Internal Versus External Customers
- Posted by J. Nirdosh Reddy
- On November 3, 2017
- BPM Concepts
Before the emergence of the concepts of TQM and internal customers, enterprises had only one type of customer – external customers. They were outside the organization and paid for our products or services. Hierarchical structures decided who reported to whom. Managers managed their subordinates. They gave them objectives, and measured their output against those objectives. The focus of all employees was on meeting their targets and thus pleasing their bosses. Silos were common. External customers rarely occupied the minds of employees.
Then came the concepts of systems thinking and process-based approaches giving birth to TQM. The notion that processes produce output evolved and began to replace the age old belief that people produce output. With this concept came the phrase ‘internal customers’ – those who are within an organization, who receive your output, work on it and hand over their output to the next person in the chain.
The concept of internal customers upended the focus of activities of employees within an organization.
Why the distinction between external and internal customers?
These days, a lot of importance is being placed on understanding and satisfying the expectations of internal customers. Why?
Consider the consequences of not meeting the expectations of your internal customers. If you don’t provide internal customers what they need, they either use what you have given them as is or take the time to correct it, if it is correctable at all.
If they use the defective part (or information) as given to them, eventually the external customer who is paying will likely be dissatisfied because it is substandard. If, on the other hand, your internal customer takes the time to correct the defective material, it adds cost to the product, and delays delivery. The external customer may get a good product, but the cost to make it wil be higher and deliveries delayed.
If you can pass on the additional costs to your customer he would be unhappy. If he doesn’t like the delays in delivery, he may look elsewhere the next time. If you can’t pass on the costs, your profit margin is eroded and your survival is on the line.
Neither outcome is good for the enterprise.
To be competitive and survive in this brutally competitive environment, it is extremely important to understand what your internal customers require from your business processes and make every effort to satisfy their needs. But this thinking has not fully translated into actions. There are innumerable instances of internal customers not only not receiving what they need, but being summarily ignored.
So why does this thinking still exist and why is still tolerated?
The root causes for internal customers’ expectations being ignored
The root causes are imbedded in:
- Silos that exist in the organizations
- Old habits of managing people by individual targets
- Controlling people instead of managing processes
In the conventional style of management, the focus was efficiency of each section / department and cost reduction at individual level. Employees focused on pleasing (meeting the expectations of) their bosses – it did not matter what their so called internal customers received or felt – they were not in their consciousness. Their bosses behaved in the same manner, all the way up the hierarchical structure. No wonder so many organizations ended up with higher costs and poor quality.
These narrowly focused actions made the system as a whole to be inefficient. But it didn’t matter much as long as your competitors were following the same management style. However, that is no longer the case.
So what’s a business owner to do?
Times have changed. For many organizations, customer satisfaction has emerged as one of the most important elements of their strategy for survival. A global market has made it impossible to force unsatisfactory products down the customer’s throat. There is much less reliance on the traditional Madison Avenue approach of marketing one’s products.
So, how do you satisfy external customers?
- By establishing internal and external customer satisfaction as the pre-eminent goal of the enterprise
- By mapping external customers’ expectations into your internal processes
- By streamlining your global process flowchart, identifying linkages between processes and identifying expectations of internal customers
- By improving your processes for consistently meeting those expectations, and thus satisfying your internal customers
It is worth noting that while people appreciate the benefits of process-based approaches, they find it difficult to implement. Our new process documentation web application makes it easy to document, manage and improve your business processes.
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