Many companies that talk passionately about being market-driven and customer-focused are overlooking one crucial ingredient - the ability to listen well.

John McDonnell, chairman and chief executive of aircraft manufacturer McDonnell Douglas Corp. of St. Louis, summed up the problem: "We did not always listen to what our customers had to say before telling them what they wanted."

Undisciplined or unsystematic customer listening shows up most clearly in the way senior management allocates resources through budgeting. The financing of new projects, products, departments or managers is too often out of sync with customer priorities. Some studies estimate that up to 50 percent of product or service characteristics are of little or no value to customers.

As a result, many organizations have become bureaucratic rat's nests, with 20 to 30 percent higher costs than necessary. Organizations turn inward, working to meet their own needs while dictating to customers the terms upon which they will have the privilege of being served.

Good customer listening helps organizations avoid expensive service or quality overkill. As management guru Peter Drucker pointed out: "Nothing is so useless as doing efficiently that which should not be done at all."

That was the case of the Delta (B.C.) Credit Union, which in early 1991 planned to improve service to its members by moving some of its eight branches to bigger, brighter and more expensive locations. Fortunately, its managers ran their plans past a number of focus groups made up of credit union members.

The focus groups told the managers: "We don't want any big, glitzy - and unfriendly - branches." Under its members' direction, the credit union redecorated existing branches. It also involved employees in improvements, such as shorter waiting periods for teller service.

This development of a local, family feeling within small branches helped Delta establish a market differentiation strategy. The image it presents is "growing big by staying small."