Customers or Employees First? Yes!

HookedOnCustomers_share4While there is no one agreed-upon definition, employee engagement is usually thought of as a measure of an employee’s job satisfaction and commitment to the organization and its goals.

In the business world, Gallup is a research firm noted for attempting to measure employee engagement with just twelve questions.  All relate to how the employee is treated as an individual. In my view, Gallup’s survey does a good job of quantifying employee WIIFM (“What’s In It For Me?”). That’s important, but is it really the key to business performance?

Over the years (decades, really) Gallup has pumped out an astounding amount of research, including a meta-analysis that concluded “the relationship between engagement and performance at the business/work unit level is substantial and highly generalizable across organizations.” Read that report and you’ll be impressed with how well employee engagement correlates with business performance.

I emphasized “correlates” because Gallup does not directly state that employee engagement causes or drives business performance. The temptation, of course, is to draw a causation arrow from employee engagement to performance. The correlation is impressive, and it makes intuitive sense. Improve employee engagement and you’ll improve business performance. End of story.

Except for one small problem. Assuming correlation means causation is one of the most common mistakes in analytics. The problem is that a correlation between A and B can result from: A causing B; B causing A; or C causing both A and B. Advanced statistical techniques can help figure whether the chicken or the egg comes first.

Academic research does generally support the argument that employee engagement is a factor in business performance. But you should also take note of a groundbreaking 2003 study by Schneider, Hanges, and Smith—researchers who conducted a longitudinal study with thirty-five organizations over eight years. The surprising finding: A stronger “causal directionality flows from financial and market performance to overall job satisfaction.”

More recently Gallup studied ten large organizations and found:

The finding of a reciprocal relationship between satisfaction and financial performance is consistent with findings reported by Schneider et al. (2003), possibly indicating that business units with more satisfied employees engage in discretionary activities that may benefit the organization but also that financial success may reinforce satisfaction by leading to better pay, benefits, and job security.

Let me be clear: Employee engagement is important. Employees who are highly committed to their jobs, like their bosses, and feel appreciated will work harder and be more productive. There’s no real debate about that.

That said, this critical question remains: Productive at what? If employee efforts are not aligned with creating customer value that also helps the organization succeed, it’s just wasted energy. And customers, not employees, have the final say as to whether a company is delivering something of value.

About Bob

Bob Thompson is an international authority on customer-centric business bobthompsonmanagement who has researched and shaped leading industry trends since 1998. He is founder and CEO of CustomerThink Corporation, an independent research and publishing firm, and founder and editor-in-chief of CustomerThink.com, the world’s largest online community dedicated to helping business leaders develop and implement customer-centric business strategies. His book Hooked on Customers (April 2014) reveals the five habits of leading customer-centric firms. For more information visit http://hookedoncustomers.com

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