Allegiance Blog

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.

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

In the consulting work that I do with companies, I find that businesses looking for ways to increase their sales and profits often overlook a critical ingredient: employee engagement.

The reason this is an important ingredient is because there is a direct connection between employee engagement and customer engagement, otherwise known as “The Spillover Effect”.

For example, in their book, Return on Customer: A Revolutionary Way to Measure and Strengthen Your Business, Don Peppers and Martha Rogers, founders of management consultancy Peppers & Rogers Group, emphasize that “Motivated employees are clearly more productive and keep a company’s employee churn rate down, which lowers expenses. Yet they also have a profound impact on customers as well by creating positive experiences through efficient and smart customer service.”

And, my colleague, Dr. David Whitlark and I, have also found this to be true. For example, in a large research study that we conducted on engagement, we found that one out of every 10 customers was hurt by disengaged employees. We also found that the work environment combined with employee attitudes has a significant impact on a customer’s perception of quality. For this reason, it’s important that companies lead with their strengths, emphasize the positives, and remove the barriers that lead employees to be disengaged with their jobs, their organization and customers.

After all, in the end, the Spillover Effect is much more than a discussion about employee happiness. It is about emotional engagement that is continually shared from employee to employee, employee to customer and customer to customer. And it is a concept that encompasses and impacts all aspects of a business, ranging from company culture to profits.

Companies that understand and leverage the Spillover Effect to their advantage will realize higher customer and employee engagement, and ultimately, greater profits.

To learn more about this topic, read the new Allegiance “Spillover Effect” white paper.

Dr. Gary Rhoads, Allegiance Loyalty and Engagement Expert

In the current economy, there is a very real and growing concern about how to gain and to keep customers. This was apparent at the 2008 North American Conference on Customer Management (NACCM) this year, with attendance lower than it has been in some time. The irony is that much of what was presented provided insight on how to reach out and hold on to customers during tough times.

In stressful times such as these, many companies tend to pull away from their customers, and may even cut back on ‘satisfaction and loyalty’ programs to try and improve their bottom line. This, unfortunately, is a mistake because it cuts at the very heart of what we all need to be doing during this time – engaging customers to the point that they are willing to ride out tough economic times with us, rather than viewing us as yet another business that really doesn’t care about its customers and is willing to drop them or cut out the programs and products they care about most as soon as times get tough.

This was part of the overarching message at NACCM, including a conference speech I gave on engagement—that it’s important to continue to invest in improving customer engagement. However, one must be smart about how one goes about it. And the five most important take aways from this year’s conference were:

Engaging your customers (moving beyond ‘satisfaction’ and ‘loyalty’) will create a relationship between your customers and your company and/or its product that will help you weather the economic storm or even any mistakes your company may make – engaged customers really do stick with you and spend more money!

Use tools that are as effective as possible with the least expense (web-based tools are ideal for this) – tools that will not only provide you with data, but will help point you toward what is really going on with your customers

Don’t just ‘survey’ your customers – use tools that will provide you with leading indicators that will allow you to predict how a much larger group of customers will react based on the responses of a smaller group.

Don’t forget your employees! Engaged employees have a positive effect (a ‘spillover effect’) on the engagement of your customers.

Engaging your customers means taking action –Even small improvements can mean an increase in your customer’s share of wallet, positive word of mouth and referrals and increased retention and productivity from employees

The key in all of this is to overcome the reactionary fear that comes with a downturn in the economy and to look beyond. By spending smarter and in the right areas (what area is more important than those people who allow us all to be paid?) we can do more than survive…we can continue to thrive.

Kevin Mellander, Director Customer Care, Allegiance

The most expensive things in this world are those that are rare. What you treasure and that you protect the most are those things that cannot easily be replaced. If you think about it, the highest thing you and your customers value in common is the most important element in your company’s products and services.

I most value my time. Time is rare indeed. It is fleeting. It cannot be preserved and saved for later. You either make the most of the moment you are in or it is lost forever. How can you best measure how you are valued by another person? Measure how much and the quality of their precious time they spend with you.

Allegiance has spent significant time and money writing and speaking about engagement. Engagement is the emotional bond that can (and I propose must) be built between an employee and his/her company, as well as between a company and its customers. We have worked hard to build technologies that can measure this bond. We have worked equally hard helping our customers not only implement these technologies but also to work with their people to improve the processes surrounding the measurement and improvement of engagement.

Lately, we have changed our thinking about engagement. We have begun to understand that engagement isn’t some intangible concept, but like time, it is an equally precious resource. In fact, engagement IS time.

Look at your most valued customers. They are usually most valued because they are engaged with you—and therefore spend their money with you. How do you know they are engaged? It is because they spend their precious time with you, usually in providing feedback about your products and service levels.

Look at your most valued employees. Once again, we value them because they give of their time. These most valued employees often give over-time. They get things done, quickly and timely, and as a result, we profit from them.

May I suggest a few time-based things you can do to increase customers’ and employees’ engagement:

Appreciate their time by word
When a customer or an employee spends time providing feedback, celebrate! Take time to thank them vocally as quickly after they spend time with you as possible. Follow up (with more time) to send them a note of appreciation. The more time and effort you spend on the note the better.

Appreciate by spending your time
Spend some time to evaluate the suggestion and evaluate its potential positive impacts on your business. Further explore how it might impact other less obvious elements of your processes. Then make the changes necessary. And of course, communicate back the results and how much you appreciate those results.

Reward
Share with them some of the rewards of the improvement. This may not always need to be monetary. Customers may appreciate even more the company that spends their time to reward engaged behavior. Perhaps you can reward a customer who improves your bottom line by offering your best consultants’ or executives’ time to analyzing and improving their business.

John Epeneter, VP Product Management, Allegiance