To what extent should executives concerned with fiscal “bottom-lines” focus on employee satisfaction and employee engagement? According to extensive research by Harter et al. (2001), it seems the answer is “a great deal.” Satisfied employees lead to better performers, who, in turn, increase both customer satisfaction and loyalty, driving financial profitability even higher. This series of relationships is known as the Employee-Customer Profit Chain.
Research from the hospitality sector reveals that employee satisfaction accounts for 32% of the customer satisfaction experience, which in turn drives 24% of financial performance (Chi and Gursoy, 2008). In laymen’s terms, this means that contented employees make for happy customers who are willing to come back and spend more. In fact, researchers found that organizations demonstrated a 4% increase in profitability when employees were highly engaged according to a meta-analysis study that examined 36 organizations across a variety of industries, including banks, call centers, health care units, dealerships, processing plants, and retail outlets (Harter et al., 2001). At the business unit level these results were even more striking; highly engaged employees, or those performing in the top quartile for satisfaction, outsold comparatively dissatisfied business units by an average of $100,000 a month.
In the late 1990s, Sears capitalized on the Employee-Customer Profit Chain to great effect. By focusing more heavily on employee engagement, an ailing Sears was able to make an impressive fiscal turnaround by increasing customer satisfaction, further highlighting the importance of monitoring employee engagement (Rucci et al., 1998). It is evident that each employee-customer encounter – every sale, every conversation – creates or erodes value for a company.
For organizations seeking continuous improvement, NBRI has solutions. We will work with you to select appropriate assessment techniques to identify non-financial drivers of strategic success including, but not limited to, customer feedback, employee feedback/assessment, and market research. NBRI provides pure, clean data that empowers organizations to make meaningful and appropriate changes. Our deep analytics pinpoint areas for organizational improvement, while our best practice process for addressing root causes ensures a focus on the right issues. In fact, our research shows that companies who successfully apply our prescribed principles outperform peers by 26% in gross margins, and 85% in sales growth. Why don’t you see what NBRI can do for your organization?
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Chi, C. G., Gursoy, D. (2009). Employee satisfaction, customer satisfaction, and financial performance: An empirical examination. International Journal of Hospitality Management, 28, 245-253.
Harter, J. K., Schmidt, F. L., & Hayes, T.L. (2002). Business-unit-level relationship between employee satisfaction, employee engagement, and business outcomes: A meta-analysis. Journal of Applied Psychology, 87(2), 268-279.
Rucci, A. J., Kirn, S. P. & Quinn, R. T. (1998). The employee-customer-profit chain at Sears, Harvard Business Review, 76(1), 82-97.