The standard model makes a handful of uncontroversial assertions:
- The purpose of the enterprise is to grow revenue profitably.
- To do this we provide the customers goods and services that they want in exchange for money.
- We use that money to purchase things like facilities, fixed assets, labor, and services from other enterprises.
- The role of HR is to build and run services that deliver labor to the business at a reasonable cost.
The standard model is wonderfully simplifying because it makes it possible to compare every business decision against the criteria of how much money it will make the enterprise, and we have these great accounting systems to keep track of how we are doing. I was an evangelist for this way of thinking until several years ago when I began to notice inconsistencies. Like a scientist whose results don’t conform to the dominant paradigm, I found a loose thread, and when I started to pull it, the model unraveled. Each of the assumptions in the list above proved to be either wrong or so incomplete as to be seriously misleading.
To tell this story I have to share something about my discipline of business architecture. Business Architects like myself build models that describe how the enterprise functions; when a company goes through a transformation such as entering new markets or establishing a new route to an existing market, we use these models to coordinate change. These models are designed to solve the dungeon entrance problem by consider the enterprise whole, as from a great altitude. To achieve this they must be be quite abstract – if such a model were used to describe an elephant, it would work just as well for a mouse, because both have heart, lungs, eyes and so on. These models are nonetheless very rigorous. Like math, these models argue back when you try to do something logically unsound.
Here’s how they work: As stated earlier, enterprises are too complex to visualize all at once. Business architecture solves this problem by modeling just a few dimension at a time. One view depicts how the information systems in an enterprise interact with each other to support operations; another view depicts how the parts of operations interact to support the customer, and a third view depicts how external customers and partners experience the company. These different views are all linked behind the scenes by a database, so looking at each view is like rotating a cube and looking at different surfaces of the same object.
In these models, the workforce shows up the Operations View, which is the view of how things work inside the the enterprise. That’s consistent with the standard model. But when it came time to place the employer brand strategy into the model, the only place it fit was with all the other brand strategies, which are out in the Business View. But if it belonged in the Business View, then it was facing an external customer. The necessary conclusion that somehow the worker was both inside the company as a part of operations and outside it as a customer at the same time. But the standard model is very clear that there is only one customer – the customer for the goods and services produced by the enterprise.
I know this must seem like a minor thing. A glitch in a bit of arcane math in a back office. And observed in isolation, maybe it would have been. But it lined up with a number of other observations. Why was it that my company had often felt the need to set up an organization dedicated to employee experience, but each time would dismantle it because we couldn’t justify the expense? It’s like we were pulled toward investing in the employee experience but our environment, but our logical reasoning (using the standard model) couldn’t support it. The same thing would happen with efforts to set up a function dedicated to helping employees to move inside the company, and yet every few years we would be compelled try again. If the employee is a customer, however, those efforts made a lot more sense. So when I found this surprise in our business architecture model, it didn’t look immediately like a glitch, it looked like a finding, and it led me to start digging at the foundations of the standard model, starting with the idea of customer.
What exactly is a customer, and why do we care about them?
The word derives historically from “custom,” meaning habit. As early as 1409 it was used to describe a buyer, someone who made a habit of purchasing goods at a particular shop and with whom the shopkeeper had to maintain a relationship in order to keep the buyer’s “custom,” or future business. The etymology of the word captures the attribute of customers that makes them so important: customers exchange value with the enterprise and are free not to.
There is no doubt that employees exchange value with the enterprise – that’s why enterprises pay them – but enterprises pay to buy capital assets, real estate, IT infrastructure and other goods. The real clincher is choice. Employees are customers because, unlike other inputs to production, employees have free will.
When I first came to this conclusion, part of my mind discounted it. I thought: sure, technically employees are customers, but they can’t be nearly as important as the product-customer. Then I did the math. I figure that at my current company, the employee delivers about 18 billion dollars worth of value to the enterprise. That’s nearly as much as all of our sales to Asia and Europe combined. It’s more than the sales of our two top product categories. So not only are employees a customer, they are a massive customer.
And then I thought: I accept that employees are exchanging value, but they are not exchanging that value in the form of dollars and a company can’t survive without money, so the value provided by employees can be discounted. But even as this thought went through my mind, I could see the holes in the logic. While it is true that an a enterprise can’t survive without income, neither can it survive without the expertise and labor of the workforce. Both are critical. And when you think about it, if a baker provides bread to a cobbler in exchange for fixing his shoes, the cobbler is no less a customer just because he does not pay with cash.
Some part of me still shied away from idea of the employee as customer because I instinctively knew that it strikes at the foundations of the dominate orthodoxy, and I would be excommunicated from the Church of Serious Business People if i spoke about it in public. If this worries you, avert thine eyes, and read no further. But if, like me, you are equally attracted to poking false beliefs in the eye, let’s go. Once you start to take the idea of the employee-as-customer seriously, the world of business changes dramatically. It will take me the rest of these pages to explore all the ramifications.