Until now, EX life cycle sets of solutions have principally centered on employee engagement-based initiatives. According to many studies on employee retention, an organization with a high rate of engaged employees can see churn reduced by 25% to 60%. That said, it’s also a reality that, today, few companies have high employee engagement rates. For instance, Gallup tracks engagement, and they have reported that only 35% of employees qualify as being highly engaged. This hasn’t changed since 2019.
During the same period, Gallup has reported employee disengagement rates of 15%, while voluntary churn rates – resulting from the combination of Covid-19, YOLO, and The Great Resignation – are at 30%, and often higher, in many verticals and in many geographic areas. Willis Towers Watson recently reported that, in their 2022 employee study, over 40% of employees considered themselves active job seekers. Statistics like these are disturbing for both organizations and their customers.
Companies that focus on optimizing both customer and employee commitment and advocacy behavior, by contrast, see much lower voluntary churn rates:
– Southwest Airlines – 4%
– Costco – 17% among new employees, 6% with tenure of a year or more
– TD Bank – 19%
– Zappos – 12%
– Umpqua Bank – 8%
– Baptist Health Care – 14%
– Trader Joe’s – Under 10%
– Virgin Group (over 400 individual companies) – 8.5% overall, 4% among management
– Whole Foods Market – 15%
Another company that focuses on employee commitment and advocacy, and may be the best retailer in the U.S., is Wegmans, a high-end supermarket chain based in upstate NY, and with stores throughout the Mid-Atlantic region. They are a paradigm ‘people first’ example for all organizations. Their annual employee churn rate is 5% (and the company motto is “Employees First. Customers Second”), where the average retail chain annual employee turnover rate is between 50% and 60%.
Where both employee experience and customer experience are concerned, we’re often asked why commitment-based and advocacy-based companies almost invariably have superior employee retention and superior customer loyalty behavior. To illustrate, let’s take two great examples of stakeholder commitment and advocacy, Southwest Airlines and Virgin Airlines, part of the 400+ company Virgin Group.
Richard Branson and Herb Kelleher never studied HR theory or staff management principles. That said, they’ve each proven to be pretty good at it. Both understand (in the case of Sir Richard at Virgin Group) and understood (in the case of Herb Kelleher at Southwest Airlines) the value of putting stakeholders first, HR-boundaried practice second.
As my colleague Colin Shaw has written about Branson and Virgin, with respect to the company providing a year of fully paid leave following the birth or adoption of a child: “…Virgin values their people and their emotional state while working there.” Colin also acknowledged the value of employee commitment and the direct connection between employee experience and customer experience. He’s noted that few companies successfully meld value optimization approaches for both groups of stakeholders: “Despite much evidence that points to the link, many organizations continue to keep the two areas separate in their efforts. However, the separate area strategy is not the direct path to success for either.”
Among airlines, working in a supportive, trusting, fun, responsive and energetic culture isn’t confined to staff at Virgin. Southwest Airlines, a company serving more than 100 million passengers per year, also pursues similar approaches with employees and passengers, recognizing that these benefits, and living purpose and values, are the foundation for passionate and committed behavior. Herb Kelleher’s formula for success at Southwest was three-fold, and is still practiced by the organization today:
1. Create a culture of inclusion and service – The essence of their culture is that employees rank first, customers second, and shareholders third
2. Hire employees for attitude and dedication first – More than seeking specific skills and background, the organization looks for spirit, a desire to perform, persevere and innovate, an ability to put others first and proactively serve customers
3. Trust, empower, and enable employees to do the right thing (for each other, the company and for customers)
There’s a fourth method that Southwest uses to reinforce employees within its stakeholder-centric culture: innovative reward and recognition programs that often included passengers of the airline.
In our work as customer and employee experience consultants, we find that some companies apply literally none of Kelleher’s three basic formula elements. They are constrained by strong sales or product orientation, command and control fiefdom management, and little operating flexibility for, or trust in, employees. These companies are subject to the cultural toxicity and lack of trust contributing to the employee burnout so often reported today. A somewhat higher percentage of companies are applying one of the three elements. Occasionally, we find a company applying two of the elements.
Rarely, though, do we find companies with the wisdom and discipline to apply and leverage all three components. Both Virgin and Southwest believe in, and practice, the art and science of keeping customers, and, at the same time, retaining and inspiring employees to superior performance. Does yours?
