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Do Happier Employees Really Mean Happier Customers?

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by Michael Hinshaw
Managing Director
MCorp Consulting

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Conventional wisdom says not just “yeah” but “hell, yeah.” That said, an issue with “conventional wisdom” is that people rarely question it. And since this is a question I was asked earlier this week–and my response predictably slotted into the “hell, yeah” quadrant–I thought it only fair to dig a little deeper.

Do happier employees really mean happier customers? Without giving too much away, the results of my exploration will almost certainly surprise you. Not because happy employees don’t mean happier customers (in general, they do), but because of the potentially worrisome connections between employee performance, their happiness, and customer engagement.

No Shocker: High Employee Engagement Yields Good Business Results. (But…)
Earlier this month, RagingWire–a data center firm that boasts the highest customer loyalty scores in its industry–published an excellent blog post about employee engagement and customer experience. RagingWire believes these scores wouldn’t be possible without a real dedication to employee experience, which it has encapsulated into 10 handy tips (see them at right). It’s hard not to agree. After all, it seems logical that companies with a commitment to employee satisfaction, development, and well-being would have at least some market advantage.

But these aren’t exactly new ideas. Gallup, for example, has been promoting the “12 Elements of Great Managing”–which are all about inspiring top performance in employees–since at least the ’90s. And its latest Q12 research quantifies the (significant) gap between companies at the top and bottom quartiles of employee engagement. In it, Gallup found that organizations in the top quartile had:

  • 22 percent higher profitability,
  • 21 percent higher productivity,
  • 10 percent higher customer metrics,
  • 37 percent less absenteeism, and
  • Up to 65 percent less turnover.

No brainer, right? Faced with numbers like these, what company wouldn’t think that employee engagement should be a top priority? What we want to know, though, is whether happier employees mean happier customers.

Since the top employee-engagement groups beat the bottom by only 10 percent in customer metrics, it seems the answer is a resounding “maybe.” What gives?

Fly In The Ointment
The title of RagingWire’s blog post, “Would Your Employees Recommend You?” reminded me of a recent Harvard Business Review post, titled “Your Least Engaged Employees Might Be Your Top Performers. ” In it, the author quotes from recent research from Leadership IQ, which states that in 42 percent of companies studied, low-engagement employees outperform high-engagement employees. You may have to read that line twice. I did.

Yet while reading the research, a crystal-clear picture of these high-engagement, low-performance employees emerges. They are happy and engaged, in part because they actually aren’t held that accountable and/or don't have to work as hard as high performers. Expectations are lower, and their jobs are easier. As a result, they’re even more motivated to “deliver 100 percent at work” than high- and middle-performers.

These higher-performance, lower-engagement employees care a great deal about their work, have loads of intrinsic motivation, and lots of talent–but often don’t feel empowered, encouraged, or recognized.

Bottom Line? Accountability Matters
Between the Gallup and Leadership IQ research, it’s easy to think these two pieces of research conflict. I’d suggest the answers are a bit more nuanced and point in a direction that may help explain why customer metrics track less with employee engagement.

While higher-engagement/lower-performance employee want nothing more than to please your customers, they may not be as willing (or as able) to make the difficult choices sometimes required to satisfy customers and meet business objectives.

That brings us back to the question at hand, and the “dangers” of conventional wisdom. Because while happy employees do help deliver happier customers, high-performing employees can help to deliver happier customers and business results.

The trifecta is this: happy, high-performing employees, happy customers and stunning business results. If you're like the most successful firms I’ve worked with, then getting there means aligning your reward systems with your customers wants and needs–and ensuring that your desired outcomes are clearly defined, and that everyone is held accountable for their results.

Get that in place, and it gets easier to imagine all of your employees contributing to customer happiness–boosting customer metrics, while driving profitability and productivity along the way.

Which, when it comes to customer loyalty, might help you go from reading about companies like RagingWire to becoming a company like RagingWire.

About Michael Hinshaw

Currently managing director of customer experience innovation firm MCorp Consulting, Michael Hinshaw radically improves how companies connect with, serve and profit from their customers. On CMO.com, he shows executives ways to drive value for their firms by transforming customer experience, and the interactions and processes that support it. Michael is also co-author with Bruce Kasanoff of the best-selling book "Smart Customers, Stupid Companies: Why Only Intelligent Companies Will Thrive, and How to Be One of Them.

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