Should You Put Employees or Customers First?

two doors to choose the best option: employee engagement or customers first

There is much debate in the business world about which orientation is the best choice when you are looking to succeed…should you strategically and culturally put employee engagement or customer satisfaction first?

While employees and customers are critical ingredients to any business, you cannot realistically focus and invest equally on both from a strategic and cultural perspective.  So which is more critical to the success of your business?

Putting Employee Engagement First
This side of the debate argues that if you engage your employees they will exert more discretionary effort, be better brand and company advocates and remain loyal workers for a longer period of time.  This equates directly to greater financial returns and more fruitful interactions with customers.

Dating back to the 1970’s concept of a Service-Profit-Chain, the overarching premise is that high levels of employee engagement (back then they called it employee satisfaction) are created from high-quality cultures and policies that empower employees to deliver outstanding results to customers.  These outstanding results create high levels of customer satisfaction and loyalty – and thereby profits.

Additionally, according to four recent studies and our own Best Places to Work Research, disengaged employees and unwelcome attrition create 10% lower profits, almost 20% lower operating income, and up to 30% lower earnings per share. Conversely, higher employee engagement correlates to nearly 20% greater productivity, more than 10% higher customer satisfaction and up to 50% less voluntary turnover.

Editors of Fortune magazine recently put together a list of 30 companies that truly put their employees first. To generate the list, they looked at companies whose work environments supported and encouraged employee development, career growth and overall employee engagement. Not surprisingly, in return, these organizations have been outperforming their peers in terms of employee turnover and performance.

It’s not surprising that Google, famous for treating its employees well, ranked #1 the list. Another example is W.L. Gore & Associates, the manufacturer of Gore-Tex and Glide dental floss. They have an unbelievable 3% voluntary turnover rate for their full-time employees. As one of the 200 largest privately held U.S. companies with approximately $3 billion in annual sales, Gore vows to “reinforce a key element of the culture to take a long-term view.” Beginning with their first annual picnic at the CEO’s home, they regularly and happily continue to include the entire workforce as they celebrate business milestones. The company focuses on fun, philanthropy and making money with superior products. They believe and live their philosophy… engaged employees are simply good for business.

One of our favorite examples of putting employees first is Southwest Airlines.  From their smiles to their low fares, Southwest’s employees are treated better and deliver higher value compared with most other domestic airlines. Southwest has been profitable for 21 consecutive years and was the only major airline to realize a profit in 1992.

Putting Customers First
On the other side of the debate is Amazon that has famously put their customers at the front and center of their business. Amazon goes beyond simple world-class customer service; CEO Jeff Bezos talks about “customer obsession.” The company is regularly at the top of every customer service poll. Clearly, their customers-first approach, which now includes the ever more popular Amazon Prime, has won them record-breaking success. From an employee engagement perspective, the news has been mixed for Amazon.  The word on the street is that working in their retail environment is less than engaging.

Another company that focuses on their customers first is REI. But they are not looking to dominate all retail markets. They understand who their ideal target customers are and what their customers truly value. They recognize their niche and deliver superior service to their members who want dependable outdoor equipment with a no-questions-asked guarantee.

A customer-centric strategy and culture also pay handsome dividends.  Back in 1990, Harvard Business Review calculated that a 5% increase in customer loyalty can produce profit increases from 25% to 85%.

Summing It Up
Clearly both approaches can breed success. So what do we recommend in the end? There is no one-size-fits-all choice. It all depends. While both employees and customers are vitally important, your true focus depends on your core business strategy and how well you align your culture with that strategy.

We know alignment is the key to success. When your strategy and your culture and your talent are in sync, your organization will outperform the competition. Our organizational alignment research has proven that highly aligned companies are 72% more profitable, grow 58% faster and outperform unaligned companies:

  • 23-to-1 in customer retention
  • 2-to-1 in customer satisfaction
  • 71-to-1 in leadership effectiveness
  • 8-to-1 in employee engagement

Clearly define the strategy that will work in your unique situation and then build the culture and talent around it. Employees or Customers first? Make the choice that will work the best for you and your strategy.

To learn more about employee engagement and retention, download our Employee Engagement and Retention Toolkit now

To learn more about customer satisfaction, download 3 “Must Have” Steps to Convert Customer Loyalty into Customer Revenue

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