The Link Between Employee Engagement, Customer Satisfaction and Profitability

What was previously a vague connection between employee engagement and customer satisfaction has become a complex metric that results in improved profitability for businesses. But how do we get to that stage? This Factoid looks at how businesses are measu

It is tempting for some businesses to think of employee engagement, customer satisfaction and profitability as three entirely independent spheres. After all, they are three independent metrics, and are handled by three independent departments – HR, Sales & Marketing, and Finance.

But research, time and time again, shows that the link between all three is unbreakable. Let’s start with those assets that really can drive your business – your employees.

Employee engagement – at the heart of everything you do

Whether your employees are customer-facing or not, their motivation to work for you ultimately dictates their productivity, and your business’s profitability. Human Resources professionals are becoming increasingly clever in their research of how employee engagement plays a role, but evidence-based HR and the application of metrics is still in its infancy.

Studies have found a direct link between employee engagement and customer satisfaction. A 2006 survey by Northwestern University made that correlation from performance strategies through to financial outcomes, and noted that employee satisfaction is best gained through organisational communication. Employees who are customer-facing AND engaged will inevitably provide a better service to the customer.

So where, as a business, do you start? You start from the top. Initiate research into employee satisfaction and find employee metrics that you can measure – and trust – over time. Above all, listen to your employees, and ensure that managers spend at least five minutes a week with each of their team simply to listen.

Customer satisfaction – a result of what you do

First of all, a clarification: a satisfied customer is not a loyal one. We need to understand the crucial difference between customer satisfaction and customer loyalty in order to understand exactly why customers stay with your business, or move on to a competitor.

So how do you measure customer satisfaction and how do you translate it into customer loyalty?

First of all, measure both separately. Your customer loyalty metrics are easy – how many customers do you retain and how many do you lose each year? Customer satisfaction is a more elusive metric, and one that businesses have recently tried to pin down through the Net Promoter Score (NPS).

NPS appears to be a basic score of 1 to 10, yet at its most complex, can provide granular detail on customer satisfaction in areas of your business, providing information that you may not have thought possible. For example, are customers in one area of the country happier than another? Are customers using one product happier than customers using other products? Broken down, you get a much better idea of why customers are satisfied or dissatisfied, and you can then correlate this to customer loyalty.

Profitability = employee engagement x customer satisfaction

Having happy employees and happy customers, you should have a happy Finance Director, but it pays to understand the impact of engagement and satisfaction on the bottom line. Carrying out employee satisfaction research alongside customer satisfaction research allows you to marry the two dashboards and understand what is really driving what.

What is making your employees happy – and helping you retain your most talented people? And what is making your customers happy? Is there a correlation between engaged customer-facing employees and customer satisfaction (research says yes, but your metrics will really inform you), and how can you drive profitability through these two base figures?

The onus is on you, as a business, to bring these three previously disparate areas together and really understand them at a granular level. Bring the departments together as a cross-business team to truly get into the detail of how profitability is driven, and you will gain the edge over your competition.


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Posted on Apr 2, 2012