Why do we expect satisfied employees to provide higher quality service to customer?

There’s a direct link between employee satisfaction and customer satisfaction. Happy employees equal happy customers. Unhappy employees lead to unhappy customers. It’s not quite as simple as that, but as a generalization it’s not too far off.

Employees are the driving factor behind customer satisfaction. Employee interactions set the tone for a positive or negative customer experience. When employees aren’t happy at work, their interactions with customers can, and almost always will, suffer. Over the course of time, this can have serious repercussions for a business.

The place where this becomes the most critical is any business where employees are directly interacting with customers, such as retail or food service. Historically underpaid and overworked, employees in these jobs are tasked with spending their entire shifts serving customers. They’re the ones being yelled at when the register doesn’t accept their coupon or an item is out of stock. They’re the ones who spend 30 minutes with a customer only to have them decide to buy their items online. It can be a thankless job, and it’s only made worse when the employees are treated like pawns in a game of chess.

This is where employee experience comes in. Companies need to start putting the same effort into taking care of their employees as they do taking care of their customers. If even a fraction of a customer experience budget was spent on employee experience, there would be a huge return on investment.

One of the easiest ways to enhance employee experience is to ask for and welcome employees’ feedback. They have great insight into customer needs. After all, they’re the ones who are directly interacting with customers and hearing their criticisms and compliments firsthand. Employees can be your biggest asset when it comes to customer satisfaction. Why not let them share their insights?

A large part of employee experience revolves around understanding what employees need and want and gaining insight into their work preferences. By learning about employee preferences, companies will be able to make necessary changes to the workplace. This isn’t to say that everything needs to revolve around employees’ demands, but there are many places where change can be enacted at a minimal cost and effort.

Another critical piece of the employee experience is training and development. Employees should be equipped with the skills they need to excel at their jobs and have opportunities to continue to learn and develop. They should be able to check in and touch base with their managers to keep track of their progress and discuss any questions or concerns as they arise.

Employee experience becomes even more important now, with Millennial and Gen Z employees demanding more from their employers than just a paycheck. They’re looking to make an impact. They want to be doing work that matters as part of a company that invests in its talent and treats employees fairly.

Showing employees that you value the work they’re doing is one of the easiest ways to boost their motivation. It can be as simple as saying thank you, to publicly acknowledging and celebrating their contributions. It’s not just the younger generations who crave recognition - no one likes to feel like the work they’re doing is going unnoticed.

It’s time to shift the mindset from employees working just to work, to acknowledging that they’re valuable contributors to a company’s success. Employees need to understand how important their role is and how their work fits into the bigger picture. They need to feel like their voices are being heard and they have respect from their managers. Most importantly, they need to be able to come to work and know that the next eight hours won’t be pure torture.

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In a recent analysis, analysts at Glassdoor asked: Can companies achieve great customer satisfaction without also investing in employees, assuring that workers who deliver service to customers are themselves satisfied with their jobs? Their answer was clear: There’s a strong statistical link between employee well-being reported on Glassdoor and customer satisfaction among a large sample of some of the biggest brands today. A more satisfied workforce is clearly associated with companies’ ability to deliver better customer satisfaction — particularly in industries with the closest contact between workers and customers, including retail, tourism, restaurants, health care and financial services.

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We all know that customers are central to the fate of businesses. It’s captured in the maxim, coined by department store tycoons of the early 20th century, “The customer is always right.” Jeff Bezos, one of today’s most iconic businessmen, has laid Amazon’s incredible success at the feet of its obsession with customers, saying “You can be competitor-focused, you can be product-focused, you can be technology-focused, you can be business-model-focused… But in my view, obsessive customer-focus is by far the most protective of Day 1 vitality.”

As company leaders strive to put customers first, our latest research offers new insights into how that might be achieved: through engaged and happy employees.

Glassdoor knows a lot about employee experience. Studying our database of millions of insights about jobs, salaries, company ratings and reviews, we’ve quantified the impact of worker satisfaction on retention, talent attraction, stock performance, and more.

In our new study we asked: Can companies help to achieve high customer satisfaction by investing in employees and ensuring that those who deliver goods and services  are themselves satisfied with their jobs?

Our answer was clear: There is a strong statistical link between employee well-being reported on Glassdoor and customer satisfaction among a large sample of some of the largest companies today. A happier workforce is clearly associated with companies’ ability to deliver better customer satisfaction — particularly in industries with the closest contact between workers and customers, including retail, tourism, restaurants, health care, and financial services.

Linking Happy Employees to Happy Customers

To study this employee and customer satisfaction connection, we joined together two data sources: Glassdoor employee reviews and ratings from the American Customer Satisfaction Index (ACSI), which records the opinions of 300,000 U.S. customers on products and services. We looked at 293 large employers spanning 13 industries, including their average overall Glassdoor rating (on a scale of one to five) and ACSI score (on a scale of zero to 100) annually from 2008 to 2018. Using a standard panel model, we estimated the impact of the former on the latter, after carefully controlling for employer, year, and industry.

We found that each one-star improvement in a company’s Glassdoor rating corresponds to a 1.3-point out of 100 improvement in customer satisfaction scores — a statistically significant impact, which was more than twice as large in industries where employees interact closely and frequently with customers.

This finding is nearly identical to another recent study on the same topic, using similar data. Taken together, this growing body of research offers a powerful lesson to CEOs: If you want to build a customer-first strategy, building high employee morale is a necessary (though not sufficient) precondition.

While our observational data can’t prove causality — it’s possible having happy customers can boost employee satisfaction, rather than the opposite — we’re confident in our findings for several reasons. First, we see many examples in our data where employee satisfaction rises or falls first, followed by changes in customer satisfaction later; by contrast, examples of the reverse are rare. Second, the panel data examines changes in customer and employee satisfaction within the same firm, which addresses fears that the results are driven by differences between companies and their customers. Finally, even if our study shows happier employees are just a predictor of customer success, and not the main cause, that is still a useful indicator.

Industry Matters, But No Sector is Immune

One of our strongest findings is that there are some industries where employee and customer satisfaction are more correlated.

For example, in retail, food service, health care, and other industries where the two groups routinely interact, each one-star improvement in Glassdoor company rating predicted a 3.2-point increase in customer satisfaction. Sales associates, cashiers, baristas, and bank tellers are prime examples in our data of service workers that make up a significant portion of these employers’ labor pools and whose personal experience with company culture (either good or bad) is transmitted daily to customers. By contrast, our data show software engineers and warehouse staffers, who rarely work directly with customers, have little impact on their satisfaction. (You can explore our analysis yourself here.)

At the same time, even tech and manufacturing companies benefit from investing in employee satisfaction, among not only workers in customer-facing roles such as sales and support but also those behind the curtain. These organizations that have invested in a positive workplace cultures should also find ways to increase customer-employee interactions. For example, although Apple is a tech manufacturer, its brick-and-mortar retail locations expose millions of shoppers to its people daily, which benefits its brand image.

Companies that Hit the “Sweet Spot”

By studying more than a decade’s worth of data for hundreds of companies, we found several employers who stand out as being in the “sweet spot” with both high employee satisfaction (four-star or above Glassdoor rating) paired with high customer satisfaction (ACSI rating of 80 or above).

In travel and tourism, Southwest and Hilton top the list. Retailers like Costco and Trader Joe’s were in a similar position. This comes as little surprise, as the link between customer and employee satisfaction surfaces often in Glassdoor reviews for many of these companies. As one Trader Joe’s  employee wrote, “you are encouraged to have fun with customers, answering product questions[…] Kindness to the customers is a big focus.”

High employee and customer satisfaction can be found outside of service industries, as well. Manufacturer Johnson & Johnson earns good marks in both areas, even though few of its workers are on the front lines. As one Johnson & Johnson employee review explains, “We are team players. We get things done. We serve our customers.”

Financial Benefits of Putting Employees First

In our study, we also give a ballpark estimate of how employee culture may impact corporate valuations through the channel of more satisfied customers.

A 2006 study published in the Journal of Marketing found that each 1% improvement in ACSI customer satisfaction scores for an employer was associated with a statistically significant 4.6% boost in its overall stock market value. Applying this to our findings, we can calculate the possible impact of a one-star improvement in Glassdoor employer ratings, given the expected knock-on improvement in customer satisfaction scores: an increase of 7.8% to 18.9% in long-term market valuation.

Becoming a customer-centric business is a worthwhile goal. But our research reminds business leaders that becoming more customer-oriented while allowing workplace morale to suffer is a poor and short-sighted strategy. Instead, customer and employee satisfaction should be seen as two sides of the same coin. Our past research shows what employers can do to improve worker engagement and well-being, while our new research shows those same strategies can also pay off in the form of happier customers.

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