How Employee Engagement Relates to Customer Loyalty

How Employee Engagement Relates to Customer Loyalty
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The authors of the book Blue Ocean Strategy recognize that, “in the end, a company needs to invoke the most fundamental base of action: the attitudes and behavior of its people deep in the organization,” or, in other words, its employees. Engaged employees believe they have a stake in the company and are more ready to embrace the company’s strategy and even voluntarily cooperate in carrying out the strategy. Employee engagement, however, should not just be considered an initiative to improve employee morale. It is also a strategy that can improve customer loyalty, which Fred Reichheld claims is “the key to proftitable growth.”

The Engaged Employee

What is “engagement”? According to the study “The Drivers of Employee Engagement,” employee engagement can be defined through several behaviors and characteristics:

  • Belief in the organization
  • Desire to work to make things better
  • Understanding of the business context and the bigger picture
  • Respectful of, and helpful to, colleagues
  • Willingness to go the extra mile
  • Keeping up to date with developments in the field

Engaged employees are more likely to stay at their jobs, which reduces a company’s employee turnover, are more productive and are more dedicated to satisfying customers. Conversely, disengaged employees cost companies money with their low productivity and lackluster customer service. Unfortunately for businesses, a majority of their employees are not engaged. The 2007-2008 Towers Perrin Global Workforce Study found that only 21% of employees are engaged.

Engaged Employees and Customer Loyalty, Kikashi

How does employee engagement relate to customer loyalty? Customer loyalty focuses on attracting customers to a business who continue to return to the business to buy more often and in larger quantities. Loyal customers also promote businesses to their friends and associates, which generates more revenue for the business. Because customer loyalty leads to increased revenues, it is a concept that is given the highest priority by businesses. In fact, many articles, books and training programs are geared toward teaching businesses how to increase customer loyalty. While many of these materials may focus on customer participation in the company or customer reward programs, employee engagement is just as important to creating a loyal customer base.

A positive experience with a company will cause a customer to return. However, a positive experience is not limited to competitive prices and product quality. Employees, the face of the company, play just as an important role in the customer experience. An engaged employee will spend more time determining and assessing a customer’s needs and satisfying that customer. A satisfied customer is more likely to return to that business and to recommend that business to friends and family. In contrast, an actively disengaged employee may display a negative attitude toward the customer, disregard the customer’s needs and create an overall negative experience for that customer. This negative experience may cause the customer to take his or her business elsewhere. The dissatisfied customer may also actively discourage others from doing business with that company, whether by word of mouth with family and friends or through social media.

Negative reviews by dissatisfied customers significantly affects a company’s growth. Bain & Company conducted a survey that calculated the economics of Dell’s relationship with its customers. The survey estimated that negative comments about Dell cost the company approximately $68 million in 2003. The survey also found that, on average, it took five positive comments about the company to neutralize one negative comment. While the sources of customer dissatisfaction and the negative comments are unclear, Dell may have saved money in 2003 if it had focused more on employee engagement.

Improving Employee Engagement

Given its positive effects on customer loyalty and a company’s revenue, improving employee engagement should be a business’s primary concern. Before implementing changes to improve employee engagement, however, a company must first assess its current level of employee engagement. Business consulting companies have the ability to conduct workplace engagement surveys, which measure the degree to which employees are engaged and connected to their jobs. These surveys can measure the specific influences on employee engagement within a particular company. By using this information, businesses can tailor their strategies to combat employee disengagement to their own workforces.

One of the largest factors affecting employee engagement is supervision. A supervisor’s confidence in and support for employees increases the employees’ confidence and makes the employees feel important. Confident employees who feel valued by their company are more likely to transfer these feelings into their work, including customer service. What kind of supervisor creates engaged employees? According to Barbara Burke, such supervisors “consider their role as a manager and developer of front-line talent” instead of as an enforcer. Thus, to increase employee engagement, companies should review supervisor performance and invest in supervisor-training.

Quality supervision is not the only factor that influences employee engagement. Increasing employees’ ability to communicate up the company increases engagement. Implementing a system for employee career development and mobility also increases an employee’s investment in the company. Finally, employees should feel as if they have a role in a company’s decision-making process. Participation in a company’s decision-making will make employees more engaged, as it gives employees a greater sense of shared responsibility and investment in the company.