Ever since James Heskitt’s seminal work published in the Harvard Business Review in 1994 entitled Putting the Service-Profit-Chain to Work, people have widely accepted the linear relationship that exists between satisfied employees, loyal customers and business results. The theory goes: happy employees make happy customers which make happy shareholders.
A wealth of data has been published since the early 1990s by PeopleMetrics and others that lend support to this formula. The terminology may be different but essentially the prevailing view is that employees who are engaged—emotionally connected to the work they do—are more likely to exert extra effort on behalf of customers which in turn creates an emotional connection between customers and the brand.
Emotions drive profits. Customers who ‘love’ a brand are more likely to return, tell others about it and even go out of their way to do business with that organization. But, new research indicates that this simple, direct relationship may be more complicated than originally imagined.
Customer-Centricity Leads to Engaged Employees
The soon to be released PeopleMetrics 2011 Employee Engagement trends report uncovers compelling evidence to suggest that organizations that adopt best practices in customer-centricity have more engaged employees. The study gathered feedback from more than 2,500 employees across a range of industries including: professional services, financial services, telecommunications, media and entertainment, retail, hospitality and healthcare we asked them to tell us about the customer-focus practices adopted by their companies.
Customer-centric organizations were defined as those where employees said:
a) Customers are:
- Part of the Mission
- Highly loyal
- Invited to give feedback
b) And employees are:
- Empowered to handle customer issues
- Invited to give ideas on the customer experience
- Provided customer feedback
- Told when they have done a good job serving customers
Company-centric companies were defined as those where employees said that their companies did not apply these practices with the same degree of consistency. The analysis then examined how employees in these two groups (those working for Company-Centric versus Customer-Centric companies) rated their work experience and, in particular, how engaged they were with their employers.
The differences between the two groups are dramatic.
- Two-thirds of employees in Customer-Centric companies are Engaged; and one in four are Fully Engaged (see Figure 2)
- Contrast this with just 22% of employees in Company Centric companies who are considered engaged; and just 4% who are Fully Engaged
Furthermore, two to two and a half times as many employees in customer-centric organizations compared to company centric companies say that (see Figure 3):
- It would take a lot to get them to leave their current employer
- They are motivated by the work environment to give extra effort and
- They recommend their company as a great place to work
- They love their company or organization
Sharing the Customer Experience Creates Purpose and Meaning
One of the above practices is particularly impactful when it comes to the employee experience. Specifically, sharing customer feedback with employees cultivates a sense of purpose at work that is not there for those who do not receive that feedback.
- Across industries, employees who are told when they have done a good job serving customers are 1.5 times as likely to agree “I get a sense of purpose from my work” (80% vs. 54% agree to feeling purpose, respectively)
- Accordingly, the boost to a sense of purpose at work drives overall Employee Engagement upwards. Employees who receive customer Recognition are 4.5 times as likely to be Engaged compared to those who do not receive this feedback (55% Engaged vs. just 12%, respectively)
Bringing the Customer inside the Company
In a recent HBR article How Customers Can Rally Your Troops, Adam M. Grant, management professor at the University of Pennsylvania’s Wharton School, provides in depth insight into this idea. He references companies who “outsource inspiration” by bringing in customers and end users to tell their stories to front line employees. The results of these endeavors provide evidence that while traditionally leaders and managers have felt the responsibility to “rally the troops” toward better performance it is actually meaningful customer feedback that holds the greatest influence on employee motivation.
So perhaps we need to reconsider the service profit chain, perhaps it looks something more like the image in Figure 4—a service profit loop.
Companies need to start by admitting that employees need to find meaning and purpose in their work beyond a paycheck. And those companies that start to actively look for ways to outsource inspiration will be rewarded by higher levels of Employee Engagement and better business results.