By Adam DiPaula, PhD

In this article, we show how organizations can use customer and employee engagement measures to drive key business outcomes, like retention and profitability.

I had just made a large home stereo purchase at a local big box retailer and was sitting in the middle of my living room floor befuddled by the vast array of components, circuits and wires that lay before me. I had read the thick manual from cover to cover—a rarity for me– but still had no clue how I was going to get this stereo system operating in time for the party I was hosting in four hours’ time. As a last ditch effort I called the store and asked to speak to Jason, the young gentlemen who sold me the equipment. With dejection in my voice I fumbled through a series of disorganized attempts to explain what I had tried to do.  After a few minutes of incoherent babbling, Jason cut in—‘why I don’t I just swing by after work and help you put it together?’ Stunned, I paused for a moment. Then, realizing my fortune I asked tentatively but hopefully, ‘Are you sure?”

Jason took 17 minutes to complete a task that I had spent the better part of six hours trying to accomplish. He even explained dutifully how and why he was putting this plug here and that wire there. I nodded earnestly, pretending like I understood the logic of the whole exercise.  Actually, I was too busy to hear him, carefully planning the musical line up for that evening.

Since this encounter I have told at least ten friends and associates about my experience. I also told Jason’s manager how Jason’s efforts had been such a benefit to me. I also noticed that I no longer engage in the relentless store by store price comparisons that were a typical part of my electronics purchase efforts. I go right to Jason.  

Happiness and the Bottom Line
Common sense and personal experience tell us that how employees feel about the organization they work for has a powerful impact on the experience of the customers they serve and how customers, in turn, interact with the organization.  Happy employees are more likely to do things that create positive experiences for customers.  Unhappy employees are far less motivated to create positive customer experiences—leaving customers with a negative impression of the organization.

The results of these employee-customer interactions have a significant financial impact on an organization. Happy customers are more likely to reward the organization with their continued business and customer referrals. Unhappy customers are more likely to leave and tell others to do the same.

Despite the well-documented impact of the employee-customer interaction on business results, organizations rarely structure their measurement programs to measure and manage this interaction effectively. This is due largely to the fact that measuring customers is the domain of the marketing department, measuring employees is the domain of the human resources department. While this may be an organizational convenience, it prevents the organization from maximizing the use of both measures to impact the bottom line.

The Sentis model is based on well-validated research showing how engagement—i.e., the emotional connection that customers and employees have with an organization–drives business results, and how integrating customer and employee engagement can elevate organizational performance.

Our model is flexible enough to be customized for any organization where customers interact with employees and where customer and employee retention are important organizational goals.

Satisfaction is Not Enough: The Organization Must Engage
There is a growing body of evidence showing that maintaining high levels of satisfaction is not sufficient to retain customers or employees. Satisfied customers regularly defect to competitors. Satisfied employees often leave for other opportunities.

This is because measures of satisfaction tap the more rational components of experience. For customers, this is their evaluation of the quality of the products and services that they get from the organization. For employees, it is also an evaluation of what they get—e.g., level of pay and benefits, quality of working conditions.

Organizations that only measure satisfaction are at a significant disadvantage because it is not satisfaction, but engagement, that drives key outcomes like retention and advocacy.

We define engagement as the emotional connection that the individual has with the organization.  Our measure of engagement includes three components—trust, admiration, inspiration.In the table below, we describe what these components represent for customers and employees. We also summarize the things that highly engaged customers and employees will do that create positive outcomes for the organization.

Integrating Customer and Employee Engagement
Employees have a powerful impact on the experience of customers who, in turn, have a powerful impact on the experience of employees. Therefore, it is not surprising that research shows that customer and employee engagement interact to produce superior results. The best financial results are produced by business units within the organization that have positive scores on both employee and customer engagement.

This is why we integrate customer engagement and employee engagement measures—and why we integrate them at the business unit level.  Business units can be individual stores, branch offices, broker offices, or departments, depending on the organization and its structure.

Integrating results at the business unit level is critical for managers tasked with improving performance within their units. Problems may differ substantially across units, and it is only when managers have specific, local, information that they can they address problems effectively.

In our model each business unit falls into one of four categories, based on their customer and employee engagement scores. The categories represent different work environments.

Apathetic.  Low customer engagement/ Low employee engagement

• Employees do not receive any compelling reason from management to deliver positive customer experiences.
• This creates apathy among both employees and customers.

Spoiled.Low customer engagement/ High employee engagement

• The organization spoils employees by giving them many benefits but does not hold them accountable for creating positive customer experiences.

Anxious. High customer engagement/ Low employee engagement

• Employees work hard to create a positive customer experience out of fear that management will punish them for not performing.

Inspired. High customer engagement/ High employee engagement

• Employees are given freedom to innovate and use their own judgment in serving customers.
• Customers feel valued as individuals.
• Employees and customers are inspired to be associated with the organization and do things to promote its success.

Research shows that business units in the Inspired category produce financial results well above those units that score high on only one measure of engagement, and account for a disproportionate share of the organization’s bottom line.

Learning from the Inspired to Elevate Performance
In order to improve performance across other business units, a key task for the organization is to learn what the Inspired business units are doing to elevate and sustain high levels of engagement among both customers and employees.

This could take a variety of approaches and we help organizations implement which approaches will be most effective.  We may conduct in-depth interviews or informal discussion sessions with managers, supervisors, and the ‘front line’ staff.  We may do the same among customers.  We identify the commonalities across these Inspired units and prioritize recommendations for action on that basis.

Adam DiPaula, PhD is managing director for Sentis Market Research Inc.

(PeopleTalk: Fall 2012)