"We need to maximize our employee and customer satisfaction to improve our bottom line." A senior executive said this to me the other day when we met for coffee.
"I'm sorry," I interjected, "The bottom line part sounds good, but does it really go hand in hand with maximizing employee and customer satisfaction?"
I understood his point, of course, that his company needed to achieve a near-utopian state in the year ahead. What I disagreed with was the assumption that maximizing employee and customer satisfaction is the path to maximizing the bottom line.
From maximum to great
First, I'd like to point out one thing: My company, Ennova, makes a living helping our clients to create more motivated and satisfied employees and to achieve even higher customer loyalty. So I'm a firm believer in the theories proclaiming that motivated employees and satisfied customers lead to an improved bottom line. There, now we've got that straight.
But I've observed business areas within organizations that command high employee satisfaction rates year after year, but score low on their other KPIs (productivity, customer satisfaction, sales, etc.). I've also observed companies with high customer satisfaction that don't make any money. And I've observed educational institutions with high student satisfaction that don't meet their other targets.
In this area, my position is clear: I would gladly sacrifice 10% in employee satisfaction, customer satisfaction or well-being and drop from 100 points to 90 out of a possible 100 - or from "maximum" to "great" if you will - in order to gain an extra 10% in the other KPIs. Don't misunderstand me: I would never be willing to go from "great" to "bad", because that would entail a significantly greater risk of employee turnover, poor innovativeness and diminished desire to participate. But dropping down a notch from the stars wouldn't do much harm. In all likelihood, it would have only a marginal effect on their bottom line compared to the effort it takes to stay at the very top.
It's not that I don't think it's possible to have sky-high employee satisfaction and customer satisfaction at the same time. I'm simply saying that maximization shouldn't always be at the expense of the other KPIs - such as the bottom line target. In this regard, it's the department head's job to set the local targets in such a way that the company's overall targets can also be achieved.
The fortunate paradox that comes from increasing your ambitions, for instance regarding your bottom line target, is that making improvements in this particular area actually tends to have a positive effect on employee satisfaction. And by optimizing your performance in the area of customer satisfaction, you can give yourself more time to improve your performance in the activities that have the strongest influence on customer loyalty (and thereby on earnings). I would therefore argue that any momentary loss in employee and customer satisfaction would be gained back as your bottom line improves.
Optimization as an alternative
The aforementioned senior executive initially found my question a bit cheeky. But when we started talking about optimization as an alternative to maximization it began to make sense. Optimization in the sense that the department/manager finds the right degree of employee satisfaction that strikes a balance with progress on the KPIs they are also measured by. Optimization in the sense that customer satisfaction only just supports the cost of achieving the best balance between customer satisfaction initiatives and bottom line. Is it logical? Yes. Is it practiced properly in the business community? No, not always.
When I speak to senior executives who say they want to optimize employee satisfaction and/or customer satisfaction and thereby maximize their other KPIs, I ask them to consider the following questions:
1) Are you willing to set more ambitious targets for your employees that could temporarily reduce (to an acceptable degree) employee satisfaction, motivation and comfort, but could potentially increase other results?
Examples might include requiring a work flow evaluation, upgrading knowledge, providing better customer service, taking on more assignments, participating in more cross-organizational projects, and so on.
2) Do you know which specific customer-centric activities actually generate value in relation to the effort it takes to uphold satisfaction (time, costs, procedures)?
Examples here might include examining all touchpoints where you meet the customer and examining the costs associated with them. Or systematically analyzing whether the products match the actual needs of the customers.
Fortunately, some companies have many of these aspects fully under control, but there is much to be gained from taking a systematic approach. A systematic approach to also offering new challenges to and making demands of departments that score high on the soft targets, like employee and customer satisfaction, rather than only making demands of those departments with low employee satisfaction and declining customer satisfaction.