How much impact does employee engagement have on a company’s bottom line? More than you think.
A recent Gallup study estimated that disengaged employees wasted more than $300 billion in productivity at U.S. firms. The flip side: firms with engaged workforces have 2.6 times the earnings per share growth rate compared to their industry counterparts.
So what’s the connection of engagement to productivity? It’s based on the premise of “Pay it Forward” — engaged employees lead to engaged customers lead to increased profits. At Nicor National, we measure both our employee engagement and customer engagement on a monthly basis using the Allegiance platform and see a consistent correlation between the two — the upticks and the downticks tend to go hand in hand.
Our engagement efforts beyond monthly tracking include a combination of e-based and direct communications, both on a scheduled and ad-hoc basis. To keep your finger on the pulse of employee engagement, you can’t rely on just one approach, since not all employees respond to our communications in the same way.
Given that our business sucess is based on creating stronger relationships with our customers, the connection between customer engagement (i.e. customer satisfaction) and profitability in our company is well documented. We’ve learned that in order to achieve our business goals and meet customers’ changing expectations, we have to start with our employees.
Barbara Porter is Vice President, Customer Service and Business Development at Nicor National
What are your employees talking about? What keeps them up at night about their job? What distracts them from their day-to-day activities?
During tough economic times, employee stress levels are up. This directly affects their job satisfaction, which impacts the way they treat customers. This can hurt revenue and profits.
Most business managers agree that good employees have an impact on customer satisfaction. At Allegiance, we call this the Spillover Effect and define it as the statistical relationship between employee engagement and customer engagement.
When employees are engaged, they believe are doing something valuable for their organizations and that their efforts will make a difference. The positive feelings that employees have about their jobs and employers influence the level of service they give to customers. These positive experiences “spill over” to customers, who become advocates for the company’s products and services.
Allegiance recently published a paper called “The Spillover Effect” based on one of the largest research studies conducted on engagement. This study found that disengaged employees hurt one out of every 10 customers. The paper identifies job enhancers that are effective at creating employees who are likely to be emotionally engaged. Critical job enhancers include:
- Having a positive impact on the lives of customers and team members
- Having opportunities for learning important new skills
- Having the ability to offer suggestions
- Completing whole jobs from start to finish
- Receiving feedback about the results of efforts
- Feeling free to perform the work the way they believe is best
Engaged employees contribute to the bottom line. As their engagement is reflected in their service to customers, they are helping to create more loyal customers. Highly engaged customers buy more products, refer potential customers to a company, stay longer and give more feedback, which, in turn, gives companies the opportunity to address issues and concerns and preserve potentially lost revenue.
For any VOC initiative, it is just as critical to conduct employee surveys as it is to survey customers. Employee engagement drives customer engagement, and without understanding the hearts and minds of your employees, your VOC initiative will be incomplete.
Conducting employee surveys within your organization presents opportunities for you to show employees that you care about them and their needs. At the same time, it provides employees an avenue for providing feedback about the company, culture, management, tools, resources, training, and more. For survey results to be most effective, employees need to trust that they can provide candid feedback in an anonymous fashion without retribution.
Even more important than conducting these surveys is to act on the results – and then to hold managers accountable for creating action plans and executing on them. However, is it a good or standard practice to compensate managers based on their employee satisfaction scores? This is a practice that is difficult to support, given the following complications caused by providing incentives to managers based on the satisfaction of their employees.
- Any time you tie survey results to a bonus plan, managers will waste time and energy trying to find fault with the overall program design, survey questions, or data quality – instead of taking the candid feedback at face value, taking ownership, and putting the feedback to work.
- Tying compensation to employee feedback also leads to situations that I refer to as the “car dealer syndrome,” which includes gaming the system, bribes, and other seedy behavior.
- The potential to earn more money because of these results can also lead to retribution for low scores and poor feedback; employees need to know they can provide feedback without fear of recourse for negative feedback.
If you want to reward your managers, use objective measures, such as employee turnover, that can’t be tinkered with. If you feel the need to reward managers, do so based not on the scores and the feedback, but on the execution of action plans created as a result of the feedback.
Having said all that, I do believe that company executives should certainly have a portion of their bonus plans tied to both customer satisfaction and employee satisfaction scores. Creating a customer-centric culture begins when you first focus on your employees and make their satisfaction a priority. This culture can only be created and driven by those at the top.
Chris Cottle
27 Jan 2010
While many business managers see only doom and gloom ahead, some are focusing on a new way to unlock a prosperous future – even in a tough recession. Through the game-changing principle of engagement, companies can learn to use technology and best practices to extract new revenue from their existing customer base.
Historically engagement has been elusive and hard to measure. However, there are four outcomes of customer engagement that can be measured in actual dollars:
- Share of Wallet – Engaged customers buy more products/services, more often
- Positive Referral – Engaged customers persuade potential customers to switch brands
- Customer Churn – Engaged customers remain loyal and stay longer
- Feedback Response – Engaged customers give more feedback, which allows companies the opportunity to address concerns and save potentially lost revenue
Even using conservative numbers, the financial benefits of engagement are substantial. Our research shows that it can be measured, and it is not as difficult as companies think. In fact, we found that improving customer engagement by a small amount, as little as one percent, can have a dramatic impact on financial results. The economics of engagement are real, and they can have a major impact on any business willing to invest the time, energy and resources in a plan of action. While most companies continue to compete on the traditional battlegrounds of price, service and quality, those that capitalize on engagement will create an unbeatable advantage.
Here are few examples of companies who have experienced significant growth in revenues due to their engagement efforts:
Allegiance Customer Case Studies
Bob Caruso
16 Nov 2009
Many companies have gone through a reduction in force (RIF) recently (i.e. organizations have reduced staffing by nearly 5 million in the past 7 months!), and are now in the process of dealing with all of the changes forced by the RIF. To help, below are three tips for reengaging and protecting your talent pool:
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Care must be taken in the short term to ensure that the strong talent left in place has the opportunity to grow, contribute and feel respected.
- Ensure that employees feel committed and secure to reduce the effect that weak employee engagement has on your customers and their confidence in your organization’s ability to deliver on your brand promise.
- Use this time to challenge staff and expand their contributions in ways that lever forward the organization and themselves in tandem.
Source: Economic Conditions Snapshot, June 2009: McKinsey Global Survey Results
By Bob Caruso, Managing Director, Endeavor Management
During a quantitative survey that Allegiance recently conducted with voice of the employee (VOE) practitioners, including human resource vice presidents, directors and managers, as well as other HR-related titles, we found that:
- 78% of the survey respondents strongly agree or agree that their top management listens and responds to employee feedback.
- However, while most companies say they listen to employees, few solicit real-time feedback. For instance, 38% of respondents only solicit employee feedback once a year, 10% solicit feedback every six months, 16% solicit feedback once a quarter, and 18% solicit feedback monthly. By comparison, 3% solicit employee feedback weekly, and 9% solicit feedback daily.
- In addition, 79% believe engaged employees are very important or important to their company in creating a sustainable competitive advantage.
What’s interesting about these survey findings is that there have been several media articles published recently on the fact that employees are stressed and suffering from poor morale due to the recession, and that once the economy rebounds, there will likely be a backlash against employers. So in order for companies to create and maintain a sustainable competitive advantage once they economy rebounds, they not only need to be actively listening to their employees now in real-time to address and resolve any concerns that they have, but also start putting some strategic measures in place to retain their best and brightest employees.
For more information on these and other survey findings, download the report at: www.allegiance.com/voereport
Chris Cottle, VP of Marketing, Allegiance
