Increased Employee Engagement Leads to Increased Customer Engagement

Contributor:  Shaun Smith
Posted:  03/09/2009  12:00:00 AM EDT
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Aligning People With Strategy

Creating a powerful customer experience requires the full and continual commitment of the people responsible for making it happen.

People make the difference. If you concentrate on creating a great environment for your employees, they will focus on creating a great experience for your customers. Research found that contact with people usually has a greater impact on customer loyalty than advertising.

When consumers were asked to rate the extent to which a number of different attributes contribute to creating a customer experience that drives loyalty, “people” was ranked first.1

While this realization is not revolutionary, making it work remains unusual. Not many companies successfully manage to harness the full potential of people power day in and day out. The trouble is that they need to. Organizations that deliver their brand promise through their people reap benefits that directly impact customer loyalty, market share and profitability.

So, how can you energize the people in your organization? You must do five essential things if you are to harness people power:

  • Hire people with competencies to satisfy customer expectations
  • Train employees to deliver experiences that uniquely fit your brand promise
  • Reward employees for the right behaviors
  • Drive the behaviors from the very top of the organization
  • Measure the employee experience

Hire People with the Attributes to Satisfy

Once you know and understand customer expectations, you can create an organization with the culture and the people to deliver on those expectations. This means identifying the fundamental behavior your brand requires and the values that are integral to the brand. You must then hire to those behaviors and values. People matter, but the right people matter even more.

At Pret A Manger, the fast growing international fast food chain, it is the restaurant employees who make the hiring decisions about which candidates will join their work team. Employees must have the right attitude to fit into the Pret culture. Even prospective senior managers have to be given the "thumbs-up" by employees.

Recruitment has to be followed by retention; as Frederick Reichheld puts it in The Loyalty Effect, “If you wonder what getting and keeping the right employees has to do with getting and keeping the right customers, the answer is everything.” 2

At Pizza Express, rising through the ranks is not that unusual. In fact, the chairman started out washing dishes. U.K. managing director James Parsons told me when I interviewed him for my book Uncommon Practice: “My boss started off as a company secretary, a secretary on clerical duties. So it's very much from the top down to the bottom that there is great career opportunity. Not everyone wants to go on and be the chairman or area manager of whatever, but for those who do, there are great opportunities.”

Not surprisingly in light of this policy, Pizza Express experiences relatively low turnover of managers and staff. People are considered the essential components of the customer experience, and they are treated as such. Pizza Express group chief executive Ian Eldridge sums the company’s approach up: “We’re not in the customer retention business; we’re in the good staff retention business.” 3

Train Employees to Deliver Experiences

In a study of brand sales effectiveness, Gallup found that people with a high natural degree of personal “sales talent” sold, on average, 9 percent more brand volume than the norm. Those with additional “brand talent” profiles outsold the rest by 21 percent. They defined people with “brand talent” as those really owning and living the values and behaviors that align with the brand personality and positioning. These people are a living extension of the brand, bringing the values to life and delivering them direct to customers.

Employees do not instantly walk through your doors and utilize their attitudes, skills and intelligence in the best ways to deliver great customer experiences. Nor can existing employees be expected to transform themselves instantly and alone. Not everyone has the luxury of starting with zero employees and hiring to clearly-identified behavioral models.

The question for many companies is, what do you do with existing employees? And how do you develop people so that they have the requisite core behaviors and values? How do you train people to do it “your way”? You need to develop training that teaches employees not just what the core behaviors are, but how to live them for customers. “We’re very well trained in knowing what the customer wants, making that link to the employees so that they can make their own decisions when something isn’t programmed, and they’ll choose the right way,”
observes Marilyn Winn, senior VP of Human Resources at Harrah’s, America’s largest entertainment company.

The “State of the Industry” report issued by the American Society for Training and Development (ASTD) some years ago found the value of investing in people.4

For example, companies spending at the higher end of training per employee outperformed those at the lower end on each of three key business measures:

  • Net sales per employee +57 percent
  • Gross profits per employee +37 percent
  • “Market to book” shareholder value +20 percent

Yet the ASTD research found wide variation in the extent to which organizations made investment in their people a priority. Leading-edge companies spent 3.4 percent of payroll on training, while average performers invested only 1.5 percent. Similarly, leading-edge companies trained an average of 8.6 percent of their employees against the average of 6.9 percent.

Reward for the Right Behaviors

Recruiting and retaining talent does not happen accidentally. It has to be planned for and systematized. There has to be a process. Organizations have to have systems to retain the best people.

At the California Federal Bank, one initiative involves the use of mentoring. This began when the company did some analysis of performances to see who was really doing well. The company has an incentive plan through which it measures results. Star performers are recognized through a “Circle of Excellence” process. Further analysis revealed that there was a group of bank managers that was doing particularly well on customer service, although this did not filter through to the company’s recognition system.

“We looked at it closely, and we found that there were about 50 bank managers that did extremely well on customer service, cross-selling, doing all of the things that we consistently discussed,” says Rick Leweke, executive vice president for human resources at the bank. “Our challenge was to determine what these people were doing, and how do we get them to share their experiences with everybody else?”5

Once people have the skills and understand customer expectations, their performance needs to be evaluated against the right behaviors. People power requires that you also develop metrics for evaluating the use and impact of core and specific brand behaviors. Reward and recognition systems need to be aligned with these metrics.

Drive the Behaviors from the Top

The final piece in the people power jigsaw is that senior managers set the tone and the example. The way they treat people is reflective of how people will treat customers. Organizations that treat employees the way they treat customers understand what the customer experience and people power are all about. In the research for my most recent book we found that the most effective leaders were those that balanced EQ with IQ. They understand that the culture of the company has a huge impact on delivering results.6 The question is, how can leaders set about improving this?

Measure the Employee Experience

Some years ago I created an Organizational Alignment Survey™ that set out to measure the extent to which employees were aligned internally with organizational strategy. This survey has been used by organizations as diverse as banks, airlines, motor dealerships and retailers. In 2001, the survey was subjected to a very thorough validation by David Matsumoto, of San Francisco State University.7 Responses were correlated from over 23,000 Organizational Alignment Survey™ respondents from 52 companies representing a variety of industries and across 20 countries. The 60 statements of the survey were correlated against six business results areas namely, customer service, employee retention, sales growth, meeting agency requirements, competitive performance and profitability. The employee responses that correlated most highly with the improved business results achieved by these companies were:

  1. We are a highly successful organization
  2. We have a well-defined strategy to overcome competitors.
  3. We match the claims made through our advertising and promotion.
  4. Employees are well trained to meet the performance standards required by their jobs.
  5. We measure our quality/service performance against the worlds' best organizations in our field.
  6. Managers meet with customers and consumer groups on a regular basis.
  7. We carefully monitor the product/service quality of our suppliers, distributors and agents.
  8. Employees are regularly briefed on departmental and organizational performance.
  9. There is good cooperation among all departments in my organization.
  10. Performance targets that my department sets are realistic and consistent with our organizational vision/mission.

David Matsumoto concluded: “All of the correlations are statistically significant and seem to predict the desired business results.”

Notice that the second highest correlated item was the extent to which the employees felt that their company had a well-defined strategy. Many organizations believe that strategy is the domain of senior executives, and that it should not be communicated to employees. I am not suggesting that you should communicate your business plans or commercially sensitive information, but the fact is that if your people do not know how you intend to win then you probably won’t.

Increased Employee Engagement Leads to Increased Customer Engagement

Finally, act on the survey findings and then use it annually to measure your success. To quote a well-documented case, Sears Roebuck, the U.S. based retailer found that for every 5 percent improvement in employee experience there was a 1.3 percent increase in the customer experience and this produced a 0.5 percent increase in revenue growth. This translated into $200 million dollars.

In my work speaking to and consulting with leading brands around the world I have found that there is a similar relationship between the employee experience, the customer experience and financial results so the case for aligning employees with strategy is compelling.

1Managing The Customer Experience –Turning Customers into Advocates. Shaun Smith and Joe Wheeler.
FTPrentice Hall 2002. ISBN 0273661957
2Reichheld, Frederick,
The Loyalty Effect, Harvard Business School Press, 1996.
3
Uncommon Practice –People Who Deliver a Great Brand Experience. FTPrentice Hall ISBN. 0273659367
4“State of the Industry,” American Society for Training and Development, 1998.
5
Managing The Customer Experience- Turning Customers into Advocates. Shaun Smith and Joe Wheeler.
FT Prentice Hall. 2002. ISBN 0273661957
6
See, Feel, Think, Do –The Power of Instinct in Business. Marshall Cavendish Business Books 2006.
7The Organisational Alignment Survey™ The results of this research are the intellectual property of Shaun Smith and Persona Global


Adapted from www.shaunsmithco.com.

Shaun Smith Contributor:   Shaun Smith


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