What Trumps a Great Customer Experience?

The ‘how’ explains the ‘what’

Published: Monday, December 16, 2013 - 12:57

A few weeks ago, I wrote a guest post for Jeannie Walters of 360Connext titled “A Great Customer Experience Trumps....” At the end I posed the question: “What trumps a great customer experience? Only one thing. Can you guess?”

I’m going to answer the question now. Quite simply, the answer is: The employee experience.

I’ve been talking about the importance of employees in the customer experience equation since my days at J. D. Power and Associates 20 years ago, and yet, in the heat of customer-experience design efforts, employees are forgotten.

Don’t believe me? There’s a ton of evidence out there that makes the link between the employee experience and the customer experience and, ultimately, on business outcomes.

Temkin Group published its Employee Engagement Benchmark Study earlier this year, and here are some findings:
“Among companies whose financial performance is significantly better than that of their peers, 75 percent of employees are highly or moderately engaged, compared to 47 percent at underperforming companies. For companies with a significantly better customer experience than their competitors, 75 percent of employees are highly or moderately engaged, compared to 34 percent at lagging companies.”

Edelman put together a compilation of seven studies on employee engagement. One of those studies is by Aon Hewitt, and according to Edelman, it reveals:
“Every 1-percent increase in employee engagement indicates a 0.6 percent growth in sales, accordingly to Aon Hewitt’s 2013 Trends in Global Employee Engagement report. Applying this logic to a $5 billion company with a gross margin of 55 percent and 15-percent operating margin, a 1-percent increase in engagement would be worth $20 million—hardly pocket change.”

Gallup has done a lot of research, as we know, on employee engagement. One Gallup survey tool is the Q¹², which is designed to measure employee engagement conditions. Gallup recently published some findings:
“In a recent study, Gallup examined 49 publicly traded companies with earnings per share (EPS) data available from 2008–2012 and Q¹² data available from 2010 and/or 2011 in its database. This study found that businesses with a critical mass of engaged employees outperformed their competition:
• Companies with an average of 9.3 engaged employees for every actively disengaged employee in 2010–2011 experienced 147-percent higher EPS compared with their competition in 2011–2012.
• Companies with an average of 2.6 engaged employees for every actively disengaged employee, in contrast, experienced 2-percent lower EPS compared with their competition during that same time period.”

This graphic summarizes nicely how employee engagement drives business outcomes:

Towers Watson has conducted its own employee engagement research, and its findings show that companies with high levels of employee engagement saw a 19.2-percent increase in operating income, while those with low levels of engagement experienced a 32.7-percent decline in operating income.

A Harvard Business Review (HBR) article from 2010 states this interesting statistic: “...some—including Starbucks, Limited Brands, and Best Buy—can precisely identify the value of a 0.1-percent increase in engagement among employees at a particular store. At Best Buy, for example, that value is more than $100,000 in the store’s annual operating income.”

Beyond Morale offers a free e-book with 99 interesting statistics about employee engagement, like this one:
“Increased employee engagement was accompanied by a 12-percent increase in customer satisfaction and significant double‐digit revenue and margin growth over the past three years.” —Serco Study

And this one:
“Companies in the Best Companies to Work For study during the period 2004–2008 increased their revenues by 94 percent and their profits by 315 percent.”

In its Sharpen Customer Experience Focus with Employee Engagement report, Forrester cites this example:
“Dell found that customer Net Promoter Scores (NPS) were twice as high for experiences delivered by highly engaged employees. And a meta study of 7,939 business units in 36 companies, published in the Journal of Applied Psychology, found that higher employee engagement scores correlated with higher customer satisfaction and loyalty measures.”

Brian Gareau has put together a page of resources that highlights some of the research done during the last 10 years that proves the link between employee experience and business performance.

Kevin Kruse has also put together a similar list of research and resources on the link between employee engagement and various business outcomes.

I’ve taken liberties in this post to skip right from the employee experience to business performance without mentioning the customer experience. We already know, with perhaps one exception, that a great customer experience drives business growth and success. What we fail to acknowledge is that the people behind the delivery of that customer experience must come more first.

Need one more bit of evidence? Let’s go to the grandfather of all evidence, the service-profit chain. Read the HBR article and the related book(s) as well as the follow-up that shows how companies are applying its principles today.

This 1999 article from Harvard Business School’s Working Knowledge summarizes the work that Sears executives did to rebuild the company to focus on customers. The article talks about the new business model and what the company discovered: “There is a chain of cause and effect running from employee behavior to customer behavior to profits.” Imagine this: Sears’ model is data-based. (See the summary in the subhead of the following chart about what the shapes represent.)

Make no mistake: Employees who enjoy their work—who are passionate about what they are doing and for whom they are doing it—deliver results. As I wrote previously: Because of that enthusiasm and passion for the brand, for the business, employees are eager to contribute to its success. And when we’re all working together for the success of the business, I believe that, ultimately, customers will win, too. As will your shareholders.

“If people relate to the company they work for, if they form an emotional tie to it and buy into its dreams, they will pour their hearts into making it better.” —Howard Schultz

First published Dec. 10, 2013, on the CX Journey blog.

About The Author

Annette Franz

Annette Franz, CCXP is founder and CEO of CX Journey Inc. She’s got 25 years of experience in both helping companies understand their employees and customers and identifying what drives retention, satisfaction, engagement, and the overall experience – so that, together, we can design a better experience for all constituents. She's an author (she wrote the book on customer understanding!), a speaker, and a customer experience thought leader and influencer. She serves as Vice Chairwoman on the Board of Directors of the Customer Experience Professionals Association (CXPA), is an official member of the Forbes Coaches Council, and is an Advisory Board member for CX@Rutgers.