“Take care of your employees, and they will take care of your guests, and your business will take care of itself.” That quote from J. W. Marriott is often used to demonstrate the power of engaging employees. More recently in 2008, Heskett, Jones and Loveman conducted research on many companies and wrote in the Harvard Business Review, “The new economics of service requires innovative measurement techniques. These techniques calibrate the impact of employee satisfaction, loyalty, and productivity on the value of products and services delivered so that managers can build customer satisfaction and loyalty and assess the corresponding impact on profitability and growth.”
As we discussed in an earlier blog, there are several ways that employee engagement can impact profitability by reducing costs, improving revenue, or both. But this is not a one-size-fits-all situation. It is not enough to understand the isolated metrics. You need to understand how those metrics are connected to work for your company, in your industry, and for your competitive set. Every business is different; the actions you need to take to improve employee engagement to drive profitability will be different as well.
Here are four key linkages that you need to understand:
- Link to Senior Management. It is critical that senior management understands and supports the relationship between Employee Engagement, Customer Satisfaction, and Profitability. Too often senior leadership believe that improving employee engagement or customer satisfaction will only increase costs; they need to understand how improving these metrics can reduce costs and improve revenue.
- Link Employee Engagement to Operations. While no employee will reject a pay or benefits increase, many organizations have seen improved employee engagement results from more, better, and more frequent communication, as well as modest investments in training programs. You need to understand where the weaknesses are, and then address them specifically.
- Link between Employee Engagement and Customer Satisfaction. There are situations when the tactics needed to increase employee engagement conflict with those needed to improve customer satisfaction. In those cases, marketers must creatively work to find solutions that meet both needs – but you won’t find the solutions if you don’t understand the connection.
- Link to Profitability. Most companies track and report the changes in customer satisfaction scores, employee engagement scores, and profit. But drawing specific linkages to the elements that are driving improved profitability is also important to reinforce the service-profit chain. Are more engaged employees driving improved productivity to result in lower cost of goods sold or costs to serve customers? Are more loyal customers purchasing more? Employees and managers need to understand that the service-profit connection is not just a black box or magic – there are real impacts making a quantitative improvement in business results.
By identifying linkages (or correlations) between customer satisfaction and employee satisfaction and operations, you know what factors will have the biggest impact on profitability. Once you have that information, you can prioritize actions to have the greatest net impact on profitability.
Employees and Customers don’t exist in isolation. Why should your measurements? If you don’t understand the linkage between your customer satisfaction, employee engagement, and your businesses operation metrics, you’re not getting the most out of your investment in research. Don’t keep making the costly mistake of measurement without linkage!
Call Infosurv Research today to talk to us about improving profitability by aligning customers and employees: (888) 262-3186.