Employee Engagement, Customer Satisfaction & Profitability

A Research Summary for Human Resources Leaders

Major Issues Facing Human Resource Executives

HR leaders are unquestionably facing daunting challenges these days... Employee engagement levels are at an all-time low, and engagement levels of top performers and high-potentials have fallen the furthest of any group. Additionally, surveys reveal that 60 percent of employees plan to leave their current employer within a year, and another 21 percent are actively taking steps to prepare to leave. Besides these very troubling workplace challenges, HR leaders are regularly expected to deliver on the following organizational goals:

  • Create a positive work environment; encourage and reward excellent performance.
  • Improve employee engagement and productivity; reinforce desired workplace behaviors.
  • Reduce turnover, attract and retain critical talent; become an employer of choice.
  • Increase organizational growth and profitability; build support for organizational goals and values.
What This Research Has Revealed
 

This study uncovered a direct link between employee satisfaction and customer satisfaction, and between customer satisfaction and improved financial performance. Organizations with satisfied and engaged employees have customers who use their products more, and increased customer usage leads to higher levels of customer satisfaction. 

Further, the research reveals that it is an organization’s employees who influence the behavior and attitudes of customers (even when those employees don’t have direct customer contact) and it is customers who drive an organization’s profitability through the purchase and use of its products. Ultimately, customers who are more satisfied with an organization’s products are less expensive to serve, use the product more, and prove to be more profitable customers.

Ideas for Applying This Research 
to Your Business

The compelling link found between employee satisfaction and customer satisfaction offers Human Resource leaders a powerful means for strategically impacting their organizations’ overall performance while remaining true to their core departmental objectives.

  • HR executives can utilize this research for making their case that engaged employees directly impact Corporate, Sales, and Marketing objectives for building customer loyalty and brand strength, customer share of wallet, and driving both top and bottom line revenues. 
  • Because the research found that even employees who aren’t customer-facing drive customer profitability, HR is uniquely positioned to evangelize the need for improving employee engagement levels in all areas of the company or risk squandering additional corporate growth opportunities.
  • HR leaders would be well-served by enhancing communications with employees, as this was found to be a key organizational characteristic for explaining employee satisfaction, which is a key antecedent to employee engagement. 
  • Organizational culture and interaction between managers and employees with regards to supportiveness, goal setting, and job design were also found to be key drivers of employee engagement in every department. Getting leaders and managers across the whole organization to embrace the importance of taking action on these issues is a consistent challenge for HR and an area ripe for increased and sustained focus by HR.

Research Basis
This executive summary is based on the groundbreaking research study, Linking Organizational Characteristics to Employee Attitudes and Behavior – A Look at the Downstream Effects on Market Response & Financial Performance, conducted by Dr. James Oakley, Purdue University at the direction of Forum Research Chair, Dr. Frank Mulhern, Northwestern University. While the original study was published in 2003, the basis remains relevant today. 
About the Forum 

The Forum: Business Results Through People, (formerly Forum for People Performance Management and Measurement) affiliated with Northwestern University, is an organizational trust for thought leadership advocating that the most effective way business leaders can create and sustain organizational value is through their partnership with people. The Forum promotes a people-centered leadership approach by: providing relevant, provocative, and actionable academic research; creating a platform for leaders to dialog, network and benchmark practices; delivering ideas for practical action and experimentation; and, building and supporting a community of champions for people-centered leadership.

 

Click here to download a PDF of this paper.