Jun 21, 2019
Summary
This week we explore whether putting employees first ahead of customers and shareholders leads to better customer service and financial results.
Transcript
Hello and welcome to episode 41 of the Leadership Today Podcast where each week we tackle one of today’s biggest leadership challenges. This week we explore whether putting employees first, that is ahead of customers and shareholders, actually produces better customer service and financial results.
Richard Branson, the founder of Virgin, once famously said “Clients do not come first. Employees come first. If you take care of your employees, they will take care of your customers.” It’s a sentiment that stands in stark contrast to “the customer is always right” and “shareholder value” formulas tracing back to the early 1900’s.
During an interview with Inc, Branson continues “It should go without saying, if the person who works at your company is 100 percent proud of the brand and you give them the tools to do a good job and they are treated well, they're going to be happy… Effectively, in the end shareholders do well, the customers do better, and your staff remain happy”.
This sounds like a nice management philosophy, particularly from an employee perspective - what employee wouldn’t want to be put first? But does the research back up this link between employee engagement, customer satisfaction and financial performance?
Large scale research into the link between employee engagement, customer satisfaction and results is actually less common than you might think. A 2008 study by Maxham, Netemeyer and Lichtenstein covered over 1,600 retail employees, servicing over 57,000 customers across 306 stores. Their research found direct links between employee engagement, customer satisfaction and financial performance.
The research highlighted three main findings:
- Conscientious employees who feel they are treated fairly and who identify with the organisation perform better in their jobs.
- Increased job performance, not just doing their job well, but going above and beyond for the customer, leads to higher customer evaluations.
- Customer evaluations around satisfaction, purchase intent, loyalty and word-of-mouth referrals, lead to higher customer spending and store sales growth.
The researchers found that even a one point increase in customer evaluations was associated with customers spending over $12 more per transaction, a 15% increase. And as customer evaluations increased, transaction values and sales growth increased at an even greater rate - it wasn’t just a straight line relationship. Other analysis of multiple studies by Harter and Schmidt also supports these links.
I think this research has four main implications for leaders:
- Hire well - hire conscientious people who love your organisation and want to go above and beyond.
- Treat employees well - fairness matters, give them great leaders to work for who also love the organisation and want to go above and beyond.
- Focus on systems and front line frustrations - as a customer it’s common to hear people apologising for their system or some clunky process. Ask your frontline teams about frustrations and remove them. A CEO of a major bank I worked for would call several bank tellers once a month to hear about their experiences on the front line, cutting through multiple layers.
- Look to other examples - research broader trends in customer service, including the interesting things others are doing outside your industry.
If we take these steps, we will be well on our way to putting our people first, and delivering better results for customers and shareholders.
References
https://www.inc.com/oscar-raymundo/richard-branson-companies-should-put-employees-first.html
Harter & Schmidt (2002) Business-Unit-Level Relationship Between Employee Satisfaction, Employee Engagement, and Business Outcomes: A Meta-Analysis. Journal of Applied Psychology.
Maxham, Netemeyer & Lichtenstein (2008) The Retail Value Chain: Linking Employee Perceptions to Employee Performance, Customer Evaluations, and Store Performance. Marketing Science.