Influenced by interactions with Amazon, Uber and other digital organisations, taxpayers expect similar experiences from every business, including their revenue agency. Customers want more personalised services and new channels such as chatbots and virtual assistants that are powered by a variety of artificial intelligence technologies. These expectations are pressing revenue agencies to deliver service levels that are comparable to commercial brands and to be flexible and responsive to constantly evolving customer expectations.
Agencies that can successfully deliver against customer expectations stand to improve business outcomes through increased voluntary compliance, reduced errors and lower costs. But critical to making that happen is holding some entity within the organisation accountable for the end-to-end customer experience, whilst also giving it control over the key capabilities and activities required to drive and assure that experience. Without this accountability and control, the experience can be defined in one part of the organisation but reliant on other functions to deliver, or initiatives may even be in conflict across organisational silos.
Right now, there are few agencies where end-to-end accountability for customer experience is clear. To get there, revenue agencies must evolve their organisation structure. It’s not that they haven’t been evolving over time. Some have regionally-based structures, some are functionally based. Others structure around products and support those products with shared services. But none of these models provide any one part of the organisation with control and accountability for the end-to-end customer experience.
My perspective is that the next organisational evolution should be to adopt a segment-based structure; one that combines distributed capabilities and functions into segments organised by customer groups. Each segment houses all capabilities needed to drive and ensure the customer experience. Service design, product design, policy and legislation and compliance would potentially be replicated in each segment, which would rely on shared corporate functions such as HR and procurement. This structure provides individual segments with the ability to drive more tailored and responsive processes and services that will improve compliance and reduce errors.
Understandably this idea represents a significant change for revenue agencies. But, the private sector has been organising around customer segments for years. By 2015 about 30% of Fortune 500 firms had moved to customer-centric structures, yet revenue agencies, for the most part, are yet to respond to this trend. How should agencies get from their current organisations to a segment structure? There are four basic steps.
- Define the purpose and role of segments – A clear understanding of strategic intent is fundamental. What are the drivers behind this structure? What level of tailored services do you want to deliver? What should the segments be able to do independently versus collaborate to achieve? What are the strategic capabilities the segments will require, and which capabilities must be centralised due to cost, legislation or complexity?
- Define which segments to organise around – First align with the purpose and then balance the benefits of having tailored services against adding too much organisational complexity. A few principles apply here:
- Decide what is right based on robust data-driven insights
- Customer movement across segments should be minimised. A small change in a customer’s circumstance should not cause them to move to another segment.
- The number of segments should reflect your agency’s personalisation aspiration balanced against the implications on cost and complexity.
- Plan for the fact that segments will evolve over time. As organisations mature in this model, more segments will likely appear.
There are two principle options for determining your segment structure and both should be considered: organise around groups of individuals with common risk profiles or organise around common customer behaviours and requirements.
3. Allocate capabilities to the segments and define which will be shared – If a segment is accountable for the end-to-end customer experience it should also control the capabilities to define, deliver and manage that experience. For each capability there are three options: put it fully in the segment, make it a shared capability across segments or follow a hybrid “hub and spoke” model. In the latter, there is a centrally shared capability and also resources housed in individual segments to tailor the capability to the segment’s needs.
4. Align the operating model to the segment structure – Once the placement of capabilities is determined, adopt an iterative and agile approach to evolve the wider operating model to support the new structure. This includes potential changes to governance, processes, skills, competencies, culture, data and key performance indicators.
As revenue agencies increase their focus on the customer experience, organisation structures must also reflect this new way of engaging with taxpayers. If there’s a lack of accountability and control, it’s unlikely there will be significant returns from customer-focused initiatives.
I have many ideas on this topic and would love to hear yours. Please feel free to comment.