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Neil Davey

Spotted Zebra

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How is customer experience affected by employee engagement?


It's HR in Retail month on HRZone! We're focusing on all things retail – check out our HR in retail hub to read all our great content!

When it comes to the root causes of customer complaints, evidence demonstrates that it is staff performance that is the biggest culprit.

A survey of 3,000 consumers by the Institute of Customer Service (ICS) reveals that staff attitude and staff incompetence are rated the “most annoying or frustrating” service problem, while “people-related issues” account for a whopping 62% of all complaints.

This is quite logical – after all, “Your employees are the face of your company”. However, despite every company being familiar with this phrase, the reality is that employees are often an under-developed and overlooked aspect of the brand.

In fact, research indicates that staff have been marginalised so long that most of today’s employees are not engaged at their workplace at all, which has dramatic implications for staff performance. Worse still, engagement levels continue to tumble.

This concept of ‘employee engagement’ really came to the fore in the UK in 2009, with the publication of the influential research paper ‘Engaging For Success’ by David MacLeod and Nita Clarke. Tackling the myths and misconceptions around the issue, the paper was so convincing in its demonstration that employee engagement is a performance-driven concern, that it subsequently led to the creation of the UK taskforce Engage For Success, backed by the Department for Business, Innovation and Skills.

Its chief achievement was in presenting a compelling case that employee engagement was correlated to business corporate profitability at the macro level. For instance, it highlighted work from the IES and the Work Foundation that indicated that if organisations increased investment in a range of good workplace practices which relate to engagement by just 10%, they would increase profits by up to £1,500 per employee per year. Employee engagement, it concluded, positively impacts levels of productivity, absenteeism, retention and innovation.

Elsewhere, other outcomes have been touted – lower accident rates, for instance and fewer conflicts. But there are also connections between employee engagement and customer-focused outcomes.

Employee engagement and customer experience

A correlation between employee engagement and customer service levels have been mooted for many years – it is now 20 years ago that the Harvard Business Review article ‘Putting the Service-Profit Chain to Work’ detailed research proposing happy employees = happy customers = happy shareholders.

However, research into the influence that engagement has on service has traditionally been reported at what Beyond Philosophy’s Michael Lowenstein dismisses as “macro…weak, tea, incidental levels”.

He points to a 2006 Gallup report that examined over 23,000 business units to highlight that companies with engagement levels in the top quartile averaged 12% higher customer advocacy than those in the bottom quartile. Elsewhere, David Ulrich, a professor of business at the Ross School of Business at Michigan, has conducted research that he suggests demonstrates that for every 10% increase in employee engagement levels, a company’s customer service levels go up by 5%, and profits by 2%.

But while most studies highlight correlation between employee engagement and business outcomes, there are some that go further and appear to demonstrate causality. A 2012 study published in the Journal of Occupational and Organizational Psychology, for instance, proposes that engagement influences customer satisfaction. Examining the organisational commitment of 755 retail bank employees, along with financial performance and customer satisfaction of the business units they worked in, researchers Silvan Winkler, Cornelius König and Martin Kleinmann demonstrated not only causation between engagement and customer satisfaction but also the size of the effect.

More recently, research by Answers has paired the results of its 2014 Experience Index with employee engagement data from its American Employee Study. The findings, it claims, quantitatively validate the causal relationship between retail store employee engagement and customer satisfaction, illustrating that employee engagement has a direct, positive effect on customer satisfaction for two dozen of the top global retail brands in the US.

When you’re having an interaction with somebody in service, their levels of engagement need to be high.

Paul Beesley, a business performance coach at Beyond Theory, and member of the Engage For Success Guru Steering Committee team, is unsurprised that there is growing statistical evidence to support the connection. “Service is all about energy and enthusiasm and emotional engagement, and so it is so evident when you’re being served by someone who is disengaged,” he explains. “You think about your own personal experiences – when you’re actually having an interaction with somebody in service, their levels of engagement need to be high. It’s pretty obvious and intuitive, but there is now evidence to show that it’s highly correlated.”

Plummeting engagement

So a growing weight of evidence appears to demonstrate not only a correlation between employee engagement and service levels and customer satisfaction, but also causality. And there is a reason why this should be a huge concern for businesses – levels of engagement are horrendously low, and particularly so in the UK. A study by Gallup, for instance, estimates that the average proportion of employees engaged at their work could be as low as just 13%.

To make matters worse, despite the high-profile MacLeod report and the Engage for Success initiative, levels of engagement are continuing to fall – with British staff reporting some of the worst scores in the world. In a survey of more than 7,000 employees across 20 countries by global research firm ORC International, the UK was placed 18th out of 20 countries, with UK employee engagement decreasing over the past 12 months in every category measured by the study. 

What is also concerning is that research by Netsurvey and Bain indicates that engagement levels are lowest in sales and service functions, where most interactions with customers occur. Indeed, the Gallup 2012 Employee Engagement Index estimates that a massive 50% of service workers are not engaged, and an additional 22% are actively disengaged.

In light of these findings, it becomes increasingly clear that any holistic attempt to manage the customer experience that does not tackle employee engagement is missing an important piece of the puzzle. But while employee engagement is a concept that is only now being embraced as part of the process of customer experience transformation, for other disciplines it is a topic that has long been under discussion.

For HR in particular, employee engagement is a chief concern, as businesses look to manage related issues such as staff absence and attrition. However, this doesn’t mean that the dark arts of engagement have been mastered by HR – far from it. 

Many don’t really understand exactly what an engaged employee looks like, nor how to create one.

“As the idea of a job for life becomes a distant memory, many organisations are realising that they must create a working environment that will encourage their best employees to stay for many years as they also work to recruit top talent. As such, ensuring employees are ‘engaged’ is often central to their game plans, but many don’t really understand exactly what an engaged employee looks like, nor how to create one,” notes Derek Irvine, vice president of client strategy and consulting at Globoforce.

Drivers of engagement

So what are the components of an engaging work culture?

Analysis conducted by The Conference Board in 2006, for instance, identified 26 common drivers of engagement amongst 12 leading engagement research companies, 8 of which were common to all:

  • Trust and integrity. How well do managers communicate and ‘walk the talk‘?
  • Nature of the job. Is it mentally stimulating day-to-day?
  • Line of sight between employee performance and company performance. Do employees understand how their work contributes to the company’s performance?
  • Career growth opportunities. Are there opportunities for growth within the business?
  • Pride about the company. How much self-esteem do the staff feel by being associated with their business?
  • Coworkers/team members. How much influence do they exert on the employee’s level of engagement?
  • Employee development. Is the company making an effort to develop the employee’s skills?
  • Relationship with one’s manager. Does the employee value relationships with managers, and is there trust and credibility between the levels?

Elsewhere, the MacLeod report proposed four drivers to employee engagement. 

  1. Employee voice. An empowered employee will have a voice. Where employee views are sought out they should be listened to and visibly acted upon.
  2. Integrity. Behaviour throughout the organisation is consistent with the stated values, leading to employee trust and a sense of integrity. The larger the gap between the two, the more distrust exists.
  3. Engaging line managers. Studies show that most of the variation in engagement levels is down to the line manager.
  4. Leadership. Leaders need to be visible and in touch with their front line staff.


But even with a growing awareness of the drivers of engagement, the task still remains challenging, not least because businesses must adapt their engagement approach for the different individuals they have in the organisation.

“Some organisations now have five generations of employee within them; as such whilst they will be motivated by the five engagement methods we describe, this will be in very different ways,” says Jo Harley, managing director of people engagement specialist Purple Cubed. “Businesses must therefore look at their workforces, as they would in any marketing exercise, and really get to know what makes their individual people tick. A sheep-dipping approach doesn’t work for engagement.”

Employees are getting the power. They are willing to band together and ask for change because they are expecting more of their employers.

And things are potentially reaching a head, says Eric Feinberg, senior director for product strategy at ForeSee, an Answers solution. “Employers used to be in charge. And then 10 years ago, with the advent of the internet, customers seized the power, realising that together you can effect change in a massive way. And I think presently we’re seeing that employees are getting the power. They are willing to band together and ask for change because they are expecting more of their employers.”

It’s therefore good news that employee engagement is now on the radar of most businesses. And while the impetus to drive engagement has traditionally been the sole concern of the HR department, the growing awareness of its influence on the performance of other departments, such as customer service, is proving to be a catalyst for activity.

“It’s a positive outlook for employee engagement,” says Harley. “Businesses and the government are recognising the value of investing in this area and so it’s not so much the mythical business creature it once was. This shift has been as a result of research and more case studies in the area proving that getting it right works not just for the employee but for the business too in terms of brand reputation and profitability.”

Year of the employee

Customer experience leader Bruce Temkin, who is also chair of the Customer Experience Professionals Association, believes that employee engagement will also feature far more prominently on the agenda of customer experience leaders as time goes on.

Having referred to 2015 as “The Year of the Employee”, he explains: "As companies increasingly focus on customer experience, they'll recognise the need to make internal changes. Successful customer experience efforts will realise that the key ingredient to success is their employees."

But while customer experience management and employee engagement appear to be heavily connected, and this connection is increasingly being acknowledged, there is still much work to do to bridge the gap between them.

Colin Shaw, founder of customer experience consultancy Beyond Philosophy, explains: “They are intrinsically linked, and if you’re trying to create an experience you need to be aligning your employees to it well. You need to find out what drives value for your employees just like you need to find out what drives value for your customers. You need to design your experience for your customers and what a surprise you need to design your employee experience as well.

“However, at present you’ve got employee engagement on one side of the fence, and you’ve got customer experience on the other side of the fence. Both of those topics are being seen to be important to business. Both of these strategies are becoming common now. But I don’t see a lot of organisations pulling them together.”

While Temkin Group research indicates that most companies had employee engagement efforts underway, less than half consider these to be significant and well-coordinated across the enterprise. Clearly, much work is still required to truly tackle the issue of employee engagement, let alone integrating it into a holistic engagement strategy that incorporates customers as well as staff.

But with Institute of Customer Service research highlighting that customer satisfaction levels are dropping in line with the plummeting levels of employee engagement, this is a matter of increasing urgency for modern businesses. 

Further reading from MyCustomer: Time to integrate staff development and customer service?

It's HR in Retail month on HRZone! We're focusing on all things retail – check out our HR in retail hub to read all our great content!

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Neil Davey

Senior Content Manager

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