McKinsey on Marketing Organizing for CRM

McKinsey on Marketing Published by The McKinsey Quarterly

July 2004

Glenn Mitsui

An in-depth look at the challenges facing senior managers

Organizing for CRM Companies should treat a customer-relationship-management solution as a product or service and its users as internal customers—by making it valuable, pricing appropriately, advertising, and providing after-sales support.

Article at a glance: Most large companies have some form of customer-relationship-management (CRM) software, but more than half of them are disappointed with it. Critics blame the software, but the real problem could be a failure to address the organizational challenges posed by any new initiative. Top management often assigns executives with other primary responsibilities to take charge of the CRM effort on a temporary basis, and they may resort to heavy-handed mandates to get frontline staff to use the new tools. Instead, CRM should be treated as a product or service targeted at internal customers. The take-away: CRM initiatives have a better chance of succeeding when accountability is clear and frontline users get adequate training and incentives.

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Organizing for CRM

Anupam Agarwal, David P. Harding, and Jeffrey R. Schumacher

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What’s left to say about customer-relationshipmanagement (CRM) solutions?1 Business commentators have spilled oceans of ink describing the gut-wrenching rise and fall of these programs’ reputations. Most large companies have implemented some form of CRM, and

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many have followed their early disappointments with fullscale CRM remediation efforts.2 Indeed, more than half of all companies investing in CRM consider it a disappointment, according to several

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recent surveys. What’s wrong? It’s not that companies are spending wildly; many of them build robust business

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cases before making their investments, which at this point are likely to be incremental. Nor does the fault lie with the technology itself—most systems provide the required features. Companies have lavished attention on business

of the money invested and the opportunity costs of failure.

and technology issues because both were glaring early

Instead, companies should view CRM as a product or

impediments to CRM’s effectiveness.

service targeted at internal customers. Like any product or service, it must be infused with clearly defined value,

The core of the problem now is that too few companies

priced appropriately, advertised, and provided with after-

are paying enough attention to the organizational

sales support.

challenges inherent in any CRM initiative, whether it involves delivering a new solution, fixing a foundering

In our experience, no temporary centralized team,

application, or tweaking a functioning CRM capability.

however competent and well-intentioned, gets everything

These challenges stem from the wide variety of people—

right. What is needed to achieve long-term business

frontline sales and service providers, business analysts,

results is an infrastructure grounded in accountability, as

IT professionals, and a broad array of managers, to

well as supporting initiatives to motivate, train, and track

name just a few—who must collaborate to ensure that

the many employees in diverse positions throughout

a CRM program is defined, delivered, and deployed. This

the organization who make or break the CRM program.

diversity creates accountability issues and complicates

Attention to these perennial organizational challenges,

the challenge of persuading employees—particularly the

which are easy to overlook in the rush to fix the technology

sales force—to embrace CRM.

and business-alignment issues, correlates strongly with success in CRM (Exhibit 1).3 Finally, CRM’s impact on

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Solving these organizational problems requires a company

frontline employees is so significant and potentially jarring

to go beyond the vigorous exhortations and heavy-handed

that clear, forceful messages from senior executives are

rollouts that many have relied on—understandably, in view

critical to enforcing accountability and motivating change.

CRM helps companies to plan and analyze their marketing campaigns, to identify sales leads, and to manage their customer contacts and call centers. 2 Turning around a CRM program (or, for the lucky few, getting it right the first time) typically involves focusing on a few clear business objectives, building or reconstructing the technology to meet them, and realigning the organization to help it embrace new tools and processes. See Manuel Ebner, Arthur Hu, Daniel Levitt, and Jim McCrory, “How to rescue CRM,” The McKinsey Quarterly, 2002 special edition: Technology after the bubble, pp. 48–57 (www.mckinseyquarterly.com/links/13061). 3 The authors heard this message, loud and clear, from executives and middle managers in the insurance industry, whom we recently interviewed and surveyed about the factors influencing the successes and failures of their CRM programs. Similarly, a recent Forrester Research study found that resistance to process change was the leading obstacle to CRM’s success at 111 large North American companies.

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Organizing for CRM

The organizational challenge

Excessive reliance on technology specialists helped sink

Building, modifying, or running a CRM solution involves a

some early CRM initiatives. In the past few years, some

large cast of characters. It can include systems experts;

organizations have overcompensated—so much so that

business analysts; backroom operations specialists;

many capabilities are now defined by the business side,

managers who use customized reports to fine-tune

without enough participation from IT. Too often, the

sales, marketing, and customer service strategies; and

results resemble those experienced by one large media

frontline sales and service people, who are responsible

company that developed a strong business case with

for inputting much of the data the CRM initiative

limited participation by its IT organization, took several

needs to yield rich insights and for acting on them. The

months to realize that achieving its goals with the chosen

breadth and scope of these constituencies create two

technology would take more than a year, and ultimately

organizational problems: identifying who is accountable

abandoned its original plans and began redefining the

for which results and truly achieving the broad behavioral

program.

change that success requires (Exhibit 2).

Resistance to change Fuzzy accountability

The large number of stakeholders involved with CRM

When the responsibility for different aspects of the

doesn’t just complicate accountability; it also magnifies

solution rests in different places, it’s often hard to muster

the difficulty of effecting behavioral change, particularly

the organizational resolve to bring in the right people,

in salespeople but also among managers and business

unclog bottlenecks, and make effective decisions. At

analysts—all groups whose recalcitrance can cripple an

worst, companies wind up with the kinds of problems

initiative. Consider the problem of managing the sales

Q3 2004 planned economies: a lack of that plagued Soviet-style

pipeline. CRM helps managers to see quickly when

ownership, a CRM failure to choose the right features, and an

salespeople are not hitting their targets and remedial

Exhibit 2 of 4 goals. inability to meet performance

action is necessary. But management can act only when

exhibit 2

Who’s accountable? Location of primary organizational obstacles associated with CRM activities1 Executives CEO

COO

Region C Region B Region A

CMO2

CIO

Business-unit heads

Worldwide/corporate operations IT

Frontline users

Operations

Operations Development

Sales

Head of sales

Business unit 3 Business unit 2 Business unit 1 Frontline users

Sales

Sales

Architecture

Marketing

Sales

Marketing

Marketing

Infrastructure

Service

Marketing

Service

Service

Quality assurance

Service

Regional IT Organizational obstacles to implementing CRM Lack of commitment, communication

1 Actual functions and organization vary by individual company. 2 Head of CRM program often reports to chief marketing officer.

Confusion about roles, responsibilities, accountability

Lack of motivation, participation