2.3 The relation between Customer and employees
2.3.1 The existing relation
During an interview on HBS Working Knowledge, Sasser explained the importance for the company to care about their employees; it would influence their attitude toward the customers. The author explained that: "If the organization does not create superior value for its employees, it is very difficult for the employees to produce superior value for customers." This statement can be confirmed by an article from The Harvard Business Review , described quantitatively the connection between employees and customers with the example of the company Sears Roebuck: "national retail customer satisfaction has fallen for several consecutive years, but in the course of the last 12 months (1998), employee satisfaction at Sears Roebuck has risen by 4%, and customer satisfaction by almost 4%." The authors added that according to the Sears forecast, 4% improvement of the customer satisfaction represents additional revenue of approximately $200 million per year. Sears Roebuck has set up an employee customer profit chain model. This model follow the idea that a good place to work will create a good place to purchase and as a result a good place to invest. The link between employees and customer is achieved through the employee's behaviour. This one is influenced by the attitude about the job and the company. The employee will influence customer impression by playing on "service, value, helpfulness and merchandise." The model provide quantitatively statistic, according to the authors, whenever the employee attitude increase by 5 units, the customer impression increase by 1.3 units and the revenue by 0.5%
Figure 2?6: The Employee Customer Profit Chain
In his article, T. Watson referred to the theory of J. Hesket "the value profit chain" according to this author, "long term growth and profitability start with employee satisfaction, loyalty and productivity; employee satisfaction today equals customer satisfaction tomorrow equals growth and profitability the day after tomorrow." The author emphasised also on the existing relation between employee loyalty and their satisfaction that leads to the customer satisfaction and its potential loyalty.
The main element to improve the connection with employee is to focus on the environment, the person and the compensations.
2.3.2 The good place to work
2.3.2.1 Empowerment and "employees first" culture
For J. Weaver, by giving the employee the power to be their best, the company contributes to their ability and motivation to deliver the best service to the customers. There are different levels of empowerment. M. Henricks , focused on the requirement to avoid any fears from employees, according to this author, "fear maybe the biggest factor blocking great service." That's why empowerment is necessary to make the front line employee do what is necessary to achieve "customer service vision." When an employee takes a decision it is necessary that the management endorse him to maintain this confident climate. J. Weaver considers empowerment as the "level of initiative that's difficult to achieve in a culture that fosters dependence and relies on the traditional chain of command." According to this author, empowerment is possible through a confident atmosphere. By empowering employees, companies increase the level of self-esteem of their employee; they are able to take decision by themselves. Empowering employees consists in offering them more independence to serve better the customers. In the same time it increases the level of self-esteem as they have more responsibilities regarding their job. Nevertheless, some employees may be reluctant to obtain more responsibilities. As a result, a confident environment must be established to endorse and improve the employee who takes charge of the actions the company expect from them.By giving the opportunity to take decision that makes job more appealing and more interesting. In the same time, it contributes to better the service satisfaction. Indeed, the customers may have to wait less for a request and don't hear "I'll have to double check with my supervisor" and in the same time, the customer feel more satisfied to do business with someone with responsibilities in the company. For S. Stephenson , senior vice president of human resources at Ritz Carlton, "an empowered employee is a satisfied employee". That means employees have the authorization to "expend up to $2000 to delight a guest who has a customer service issue" (conflict with the phone bills or so.). This autonomy leads to improve the employee consideration, he knows that the company trusts him and is confident toward him. It is the same at Target, the company has increased the autonomy of every employee. The cashier for example is able to take an on-the-spot decision to substitute one product of equal value if it is out of stock of to trust the customer if one product misses a tag. That's a source of motivation; it increases the relationship between employees and the company. The more the employees have consideration for the company, the more they are willing to perform their job efficiently. Moreover, it is positive for the customer as well, this one doesn't have to wait and he is dealing with somebody significant in the company that has responsibilities. The whole image of the company is improved, the customer get the impression to deals with a company with dependable employees. The company shows consideration toward the customer. Indeed they have the impression to be served by the top manager even if the frontline employee is just a simple employee.
2.3.2.2 Company's cultures
The Company's culture is a major concept that makes an organisation outstanding. It allows people to know what they have to do and what they are supposed to do. If people are proud of the culture and their job, they are more willing to be motivated. A study on Indonesian Airlines achieved by D. Natalisa and B Subroto has concluded that the corporate culture defined by the management commitment to service quality was a major factor of the customer's satisfaction. Another example is the culture of Starbuck. It consists in offering pleasure to the customers. Some details, allow the company to create a personal environment. For example, when they are preparing the coffee for a client, they ask his name and write it on the cup. As a result, when the coffee or hot drink is ready, the employee calls the customer by his name. That creates a relationship between customer and employee. The assertion is that the closer employees are from the customer, the more the customer will remember of the experience and will be willing to come back. The concept of the gift card emphasises it. Many people offer a Starbucks card as a gift. The Starbucks experience is considered as a gift and that's a source of pride for the employees, who actually are not considered like employee but as "partner" of the Seattle based company.
The evaluation of the service is partially based on the service providers and on details. This evaluation is based on language, clothing, politeness communication skills, and the ability to fit with the expectations. The uniform reflects professionalism. The photographer who wears gloves when showing the pictures to the clients will characterize professionalism. The employees of Ritz-Carlton are expected to "maintain positive eye contact, use the proper vocabulary with the guests such as "Good Morning," "Certainly," "I'll be happy to," and "My pleasure." All these details contribute to increase the pride to work for an outstanding company.
Be proud of your company, you'll be proud of yourself. The pride to work for a company increases the level of satisfaction as well. For example, most of the employees of Airbus are very proud to work for the European company. And they are very proud of the jumbo-jet A380 that just went through the first test on the 27th of April. The company gave 12,000 employees a day-off to attend this event. This privilege given to the employees increased their pride to work for the aeronautical leader Airbus and the feeling to belong to the Airbus family.
Another way to set up a culture that will be orientated on employee is to develop an entrepreneurship culture. According to Jauhari , "The behaviour is reinforced by linking the performance of an individual to his growth in the organization." The more an employee will consider the company's result dependent from his effort, the more he will be involved. In the condition he is compensated. It is easily remarkable in the franchising such as McDonald's where employees don't feel like entrepreneur. It is very notable the difference of service performance there is between a regular employee and the manager. The employee will serve basically using the main procedures he has been taught. To the contrary, the manager whose compensation is tightly connected to the performance of the restaurant will serve very well the customer and try to sell as much as possible.
Company where it is good to work is often a company where there is a team that is willing to work together. While interviewed on their motivation, the employees of Courtyard Hotel by Marriott expressed that their main motivation was they liked what they did and the persons with whom they were doing it. It is essential to create an environment where people are happy to work together. Team is often described as "Together Everyone Achieves More" and the customers receive more as well. In an organisation with a strong culture, S. O'Dell explains that there are more "individuals who think that helping someone else is a neat thing to do and can't help but find ways to do it"
Make the employees count is essential; an article from C. Tessier stresses some methods to stimulate employees energy. An employee-oriented culture includes that "manager demonstrate their belief in people by respecting them, providing them support to do the job and hold them accountable." It is a major concern that managers respect employees and show them interest. As a result, the author points out that "employees start to develop their internal leadership capabilities." The results are more numerous according to the author. It increases the level of "enthusiasm" during the relations with other employees or customers. It impels them as well to find and implement improvements in the workplace. And finally, the author adds that employee "become more focused and committed to delivery results." To sum thing up, the author advice to develop a corporate culture that makes managers listening to the employees, being honest, using a "positive language" and holding them accountable.
2.3.2.3 The role of design
P. Francese pointed out the role of the design in the workplace. According to this author, by providing an "outstanding design" a company can transform "a place or a service into an experience." The whole design includes the interior design such as paintings, music, layout, colours, lights, employee's uniforms and equipment. On the other hand, the exterior design consists of the parking, the façade, the environment and so on. In his book M. Leboeuf , reported: "85 % of what we remember comes from the eyes" that emphasises the main role of the design in the customers' perceptions and experience that will influence his loyalty.
The design is important for customer which experience will be influenced by these details. The music influences the customers experience in a shop or a restaurant. It has been proved that customers are more willing to spend time in a shop with soft music and it results in bigger amount of purchasing. In the same time, the improvement of the whole atmosphere contributes to the employee well-being. An employee who works in a nice environment will be more willing to be "glad at work" and to serve better the clients.G. Wallace , the CEO of Commonwealth Credit Union explained the purpose of design in the employee motivation. "We have created an environment that works for both employees and members. From the time members walk in our door, they 're able to see and feel the difference. It's reflected not only in the design of our branches but in our employees' attitudes" the design includes decoration to the colours of the local universities, the implementation of "festooned lounges", big screen providing motivational messages or coming events. The design contributes to the pride of employees in their workplace. Indeed, they have "large private offices with first class furnishings" that makes them satisfied and proud of their offices and it also make a "good impression" to the clients.
The design influence positively the behaviour of both customers and employees and contributes to improve the relationship. By improving the overall perception of the customers, by simplifying their access to the service, the company influence the mood of customers. These ones are more eager to communicate with employees and to make their job easier to achieve. Finally the author concludes arguing that they "have provided a workplace employees enjoy so they can concentrate on members. Service has improved and employee turnover has declined."
2.3.3 The good employees
2.3.3.1 Hiring
Many managers consider the hiring as the most important step for reaching an efficient workforce. Whereas it is possible to train the employee, it is important to recruit employees that fit with the job. For example, the company Southwest spends a lot of money on recruitment. They interview 70.000 persons of 100.000 applicants and they just hire 3000 of them. The recruitment team is composed of "a recruiter, a "peer" employee, and a "leader" or manager from the area where the candidate might work" that allows them to optimise the selection. The article emphasises on the role of each three, they all have to agree to make the applicant becoming a "keeper". "The peer" has to identify if the applicant can become a dependable teammate, the leader has to ensure if the interviewee will improve the team quality and finally, the recruiter will make sure that the potential employee fit the Southwest culture. The Ritz Carlton Osaka has an approach more applicants focused. While on the recruiting process; applicants are asked 50 questions to assess their suitability to the job at the hotel. They consider more important the "applicant view of the customer rather than the applicant's experience." P. Wright explain it is better to focus on the attitude and hire "a person who at least has the right instincts, which you can reinforce through training" The number of customer's complaining after the new hiring methods at Ritz has dropped from 27% in 1992 to 1% in 2000 . R. Zemke added "it's a lot easier to start with people who've got the right personality qualities to work with customers than it is to struggle to teach those skills to whoever walks in the door."While interviewed by the "chief executive", "G. Schwartz , president of G.S. Schwartz & Co., a public relations firm in New York", emphasised the consequences of a bad recruitment. In the beginning of the 80's, their activity grew fast and their needs of workforce followed the same trends. The "people were hired quickly" and they were not necessarily connected to the company's culture. That resulted in a vast turnover. The CEO explained that "people learned what they had to learn, and then went someplace else. We were a great training ground for other agencies." The CEO added that they changed their hiring approach to focus on people that would stay on the long run in the company. Finally, he pointed out that with this new approach, "the quality of their work goes up, clients are happier and stay longer and pay us more, which gives us this wonderful circle that allows us to treat our people better." The author refers to a positive circle that allows the company to make profit-satisfying customers and to contribute to the employee well being.
By hiring the right persons, the company contributes to lower the rate of turnover. As a result, its employees are more competent and they stay longer. The valuable knowledge and experience they acquire stay in the company and contribute to serve better the customers. But this last point is connected to an important part to consider in the hiring process is the dissonance cognitive.
The dissonance cognitive is the difference between the values of an employee and the values of the company. There is dissonance cognitive when the employees' values differ from the company's ones. It would be hard for an employee to work for a company that sells liquor if this last one had a problem of alcoholism in his family. It is important during the hiring process to take into consideration that concern. Indeed, the way an employee matches with the job will influence his willingness to perform it efficiently. If this job, doesn't match with his values, the motivation will be lower, the employee will never surpass the step of esteem and self-actualisation. Another type of dissonance cognitive concerns the job function itself. The job must fit perfectly with the employee's behaviour. If it is not the case, the employee will not perform correctly the job and his level of motivation will be very low. That's the responsibility of the recruiter to detect that kind of dissonance. To emphasise the importance of the recruiters, Zemke quoted by M. Henricks said, "If you have good workers, use them to recruit" they are more likely "to identify other people like themselves."
2.3.3.2 Training
The training is central for the company. In the first hand, it allows the company to motivate its employees, by increasing their motivation through the growth need of the Alderfer theory or also the recognition and esteem needs listed by G.A. Cole earlier in this report. By being trained they feel recognised by the company. That responds to the need to achieve personal in knowledge and skills. And finally, it fits with the need to find personal growth and development through work. P. Francese pointed out the importance of the training in a company to obtain highly motivated employee that understand their part is " a vital part of the firm's marketing advantage."The discount shop Target has adopted a different strategy than his main competitor Wal-Mart. The strategy of target is to invest largely on employees. P. Hisey quoted L. Gilpin, vice president, human resources said, in "We spend more on training and development than anyone I know of or have heard about. This is a key issue in our culture: It is an investment in our people and it creates a bond between the company and its employees," whereas target's employees have been more attractive for competitors, most of them stay with Target as the discount shop has created a paternalistic culture for his employees. He continued, "I think we provide a better humanity factor than do most employers. We want Target to be a nice place to work, not just a job." The vice president added, "in very general terms, happier employees provide better service."
The company implemented a program in 1989, which aim is to improve service by impacting the culture. Many key employees have followed the "entertainment company's service training" in Disney. The author explains today, in each shop, there is at least one employee who attended the full Disney treatment to manage ongoing and new-hire training session. This person is responsible for maintaining the target's culture by organizing parties, special event to entertain the store. In 1990, they established a Target university which aim is to "train the trainers," who then moved out to train store-level employees. The target motto "Fast, Fun, Friendly," meant to apply to employee relationships as well as customer service. And in 1994, Target followed the Disney Company by asking to his employees to treat the customers (called guests) like guests in their home. "Surveys of both guests and employees show that it works," Gilpin said. "Employees feel more positive about their jobs and customers give us higher ratings in friendly and efficient service."
J. Weaver , the vice president of human resources, Guest Quarter Suite Hotel explained that training their employees was important to avoid the "not my job syndrome". By training people the company improve the "innate creativity and initiative". The vice president reported that there was a connection between training, employee satisfaction and guest satisfaction, arguing that their hotel with the highest level of training had the "highest intent to return and friendliness of staff." The main explanation is training sessions give employees more knowledge and recognition from the company. They feel more engaged in the company success and are more willing to serve well the customers. Additionally, with training, employees are given the tools to deal better with the customers.
2.3.3.3 Communication
The former director of human resources of Xerox A. Mulcahly (she is now CEO) reckons that the main tool to attain customer satisfaction is the feedback. She said, : "High levels of motivation and satisfaction among our people will yield higher customer satisfaction. It's a closed loop that just keeps going on and on as long as we do something about the feedback." At Xerox, they emphasise on feedback by increasing relationship between senor management and employees. The communication is very important for improving the connection toward the different functions in the company. But is also very useful to know more about customer, the frontline employees are very competent to tell to the top management about the expectations of the employees. M. Henricks reported the recommendation of Berry who advises that each employee should submit an idea a month to improve the customer service. He commented that "make it part of their job description and part of their job evaluation." Indeed, front line employee is a valuable source of information to improve the customer service; they know better than managers how to meet the needs of customers. They can reduce the knowledge gap described in the Servqual model. As a result, the gap between the expectations of the customers and what the managers think they have to offer is reduced.
Moreover by asking them their point of view, it contributes to reinforce their participation in the work and in the same time, they are given the opportunity to improve their own business area. Finally J. Wanner emphasised on the need to reward these ideas, he indicated, "reward the idea generator and you will receive a continuous stream of new projects ideas." That will allow maintaining continuous research and projects development.2.3.3.4 Customer & employee loyalty
Another connection on motivation is the loyalty; a hypothesis is that if employees are satisfied by their job, they are more likely to remain in the company. G Tarzo quoted Oakleys who explained, "an employee's intention to stay is highly correlated with satisfaction. Employees who are not satisfied are more likely to be looking elsewhere for another job." The more an employee is satisfied with his job, the more his willingness to stay will be significant. Jonathan Barsky has achieved a study on the drivers of employees' loyalty in the hotel industry. The results from this research indicated that the emotion category was the main "predictor of employee loyalty". Those who reported feelings such as "powerful, appreciated and proud were more likely to remain loyal employee". Can we link the employee's loyalty to customer loyalty? G Fest confirmed it by using a study from Kottler reported that one of the biggest sources of dissatisfaction of the customer of the bank BAI/Oracle were the lack of skills of the frontline employees. It resulted directly from the high turnover rate. Indeed, the authors reported: "sales aptitude, training and product leadership were mostly lacking" if the turnover is high, the number of new employees increase and the number of experienced employees decrease. The former employees leave the company with the skills based on their experience and the training sessions they had with the company. As a result the whole knowledge of the company is reduced and an employee with fewer competences serves the customers. In the contrary, by retaining employees, companies contribute to maximize their customer loyalty. And that is very important LeBoeuf said on this topic "customer loyalty is in most cases worth ten times the price of a single purchase." However, even if customers are satisfied with the product, they may not be loyal. It depends on the switching costs, the existing substitutes and if there is differentiation or high involvement from the service provider and customers. But the more there is a strong relation between the service provider and the customer, the more loyal the customer will be.
2.3.4 Rewards the employees
2.3.4.1 Desire of promotion
The motivation can be achieved toward the desire of promotion; many companies offer the management position to the internal employee. For example, the company Costco offer 90% of the management jobs to actual employees . Hasser, Heskett and Hart commented the reward by promotion at UPS, many employees start at the Hub, if they are successful they are promoted to conduct a delivery car and later can be promoted to supervisory position. Even if the work is hard, employees who are ready to get involved in the company can raise positions and obtain high wages. That allows companies to motivate employees to achieve hard work by compensating them with better work position. In the same time they feed management positions with internal workers who have already the company's culture knowledge.2.3.4.2 Compensation to customer satisfaction
The compensation can have many forms. It can be directly offered by the customer, or achieved indirectly by the company. The tip is very common in North America, it is very usual to leave 20% of the bill to reward the waiter, the hairdresser or the cabdriver. As a result, the service is often excellent; the employees are rewarded directly by the customer and will be highly motivated to perform well and to maximize their tips. In some industries or other countries, the tip is less common. The company can replace the tip by increasing the outcome. In Fairfield Inn, a frontline employee such as receptionists and housekeepers can earn an additional 10% if their evaluation by a customer survey is satisfactory. As a result, the employees have a motivation tied to the customer happiness. The more the customer is happy, the more the employee will be compensated.Nevertheless, some companies compensate their employee "regardless" to the customer satisfaction. They think that by offering good reward and compensation to their employees, they'll contribute to make them happy, to make them stay in the company and as a result the customer will be satisfied. That's the case of companies such as the Ritz-Carlton, by implementing a strong compensation and reward system they reduced their "turnover rate from 51% in 1991 to 23.3% in 2004".
The figure 2-7 shows the "total pay package" offered by Starbucks to its employees called "partner" by the company. It includes insurance, compensation, retirement plans… that help the employee to feel better in the company. Indeed the company show that it cares about they "well-being."
Progressive Compensation Package Adoption Assistance Plan Healthcare Benefits (Medical, Prescription Drugs, Dental and Vision) Domestic partner benefits Retirement Savings Plan Referral programs and support resources for child and eldercare Stock Options and Discount Stock Purchase Plan Discounted Starbucks merchandise Income Protection Plan (Life and Disability Coverage A pound of coffee each week Management Bonus Plan Figure 2-7: Total Pay Package of Starbuck's Partner
Starbuck's has been ranked by the magazine fortune, the 11th "best company to work for" in 2004. The company has recently won a "Great Place To Work Award" . The company has been rewarded with the Credibility Award, that recognizes the company for its Mission Review program, that actuate its employee to question on the business practice to fit with the company's mission statement.
These compensation systems offered to the employees improve the loyalty of the customers. Some studies have demonstrated that compensations and rewards contribute to the employee's loyalty. This loyalty leads to more customer satisfactions, customers are dealing with more enthusiastic people, more trained people. They are working in the company for longer. As a result they are more willing to be properly served and to experience great perceptions. J. Barstky affirmed that more loyal employee affect the overall employee morale and impact as well the Guest experience. It is important that employees see that their efforts benefit to the customers, to the company and to them as well.
Some reward can be huge that the case of the biggest compensation system settled described by D. Mc Carthy . In 1996, the company Levi Strauss has proposed to its 37,500 employees a one-time bonus equal to approximately a year's pay "if the company meets its performance goals over the next year." That represents roughly $750 million. The author considers this reward an "effective incentive program." It is attractive, attainable and it is tied to the long-term goal of the company.
These methods allow companies to transform employees into "partners" and motivated employees into "engaged employees". G. Terzo defined that type of employee as "those who are motivated and inspired and who feel a sense of personal involvement in their work, as well as support from their organization. Satisfaction and engagement aren't the same thing, but satisfaction drives engagement." The author emphasises on the benefits to have engaged employees, those who will get involved in the company's success and take into consideration the customers' needs.
2.3.5 The effective companies
The magazine fortune rank every year the 100 best companies "to work for". This chart from CNN.com lists the first ten companies for the year 2003.
Edward Jones For the second year, the St. Louis, Missouri-based stockbroker was named the best company to work for. A commitment to training and profit sharing (25 percent of employees have partnership stakes) are two of the factors that Fortune called key to the workforce's high morale. Container Store The retailer of boxes (and other items to put items in) ranks No. 2 for the second year in a row. The Dallas, Texas-based retailer, which is expanding across the country and continues to offer one of the highest pay scales in the retail field, also provides domestic partner benefits, free yoga classes at distribution centres, and chair massages at headquarters. Benefits include a 100 percent match for 401(k) for up to 4 percent of salary, and 94 percent of employees surveyed felt they made a difference to the company. Alston & Bird The Atlanta, Georgia, law firm was the first law firm to be in the top 10, when it made No. 9 last year. The company stresses daily, weekly, monthly and quarterly communication, and unlike many law firms had no layoffs this year. It holds celebrations for employees, including Bunny Brunch and Welcome Breakfasts. Xilinx The semiconductor maker, headquartered in San Jose, California, protected its employees from a nasty downturn in the industry tech by refusing to abandon a no-layoff policy. Workers took a 6 percent pay cut, but the CEO led the way with a 20 percent cut. Adobe The Silicon Valley stalwart renowned for cool graphics products and as a place where "camaraderie is the byword" holds the No. 5 spot. There are frequent all-staff meetings and job rotations. Perks include three-week paid sabbaticals every five years, Friday night beer bashes and an annual holiday black-tie party American Cast Iron Pipe The company on Fortune's list with the lowest employee turnover (1.5 percent) is American Cast Iron Pipe. More than 20 percent of employees have been with the company more than 20 years. The Birmingham, Alabama, company has an on-site clinic that offers medical and dental care for employees and families for life. TDIndustries This employee-owned construction firm links insurance premiums to compensation -- the less you earn, the less you pay. J.M. Smucker The Orrville, Ohio-based jam and ice cream topping maker nearly doubled sales in 2002 with the acquisition of Jif peanut butter and Crisco shortening. The 105-year-old company offers health care for retirees and their spouses, as well as on-site stop-smoking classes and gives its employees unlimited paid time off to volunteer in the community Synovus A Southeastern bank holding company with on-site child care, state-of-the-art gym, and generous profit-sharing and pension plans. Wegmans Food Markets The New York state-headquartered supermarket chain allows its employees time off to volunteer and care for sick pets. Its employees have mentored more than 1,000 kids, helping them to graduate from high school. Figure 2-8: The Fortune "best employees to work for" classification
Company where customers are satisfied often leads to companies where clients are happy. To sum this chart up, most of the best companies providing the best job environment propose services such as:
Nice workplace: with personal comfort (free yoga class, massage chair…), a good communication, increase the relationship: camaraderie, celebrate events (breakfast, birthday), paid time off for volunteer in the community…
According the main literature, the competitive advantage of the company in the service industry can be obtain across three main area that are the work place the good person and the compensation system. It will be analysed through case studies, interview and personal experience in the Third part.
