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Industry and Regulators Committee - Consultation Response Featured Image

The Institute of Customer Service welcomes the opportunity to respond to the call for views and evidence from the Industry and Regulators Committee on UK regulators.  

Fundamentally, the Institute believes that there should be a joined-up approach across the regulators regarding key customer satisfaction measures to ensure that customer experience is a consideration that is held throughout the provision of regulated services and there is transparency of performance across sectors. Although each sector has specific challenges, the overall service and customer issues and challenges will often be consistent across a range of industry sectors. 

Regulators should seek to promote high standards of customer service in the sector but also define minimum acceptable levels of customer service, for example, so that customers are able to make appropriate contact and issues are resolved in a reasonable timeframe. Regulators should define the level of customer satisfaction they expect the sector to achieve using a consistent set of measures. Measures should also be put in place for those companies that fall below such minimum KPIs. This should not just be focused on service departments but applied across the whole customer journey and, therefore, the whole business.  

Such KPIs should include a minimum level of customer satisfaction but should also cover ensuring an adequate level of investment is made by companies on a consistent basis to prevent any issues, complaints or problems in customer service experience from re-occurring. It is vital that KPIs are grounded in a proactive culture of service excellence. 

We would like to see greater emphasis placed on customer outcomes and the burden of doing the right thing for the customer to fall on the organisation serving them. There is only so much that a minimum standards-led approach can achieve, and we believe that an outcomes-focused regulatory approach stands the best chance of affecting the genuine cultural change required in some businesses within regulated industries. It also avoids organisations only working to the minimum or transactional standard.  

To create an excellent customer experience, transactional aspects (complaint handling, keeping the customer up to date, responding in a timely fashion, availability of a range of communications channels) need to be delivered consistently, but significant and sustainable change requires board-level input and monitoring to build a service culture that pervades the whole organisation, not just service functions. 

The overall customer experience is far greater in scope than simply the operational delivery, and there wasn’t enough attention paid to the end-to-end customer experience and overall communication during the energy crisis and subsequent changes in the structure of the market. This demonstrates a lack of understanding about the strategic nature of customer service and the extent to which an organisation has an effective service-led culture. 

A consistent method of measuring and benchmarking customer satisfaction would be beneficial and enable regulators to be held to account more consistently by customers and Government.  

Regulators, therefore, need to consider how they find credible evidence of an organisation’s culture. There is a growing recognition that customer service is not just a function or a set of transactions but a way of doing business that is the product of organisational culture, permeating an organisation’s decision-making, governance, operations, and relationships. As a result, improving customer service in sectors that deliver essential services requires a cultural focus and shift.  

Therefore, regulators should focus more on cultural aspects of organisations. Many regulators recognise that higher standards of customer service require a cultural shift, so regulators need to consider how they find credible evidence of an organisation’s culture. Organisational culture is founded on leadership commitment, purpose and values, a clear customer proposition and proactive engagement with customers, employees, suppliers and stakeholders. Organisational culture shapes the ability to understand and respond to changes in customer needs and behaviours. It helps manage change, focus on short- and long-term priorities, and make decisions that balance the needs of all stakeholders. The Institute’s ServiceMark accreditation provides a framework for developing this.   

ServiceMark accreditation is based on a combination of customer feedback, employee feedback and an independent assessment. It gives evidence of an organisation’s commitment to and achievement in customer service. As such, we would maintain that ServiceMark accreditation be undertaken by regulated companies, not only to demonstrate commitment to high levels of customer service and a culture that supports and encourages high levels of customer service standards, but also to allow some organisations to improve their customer service standards to the point where they remove the criticisms from customers as far as possible. This, in turn, will build trust between regulated sector companies and their vulnerable customers, as well as helping to drive down excluded customers. 

The Institute publishes the UK Customer Satisfaction Index (UKCSI). The UKCSI, launched in 2008, has become a key part of how organisations assess their performance, including regulators. It is a 6-monthly survey (published every January and July) of over 10,000 consumers that are demographically representative of the UK population. Its 52,000 responses cover 13 key sectors of the economy, including regulators, with a minimum of 3,000 responses per sector and it provides a unique insight into the quality of customer service in the country as a whole. 

We would recommend regulators use the UKCSI to ensure monitoring of customer service and satisfaction levels are holistically gathered on a six-monthly, rather than annual, basis. The UKCSI would also serve to benchmark a company’s customer service and satisfaction levels against other similar companies and regulated sector companies without the need for individual companies to draw together or compile their own reports and surveys on customer service and satisfaction from customers’ standpoints. It would also encourage increased benchmarking outside of sector, which is critical (water companies are rarely compared by consumers to other water companies for example) and too often overlooked. 

It should be noted that from the Institute’s July 2023 UK Customer Satisfaction Index (UKCSI), that every sector had a lower customer satisfaction score than a year ago. However, the biggest downturn in customer satisfaction scores emanated from the transport sector and the utilities sector. Average satisfaction with Utilities organisations is down by 4.6 points (out of 100) compared to July 2022 in the July 2023 UKCSI.  

In the July 2023 UKCSI report, our Chief Executive, Jo Causon, notes: 

“More than half of the 275 organisations that appear in the UKCSI have received a lower customer satisfaction rating than they did a year ago. The adverse impact of a poor customer experience appears to have got worse, with customers more likely to experience a negative reaction when they report a problem and wait longer for their problem to be resolved. The consequences of organisations failing to understand and respond to a customer’s personal situation are especially apparent for people who are experiencing low levels of financial well-being.” 

Responsibilities of regulators (Q1-4)  

The Institute believes that from the perspective of customers, there may not always be clarity as to whether regulatory outcomes are the result of the framework used by a particular regulator, or the regulator’s legislative remit. We believe that it is beneficial for Government to empower regulators to set standards and hold organisations accountable for achieving them.  

Regulator Remit and Co-operation (Q5-6)  

The Institute believes that it would be beneficial to have a consistent approach across regulators in measuring and benchmarking customer outcomes. The Institute would recommend that reporting of customer satisfaction and service levels is conducted holistically, and that benchmarking outside of sector is also conducted, to ensure that companies understand where their customer service levels, and satisfaction sit against other regulated sector and utility companies, and compared to other non-regulated sectors. The Institute would be more than willing to support benchmarking through the UKCSI. 

Section 172 of the 2006 UK Companies Act and the 2018 UK Corporate Governance Code require companies to show how they have given regard to the interests of customers. In some cases, companies report on their customer satisfaction in their annual report and accounts. However, the quality and consistency of reporting is variable and can be selective. In holding company directors to account, it would be beneficial for customers, shareholders and other stakeholders if there was a stronger requirement for companies to report their customer satisfaction results in a consistent format and demonstrate their performance over time, for example a 3 – 5 year period. Furthermore, monitoring and reporting for all companies should also include the UK Regulators Network and the UKRN’s scorecards should be prioritised.  

The Institute’s Governance and the Voice of the Customer research highlights that 42% of customers believe there is not a focus on long-term performance and success by organisations and more than 50% of customers feel that energy and water companies usually put shareholders’ interests first. The Institute believe that a review of Section 172 of the UK Companies Act is required, to examine the appropriate balance of needs of all stakeholders and promote a focus on long-term performance.  

Skills, Capabilities and Expertise (Q7)  

The Institute believes that UK regulators internal skills capabilities and expertise could be developed in several ways to enable them to keep pace with evolving technologies, customer needs and behaviours:   

  • Use a variety of sources to build a dynamic understanding of evolving customer needs and behaviours and factors influencing customers’ experiences with organisations. 
  • Develop expertise and understanding of the business and operating models of organisations in the sector. 
  • Grow understanding of the practical and ethical implications of artificial intelligence for customer experience and share knowledge across regulators.
  • Draw on relevant expertise, knowledge, data from trusted sources.   

The Institute has a wealth of data and research that would be beneficial in providing the regulators with information on the factors influencing customer experiences within organisations and can support the regulators as an independent partner to demonstrate how companies are falling short of regulators.  

Regulator Accountability (Q8-10)  

The Institute believes that UK regulators should be held accountable for their performance against their objectives by Government. Regulators’ performance should be judged on a combination of improving customer satisfaction, continuity of supply, treatment of vulnerable customers, financial stability of supply and environmental sustainability. 

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