The Relationship between Employees, Customers, and Business Success

Wouldn’t it be great if a magic crystal ball existed that would reveal to you the secrets of what your customers want as well as the secret to keeping them returning over and over to your business to increase profitability?

It does exist.

Only there is nothing magic about it – it is scientific.

We all know that customer satisfaction is vital to the success of any business. In a recent article in The McKinsey Quarterly Marc Beaujean, Jonathan Davidson and Stacey Madge point out the proven fact that retaining customers costs less than the costs of acquiring new ones. In order to reveal the mystery of how to keep customers satisfied, we must also be knowledgeable about the drivers of our employees’ behavior. Why? Because as Guy Herrington and Wendy Lomax point out in an article describing the results of their study on employee and customer satisfaction, the two are intimately related. According to their research and the research of many others, there is a direct relationship between employee job satisfaction and a customer’s repurchase intention.

This should not surprise anyone since most of us are both simultaneously someone’s employee as well as the customer of many other businesses. All we need to do is think about our own experiences to find examples of the importance of the relationship between employees and customers. Have you ever had a job you were very dissatisfied with? If so, how did it affect your attitude and your job performance? If you had direct contact with customers, how did it affect the way you interacted with them? And as a customer have you ever interacted with an employee that obviously did not like their job? Not only can their nonverbal behavior let you know that they do not want to be doing their job, but sometimes they will tell you directly!

I can’t tell you how many times I have asked clerks who were waiting on me how they were doing only to have them say something like, “I’ll be great in an hour and a half!” Thus they are indicating that they will be much better when they get off work and no longer have to wait on customers – like me. I have even had people helping me in customer service tell me that they were in the process of looking for another job! Incidents like these do not give a customer a favorable impression of a business and certainly do not contribute in a positive way to intent to return. In fact, such employee revelations can make customers feel uncomfortable. Psychologists tell us that this negative emotional state can become associated with your products or services and make the customer want to avoid them all together. However, Walter Greene, Gary Walls and Larry Schrest, in an article in the Journal of Services Marketing, state that organizations delivering high-quality service maintain or increase market share and they have a higher return on sales than do their competitors.

So we know that employee and customer satisfaction are interrelated and that their behaviors affect each other and the financial performance of the organization. Exactly how are they interrelated? The root causes, also known as drivers, of employee behavior influence overall employee engagement. The root causes of employee engagement (job satisfaction, management style, and culture), in turn, influence overall customer satisfaction and the customer’s willingness to recommend the business. The root causes of customer satisfaction and willingness to recommend ultimately drive financial performance.

Now, back to that crystal ball. Understanding the relationship between these variables is helpful. But how do you “fill in the blanks” with the specific root causes or drivers of employee and customer behavior? This is where science plays an indispensable role.

Scientific survey methods can enable you to “read the minds” of your employees and customers and “see into the future” in regards to their behavior. Keep in mind that it is best to start with your employees since their behavior and attitudes influence your customers. A scientifically sound survey instrument used conjunctively with state-of-the-art statistical techniques can enable you to identify a small number of drivers that are influencing the attitudes and behavior of your employees overall and more specifically, the root causes of their job satisfaction and their perceptions of management style and culture. Once these root causes are identified, your next step is to design and implement strategies that will improve your employees’ perceptions of these root causes. Improving employee perceptions of these root causes will have a positive influence on their behaviors and thus, you will see improvement in customer perceptions as well.

To further improve customer relations and, of course, profits you must also survey your customers. As with employee surveys, customer surveys are invaluable if they are scientifically sound. I am not referring to a 5-item questionnaire (like the too brief instruments I have seen at many of the businesses I patronize), but rather I am referring to a comprehensive, carefully worded instrument designed to measure both obvious and subtle influences of customer behavior. Organizational psychologists have specialized doctoral-level training in survey instrument design and are the best choice for this task.

Once you are knowledgeable about the root causes of your customers’ overall satisfaction and their willingness to recommend your business to others, you will have the “secrets” of increasing business and profits. The next part of the process is taking action on these root causes. Improving customer perceptions of the root causes will further increase their desire to continue doing business with your company. This leads to increases in sales and profits. Taking action on customer root causes is not the final step, however. The survey process needs to be ongoing. Why? There are two reasons. First, resurveying is the only way to know for sure if the strategies you implemented had the desired impact. Secondly, human behavior is not static: it changes over time. You must continue to keep your finger on the pulse of your employees and customers in order to stay abreast of the root causes of their attitudes and behaviors. By doing so, you can adjust your strategies when necessary and continue to see increased profits. Let’s look at what this process revealed when applied with a financial advising company.

Recently, the National Business Research Institute (NBRI) conducted a scientific survey of the employees and the customers of a large financial advising company. Starting with the employees, NBRI’s survey revealed three root causes of Job Satisfaction that were driving almost half of the items on the employee survey. The item identified as the primary root cause was: “The degree of authority I have to do my work is appropriate.” The item identified as the secondary root cause was: “The amount of recognition I receive is appropriate.” “My supervisor treats me with respect” was the tertiary root cause. The root causes were positive, meaning they were having a statistically significant, positive impact on the items they influenced.

When Management Style and Culture were examined, NBRI also found three root causes at this financial advising company. The first item identified as a root cause was: “Communications within the company are clear.” The second and third root causes were: “There is team spirit at this company” and “I understand what is expected of me in my job” respectively.

The second part of the survey, measuring customer attitudes and perceptions, revealed three root causes of overall customer satisfaction. In order of significance they included: “The company makes it easy for me to do business with them,” “The company provides me with accurate information,” and “The company understands my business.”

The last piece of crucial information was the root causes of customer willingness to recommend. Once again, three root causes were identified. The primary root cause was “The company personnel exhibit integrity.” “Feedback from advisors is important to the company” and “The company makes competitive products available” were the second and third root causes, respectively.

It is coincidence that many of the variables studied at this company had three root causes. The number of root causes varies by sample as does the specific drivers identified. Any interventions made by this company that improve customer perceptions of the root causes will directly and significantly increase customer overall satisfaction and willingness to recommend and therefore, will increase financial performance. The relationship is bi-directional meaning that decreases in perceptions of the root causes will directly decrease financial performance.

Leonard Berry has written a book called Discovering the Soul of Service: The Nine Drivers of Sustainable Business Success. In the book he states that “the single most important factor in building a lasting service business is not a matter of savvy business practice, but of humane values.” As the title indicates, he goes on to identify nine drivers of business success. I both agree and disagree with his approach. I agree that in order to have a successful business you must place a high emphasis on the people involved; both the employees and the customers. The treatment of both will directly impact your success. However, I disagree with Berry’s identification of nine drivers. While there are issues that are common to employees of all businesses and industries and likewise issues common to customers of all types of businesses, drivers are unique. The only way to know what influences your employees and customers is to invest in scientific surveys. They will pay for themselves with the valuable information for business success that they provide.

If you would like to learn more about how employee and customer surveys can help you “see inside the crystal ball” contact NBRI at 800-756-6168.

Dr. Jan West, Ph.D.

Organizational Psychologist

National Business Research Institute, Inc.