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CRM horror stories: GMACCM spills the beans over failed CRM

General Motors Acceptance Corp.'s commercial-mortgage operation, called GMACCM, ran into CRM trouble when outside consultants misunderstood its customer base and installed cost-efficient automation that didn't fly with customers.

Studies show two things about customer-relationship management: It will remain the hottest area of information-technology...

spending for years to come—and most of the billions of dollars spent thus far on customer-relationship-management systems, or CRM, have been wasted.

Just probe for examples of how CRM has been fumbled, though, and everyone quickly closes ranks. "Bad CRM? I've heard of it. Check down the street." Of course, such failures at their companies are just urban legends.

"Companies absolutely hate to admit that they haven't gotten their arms around CRM, especially if they've already tried mightily to do it and maybe spent millions of dollars in the effort," says Rich Hebert, chief executive of ISky Corp., which operates call centers for large companies. After all, he says, "CRM has been deemed the Holy Grail these days."

Even though these disasters often involve seven-figure investments, they are relatively easy for companies to bury. When a blown implementation of enterprise-resource-planning software kept Hershey Foods Corp. from putting candy on store shelves right before Halloween, it was front-page news in the Wall Street Journal. It is harder to find out, though, when a company's CRM system causes call-center operators to miss a chance to cross-sell products and services or annoys customers by suggesting services they clearly don't want. The company can blame weak sales on the uncertain economic environment, and who's to know?

But the problems are out there: Meta Group Inc., a research firm, says 55% to 75% of CRM implementations initially fail to meet objectives. So we went in search of examples of the secret shame of CRM calamity and found some companies that were willing to 'fess up. Here are their stories:

(Mis)understanding the customer: General Motors Acceptance Corp.

General Motors Acceptance Corp.'s commercial-mortgage operation, known as GMACCM, has rocketed into a leadership position in business real-estate loans. Set up as a separate unit in 1994 with a portfolio of $5 billion of mortgages, GMACCM now has a portfolio of more than $100 billion. Much of the reason is that the business was built on a platform of the latest, most advanced information technology, such as the $3 million system installed three years ago to let employees digitize loan documents and zap them to each other around the world. The technology platform lets GMACCM be fast and efficient while providing good service.

"I don't think any competitor on the commercial-mortgage side has made the kind of investment in technology that we have," says Mike Lipson, an executive vice president of GMACCM.

Technology initiatives usually have worked smoothly for GMACCM—but CRM proved to be a much tougher nut to crack.

GMACCM Chief Information Officer Niraj Patel says he and other executives saw CRM as a way of holding customers' hands better, while standing out from competitors. So, three years ago, GMACCM asked the consulting firm PricewaterhouseCoopers to redesign its customer-relationship apparatus so that it could operate well into the new century. Patel recalls that GMACCM had modest goals. It primarily wanted more efficiency and automation, plus ways for call-center operators to know a bit more about its borrowers. For instance, did they always call to make sure their payments were posted to the correct accounts?

The problems began, according to the GMACCM executives, when PwC stumbled into a fundamental misunderstanding of the complexity of the GMACCM customer base. PwC, which recently agreed to be acquired by computer hardware and consulting-services provider IBM, declined to comment for this article. A company spokeswoman cited a policy of not commenting on client work.

Explaining the complexity, Lipson says, "Our average loan is about $3 million, but we have loans as small as $100,000 and as large as a $1.6 billion loan for Rockefeller Center. And we can have anyone from the chairman of the company down to someone in the accounts-payable department calling us with questions."

The new system treated all customers pretty much the same way—badly. Patel says the consultants didn't challenge GMACCM's existing structure, which divided customer service along functional lines, differentiating, for example, between representatives who answered questions about originating loans and those who handled loan-servicing concerns. When PwC's overhaul was unveiled two years ago, call-in customers were essentially expected to know GMACCM's customer-relations structure well enough to know what kind of person could answer their question, and then request that department.

Even worse, PwC suggested that GMACCM get much more aggressive about trying to use cost-efficient automation to answer as many of customers' questions as possible. The consultants installed a sophisticated voice-response system so that customers could call an 800 number, and then tap in their loan number and other information on the phone keypad to obtain the information they were seeking, such as loan balances.

"When we fired it up, we found that 99% of our customers—literally—were hitting zero so they could talk directly to a live operator," Lipson says. "While a personal-account customer might be willing to punch through a whole bunch of numbers, like for an American Express Gold Card, when he was calling about a commercial loan, he wasn't willing to do the same."

During the few months in 1999 that most of GMACCM's 20,000 customers were calling up GMACCM and furiously "zeroing out," Lipson says the competition was "using this against us as a marketing tool." While he declines to estimate the cost of the debacle, he says it was "a big deal."

"We were irritating people, and they didn't want to do business with us going forward," Lipson says. Internal complaints welled up too, from loan officers who were losing deals because customers "were dissatisfied with the service from us," Lipson recalls.

By the time, about 20 months ago, that Lipson was promoted to executive vice president in charge of client relations, putting him atop the company's CRM apparatus, GMACCM's new system was doing way more harm than good. He had to overhaul the overhaul.

Right off the bat, Lipson junked the automated responses in favor of live operators. He also reorganized the client-service operation along product lines, and, when a loan is originated, the company gives a customer the 800 number of a specific representative for any further contact, rather than "sending a letter to the borrower saying, 'Contact GMAC Commercial Mortgage.'" In addition, Lipson says he has "upgraded personnel," especially seeking phone reps with real-estate experience.

Only recently has Lipson become convinced that he has reversed the problems. "We're beginning to see more compliments coming from our customer base, and internally," he says. "And I'm spending less and less time on complaints."

In the next installment, learn about unsuccessful CRM efforts at Owens Corning and Perseus Development.

This story originally appeared in Context magazine.

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