 69 customer needs. He prioritized the needs according to customer importance and then surveyed customers for performance feedback, establishing a performance baseline for the organization.
For Nelson, establishing customer service excellence as a part of the company culture was vital to achieving his growth plan because Cal Water’s union environment didn’t offer him the variable compensation options that many CEOs rely on to help drive key business initiatives. The organization’s growth would have to be supported by employee pride and a desire to service customers above and beyond their expectations.
“The next step is to train your employees on the continuous improvement process,” he says.
Nelson used trainers and conducted the training in-house. Employees went through these sessions every day.
“It’s vital that they understand how to interpret the voice of the customer as part of a continuous improvement process,” he says.
The vice president of human resources and the vice president of operations over-saw much of the training because those leaders are key to getting the training accomplished.
“Those VPs must work on getting rapid pull-through on any concepts that you’re teaching because it can take up to seven years to get a continuous improvement process fully implemented,” Nelson says.
Once the staff completed initial training and reviewed Cal Water’s first set of customer feedback scores, the staff was divided into teams of up to 14 employees by service location. Each team was led by a manager, who also acted as the team’s coach and a water quality expert. Because the customer survey results are measured by each service locale, the continuous improvement teams are charged with developing solutions that raise customer perception within their assigned geographic service area.
Teams met weekly, and they designed and presented a business plan around a suggested quality improvement to an officer review panel every 90 days.
“The plan must include step-by-step details outlining the problem, the analysis of the problem and the suggested improvement,” Nelson says.
Every member of the team must present to the panel, which is composed of other employees and three or four officers of the company.
“This step is vital because not only are we bringing forward ideas, but we’re teaching employees about the continuous improvement process and we’re building their confidence and presentation skills,” he says.
The presentation doesn’t always have to be a brand-new idea; they can also present an update on how a previous business plan is progressing. Under this system, he had 870 employees presenting in an open forum every 90 days.
“What you’ll find by installing this kind of process is that the employees build skills and talents they didn’t have before, or in some cases, it brings those talents to the surface and that helps you develop people as well as improve customer service,” Nelson says.
He says nearly every employee has stepped up through this process.
“It helps that they are part of a team because they can rely on each other and the team environment also helps in interpreting the voice of the customer, because they can discuss what the data really means,” he says.
In addition to requiring employees to articulate the prospective value of their ideas to customers, Nelson requires the teams to estimate the cost and the return to shareholders as part of their business plan. For example, if the customer service improvement plan calls for increased capital investment, the team must present a recommendation about how to finance the improvement, how many additional customers can be serviced through the proposed investment and when the company can expect to recapture the costs.
One of the best suggestions to come out of this process was improving customer satisfaction in Bakersfield.
“The customers were reporting a problem with water pressure and with water quality, and after the team conducted their analysis, they recommended that we build a new treatment plant,” Nelson says.
Although that idea would result in a major capital expenditure, the team moved forward with that recommendation and investment. In another service location, the customers complained about a strong chlorine taste in the water in the mornings. The team monitored the water quality and recommended a device that regulates the chlorine dispersal.
Work to improve
As a final step toward building an organization entrenched in continuous improvement and customer satisfaction, Nelson includes expectations in performance plans and implements continuous improvement process training for the employees of newly acquired companies immediately.
“This is part of the expectation of working here — it’s not voluntary,” Nelson says. “You always get some push-back from new employees when you acquire a company because it’s a change and so that’s to be expected.”
To get them on board, he spends time talking with the employee groups telling them why they do this and why it’s important. Once they complete the training, it helps them understand the process and overcome some of their fears, so they begin training with new employees right away. While a few opt out, most stay because it’s a better deal for many of these employees to work for Cal Water because the compensation, benefits and security are better and it has a larger footprint, which opens the door to increased career opportunities.
“That value proposition at least gets them to move forward with the training, and once they’re engaged, they generally don’t want to go backward,” Nelson says.
Every six months, he establishes a new set of objectives for his 20 field managers and six headquarters managers that support his corporate goals of providing excellent service, developing employees, delivering shareholder value and communicating well.
“You don’t want to set objectives that are too long-term because things change, and you can’t make corrections,” Nelson says.
He has eight officers on personal performance contracts with him, and he checks in on their progress every Monday. Additionally, they spend the day together once a year to select one major initiative for that year.
“If you just always focus on goals and objectives it gets routine and people can lose their enthusiasm,” he says. “I like to select one annual initiative that will really make a difference and focus on that. The officers are then charged with communicating the initiative and how each employee can contribute.”
By doing these things, Nelson has increased Cal Water’s service connections by more than 100,000 and has grown revenue from $210 million when he started in 1996 to $367.1 million in 2007. The company has made numerous acquisitions under his leadership, and he’s achieving the board’s original charge by delivering growth.
“It’s a great question to ask how customer satisfaction is tied to business performance, and I think it’s one that CEOs should ask themselves all the time,” Nelson says. “Good service is the key to customer retention, and when you have it, everything just seems to work better.”
HOW TO REACH: California Water Service Group., (408) 367-8200 or www.calwater.com