Customer Satisfaction and Employee Satisfaction: A Conceptual Model and Research Propositions

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1 Customer Satisfaction and Employee Satisfaction: A Conceptual Model and Research Propositions Abstract The marketing literature reflects remarkably little effort to develop a framework for understanding how customer responses to service affect the work attitudes of employees. In particular, very little is known about the influence of customer satisfaction on the individual employee s work satisfaction. The authors synthesize extant knowledge on the subject and provide a foundation for future research by developing research propositions, and constructing a framework for understanding how customer satisfaction influences employee satisfaction. They draw on the limited sources in the literature as well as on interviews with customer-contact employees to develop these propositions. Managerial implications of this research are also discussed. Keywords: Employee Satisfaction, Customer Satisfaction, Employee-Customer Identification, Emotional Contagion, Balance Theory, Customer Status Track: Services Marketing 1

2 1. Introduction The study of customer satisfaction, along with its determinants and outcomes is a major area of interest among marketing academia. In terms of outcomes of customer satisfaction, performance and loyalty have been the major variables considered. However, in recent years, there is a growing a body of research which focuses on how customer satisfaction affects employees (Pugh, 2001, Ryan, Schmidt and Johnson, 1996; Yi, Nataraajan and Gong, 2011; Luo and Homburg, 2007). The idea that customer outcomes might influence employee attitudes has been present in the literature for over four decades. For example Friedlander and Pickle (1968: ) suggest that Customer satisfaction may fulfill employee service needs, thereby causing employee satisfaction. However till date, very little empirical attention has been devoted to the potential impact of customer satisfaction on employee satisfaction. To the researchers knowledge, only three empirical studies (Ryan, Schmidt, and Johnson, 1996; Pugh, 2001; Luo and Homburg, 2007) have explicitly addressed this issue. A careful examination of the limited literature on this topic reveals two important gaps. First, while the mechanisms through which customer satisfaction influences employee satisfaction have been discussed, only a few studies have discussed the theoretical reasons why customer satisfaction should influence employee work satisfaction (e.g., Luo and Homburg, 2007). There is therefore need for more theoretical work explaining this key relationship. Second, there is a need to better understand how the various levels of customer satisfaction influence individual employee satisfaction. The limited literature in this area, by focusing on aggregate employee satisfaction, often implicitly assumes that employees are similarly influenced by customer satisfaction or dissatisfaction. This is unlikely because individual characteristics, job characteristics as well as relational dynamics might result in work satisfaction being influenced to different degrees by customer satisfaction. The important question therefore is what factors make an employee s work satisfaction more or less prone to the influence of customer satisfaction? From a practice perspective, describing conditions under which the relationship between customer satisfaction and employee satisfaction may be stronger or weaker provides information to aid managers in the individual management of employees. The purpose of this article, therefore, is to delineate the effect of customer satisfaction on employee satisfaction, develop a propositional inventory, and create a framework for directing future research in this area. While there are studies that focus on how employee satisfaction influences customer satisfaction (e.g., Evanschitzky, Sharma and Prykop, 2012; Homburg and Stock, 2005), our study, without conflicting with these studies, examines customer satisfaction s influence on employee work satisfaction. In developing our propositions, we draw on the literature in marketing and related disciplines and supplement it with interviews with customer contact employees. Figure 1 is a conceptual model for our discussion. First, we explain how and why customer satisfaction influences employee work satisfaction. We then discuss and develop propositions for four types of factors that moderate the relationship between customer satisfaction and employee work satisfaction. 2. Literature Review and Research Propositions Work satisfaction is defined as an employees sense of satisfaction not only with the work itself but also with the larger organizational context within which work exists.customer 2

3 satisfaction is defined as an attitude resulting from an evaluative process where a standard concerning an offer obtained from a company is compared to the customer s perception of the actual offer (e.g., Oliver, 1996). There are many levels of analysis for customer satisfaction. In this paper we focus on three levels: aggregate customer satisfaction at the firm-level (hereafter level 3 customer satisfaction), satisfaction of a salesperson s customers (hereafter level 2 customer satisfaction) and satisfaction of individual customers (hereafter level1 customer satisfaction).customer satisfaction also has many facets: overall satisfaction with the firm, satisfaction with the employee etc.. However, in this study we focus on overall customer satisfaction. Figure 1: Customer Satisfaction and Employee Satisfaction 2.1 Mechanisms of Influence: How does the influence occur? In explaining how customer satisfaction influences employee satisfaction, we draw upon three principles of social psychology that link individual s interactions and their attitudes. First, individuals seek balance, which may be achieved by modifying their attitudes to correspond to those of others (Heider, 1958). Second, information theory suggests that individual s sentiments are influenced by the information to which they are exposed through interaction with others (Anderson 1971). Third, emotional contagion theory holds that exposure to someone else s positive or negative emotions can produce a corresponding change in the observer s emotional state (Pugh, 2001) and subsequently lead to attitude change. Emotional contagion effects are likely to flow from customers to employees because individuals are more likely to transmit their emotions to others when they are able to express these emotions (Hatfield, et al., 1994). We argue that customers are more likely than employees to consciously display emotions related to their experiences in the service encounter. Individuals are also likely to assimilate the emotions of individuals to whom they pay attention to. Furthermore, employees are likely to pay attention to the emotions of customers because they depend more on the customers than vice-versa (Hatfield et al., 1994). Drawing upon these theories, it is expected that over time, the satisfaction levels of the customer and the employee should converge. However, a key difference in the balance theory and emotional contagion explanations is that, while a balance theory explanation does not need customers and employees to interact for influence to occur, for emotional contagion 3

4 effects to operate, employees must interact directly with customers. Therefore from a balance theory perspective, employees who do not interact directly with customers can also be influenced by customers satisfaction. 2.2 Work satisfaction: why should customer satisfaction matter? In the internal marketing literature, work satisfaction is often thought to be the result of controllable elements of the work environment and work conditions. However, while intuitively convincing, working conditions as the major cause of work satisfaction have been challenged. Research suggests that noncontrollable elements also impact on the satisfaction of employees and in particular frontline employees. Doorman and Zapf (2001) suggest that dispositional variables account for at least 30% in the variance of job satisfaction. In addition, Judge et al. (2005) find that goal attainment has a positive impact on employee satisfaction and that task success is an important determinant of liking for the task and work satisfaction. Furthermore, there is a growing appreciation that outputs of customer contact employee interactions with customers (e.g., customer satisfaction) are also determinants of employee satisfaction (Bell et al., 2004; Luo and Homburg, 2007). There are a few reasons for this. First, a need fulfillment theory perspective (Vroom, 1964), suggests that work satisfaction is the result of good performance (Bagozzi, 1980). We suggest that customer-contact employees have an intrinsic need to see customers satisfied and to the extent that this need is met, employees levels of satisfaction should be enhanced (Judge et al., 2005). Second, customer satisfaction serves as feedback to the employee about how their work and their organization are perceived. Feedback plays an important role in individual and organizational learning and has been shown to affect employee attitudes and behaviours (Bell et al., 2004). More often, research has focused on feedback from managers or supervisors. However, feedback from customers may be equally potent in influencing the attitudes of employees. Third, customer satisfaction should influence employee work satisfaction because it indicates the attractiveness of the organization as an employer and thus signals better future opportunities for the employee (Luo and Homburg, 2007). Consequently, we suggest that employees attitude to their work and by extension their firms will depend to some extent on the feedback customers provide. Thus, an employee who is confronted with highly satisfied customers will develop a higher level of work satisfaction than employees who deal with dissatisfied customers (Luo and Homburg, 2007). Therefore Proposition 1: There is a positive relationship between all levels of customer satisfaction and individual employee work satisfaction. 2.3 Moderators In this section, we discuss four types of moderating factors: job characteristics, employee characteristics, customer characteristics and relationship characteristics. We specify in each proposition what level of customer satisfaction these variables moderate Job Characteristics Relative Contact with Customers: In many organizations there is variation among employees in the terms of how much they interact with customers. While some employees may interact 4

5 more frequently with customers, other employee s jobs require less interaction with customers. We suggest that individuals who interact more with customers are likely to be more sensitive to firm-level customer satisfaction than those who interact less with customers. This is because the more they interact with customers, the more personally relevant customer satisfaction becomes to them. Therefore: Proposition 2: Level 3 customer satisfaction will have a stronger influence on individual employee satisfaction for employees who interact more with customers than for those who interact less with customers Employee Characteristics Perceived Importance of Customer Satisfaction: Research has shown that the effect of feedback on individuals depends on how important that feedback is to the individual (Earley, 1986). In essence, while some employees would perceive feedback in terms of customer satisfaction as very important, others might perceive it as less important. These differences in importance perceptions may result from different individual characteristics such as levels of customer orientation or from perceptions of the consequences of customer satisfaction on personally-relevant outcomes might differ from one employee to another. For example, some employees may not consider their promotion to be significantly dependent on customers satisfaction while others might perceive the opposite. As a result of differences in perceived importance, we expect that, for all levels of customer satisfaction, there would be differential impacts of customer satisfaction on work satisfaction. Therefore: Proposition 3: The relationships between all levels of customer satisfaction and employee work satisfaction are all positively moderated by the perceived importance of customer satisfaction to the employee Susceptibility to emotional contagion: Previous literature has documented individual differences in susceptibility to emotional contagion due to differences in gender, culture, personality, occupation, and so on (Hatfield et al., 1994). Translated to an organizational context, differing levels of susceptibility should influence both the actions and reactions of employees to events. Verbeke (1997), for example, found that salespersons who are more sensitive to the emotions of their customers could perform better and incur higher risks of burnout in a sales organization. Accordingly, we conjecture that the effect of customer satisfaction on employee work satisfaction will depend on how susceptible employees are to the emotions of customers. Therefore: Proposition 4: Susceptibility to emotional contagion increases the respective effects of level 2 customer satisfaction and level 1 customer satisfaction on employee work satisfaction Relational Characteristics Our proposition in this section is based on the idea that influence in relationships depends on power dynamics as well as the emotional or cognitive connection between interacting parties. Employee-Customer Identification: Recent advances in social identity theory suggest that employees can identify with more than the organizational identity (Ashforth et al. 2008). In particular, it has been argued that identification with customers can also be a powerful source of self-definition (Korschun, Bhattacharya and Swain, 2010). The theorization of relational 5

6 identification holds that a person perceives a sense of oneness with a specific role relationship or role relationships in general. Thus, employees can identify with a particular customer or with a set of customers. When a social identity is salient, people see themselves as relatively interchangeable members of the group rather than as unique individuals; a process known as depersonalization (Mackie et al., 2008). Depersonalization causes an individual to react as a group member rather than as a unique individual, and so events have emotional consequences based on how they affect the group and not the individual. Consequently, we suggest that the more the employee identifies with the customer, the more the employees will be influenced by the customer s satisfaction. Therefore: Proposition 5: Employee-customer identification (with the individual customer; with the employees own customers; with the firm s customers respectively) positively moderates the influence of level 1, level 2 and level 3 customer satisfaction on employee work satisfaction Customer Characteristics Customer Status: Status represents a social characteristic that communicates the extent that one is seen as valued - often due to control over resources or desirable outcomes (Locke, 2003). While there are many dimensions of status, the focus here is on customer status as it relates to customers standing in the organization; perceived status refers to the esteem (from the employee s perspective) in which the customer is held by the firm (Wangenheim & Bayon, 2007). We propose that the satisfaction of higher status customers would have a stronger effect than that of lower status customers on the work satisfaction of employees because outcomes related to high status customer should have stronger work-related consequences (than that of the low status customer) for employees. Consequently Proposition 6: The influence of level 1 and level 2 customer satisfaction on individual employee work satisfaction are positively moderated respectively by perceived status of the individual customer and perceived status of the employee s customers Managerial Implications Our propositions have direct managerial implications. First, our research suggests that customer satisfaction should impact upon employee work satisfaction. This is important because, if customer satisfaction directly influences employee satisfaction, then in addition to efforts by the organization to improve employee work satisfaction efforts may also be focused on directly improving customer satisfaction. Second, the research clearly delineates the factors that can be expected to strengthen or weaken the effect of customer satisfaction on employee work satisfaction. While many of these factors are not controllable, some of them are controllable by managers and therefore can be altered by them so that customer s satisfaction might more readily influence employee satisfaction. For example, managers can act to make customer satisfaction more personally relevant (and so important) to employees through restructuring of rewards. Managers can also use the information from this study as a guide for matching employees to specific customers. For example, when faced with a difficult customer, who is constantly dissatisfied, managers might choose to match such a customer with an employee who is less likely to be influenced by the customer s emotions and attitudes. 6

7 In conclusion, our propositional inventory and conceptual framework represent efforts to build a foundation for understanding how customers influence employees. Future studies can improve knowledge by expanding the framework and empirically testing our propositions. Selected References Anderson, N. H. (1971). Integration theory and attitude change. Psychological Review, 78 (3) Ashforth, B. E., Harrison, S. H., & Corley, K. G. (2008). Identification in organizations: An examination of four fundamental questions. Journal of Management, 34(3), Dormann, C. & Zapf, D. (2001). Job satisfaction: a meta-analysis of stabilities. Journal of Organizational Behavior 22(5): Earley, P. C. (1986). Trust, perceived importance of praise and criticism, and work performance: An examination of feedback in the United States and England. Journal of Management, 12, Hatfield, E., Cacioppo, J.T, & Rapson, R. (1994). Emotional Contagion. New York: Cambridge University Press. Heider, F. (1958). The psychology of interpersonal relations. New York: Wiley. Judge, T.A.; Bono, J.E.; Erez, A. & Locke E.A. (2005). Core self-evaluations and job and life satisfaction: the role of self-concordance and goal attainment. Journal of Applied Psychology, 90 (2), Locke, K.D. (2003). Status and solidarity in social comparison: agentic and communal values and vertical and horizontal directions. Journal of Personality and Social Psychology, 84 (3), Luo, X., & Homburg, C. (2007). Neglected outcomes of customer satisfaction. Journal of Marketing, 71(2), Mackie, D. M., Smith, E. R., & Ray, D. G. (2008). Intergroup emotions and intergroup relations. Social and Personality Psychology Compass, 2(5), Pugh, D.S. (2001). Service with a smile: Emotional contagion in the service encounter. Academy of Management Journal, 44 (5), Ryan, A. M., Schmit, M. J. & Johnson, R. (1996). Attitudes and effectiveness: Examining relations at an organizational level. Personnel Psychology, 49 (4): Vroom, V. H. (1964). Work and Motivation. New York: Wiley. Yi, Y., Nataraajan, R., & Gong, T. (2011). Customer participation and citizenship: behavioral influences on employee performance, satisfaction, commitment, and turnover intention. Journal of Business Research, 64(1),

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