How Engaged Employees Lead to Engaged Customers

May 9, 2017
| ByMike Ryan

In my last two posts I offered several stats that identified recognition’s impact on worker retention and productivity. To review, employee engagement triggered by the timely and consistent use of recognition, effects how profitable a company can become over time. Examining companies with higher levels of engaged employees uncovered noticeable differences in business performance. For example, highly engaged employees are twice as likely to stay with their current employers; they are 38% more likely to contribute at above-average levels and they are more likely to generate better margins (in the neighborhood of 800 basis points higher). All of that can increase profits by more than $2,400 per employee, per year!

In this edition I will shift from the employee retention and productivity discussion and focus instead on customer retention and growth advantages. That’s because employee engagement not only improves an employee’s loyalty and output, it’s also directly behind the organization’s most powerful growth catalyst—the satisfaction of its customers and the repeat purchases that follow.

Is there really a connection between employee engagement and customer engagement? Yes, and to illustrate that point I’m going to briefly revisit “The Service Profit Chain” model. It’s a business blueprint created by a group of researchers from Harvard University in the mid-1990s that went on to become the operating doctrine for customer-focused enterprises. It was structured around a simple philosophy, one that remains true today. Customer satisfaction is not simply a growth trigger; it’s also a competitive insulator. It suggested that companies with higher customer satisfaction were protected from the occasional service miscue and immune from competitive poaching. The theory was then, and is now, that customer satisfaction paves the way for customer loyalty and that the migration (from satisfied to engaged) fuels sustained revenue growth at higher margins.

Make no mistake; the employee is right in the middle of that equation. There is a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and financial performance. Companies in the top 25% of employee engagement outperformed bottom-quartile units by 10% on customer ratings. Engaged employees lead to “engaged” customers; customers who form allegiances toward your company based on their experiences they have had with your people.

The question for program planners looking to expand their business case is this: how do you position your recognition program’s benefit to include engaged customers (as well as engaged employees)?

Here is what you need to know. Businesses, specifically marketing departments, spend a lot of time and money creating a brand. Most use identifiers defined in human terms. Through their brands, companies are said to be dependable, intelligent, friendly, or trustworthy.

That only works when the customer’s actual experience with employees is consistent with that expectation. That intersection is said to be the moment of truth in marketing. The challenge that all companies face is to motivate their people to keep that promise.

That is where your recognition program should step in. It translates those brand promises into behaviors and actions that employees can comprehend, embrace and act upon. Like any other approach, it starts with targeted communications that help employees understand their roles in delivering against expectations, followed by rewards and/or recognition for employees who do just that.

It’s a strategy that works. The impact of employee engagement on customer satisfaction is undeniable. Customer retention rates are 18% higher when employees are highly engaged. In fact, the number one way to improve customer satisfaction is to focus on the employee experience including how you recognize and applaud their efforts (not simply the customer experience).

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