Impact of employee engagement on customer loyalty

October 2012

Impact of employee engagement on customer loyalty

A link between having engaged employees and increased customer loyalty and satisfaction has been established (Haid & Sims, 2009; Harter et al., 2009; Gonring, 2008). Giving employees the drive to enhance the customers experience is as integral as the reputations and bottom lines of businesses that rely on the ability to inspire customer loyalty. Customers are more likely to recommend a business to others if they have had a positive experience and that positive experience is most often formed by interactions with frontline staff. The attitudes of frontline staff are a product of their engagement, and to a lesser extent, the engagement of those around them. Employees are more customer focused when engaged (Harter, 2009) as they are motivated to increase their discretionary effort to achieve the success of the business, rather than simply for personal gain.

Research provides credence to this idea. In their 2009 meta-analysis, Harter et al. found that business units that scored in the top 25% on engagement had customer ratings 12% higher than business units scoring in the bottom 25% of engagement. This improvement is due to the fact that engaged employees care more about meeting customer needs. They believe their organisation has a strong customer focus, whereas less engaged employees "have far more misgivings about their organisation in terms of these measures and are likely to have little personal investment in a strong customer focus" (Towers Perrin, 2003).

Engagement impacts on customer loyalty in more ways than simply interactions with frontline staff. The quality of products produced by engaged employees is better, as previously reported and more productive staff make less mistakes that could impact on customer.

Additionally, engaged staff have a positive impact on an organisation's reputation in the wider world by being brand ambassadors. Conversely, disengaged employees can become a public relations nightmare. In the new world of social media, employees and customers can interact outside the traditional boundaries. For instance, when it was widely reported that Walmart started treating its employees badly, customers and employees were able to discuss and spread this news. This dissemination resulted in a drop in reputation and financial performance for Walmart.

Other employee engagement resources


Sources

Haid, M. & Sims, J. (2009). Employee Engagement: Maximising Organisational Performance. Right Management.Retrieved 15 June 2011, from http://www.right.com/thought-leadership/research

Harter, J. K., Schmidt, F. L., Killham, E. A. & Agrawal, S., T. L. (2009). Q12® Meta-Analysis: The Relationship Between Engagement at Work and Organisational Outcomes. Retrieved 5 June 2011, from www.gallup.com/consulting/File/126806/MetaAnalysis_Q12_WhitePaper_2009.pdf

Gonring, M.P. (2008) Customer loyalty and employee engagement: an alignment for value.The Journal of Business Strategy, 29(4), 29-40.

Towers Perrin (2003). Working Today: Understanding What Drives Employee Engagement. The 2003 Towers Perrin Talent Report.Retrieved 15 June 2011, from http://www.towersperrin.com/tp/getwebcachedoc?webc=hrs/usa/2003/200309/talent_2003.pdf