Employee Satisfaction Can Lead to Customer Satisfaction and Improved Financial Performance Essay
Employee Satisfaction can lead to Customer Satisfaction and Improved Financial Performance There is a direct link between employee satisfaction and both Customer Satisfaction and Improved Financial Performance. As report by Leader Values, illustrates this relationship. (Written by Josh Greenberg, President of AlphaMeasure, Inc. 2004. Link: http://www. leader-values. com/Content/detail. asp? ContentDetailID=950) Researchers have undertaken numerous studies to look at the connection between customer and employee satisfaction.
A majority of these studies were able to uncover a correlation between employee satisfaction, customer satisfaction and profitability.
In a recent study for an international computer firm, the data reinforced the crucial link between customer satisfaction, employee satisfaction and profitability. Some of the key factors they found: • Profit and growth are stimulated primarily by customer satisfaction and loyalty. • Employees who are satisfied in their jobs provide higher levels of customer service. Employee satisfaction results primarily from internal high-quality support services and policies that enable employees to deliver results to customers. Putting employee and customer satisfaction in the spotlight when planning strategy is one of the top priorities for organizations committed to continuous improvement, both internally and externally.
Maintaining a continuous flow of information from both employees and customers is how successful organizations are able to continually maintain their high rankings in the marketplace.
At the heart of these endeavors is a strong belief that today’s employee satisfaction, loyalty and commitment influence tomorrow’s customer satisfaction, loyalty and commitment-and, ultimately, the organization’s profit and growth. This belief in practical management is reinforced by a growing body of empirical research. These all-important “links” comprise what is generally termed the “value profit chain. ” A recent Gallup survey of 55,000 employees matched the following attitudes with higher profits: • Employees felt they had an opportunity every day to do what they do best • They believed their opinion counted They sensed that their co-workers were committed to quality • There was a direct connection between their work and the company’s mission statement Yes, it’s true that people need to feel as if they are fairly compensated; but they also want to feel like they are a part of the company and that their ideas and suggestions are important. They also like to feel that they add value and aid in the company’s growth. According to many management experts, the single greatest key to productivity is employee happiness. Satisfied employees are usually energetic and tend to be highly motivated.
But, determining what makes workers happy can be a mind-stretching exercise. For years, the belief was that money was the source of employee happiness and retention. While there is no question that money is important, management studies show that it does not buy employee satisfaction. While employees want to be fairly compensated for their efforts, they also want to be challenged and treated with respect. Here are some suggestions on how organizations can increase employee satisfaction: Understand why people are working and commit to helping them achieve their goals on the job.
Develop a plan that will assist them in getting where they want to go. Empower workers to do the job you hired them to do. A work environment in which employees are constantly monitored, micro-managed and bossed around can be stifling. While most employees are capable of receiving empowerment, not all will seek it. The overriding motivation for all employees is respect. Keep employees informed. Share the big picture as to why they are being asked to do what they do and how their work can benefit others. Invite them to share their opinions.
Allow them to actively participate in the discussions that lead to business decisions. By including them, you signal that you value their expertise and recognize that they are a valuable asset for the organization. Remember, involvement equals commitment! Communicate your expectations. Let your employees know what you expect from them in terms of work ethic, quality, honesty and job performance. Do not assume that employees somehow inherently understand what is required. Take care of the people who work for you. Acknowledge their accomplishments with frequent and sincere recognition.
Take time to single out employees who have gone well beyond the call of duty. Hire the best people for the job, give them directions and tools to do the job and step aside. But, be sure to follow up. Treat employees the way you would want to be treated. Think about how you would want to be informed of changes and recognized for a job well done. Then do the same with your employees. The positive connecting between Employee Satisfaction and both Customer Satisfaction and Financial Performance has been found in numerous studies – several examples follow:
Direct Link between Employee Satisfaction and between Customer Satisfaction and Improved Financial Performance There is a direct link between employee satisfaction and between customer satisfaction and improved financial performance. The key organizational characteristic for explaining employee satisfaction is organizational communication (a measure of the downward and upward communication in an organization). Interaction between managers and employees with regards to supportiveness and goal setting, as well as job design were also key drivers of employee engagement.
Organizational culture was another significant driver of employee engagement, where employees must be expected to cooperate and work together, but also to take charge and provide a voice for the customer within the organization. A fully cooperative culture feels the need to reach consensus on a single option, where a culture promoting healthy cooperation provides multiple choices, which are then balanced against one another in an attempt to develop an optimal solution.
When individuals and teams are competing to implement the optimal behaviors to the market and its customers, such competition can work to the advantage of both the organization and its customers. Organizations with engaged employees have customers who use their products more, and increased customer usage leads to higher levels of customer satisfaction. It is an organization’s employees who influence the behavior and attitudes of customers, and it is customers who dive an organization’s profitability through the purchase and use of its products.
In the end, customers who are more satisfied with the organizations’ products are less expensive to serve, use the product more and, hence, are more profitable customers. A focus on market outcomes, e. g. , customer satisfaction, is warranted as they were found to mediate the relationships between employee attitudes and financial performance. Source: James Oakley, Purdue University, Linking Organizational Characteristics to Employee Attitudes and Behavior: A Look at the Downstream Effects on Market Response and Financial Performance, 9/13/2004. 00 Best Outperform the S&P 500 From the period of 1997 to 2003, the stock of the companies identified in Fortune Magazine’s “100 Best Companies to Work for in America” list outperformed that of the Standard and Poor’s 500 by over 430 percent. Source: Frank Russell Company, 2004. Cited in presentation: “Transforming Your Organization: Creating a Great Place to Work,” delivered by Robert Levering, Building Trust Conference, Washington, D. C. , April 14, 2004 Employee-Friendly Southwest Outperforms Competitors
An eight-year MIT/Sloan Foundation study of Southwest Airlines, renowned for its progressive and innovative people practices, found that the airline had the highest profitability of any U. S. carrier, had a total market value that exceeded that of all other U. S. airlines combined, and had the highest employee productivity of any major U. S carrier, despite the fact that it was the most highly unionized airline in the industry, and its employees were paid only at or below the industry wage average. Source: Gittell, J. H. , 2003. The Southwest Airlines Way: Using the Power of Relationships to Achieve High Performance.
New York: McGraw-Hill. Employee Satisfaction Levels Affect Business Performance* |[pic] | | | |Source: “Business-Unit-Level Relationship Between Employee Satisfaction, Employee Engagement and Business| |Outcomes: A Meta-Analysis” by James K. Harter, Frank L. Schmidt and Theodore L. Hayes, Journal of Applied| |Psychology 87 (2) 268-279, 2002. | | |
Employee-Friendly” Workplaces Get Dramatically Greater Returns For Shareholders |Average Five-Year Return to Shareholders: April 1996 to April 2001 | |[pic] | | | |The value of employee-friendly companies’ stock increased in value by 64 percent over five years compared | |with an increase of only 21 percent for stock prices of companies with the least employee-friendly | |workplaces. | | |Source: Watson Wyatt Worldwide survey of more than 500 publicly traded companies, 2001 | | | Study Finds Strong Correlation Exists Between Employee and Customer Satisfaction A study of Ford Motor Credit Corporation found that employees’ satisfaction with their workload, team, job, and the company overall were statistically correlated to the level of customer satisfaction with the company’s services. Source: Johnson, R.
H. , Ryan, A. M. , & Schmit, M. J. “Employee Attitudes and Branch Performance at Ford Motor Credit” (paper presented at the Ninth Annual Conference of the Society of Industrial and Organizational Psychology, Nashville, Tennessee, April, 1994), cited in Pfeffer, J. (1998). The Human Equation: Building Profits by Putting People First. Boston: Harvard Business School Press. Increase in Employee Satisfaction Leads to Identical Increase in Customer Satisfaction A major study at Sears, Roebuck & Co. ound that an increase in employee satisfaction of 4 percent lead to an identical increase in customer satisfaction, which in turn led to an increase of over $200 million in revenues. The researchers further found that at their current after-tax margin and price-earnings ratio, those extra revenues increased Sears’ market capitalization by nearly one-quarter of a billion dollars. Source: Rucci, A. J. , Kirn, S. P. & Quinn, R. T. “The Employee-Customer-Profit Chain at Sears. ” Harvard Business Review. January-February 1998, pp. 82-97.
Investments in People Improve Stock Performance A 1997 study by three Harvard Business School professors found that over a 10-year period, the stock price of companies that made substantial investments in employee loyalty and satisfaction increased over 147 percent, almost double the increase in stock prices of their nearest competitor. Source: Heskett, J. L. , Sasser, W. E. , Schlesinger, L. A. (1997). The Service-Profit Chain: How Leading Companies Link Profit and Growth to Loyalty, Satisfaction, and Value. New York: Free Press.
People Practices an Integral Element of Successful IPOs A major study of 136 companies that initiated public offerings in 1988 found that firms which emphasized their people management practices and treated employees well were significantly more likely to survive five years following their initial public offering than companies that did not. Source: Wellbourne, T. & Andrews, A. “Predicting Performance of Initial Public Offering Firms: Should HRM Be in the Equation? ” Academy of Management Journal 39 (1996): 901-911. Majority of U. S. Employees Not Engaged
The research on employee morale, workplace satisfaction, and overall productivity in today’s workforce is rather startling. Surveys by The Gallup Organization and Franklin-Covey have found that only 29% of today’s workers feel engaged at work, and only 22% of workers are enthusiastic about the goals they have set with their work teams. Surveys by The Herman Group have found that at least 30%, and perhaps as many as 40% of workers, have already “checked out”–showing up for work every day, but focusing on where their next job will be.
These low employee satisfaction marks should have employers concerned. The Gallup Organization estimates employers suffer more than $350 billion dollars annually in lost productivity. Instead of striving for excellence in meeting customer’s needs, the result is a workplace with low morale, low job satisfaction, and decreased productivity. The inability of employers to inspire workers to give beyond what is minimally required does not bode well for businesses. Source: Ken Blanchard Companies, 2004