Connecting Employees with Customers

Although analysis of consumer behavior with respect to durable and nondurable goods such as automobiles and breakfast cereals continues to be done, much recent investigation on the consumer front has been targeted toward services. Because services often are delivered through direct contact with employees, considerable attention can be directed toward understanding the nature of service delivery and the role of employees.

One of the more influential concepts coming out of this work is the service profit chain offered by James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger in a book by that name.^[2] Another model—the employee-customer-profit chain—is a closely related alternative developed by Anthony J. Rucci, Steven P. Kirn, and Richard T. Quinn that was anchored in work done at Sears, Roebuck and Company in the mid-1990s.^[3] Behind both models is an intuitively appealing hypothesis that employee satisfaction and positive employee attitudes more generally are sources of happy, spending customers. Figure 9-1 expresses the cornerstone hypothesis.

Figure 9-1: Positive Employee Attitudes Produce Happy Customers

In reality, the connection between the way an employee feels and the profitability that can be realized from customers is not as simple as this hypothesis suggests for at least three reasons. First, the weight of the research evidence indicates that employees’ satisfaction does not have a strong direct effect on their job performance. How, then, do employee attitudes affect customer behavior? Second, the causal influence actually may run in the other direction; that is, employee happiness may be a result of interacting with satisfied customers. Third, the very business practices and processes that make for good customers also may bring about positive employee attitudes. In the paragraphs that follow we take a closer look at these possible employee-customer connections. These three are not the only possible ways of proposing links between employee attitudes and customer behavior. But they are the prevailing points of view in practice.

The direct connection between employee satisfaction and job performance implied by Figure 9-1 does not hold water. The first comprehensive, research-based assessment of the direct relationship between employee attitudes and job performance was made half a century ago. A. H. Brayfield and W. H. Crockett reviewed the evidence up to 1955 and found a substantial body of research on the topic; that research was based on a wide variety of employees and types of jobs and indicated that the relationship between employees’ attitudes and their performance was weak.^[4] That was a surprising and counterintuitive finding and remains so today, yet it has been borne out by several subsequent accounts of newer research evidence. Scholars have revisited Brayfield and Crockett’s findings every 10 years or so, only to find that their conclusions still hold.

Despite long-standing weak evidence supporting the concept of a direct connection between employee’s attitudes and job performance, which is the core of Figure 9-1, the concept has been extended into a “chain” that links employees to customer profits. Here’s how it works:

Positive employee attitudes ‘ more spending by customers ‘ greater profits

No one will contend that the last link in that chain is invalid. The first link, however, is the less supported one. Could it be that employee attitudes and customer behavior are indeed linked, but in a different way? Figure 9-2 offers an alternative formulation.

Figure 9-2: Happy Customers Produce Positive Employee Attitudes

Recently, one of the authors of this book was engaged in a discussion with an airline employee who after many years of service announced that she soon would be quitting her job. When asked why, she explained that grumbling customers had made her unhappy at work. Heskett and colleagues explicitly recognize that customer satisfaction affects employee satisfaction, invoking the concept of a “satisfaction mirror” to indicate that the attitudes of employees and customers reflect back to each other during person-to-person service encounters. The mirror is an appealing concept, but the evidence offered in its support is nonspecific.

More powerful support for the directionality of influence shown in Figure 9-2 comes from the work of Anne Marie Ryan, Mark J. Schmit, and Raymond Johnson,^[5] who examined employee attitudes, customer satisfaction, unit performance, and other factors over a two-year period in a large automobile finance company. Their causal analyses indicated that customer satisfaction leads to positive employee attitudes. They also tested the hypothesis underlying Figure 9-1 (positive employee attitudes produce satisfied customers) and found it to be unsupported.

Why fuss about whether Figure 9-1 or 9-2 is more correct? Because it makes a difference in practice. From a manager’s perspective, if employee attitudes drive customer results, the task of managing effectively is one of improving employee attitudes and morale. In this case measures should be put in place to monitor employee attitudes since those attitudes are predictors of future changes in the business. In contrast, if Figure 9-2 is correct, all the measuring of morale and efforts to raise employee satisfaction will be misspent. Efforts aimed directly at improving customer satisfaction will generate a higher return and raise employee morale in the process.

Perhaps there is room for both hypotheses under the same tent. That could be the case if one makes a substitution of sorts. If one returns to Figure 9-1, takes out the words employee attitudes, and substitutes the words employee capabilities or skills, the hypothesis becomes more tenable. That is, knowledgeable employees (knowledgeable about the company’s services, products, and customers) who have the right job and customer interaction skills (for example, problem-solving skills and social skills such as listening and negotiating) can drive customer response. Another way to accommodate the two hypotheses is to put them in a larger context, as in Figure 9-3.

Figure 9-3: A Third Alternative

Figure 9-3 emphasizes the contributions of company practices and conditions to employee and customer behavior. It asserts that those contributions are the prime determinants of how employees and customers respond. It also acknowledges that employee attitudes—and capabilities—and customer behavior are related. In particular, customers influence employees’ attitudes and vice versa. The implication of this set of relationships is clear: Management should focus on getting the system of company practices right. Success with customers and employees will result.

Benjamin Schneider and David E. Bowen emphasize the importance of getting the system of human capital practices right in Winning the Service Game.^[6] Those authors recognize that human capital practices such as effective hiring, adequate training, and appropriate rewards are critical to the delivery of excellent service. Nevertheless, they recognize that those traditional human resources (HR) practices are not by themselves sufficient. Schneider and Bowen speak to the necessity of creating a service culture: an entire system that coordinates nitty-gritty operational issues such as managing customer queues (whether standing in line or calling in by phone) with people practices. Heskett, Rucci, and their respective colleagues also recognize the contribution of system practices to employee attitudes and, ultimately, customer spending.

Common prescriptions for getting the system right include empowering employees to make customer service decisions and building training and reward systems that motivate employees appropriately. The intent is to create the kind of customer experience that wins loyalty and revenue.

^[2]James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain. New York: The Free Press, 1977.

^[3]Anthony J. Rucci, Steven P. Kirn, and Richard T. Quinn, “The Employee-Customer-Profit Chain at Sears,” Harvard Business Review, January–February 1998, 82–97.

^[4]A. H. Brayfield and W. H. Crockett, “Employee Attitudes and Employee Performance,” Psychological Bulletin, 1955, 52: 396–424.

^[5]Anne Marie Ryan, Mark J. Schmit, and Raymond Johnson, “Attitudes and Effectiveness: Examining Relations at an Organizational Level,” Personnel Psychology, 1996, 49: 853–888.

^[6]Benjamin Schneider and David E. Bowen, Winning the Service Game. Boston: Harvard Business School Press, 1995.