Do Happy Employees Lead to Happy Customers?: Revisiting the Employee-Customer Relationship

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1 Do Happy Employees Lead to Happy Customers?: Revisiting the Employee-Customer Relationship AMA Web Cast October, 2008 Rick Garlick, Director of Consulting and Strategic Implementation, Maritz Research

2 The Service-Profit Chain Increased Increased Employee Employee Satisfaction Satisfaction & Commitment Commitment Increased Increased Customer Customer Satisfaction Satisfaction & Loyalty Loyalty Growth Growth in in Revenues Revenues & Profits Profits Operating Strategy and Service Delivery System Service Delivery Employee Satisfaction Revenue Revenue Growth Growth Internal Internal Service Service Quality Quality Capability Loyalty External External Service Service Quality Quality Value Value Customer Customer Satisfaction Satisfaction & Loyalty Loyalty Productivity Customer Profitability Profitability Source: Heskett, J. L., Sasser, W. E., & Schlesinger, L. A. (1997) The Service Profit Chain. New York: Free Press.

3 Customers Frequently Defect Because of Poor Experiences with Employees Reasons for Customer Defection Other Service (43%) Employee Attitude and/or Behavior (77%) Other Nature of Service Failure

4 Employee engagement and service quality delivery are only moderately correlated Employee Engagement (14%) Service Quality

5 What Can Employees Tell Us? Their degree of engagement and commitment to the organization and its success Performance climate, including leadership, work environment, communication, and relationships with co-workers Their jobs and their place in the organization What customers like and/or dislike about their experiences with a company, its products and services, its people, and/or its business processes What facilitates or inhibits creation of a positive customer experience 44% of US consumers say a poor call center experience was the sole reason they stopped doing business with a company* * SOURCE: 2007 CFI CALL CENTER SATISFACTION REPORT

6 A Framework of Employee Measurement Leadership & Management Conventional Employee Surveys Performance Climate Overall Employee Engagement Business Results My Job & My Place In This Organization Customer Orientation & Focus Customer Satisfaction & Loyalty

7 Leadership and Management CONVENTIONAL SURVEY MEASURES My company genuinely listens to and cares about its employees. Senior management s actions are completely consistent with its words. My supervisor is concerned about my personal well being. CUSTOMER-FOCUSED SURVEY MEASURES Senior executives in our company have frequent direct interaction with our customers Senior executives in our company have frequent direct interaction with customercontact employees Feedback from front-line managers and employees must pass through several layers of management before it reaches senior executives (-)

8 Performance Climate CONVENTIONAL SURVEY MEASURES Our company only hires individuals who are qualified to do the work they are assigned to perform All employees in our company are given an equal opportunity for advancement Open and honest dialogue is encouraged here My company is a fun place to work Work expectations at my company are realistic and fair CUSTOMER-FOCUSED SURVEY MEASURES Everyone in my company contributes to a team effort to satisfy customers Employees in marketing frequently interact with customer-contact employees regarding the levels of quality and service to be delivered to customers Our salespeople often make promises and commitments to customers that the company cannot deliver (-)

9 My Job and Place in the Organization CONVENTIONAL SURVEY MEASURES I know exactly what is expected of me in my role My job gives me a strong feeling of personal accomplishment I have real opportunities to develop the skills I need to do the best job possible I have real opportunities to learn and develop at my company I am recognized for my work performance in ways that are important to me My work and personal life are well balanced CUSTOMER-FOCUSED SURVEY MEASURES I spend a great deal of time on the job attempting to solve customer problems over which I have little control (-) I have the authority I need to respond promptly to customer complaints and requests I understand how my job relates to satisfying our customers

10 Customer Orientation and Focus ADDITIONAL EXEMPLARY MEASURES My company always acts in the best interests of its customers. My company eliminates processes and procedures that interfere with best serving my customers. Employees in my company are given incentives to provide the best possible service to our customers. My co-workers consistently think about how to better serve our customers. Our company has formal programs and processes for improving customer satisfaction Our company sets specific goals for achieving and improving customer service and satisfaction Our company effectively uses technology to deliver a consistently positive customer experience Our company commits the resources required to fulfill the needs and expectations of customers

11 Three Areas We Typically Evaluate Employee engagement: Defined as how much satisfaction and loyalty employees feel toward their jobs. Customer affinity: Defined as how much employees enjoy their interactions with customers. Customer service perceptions: Defined as how employees evaluate the quality of service provided by their companies.

12 The Study 1478 full-time employees 18 years or older Work 30+ hours or more per week Not self employed Wide variety of business sectors Conducted online Panel provided sample February 2008 Wide range of questions 65 total questions surveying attitudes toward employer

13 Key Drivers of Employee Engagement Do Not Include Customer-Focused Issues I have real opportunities to learn and develop at my company. I am able to use my best talents every day in my job. My company genuinely listens to and cares about its employees. I have real opportunities to develop the skills I need to do the best job possible. My company s values are completely consistent with my own values. I am completely satisfied with the way my organization communicates with me. My company actively encourages creativity and innovative thinking. At my company, it seems like we re all on the same team, working for the same goals. Work expectations at my company are realistic and fair. I completely trust my employer to look out for my best interests.

14 Key Drivers of Customer Affinity Include A Mix of Engagement and Customer-Focused Items I look forward to coming to work every day. My work gives me a strong feeling of personal accomplishment. I am able to use my best talents every day in my job. Our customers would rate the service we deliver as 'excellent'. I completely understand how my work impacts customers experiences. I completely trust my employer to look out for my best interests. I am completely satisfied with the way my organization communicates with me. My company s values are completely consistent with my own values. Open and honest dialogue is encouraged here. My company has the necessary capabilities to fulfill the needs and expectations of our customers.

15 Perceptions of customer service are driven almost exclusively by customer-focused issues Policies, systems, and procedures at our company support the delivery of outstanding customer service. My company s policies and procedures make it easy to satisfy customers. My company commits the resources required to fulfill the needs and expectations of our customers. My company has the necessary capabilities to fulfill the needs and expectations of our customers. Salespeople at our company rarely make promises and commitments to customers that our company cannot deliver. My company provides effective training to support excellent customer service. My company s commitment to customers is reflected in senior management s decisions. My company sets specific goals for achieving and improving customer service and satisfaction. My company has effective formal programs and processes for improving customer satisfaction. My company frequently seeks suggestions for improving customer satisfaction from employees who have regular contact with customers. My workgroup has a clear understanding of our customers needs.

16 What Does This All Mean? Employee engagement has some impact on the customer experience. Positive cultures attract and retain a better talent pool. Happy employees enjoy interacting with customers more than unhappy employees. Employee engagement is necessary, but not sufficient to produce positive customer experiences.

17 What Does This All Mean? Happy customers produce happy employees. When a company has satisfied customers, employees feel less stress and enjoy customer interactions to a greater extent. Having a personal sense of mission toward customers is an essential link in the employee-customer relationship. Important to connect to the employee s personal values Customer satisfaction is as much a product of a strong system as it is having engaged employees. Put a good person in a bad system and the system will win every time. Both customers and employees will be aligned against the company.

18 Recommendations Strive to create a customer-focused culture in the workplace. Examine whether policies are truly customer-serving vs. primarily company-serving. Provide meaningful recognition and incentive programs to associates at all levels who provide great customer service. Focus on customer service rather than operational efficiency. Evaluate the resources that are committed toward providing customer service. Talk directly to customer-facing associates about the factors that either facilitate or inhibit a positive customer experience. Empower people to resolve customer complaints or problems without having to escalate the issue to a manager.

19 Recommendations Evaluate the effectiveness of training programs relative to customer service. Is customer service emphasized in employee training? Are there clear guidelines for providing customer service? Is training sufficient to give people a thorough knowledge of their jobs? Emphasize the importance of everyone s contribution to the customer experience. Clearly communicate to everyone how critically important his or her job is to creating a positive overall customer experience. Connect each person s job to his or her own personal value system. Recognize all, not just some. Celebrate customer success stories.

20 Recommendations Managers must involve everyone and create a strong team feeling. All employees should feel he or she has a stake in everyone else s success. Consider implementing team recognition. Create activities to foster relationships and team cohesion. Seek suggestions from employees at all levels of the organization for improving customer Although it is understandable that salespeople want to sell as much as possible, there is a clear breakdown between what is being promised and what can be reasonably delivered. Evaluate the reasons for this discrepancy Staffing issues? Process issues?