A Break in the Service Profit Chain: Why Increases in Employee Engagement Don’t Improve the Customer Experience

Over the past 25 years of working with companies to design and implement outstanding customer experiences, it has become resoundingly apparent that the key to a great customer experience is a deliberately designed set of employee experiences.

About 10 years ago, James L. Heskett, W. Earl Sasser, and Leonard A. Schlesinger created positive awareness about “The Service Profit Chain“, which is generally summarized as:  happy employees create happy customers create happy shareholders.  The Service Profit Chain is a great way of illustrating the correlation between employee satisfaction, customer satisfaction, and profits.  It’s true; customers tend to have a better experience with organizations that have higher levels of employee satisfaction and engagement.

However, just because employee satisfaction and engagement are correlated with customer satisfaction doesn’t mean that making employees happier will lead to a better customer experience.  This is one of the classic traps your college professors warned you about; confusing correlation with causation.   I’ve observed that this flaw in logic has led many organizations to invest in trying to make their employees happier in the hope that those happier employees will turn around and deliver a better experience for customers.   IT DOESN’T WORK THAT WAY!!!

I understand this point of view runs against the grain of the traditional thinking.  We’ve just seen too many companies where, at best, more highly engaged employees simply deliver a sub-par experience more enthusiastically.  Now, I do believe that employee engagement is important.  In most situations, it’s necessary but far from sufficient.  Across the work we’ve done with companies in this area, we’ve learned that four major barriers must be addressed in order to have increases in employee engagement actually lead to a better customer experience.

  1. A clear, current, and well-tested understanding of customers’ priorities. Unless the key decision makers throughout the organization really understand what’s important to customers, the best efforts of the organization will be misdirected. We’ve observed that, in most business situations, customers’ expectations and alternatives change faster than the “mental model” or beliefs of internal decision-makers about what’s important to those customers. If this is true in your situation, there are two important implications. It implies that there is always a disconnect between internal beliefs and the external realities about the customer. In addition, it also implies that this disconnect is not only present but growing. In order to have improvements in employee engagement translate into improvements in the customers’ experience, most organizations have to work very hard to make sure they stay in sync with continually changing customer priorities.
  2. Alignment around a concise specification of the intended customer experience. What exactly is the experience you expect customers to have? Although every company designs their products and services, very few have ever clearly specified or deliberately designed what they do around the experience they intend their customers to have. As a result, the individual efforts of executives, managers, and front-line employees tend to be at odds with each other in subtle or even not so subtle ways. In turn, the experience customers have tends to be inconsistent, fragmented, or just plain frustrating. If this is true, increases in employee engagement will not translate into any substantial improvement in the quality of the customers’ experience.
  3. Processes, technology, and management practices that get in the way of employees doing the right thing for customers. Is it easier for employees to do the right thing for customers or are there policies, procedures, systems, measurements, reward systems, etc… that get in the way? Although it isn’t intentional, most organizations have significant hurdles employees must overcome in order to deliver a great customer experience. Although, very high levels of employee engagement can contribute to employees’ ability to overcome these hurdles, individual heroics also tend to contribute significantly to inconsistency in the customer experience.
  4. “Unwritten rules” that drive behaviours inconsistent with the desired customer experience.These unwritten rules drive the real behaviour of the organization.  In virtually every organization we’ve talked to and worked with, there are significant unwritten rules that are just inconsistent with delivering a great customer experience. These unwritten rules are unique to each organization,driven by extensive legacy effects, and reinforced by the existing employee experience. Many of these unwritten rules typically center around things like: what it takes to be successful in the organization; the importance of financial vs. non-financial metrics; the importance of internal vs. external stakeholders (e.g., my boss vs. the customer); the importance of acquiring new customers vs. caring for existing customers; the ability to admit mistakes; the ease of cross-functional collaboration, etc… Unless these unwritten rules are surfaced and addressed, they get in the way of having improvements in employee engagement drive a better customer experience.

Unfortunately, I have a hard time thinking of many organizations where these barriers are not in place.  The pervasiveness of these issues is one of the reasons why many organizations run the risk of investing heavily in improving employee engagement and have it not generate the benefits implied by the Service Profit Chain.

Over the past several years, we’ve been working on a way around this problem.  (See:   Why Customer Experience Initiatives Fail? ).    We’ve learned that, if you want to enable an intentionally better customer experience, you need:

  1. Customer intelligence specifically designed to close the gap between customers experiences and internal beliefs (see:  Observation and Elicitation:  We Like to Watch )
  2. Alignment on a concise specification of the intended customer experience (see:  I Got a Song that Ain’t Got No Melody)
  3. To use this specification to prioritize and blueprint specific changes in the operating model required to consistently deliver the specified experience.  This includes customer communications, product and service strategy, customer-facing processes, organizational roles, skills, and structure, management systems, technology, etc…
  4. To holistically design specific employee experiences that “generate” behaviors aligned with the specific experience you intend for customers… not just improve engagement!

So what do we mean by “Employee Experience?”  Our working definition is: “An employee’s rational and emotional reactions to how their organizational and external environment impact their ability to accomplish goals that are important them.”  This is inherently “employee-centric” in that it focuses on the employee’s priorities and how the organizational and external environments impact the employee’s ability to address those priorities.”  This has several important implications:

  • The employee experience is not just about what you do for employees nor the managerial or physical environment in which they work.  The employee experience is about how an employee reacts to their environment and how that environment helps or hinders them in addressing their priorities.
  • Different employees will have very different experiences of relatively similar work situations based on their individual priorities, motivations, what they are looking for from their job, etc…  Effective employee experiences must be designed to address the unique needs of employee segments rather than be “one size fits all.”
  • Employees’ experiences must be designed to reinforce specific motivators (what’s important?), enablers (who’s important?), and triggers (how do people get what they want?) required to produce group behaviors that are consistent with and “generate” the intended customer experience.
  • Employee experience interventions must be designed to address any “unwritten rules” that produce behavior inconsistent with the intended customer experience.

In addition, by creating a strong linkage between the customer experience required to drive profitable growth and the employee experiences required to deliver this customer experience, it becomes possible to create an economic model and ROI for well-defined investments in improving the employees’ experience.

I’m looking forward to talking more about holistic employee experience design in future posts.

4 Responses

  1. […] This has little or nothing to do with making employees more satisfied or “engaged.”  We’ve seen many situations where more highly engaged employees just deliver a poor experience more enthusiastically.  I’ve already had a lot to say about that in A Break in the Service Profit Chain:  Why Increases in Employee Engagement Don’t Improve the …. […]

  2. […] A Break in the Service Profit Chain: Why Increases in Employee Engagement Don’t Improve the Cu… […]

  3. The one thing that I think you understand but is not exactly stated here, is there is a huge difference between employee satisfaction and employee commitment. One can be satisfied and engaged but not committed to the company vision, mission or goals. There are many organizations spending too much effort on satisfaction instead of commitment. Find ways to build and reinforce commitment and customers will go from satisfied to evangelists and profits will equally grow.

  4. […] in several previous posts, a highly engaged workforce is necessary but not sufficient.  (See:  A Break in the Service Profit Chain:  Why Increases in Employee Engagement Don’t Improve the …).  In addition, if you’re interested, please feel free to check out the white paper titled:   […]

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