How Employee Engagement Leads to Customer Loyalty

April 23, 2013

employee engagement kevin kruse quoteWhen an employee is engaged, they are very much your biggest brand advocates. They preach the benefits of your products and are enthusiastic in dealing with the public. These employees want the organization to be successful, not just themselves. Your customers first point of interaction with your organization is often through your employees. This first interaction is often make-or-break for first time customers, if you fail to make a good impression they may leave and never return.

High engagement among your employees improves morale, reduces turnover, and improves profitability. In fact, according to research from a Hay Group study, companies with highly engaged workers grew revenues two and a half times as much as those with low engagement levels.

employee engagement double revenueContrasting this with disengaged employees, Gallup found that actively disengaged employees erode an organization’s bottom line, while breaking the spirits of colleagues in the process. Within the U.S. workforce, Gallup estimates this cost to the bottom line to be more than $300 billion in lost productivity alone.

Not only this, but it betters customer experience and leads to improved customer loyalty. Studies have found that companies with high employee engagement scores had twice the customer loyalty (repeat purchases, recommendations to friends) than companies with average employee engagement levels.


Why Employee Engagement is a Must

The statistics above make a convincing case for having engaged employees. Here are my top reasons why having engaged employees is a must for your organization:

1. Improved Productivity

An engaged employee finds their job to be motivating and personally fulfilling and therefore tend to be more productive on the job than disengaged employees. Research conducted by the Hay Group found that among office workers who were actively engaged, they were 43% more productive.

employee engagement active engagementThis productivity frees up time for employees to devote to other tasks. This extra time could be used to search for more customers, provide service to existing customers, or help a team member complete a difficult task. The extra time could also be used to hone existing skills or develop completely new ones. If this is the case, not only is the employee more effective, but they will also be more engaged as a result.

2. When an Employee is Engaged, Financial Compensation is Not Their Primary Motivation

Engaged employees find their work to be personally fulfilling, and feel that their position is an important part of who they are as a person. While they do expect to receive compensation, this is not what drives their efforts each day. They are motivated to improve themselves, the position they are in, and the organization as a whole.

employee engagement satisfactionThese employees receive personal satisfaction from a job well done. Contrast this to an employee who is only working to receive a paycheck. This individual will apply not extra effort to the position and does not really care about the organization. You don’t want your employees to remain employed with you just because “the money is good.”

3. Improves Retention and Reduces Absenteeism

When an employee is engaged, they are much more likely to remain an employee of yours for an extended period of time. Studies found that highly engaged employees were 87 percent less likely to leave their companies than their disengaged counterparts. This makes employment forecasting a breeze for your HR department. It also reduces the negative word of mouth spread by former employees, improving your brand’s perceptions in the eyes of consumers and those in your industry.

Additionally, engaged employees miss work less than their disengaged co-workers. An Unnamed Fortune 100 manufacturing company saw absenteeism drop from 8% to 4.8% and reduced turnover from 14.5% to 4.1%.

employee engagement absences

Reducing absenteeism means that your organization can work at full pace more often, improving your overall effectiveness and the speed with which you can accomplish tasks.

4. Impacts Profitability and Increases Revenue

Having engaged employees can have direct, bottom-line impact on profitability. Sears measured that a 5 point improvement in employee attitudes drove a 1.3 point improvement in customer satisfaction, which in turn drove a 0.5% improvement in revenue.

employee engagement better customer experienceIn additional to this, a study of 64 organizations revealed that organizations with highly engaged employees achieve twice the annual net income of organizations whose employees lag behind on engagement.

These findings illustrate just how big of an impact employee engagement can have on profitability and revenue. It is easy way to increase these two metrics without having to attract more customers or cut costs in any way.

5. Employee Engagement Leads to Customer Loyalty

Perhaps the biggest organizational benefit of employee engagement is that it can help to develop loyalty among your customers.

Here are three reasons why having engaged employees can lead to customer loyalty:

1. Engaged Employees Provide Better Customer Service

Engaged employees provide top-notch customers service and aim to create an amazing experience for customers. They will truly go the extra mile for a customer, making sure that they are pleased with the products they have received and the experience they have had with your brand. These employees don’t mind spending extra time with a customer and make sure that they are completely satisfied before they leave. They set realistic expectations for customers and ensure these expectations are met.

employee engagement delighted

Your customers will take notice of the amazing customer service your provide, and repurchase from you as a result. This idea is expressed in John Goodman’s book “Strategic Customer Service”, where he found that customers who are delighted by proactive education or superior service are 10% to 30% more loyal than customers who have not been delighted.

2. Engaged Employees Provide a Better Brand Experience

Engaged employees love products they are selling. In addition, they are enthusiastic, kind to customers, and willing to promote to others how amazing your company and products are. Their excitement and brand affinity will shine through in their interactions with customers. If a customer sees that an employee (a likely expert on the subject) has so much excitement for your products, they will likely make purchases from you. According to Monetate, 73% of consumers would consider purchasing from a brand again if they had a superior customer experience.

employee engagement passionateAs I said before, engaged employees are more productive than their disengaged counterparts. This improvement in productivity means that they will be able to deal with customer inquiries and complaints faster than disengaged employees. People are increasingly busy, and want more time to spend on personal endeavours.

The fact that an engaged employee will be able to help a customer in a more efficient manner will stand out in the minds of your customer. They will return and purchase from you again because it is easy and hassle-free. As a result they will become more loyal to your organization.

3. Engaged Employees Make Your Organization More Customer-Focused

Engaged employees truly care about the customers of your organization. They not only want to meet the needs of these individuals, but also make them feel special and valued. These type of employees have a customer-focused approach in all that they do. This is the type of focus every organization should have. Your customers are the reason you are even in business in the first place, so why wouldn’t you cater all that you do to meet their needs? This new strategy of putting the customers in the spotlight is called “customer centricity.” It requires businesses to understand their customers problems, and look out for their interests.

employee engagement customer-centricEngaged employees allow you to develop that outward focus that is highly sought after. Customers will become loyal to you if they see that your underlying goal is to serve them. They want to feel valued, be treated as an individual, and receive empathy if they have a complaint.


How to Engage Your Employees

1. Recognize Their Successes and Use Their Failures in a Constructive Way

When your employees are successful at something job-related, no matter how small, be sure to recognize them for it. This recognition could something as simple as a pat on the back or a “great job” email. Make this recognition visible - it not only fills that employee with pride, but it shows other employees that they can receive recognition for their small successes as well.

employee engagement recognition

When your employees do make a mistake, use this mistake to better the employee. Don’t call them out in front of their co-workers or threaten their job for their error. This is an ancient way of thinking and has been shown to actually demotivate employees. Take each failure as an opportunity to make the employee better at their job. When employees realize that they won’t be embarrassed or demoralized if they make a mistake, they will be more willing to try creative methods to solve problems.

2. Empower Your Employees by Giving Them Responsibility

Don’t expect your employees to be engaged if they do not have any responsibility or discretion in their position. When you empower your employees you allow them to make key decisions surrounding their job and your customers. If your employee has lots of responsibility and feels empowered, they are more likely to be pleased with their job and become engaged.

employee engagement empowerTrust your employees to do their job correctly and up to the standards you have set. If you show no trust in your employees, then how do you expect them to trust you? Give them the autonomy to make their own decisions. When they make a decision and succeed they will become more engaged. If they make a decision and fail, they will learn from the experience and be more well-rounded as a result.

Set high expectations for your employees, but not so high that they are unattainable. If you set goals too high, employees might feel as though you are setting them up to fail, which can lead to disengagement.

3. Allow Employees to See How They Contribute to the Big Picture

Never, I repeat never, allow your employees to lose sight of how they contribute to the success of your organization. I can’t think of something more disengaging and demotivating than not being able to see how your work contributes to the big picture.

Show them directly how their work is improving customer retention, profitability, or the metric that is most closely related to their position. This will give them motivation in their jobs, goals to strive towards, and increase engagement as a result.

4. Focus on Improving the Employee’s Skills by Challenging Them to Better Themselves

Allow your employees to develop themselves, both personally and professionally. Offer courses that broaden the employee’s skill set and will improve their performance on the job. In addition, offer employees ways that they can improve themselves personally. This could be through free fitness classes, personal counselling sessions, and more. Employees will tend to be more engaged if an organization shows that they are concerned with an employee’s entire being, not just their work.

employee engagement improveAlways challenge your employees to better themselves. If your employee achieved sales of $50,000 in the month of January, regardless of the industry/company average, in February challenge them to have $60,000 in sales. Doing so will push them to their personal boundaries. The employee might achieve something that they had never thought possible. This can be very fulfilling and employees will be more motivated and engaged as a result.

5. Provide Regular Feedback

When employees don’t receive feedback or aren’t told how they are progressing they lose sight of their end goals and simply float by. With no prior knowledge of the company or position, how are new employees supposed to track their performance? This is why feedback needs to be given on a regular basis. Set a time each week for each employee and their direct supervisor to sit down and discuss performance. At these meetings review with the employee their upcoming tasks for the week, how they are progressing towards goals, and any issues that may have come up.

employee engagement feedbackRegular feedback is especially important for new employees. It allows them to see how they are doing in comparison with goals, and also for improving themselves. When I first started at Sweet Tooth, I had meetings with my supervisor Steve twice daily. This allowed me to review my progress on certain projects and clear up and issues I was having. It caused me to become more engaged because I saw how helpful Steve was and how much he wanted for me to thrive at Sweet Tooth.

6. Encourage Collaboration and Get Rid of Hierarchies

Employees are more likely to be engaged if your organization has a collaborative environment. Allow communication to happen top-down in your business. Your lowest level employee should be able to interact with your CEO if they need to. Employees will be more engaged if they believe that every employee is reachable. Being able to collaborate on projects with other employees will not only increase engagement, but it will also make the process much quicker and effective. Employees can share ideas and give direction if needed.

employee engagement teamI love it when someone refers to a co-worker as their team member. The best organizations are able to create a team environment in their office. In doing so, each employee feels as though they are accountable to the team and have an important role to play. When your employees see that they are just as important to the organization as someone in a more prominent role, they will become more engaged as a result.