Back in the 1990s, a group led by James Heskett of Harvard Business School set out the Service-Profit Chain, which outlined the relationship between traditional ‘soft’ metrics such as employee engagement and customer satisfaction and hard business KPIs such as profitability.
Essentially it showed that engaged, happy employees deliver better, more valuable service to customers, which leads to satisfaction, loyalty and consequently profit and growth.
Over the subsequent 20 years, the Service-Profit Chain has helped many organisations to increase their revenues and financial performance by focusing on employees first.
However, while extremely powerful, the Service-Profit Chain flows in one way – from employees to customers and then to business growth. In today’s more complex, interrelated business world this is potentially limiting.
Introducing the Winning Triangle
The Winning Triangle builds on the Service-Profit Chain. It combines Voice of the Customer and Voice of the Employee feedback, linking its impact to financial KPIs such as profit, turnover and margin.
By joining these separate areas up, it gives your feedback a chance to transform your operations and strategy in real, concrete ways. Unlike the Service-Profit Chain it recognises that each point of the triangle affects the others, in a non-linear manner.
It also helps HR to demonstrate its commercial importance in the boardroom by linking these people metrics to core business measures in this way. The rewards for unlocking the insight located in the triangle’s centre are substantial.
Let’s first dig a little deeper into the three separate feedback and data streams before discussing the benefits and challenges of integrating them.
The Customer Voice
Most organisations already use a combination of Voice of the Customer (VoC) programmes, market research and tools such as online communities to get closer to customers and deepen understanding.
To work well, you need to structure these so that you’re encouraging feedback from customers in ways that fit in with today’s mobile, time poor, consumer lifestyle, such as through short, event-driven surveys at particular points on the customer journey, for example. As well as this, increasingly organisations are investing in online communities that involve customers in the co-creation of new products and services.
The Employee Voice
Listening to employees is crucial to retention and engagement, and more organisations are now moving beyond a single annual employee survey to collect feedback more frequently across the employee lifecycle.
Developing a better understanding of what staff think and feel helps identify ways to keep them engaged and happy, which in turn is proven to increase productivity, enhance the service given to customers, and improve retention rates.
Business and Finance KPIs
We live in a world of data, and organisations rely on business and finance KPIs to achieve their goals, improve performance and help decision making at both a tactical and strategic level. These range from financial metrics, such as revenue, sales, productivity and profitability data, broken down by product line or by region for example to more marketing led measurements such as market share, retention rates and customer lifetime value.
Looking at data from these areas in isolation, while it’s useful, does not provide the same rich, multi-layered insights you can extract from a combined, integrated, perspective. For example, being able to measure the sales impact of improved customer experience or the financial savings of increasing staff retention rates, are both powerful business level metrics.
Linking feedback to financial KPIs in this way demonstrates its importance to the business in concrete terms, making it central to how an organisation operates, increasing agility and performance.
No wonder that a Questback survey found that 83% of companies who linked feedback from customers and employees say it led to an improved customer experience. 75% felt it contributed to more motivated and engaged employees, and nearly six in ten (58%) said it allowed them to gain insight into activities that linked directly to business objectives.
Over half (51%) were able to connect positive customer experiences to specific, engaged employees.
What are the obstacles?
While the potential benefits of the Winning Triangle model are clear, there is still some way to go before integration is widespread. 64% of organisations questioned in Questback’s study fail to integrate feedback at all, and only 36% said they wholly or partially integrate data from customers and employees. Why?
One of the main reasons is that customer service, HR and finance all operate independently, with separate departmental systems that make it harder to combine data streams. In Questback’s survey over a third (36%) of companies with no integration plans said they were not combining different feedback data as they felt it was too complex to link their existing systems.
This means that the majority of those integrating feedback rely on costly and error prone manual processes; either manually exporting data (51%) or comparing printed reports (37%). As well as introducing potential errors, these approaches fail to deliver real-time insight, which is increasingly vital given 24×7 operations.
To overcome this silo-based approach, forward looking organisations have implemented a fully integrated platform that brings together data from across the enterprise. This provides management with the ability to extract insights with easy to use dashboards, linked to business KPIs.
In most industry sectors today, the combination of ever-more demanding customers, falling customer loyalty and increasing competition mean it’s crucial to make informed decisions and be agile in exploiting opportunities and heading off threats.
Creating a Winning Triangle between customer, employee and financial KPIs is therefore key to tackling these challenges and improving business performance and strategy, now and in the future.