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  Performance Improvement    by H. James Harrington

Happy Employees Don't Equal Happy Customers

There seems to be little correlation between employee and customer satisfaction, and organizational performance.

For years, I've believed that the way to have satisfied customers is to have satisfied employees. However, according to Fortune magazine's list of the 100 Best Companies to Work For, these aren't the ones that maintain the highest levels of customer satisfaction. And many companies on that list weren't ones I would put on my list of best-managed organizations, either.

    With this thought in mind, I compared the 100 Best Companies to Work For list with the first 100 companies of the Fortune 500 as well as the first 100 companies on the magazine's Most Admired Companies list and Customer Satisfaction list. The percentage of 100 Best Companies to Work For that were included in each list were as follows:

  Fortune 500 -- 12 percent

  Customer Satisfaction list -- 5 percent

  Most Admired Companies list -- 26 percent

I also compared the Best Companies to Work For list to Fortune's Best Managed Companies list and saw that only five companies showed up on both. Then I compared the Best Companies to Work For list with the Best Boards list and found 10 companies in common. In all, 62 percent of the best companies to work for weren't included on any of the five lists.

Thus, there seems to be little correlation between employee and customer satisfaction, how well an organization is managed and organizational performance. This was a shocking realization to me, having expected to find clear-cut correlations among all these lists. I firmly believed that satisfied employees directly contributed to satisfied customers. But maybe I've been wrong all these years, and there is no     advantage to having satisfied, happy     employees.

We need to consider why there is such poor correlation between the two. I think it's safe to assume that organizations with unhappy employees also will have low levels of customer satisfaction. Therefore, it seems that the best place to position an organization is somewhere between the two extremes of employee satisfaction and dissatisfaction.

For the average employee, a "good place to work" will offer high pay, low stress, interesting assignments, friendly work associates, fun at work, lots of credit and little criticism, and job security.

When I first managed an inspection department at IBM, every 18 months the company conducted employee-opinion surveys. One of the other inspection managers always got outstanding ratings -- 4.9 out of a possible 5. His people loved him. He was a friendly Irishman who always had a good story to tell. He played cards with his team during lunch hours, which often ran one-and-a-half to two hours. When an employee needed to come in late or leave early, he never said no.

This man also told his employees to keep busy and that was all that was necessary. They weren't paid enough to worry about the work backlog, he said. If there was too much work to be done in eight hours, he advised them to put it off until tomorrow or work overtime.

He had a very happy work family that was never stressed or challenged. His employees enjoyed working at IBM, but was he doing the right thing for them, ultimately, or for the company?

Employees don't feel comfortable when things are changing, when their managers tell them they need to improve, when they can't rely on past performance to earn next week's paycheck and when managers won't accept excuses about jobs not done on time. But that's what good managers do.

The business world is tough and competitive. We are past the point where we can keep up by merely maintaining a relaxed, friendly environment. We must all give up our old, comfortable ways of working. A successful organization must bear a certain amount of stress, and that includes employees doing things they don't like. To be competitive, we constantly must improve our abilities. Individuals should understand and address their inadequacies, and management should level with employees even when it's unpleasant.

The five companies that top Fortune's 100 Best Companies to Work For list        are Southwest Airlines, Kingston Technologies, SAS Institute, Fel-Pro and Tdindustries. Only one of these, Southwest Airlines, also appears on any of the five other comparison lists. Southwest Airlines was number 97 on the Customer Satisfaction list, and that rating has a lot to do with the airline's low fares.

I don't understand why the best organizations to work for don't have the best level of customer satisfaction. I'm very interested in receiving your thoughts on this subject, and I will report on them in a future column.

About the author

H. James Harrington is a principal at Ernst & Young. He can be reached at 55 Almaden Blvd., San Jose, CA  95113; telephone (408) 947-6587, fax (408) 947-4971, e-mail His Web address is


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