Reality HR: Don Schultz, Medill School of Journalism on the Internal/External Marketing Equation

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Forum founder and Professor Emeritus-in-Service of Integrated Marketing Communications at Northwestern's Medill School of Journalism, Don Schultz is the academic force behind the push for more substantive research into the internal/external marketing equation.  Within the last year alone, three Forum-sponsored studies have helped fill the void to prove internal marketing should be treated as an investment and return process.

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HR.com: Can you tell us about The Forum for People Performance Management and Measurement?

DS: We started looking at integrated marketing communications in the late 1980´s. Most of our work has been focused on looking at how you integrate the organization for external activities. About four or five years ago we realized that it didn´t do a lot of good to align the external communication and external marketing if you haven´t got the employees and the internal stuff lined up. That is when we started looking at various kinds of internal marketing, internal branding, performance measurement and so on. About three years ago a group of people came together and said that they were interested in trying to develop some academic thought, plans, programs and study in this area and asked for my help. Three years ago they founded the Forum for People Performance Management and Measurement. What we have been doing is developing research studies in this area. There are three prongs to this forum. The first one is to develop academic research and build a theory base for what we all practice and know but don´t have a strong theoretical basis for. The second prong revolves around trying to get some visibility for the whole area of performance. The third prong is teaching. We´ve generated two studies and have a couple more in the works. I have developed a course that I am teaching now on internal marketing. We are doing quite a lot of external outreach in terms of trying to build a consensus on what this whole area is and how it works. That´s what the forum is. It is located at the Medill School of Journalism at Northwestern University in our integrated marketing communications department.

HR.com: Could you tell us a bit about some of the recent research that you have been doing?

DS: We´ve done three studies and two more are in various stages of development. One was a comparison of how HR people and marketing people look at internal marketing communications. The study looked at how they look at internal marketing and branding and how they look at performance. Those seem to be the two areas where most of the activity occurs within an organization.

The second study looks at the idea of impact of employee attitudes on market response and financial performance, which has taken a large database and tried to look at how employee attitudes impact and affect the performance of the organization.

The third study is focused on how you encourage and challenge a field sales force. What kind of activities do you use to get them to respond and develop?

We have one study that is about halfway through now, which looks at the use of incentives (cash versus non-cash). The question has been around for a long time and we think we have found a way to get at that.

Another study that we are starting is helping us to build a model that relates the impact of employee actions and employee activities to consumers and then puts financial values on both of those things. If my employees do this, here is the impact it will have on customers and that will generate X dollars. Then we can start to talk about what happens if you invest in a particular initiative within your organization. What will be the financial outcome of that in the marketplace? That is probably the one study that is generating the most amount of attention these days.

HR.com: How would somebody access some of the study findings?

DS:  You can get them through the Northwestern website at

http://www.performanceforum.org/PFM/default.asp

HR.com: If we go back to the HR and marketing study that you commented on, what were some of the main findings there?

DS: You would think that people who were in the same organization and who are trying to accomplish the same thing would have some common views but that is not always the case. The marketing people come at it primarily from the external view. They look at the impact of any kind of internal communication on customers. The HR people look at the impact it has on employee retention and employee commitment. There is a big difference in the way the two of them look at things.

HR.com: With regards to the study on incentives, what were the findings there?

DS: The study looked at the sales force and it found that people respond to incentives. We have learned that generalizing about specific incentive programs is difficult to do. What we always look for is, ´if we have this problem, should we do that?´ The thing we are increasingly finding is that these are all fairly specific, so generalized models while they are helpful are not as usual as things that are more. Specificity is the major finding coming out of that study.

HR.com: You have some expertise in the area of effectively linking employees with bottom line productivity. Do you have any recommendations that could be implemented within organizations?

DS: There are two simple ones. The first thing that prevents an organization from being successful from a PPM approach is the organizational structure. The organization exists within a whole bunch of silos and all the silos are competing with each other for resources. All the silos are doing their own thing and are thinking very little about what other people in the organization are doing. You have to find a different way to think about how you are organized. You can´t blow up the silos. Senior management knows how to mange silos and they´re not going to give that up. What we have been doing is trying to build horizontal systems and processes. That is, finding things that link the various silos when you talk about HR, marketing, finance, operations, etc. How do you find ways to link those things together? The common link for all of those is the customer. If you can get the organization to start thinking about the customer, as opposed to their functional duties, then you have a good chance of bringing those silos together.

The second problem is compensation. The problem is that if you reward people for achieving certain sales goals then customers don´t matter. What happens is that people will find a way to achieve their sales goals and they will step on customers to do it because they know they are being rewarded by volume and not on long-term customer commitment. You have to think about a different way of compensating people. You have to compensate people for four things. Number one is customer acquisition. The second one is customer retention. The third one is customer growth and the fourth is what we call "migration", which moves the customer through the product portfolio.

HR.com: What role do you think the performance management process has in all of this?

DS: I think there is a huge opportunity here. Historically almost all performance has been based on moving units, moving volume and moving certain numbers of products. You can take the same process and flip it around to put in an incentive program that focuses on customer retention, customer acquisition, customer growth and migration through a product portfolio. You can use the same thing and move from a product focus to a customer focus. You can use the incentive approach the same way by giving people incentive to do different things.

HR.com: It sounds like this would allow the goals to be aligned more closely.

DS: Absolutely. The goals of the organization are to accomplish certain things. By and large only two things matter in business. Number one is cash flow and number two is shareholder value. The only place you can get either one of those are from customers. It doesn´t come from the product because the product is just a detail. It is the customer that creates the cash flow and the shareholder value. If you step back from it and look at the source of your success you will see that it is customers. Customers deal with companies and organizations that they enjoy working with. There are so many alternatives out there and it is the customer experience that makes the relationship. The experience comes from people and not just the product.

HR.com: Do you have any closing comments?

DS: These issues are not unique to the U.S or to Western countries. We spend a lot of time in China, Japan and India. The managers in those countries are struggling with exactly the same thing. The Chinese are coming from a planned economy. They never thought about customer service because they didn´t have to. Now all of a sudden the Chinese managers are struggling to get their employees to support what they are trying to accomplish. This is a global issue and everyone is talking about the same thing.