Posted: 28th October 2013
When Mark Tercek left Goldman Sachs to explore whether green investments could make commercial sense, the reaction from the CEO was this: don’t go. Stay and build an environmental effort for Goldman Sachs. There are lessons for regulated firms and their approach to customer outcomes in Tercek’s thinking.
If the rules weren’t there…
In the US, the view of big business is that government sets the rules on green policy and companies barely scrape to meet them. If the rules were scrapped altogether, those companies would most likely not stay green.
Rather than forcing firms to take on green policies with no commercial benefit, Tercek took a different approach:
1) What are these companies or investors trying to achieve? (higher return on investment, larger market share)
2) Here’s how a green approach might achieve it for the same money.
For instance, in the Gulf a new sea wall was required to protect against storms and reduce beach erosion. The government budgeted $1 million to build one mile of man-made concrete sea wall. Tereck’s green investment approach recommended an alternative – a natural oyster reef – for the same investment which does the same job.
The green alternative achieved the project’s goal and brought many other benefits: a natural wall provides a habitat for oysters; oysters clean the water; the wall appreciates in value over time; it nourishes the beach by washing shells to shore. This is a win for the investors: coming in at budget and creating an appreciating asset.
But, you might ask, why are regulatory consultants writing to us about green policies?
Quality of customer outcomes
What would the financial services industry do if regulations to treat customers fairly were to fall away tomorrow? Would it strive for good customer outcomes if the regulator were not pushing for them with rules, priniciples and legislation?
Rather than seeing achieving good outcomes as chore, firms can see it as a means to their commercial ends:
1) What is your firm trying to achieve? (Increased market share? Improved complaints handling or quality assurance? New product launch? Increased sales?)
2) Consider how you can achieve that through delivering good customer outcomes.
A successful customer outcomes monitoring system does more than meet regulatory requirements. The benefits go well beyond:
Customer focussed culture is fostered
Customers are treated like individuals and respond well
Complaints may reduce and advocacy rise
Staff are engaged, being empowered to focus on the customer, not the process
Action plans focus time and resource on projects with a measurable impact on customer outcomes
High quality management information gives senior management a true picture of how well your firm is doing.
The final win? In Mark Tercek’s world the global environment benefits; in the financial services industry consumer trust within financial services is rebuilt. Those are the positives. The negatives avoided are also clear: putting customer outcomes at the centre of your business reduces the risk of major fines, reputational damage or a redress bill with commercial impact.
Striving for good customer outcomes is simply an alternative way to run your firm with long term as well as short term benefits. It may require taking a few unusual decisions – like oysters versus concrete – and making a few supplier changes but there may be far wider impacts than your firm can imagine right now.
This article is inspired by Harvard Business Review’s interview with Mark Tercek: “Yes, Business Relies on Nature”
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