Introducing the CNO

Every company needs a CNO. Ideally it should be the CEO, but if for some reason the CEO does not want the job, his next in line has to take it. What is a CNO? The chief NO officer. This is the single person in your company allowed to say no to a customer. That's right. Not under any circumstance nor for any reason will a customer hear no from anyone other than the CNO.

Impossible as this may sound for all but the smallest company, I assure you that it worked for me as my company grew to service more than 15,000 customers shipping more than 100,000 circuit boards per year.

When are customers told no by someone in your company? Most CEOs would claim that a customer will be told no only when asking for services not offered and products not manufactured. As cut and dry as that sounds, the truth often is more interesting.

Customers may want you to do a better job at what you already are doing. They may want you to add new features and services so they can spend more money with you. They may want to tell you about your competitor's offerings and what you need to do to stay competitive. They may want to show you new technologies and propose products that you could and should be offering to them.

In all but a few instances per year, when a customer makes a request of your organization that is not easily satisfied, finding a way to satisfy it will help you grow and make more money. Saying no usually is not about needs you cannot satisfy but rather about needs you will be challenged by and improved by if you find a way to satisfy them.

If that is all customers want from you, then every employee should be able to handle the customers who present requests you can't satisfy, right? Why should you have to prohibit all your employees from the order department right up to the vice president of engineering from ever uttering the word no to a customer? Simple, if you don't prohibit it, they will do it too often and for the wrong reasons.

We are all too quick to say no when presented with a new challenge. We might even think we are doing the best we can for the company by telling a customer no. Most people in your organization don't have the power to launch new products and services, so without the power to personally effect changes, your front-line employees are only trained to offer what you have and service what you sell.

Even if the customer reaches deeper into the organization, it probably will be a department supervisor who has the last word. Perhaps this manager is more tuned into business opportunities and will pass the information along. Perhaps not. But he or she still has more natural motivation to say no than to start carrying the customer's request up the chain.

Daily there are many opportunities to say no. For most of your employees, there is little perceived reward for championing a customer's unusual request. All companies are under pressure to run efficiently.

The department manager certainly is evaluated and compensated on department productivity. Taking time out to pursue a customer's unusual request may not garner positive feedback. In addition, everyone who works at your company, even you, can have a bad day, a busy day, or just not see the light of day when opportunity knocks. On those days, when faced with a request they cannot satisfy with an off-the-shelf solution, your employee will say no. You will lose an opportunity without ever knowing what you have lost.

As a business owner, I would occasionally stumble upon or learn after the fact about a no. Attempting to prevent our company from saying no to our customers, I used a number of different strategies and systems to capture the information when employees found themselves unable to satisfy a customer. None of the forms, entreaties, or coaching worked until I became the CNO.

The only solution was to take full responsibility for saying no. Once I started communicating that message, the company was transformed. The same transformation is available to you.

Implementation is easy. First of all, you have to be serious about it. Communicate your new position to everyone as well as discuss the consequence of any other person trying to do your job. You have to make it clear that anyone, at any level, who tells a customer no, will receive, at minimum, a written warning. Twice and you are gone.

Sound tough? Well, if this function is in your job description exclusively, as is the ability to bind the company contractually, then it is a serious breech of executive authority to usurp that function. This is the way to explain it:
• I take saying no to a customer as seriously as I do signing contracts and checks. It is as serious a problem for you to say no to a customer as it would be if you were to try to sign a contract on behalf of the company or a check on the company bank account. That will get the point across.
• Tell your customers they don't have to take a no from anyone else in the company. Put notices on your Web pages for customer service, technical support, and executive access and on your personal page advising customers that you are the CNO. Ask them to please use the contact form on your personal page to let you know if they are feeling a no from any other person in the company.
• Communicate your new position to all your employees again, directing them to your personal page and the notice there. Explain what you hope to learn by being the CNO and why you consider a no to a customer of such strategic importance that you are investing your most precious resource—your time—in this project. Most importantly, tell the stories of the benefits that have been won for the company by refusing to say no.
• Don't worry about saying no. You will almost never have to. Your employees are loyal, creative, and often brilliant. They understand the importance of customers and are able to craft solutions to new problems, create new products and services, and find ways to reconfigure existing offerings to satisfy customers. Your commitment to your customers' unusual requests validates their desire to satisfy the customer and prioritizes that investment relative to other productivity measures.

You might be concerned that proscribing a customer service representative's or a manager's freedom to say no to a customer is demeaning or constrains his sense of empowerment within the organization. That is a fair question but not a real outcome. Constrained to never tell a customer no, the managers and employees become empowered to find a way for the organization to say yes.

Creativity and initiative are challenged to reach deeper for solutions. Resources and interdepartmental communications are encouraged because nobody wants to be identified as the cause of a no to a customer so every-body prefers to join in the search for a resounding yes.
• As the CNO, never delegate the actual no conversation with a customer. If you delegate the communication, you will lose the respect of the company. You've got to take responsibility for no. If and when the time comes for you to decide that your company simply cannot satisfy the customer, then you must explain why to your customer. Tell your customer about the effort your company put into researching the request. Explain the challenges you cannot overcome. Finally, encourage your customer to keep in touch with you if they are able to get the solution they need elsewhere.

By forcing every instance of no up to you through each level in your organization, you encourage your employees to find ways to avoid saying no.

So how much added work is created for you as the CNO? If you imagine that, because you are the only person who is authorized to say no to a customer, you will spend your entire day doing so, let me assure you that will not happen. And, it won't happen because:
• In most cases there was no reason for my company to say no to a customer. Delivery of large orders in a short time may take some careful reconfiguring of a manufacturing schedule, but the delivery can be made. The request for additional service usually could be met by putting in some extra time on the problem.

Additional features could be met with creative configurations of existing products or a quote from sales engineering for a new or custom product. Custom products eventually accounted for 5% of our sales. Information on competitive products, services, or pricing was met with aggressive responses consistent with our strategic intent to never lose a sale to a competitor. All that was needed to drive these solutions was an organizational commitment to yes.
• Nobody in your organization wants to present you with a problem. At every level, your talented people will try to satisfy the unusual request rather than ask you to resolve it. In my case, very few customer requests reached my desk. Sometimes the problem was simple; we just did not make what the customer wanted so the decision to satisfy the need became a matter of resources and fit. Other times it was less clear.

By the time one of my executives brought me a no, a fair bit of research had been done. The problem was clearly defined as well as the gaps between the required solution and what we presently were capable of. Here was a challenge for my entire company, a real tough challenge that would require some realignment of resources, new research, a new approach to support, a powerful competitive response. Something exciting!

That is the kind of work that got me into the office early and kept me there late—the kind of work you should welcome. As a founder and CEO, it was just this sort of excitement that prompted me to start a company in the first place, the unsolved problem that beckons me onward. It is the only good reason to put up with the burdens of running a company. Plus, this is how you make money, and I always enjoyed making money.

What About Very Large Businesses?

During and after the sale of my company to National Instruments, I had many conversations with NI's then Vice President of Engineering Tim Dehne. Together we discussed business tactics and strategy, specifically, the strategic culture of my company.

Of the many ideas we exchanged, one intrigued Tim more than most: the concept of the CNO. He could see the power in the concept but was daunted by the challenge of implementing the process in a large company like NI that had an established culture. How would a new concept like that fit in? How would you sell it to people? How could you ensure that it would be adhered to? How would you manage the huge burden it would place on the CEO while the organization adapted to it?

Excellent questions. What follows is what I would do given the challenge of implementing CNO into a company the size of NI.

First of all, when a company starts up, the CEO is the CNO by default; he just does not think about his role that way. There are no layers of people between the CEO and the customer so the CEO talks to almost every customer and is the one to say no.

As CEO, your executive team is your conduit to the organization. The people who report to the executive team implement that team's objectives and so on down the line.

No matter the size of a company, one person can only manage so many people. No matter how large the company, the CEO does not personally direct very many of the people in it. He certainly leads them all, but he does not manage them.

Because the direct management of individuals generally is 10 or so employees per manager, I don't think the methods of change-management and overall organizational value implementation are unique to company size. If you don't win the confidence and support of your direct reports, you are defeated. In turn, they must win the confidence of their reports, and that process must hold all the way down the chart. So here are the elements I think would be required to implement CNO in a large company.

Executive Team Commitment
Schedule a time to meet with your executive team solely to address the issue of commitment. Like any other policy change, you must present your overarching concept and open the discussion to the team. If you have done a good job as a CEO, you have a strong, confident, intelligent executive team. Your team will bring to the fore all the questions, problems, and opportunities that, when sorted out, will allow you to construct the roadmap for implementation.

Analyze
Trying to implement a policy change all at once won't work. The leadership is just not available to make sweeping changes and manage the business at the same time.

You need to make an important choice: Would you like to start this policy where it will have the most impact on the organization or where it will be easiest to implement? Because the CNO is a customer-centric concept, the focus is on response to a customer's interaction with your company through your employees.

Many departments interact with customers. Sales works with customers before the sale. During the sale, there may be an implementation team to assist in finalizing the specifications or schedule of the delivered product. Prior to delivery, there is credit approval and, if needed later on, collection actions. There is after-sale technical support. There might be training. You have many distinct phases of customer interaction to choose from.

Analyze the impact on the department and the value to the organization for withholding the ability to say no to a customer from that department. Each department executive might conduct a cost/benefit study where few of the costs and benefits are hard numbers.

Prioritize
Pick a place to start. I would choose the sales department for some very strong psychological and revenue reasons.

Selling is the most emotionally challenging job in the company. It is fraught with risk and pressure. As a rule, salespeople respond very well to attention from management. And, of all the employees in your company, the salesmen are most open to a new way of dealing with customers.

The effect of managerial attention to employees is broad. A number of studies have shown that after a training session or as a result of coaching, the performance of employees goes up measurably. This effect shows up every time training or coaching above the everyday level is provided. The room for improvement in each instance comes, in part, from the fact that performance tends to return to previous levels some months after the training is completed. There is a good argument for regular training and for managers who are consistently coaching their employees.

Salespeople appreciate any efforts by management to give the customer better service. Improved delivery and new features are welcomed by salesmen. So is never having to tell a customer no.

Train your salesmen to make this speech: “You will never hear no from me or anyone else in this company other than the CEO. My job, and that of everyone else in this company, is to satisfy you. If the company fails in that goal, only the CEO can make that call.”

Sound powerful? You bet. Now put on your customer hat. When was the last time you heard anything approaching that from a salesperson? Would you have been impressed? Your salesmen understand the power of that speech very well and will support you as you implement CNO. The only caution with salespeople is to communicate that a refusal to say no does not equal a yes. Anything not off the shelf still requires management approval.

For other departments, the implications of saying yes are very different. Rather than more money, yes might just mean more work. This is true for people in technical support, manufacturing, engineering, and so on.

Implementation
The big concern of implementation is the added workload. There is the workload placed on the sales force in reporting a no and on the CEO in dealing with one. A little automation helps here. A simple Web form that the salespeople must fill out whenever they are put in a position of saying no will do the trick. Of course, there has to be a place on it for the salesperson's manager to comment.

No point in pushing up that no unless the manager is on-board and cannot solve the problem. Of course, the regional sales manager or whoever is between the first manager and the vice president of sales has to add comments before the no moves on. Finally, before the CEO has to get involved, the vice president of sales must comment.

All this automation is easy to build, deploy, and use. A few on-screen reports showing the open No-in-Progress will keep everyone up to date on all open issues and make it easy to review the status.

Temporary Assistance
Finally, if you are truly concerned about the extra work, the CEO can have a no assistant to the CEO; call him the vice no officer or VNO. Make sure you are clear that this is a temporary position.

The VNO to the CEO would review the No-in-Progress on a daily basis. His role would be to assist everyone in clarifying the request and the reasons why it cannot be satisfied. His interaction with the CEO would be limited to a weekly review.

He also is the interdepartmental liaison for direct, immediate access for time-sensitive decisions. The job is temporary because there is just not going to be much for your VNO to do. Remember, the VNO is not delegated the authority to make a no decision or to communicate that decision to the customer.

A CNO War Story

Good competitive insight is hard to come by. The best way to get facts about the competitive challenges you are facing on the front lines today is through unsatisfied customer requests. When your customer asks your sales people for something they cannot deliver, you need that information at the CEO level.

In the first place, you've already paid to get the competitive insight. You spent money to reach that customer. Do this math. Divide your marketing communications budget plus your sales budget for the last 12 months by the number of prospects, in total, the sales force presented to in that same period. The result is the cost-per-prospect of marketing and sales. I think you will find the number staggering.

For most companies, the cost of getting the opportunity to present to a customer is very high. When you reject a prospect's request, you toss that money aside. When you say no, you also squander the opportunity to learn how to get that customer's money. The customer wants you to take his money. That should get you fired up.

Getting real customer intelligence about what customers want to purchase today—but you don't have—is very hard to come by. Customers don't knowingly call around to companies expecting to be told that what they want is not available. Time is too valuable to waste.

If a customer calls, either he had some reason to think you could help him or he very much wanted to do business with you. In either case, if you lose the information from that customer, you probably lost the information you need to win a large number of customers.

I have a real example, worth millions, to share with you. The measurement electronics market is very conservative. It should be. Customers are not anxious to adopt new technologies; however, occasionally something will come along that is just too good to pass up. The PC was one. It completely changed the way measurement devices were built and what they cost. Among big changes after the introduction of the PC was the introduction of the PCI bus followed by the USB interface.

The PCI bus allowed PCs to run faster and do more. The PCI bus also placed a cost burden on every board that plugs into a PC. The PCI chipset is expensive and complex.

Along came the USB interface. The USB interface was intended as a way to connect printers, cameras, and other things to computers. It was designed to be fast, easy to use, and inexpensive.

The price of measurement chips and simple computer chips is falling all the time. You probably know Moore's Law, which states that the number of transistors that can be placed on an IC doubles every 18 months. If you can put 1 million circuits on a chip in 2001, you can put 4 million on in 2004 and 16 million transistors on a chip in 2007. That is why your computers get more powerful and don't go up in price.

While USB was taking hold of PC interfaces, a new class of more completely integrated, less expensive measurement chips was being introduced. They were cheap and complete but not as accurate as the less integrated solutions. We didn't think our customers would want them….

As CNO, I received a request for a little USB measurement device. We did not make one, but a little device with a USB interface and eight measurement inputs was available from a company called LabJack. Checking up on them I learned it was not much more than a garage and two guys, not much threat to Measurement Computing with close to 100 employees in a 33,000 ft2 building.

While I was considering what to do about that potential no, another request for the product showed up. After speaking with both customers, I ordered the LabJack device for myself and received it the next day. Over the weekend, I experimented with it and took it apart.

On Monday, I showed it to my vice president of engineering. I asked him to identify all the chips and cost it out for me. I also requested a schedule to design one and get it into production. No new features, no improvements, just a copy, in production, on the shelf, ready to ship ASAP. The cost came in surprisingly low. There was plenty of margin in this little device, and apparently some customers wanted them. We had the product ready for shipment six weeks later.

To make a long story short, that product was so successful it spawned a product line worth many millions in sales over the next three years. We sold more than 10,000 units in the first year.

Conclusion

CEOs of companies large and medium who also are founders need only recall what it was like when you ran a startup: You were the CNO. If you think about how you handled those early, tough customer requests, I'll bet you'll recall the opportunities gained as a result. Think about it and you'll say, “Time to take that job back.”

If rather than founding a company you've worked your way to the top of a large company by recognition of your excellent performance, now is the time to take on a new challenge. Try on this new hat. You'll begin to understand why founders have such fun.

About the Author

Bendrix Bailey began his successful entrepreneurial career when he established Babson Micro Group to promote and study microcomputers while a student at Babson College. After graduating from Babson in 1979 with a B.S. in business administration, Mr. Bailey was founder and CEO of Intelligent Devices and later vice president of sales for MetraByte. In 1989, he founded and worked as CEO of Measurement Computing until National Instruments purchased the company in 2005. e-mail: [email protected]

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