If you’re in recruiting or HR, you already know how business-critical it is for companies to cultivate a strong company culture and positive working environment. Sometimes, though, when senior leadership’s main focus is on NPI scores, sales and revenue, employees end up taking a backseat to customers. But a new Glassdoor Economic Research report, Happy Employees, Satisfied Customers: The Link Between Glassdoor Reviews & Customer Satisfaction, suggests that organizations hoping to win over customers should consider investing in their own employees first.
The Employee/Customer Satisfaction Connection
In the study, Chief Economist Dr. Andrew Chamberlain and Senior Economist & Data Scientist Daniel Zhao looked at a panel of 293 large employers across 13 industries between 2008 and 2018, comparing the link between employee satisfaction through Glassdoor reviews and customer satisfaction through the American Customer Satisfaction Index (ACSI).
Chamberlain and Zhao discovered that each 1-star improvement in an employer’s Glassdoor company rating out of 5 is associated with a 1.3-point increase in customer satisfaction out of 100.
“Across all companies and years, customer and employee satisfaction are positively linked. In our sample, there is a clear overall link between satisfied employees and happy customers,” the report says.
Higher Customer Contact, Higher Impact
The connection between customer and employee satisfaction was not equal across all sectors, however. In industries where front-line employees directly interact with customers, employee satisfaction had an even bigger impact on customer satisfaction.
“Focusing only on sectors where front-line employees have the most direct and frequent contact with customers — including retail; restaurants, bars and food services; travel and tourism; financial services; and health care — we find the effect of satisfied workers on customer satisfaction is more than twice as strong, with each 1-star higher Glassdoor rating predicting 3.2 points higher customer satisfaction,” the report says.
It might come as no surprise, then, that the satisfaction of employees in front-line roles like sales and customer service directly impacts customer satisfaction, regardless of industry — it’s not easy to provide good service if you’re unhappy at work!
How Customer & Employee Satisfaction Drive Financial Performance
So it’s clear that employee satisfaction is closely tied to customer satisfaction — but how does that actually affect your business’s bottom line? By leveraging a 2006 study published in the Journal of Marketing that associated ACSI customer satisfaction score with stock market performance, Chamberlain and Zhao were able to estimate how an increase in employee satisfaction translates to financial gain.
“While the statistical impact of higher Glassdoor ratings on customer satisfaction appears small on the surface, there are potentially large financial gains to employers from improving workplace morale among customer-facing employees,” the study says. “Based on one recent estimate, each 1 percent increase in customer satisfaction is linked to 4.6 percent higher company market values. That translates into a predicted boost in company market valuations of 7.8 to 18.9 percent for each 1-star improvement in overall rating on Glassdoor — a potentially large financial boost from better customer satisfaction via an improvement in employee morale.”
If your company wants to reap the benefits of higher employee satisfaction, the following suggestions are a great start:
- Get the executive team on board. Use data and research to convince senior leadership of the importance of investing in employee culture. Not only can buy-in from executives provide additional budget — it can be felt throughout the whole company. Remember, culture is often top-down.
- Check in with employees. You won’t know what your employees want if you don’t ask them. So whether you use an employee engagement platform or just a Google Forms questionnaire, it’s worth asking employees how satisfied they are, what they like and what you can improve. Make sure to act on their insight and check in with them again at a later point so you can measure your progress.
- Invest in career paths. A recent Glassdoor study found that access to career opportunities is one of the top three factors that influence employee satisfaction, so if you don’t already, make sure that career paths are clearly laid out at your company. Incorporate transparency around what the next level looks like, and how employees can get there. You may even want to consider establishing a process for lateral moves within your organization.
At fast-paced organizations where the bottom line is constantly in mind, it’s easy for the organization to adopt a “customer-obsessed” mindset. But too often, focusing on customers comes at the expense of creating a great employee experience — something that can have a material impact on customer satisfaction and, ultimately, revenue. As the founder of the Virgin Group Richard Branson once said, “if you look after your staff, they'll look after your customers. It's that simple.”