Employee loyalty leading to Customer satisfaction and their Retention

suyam By suyam, 25th Dec 2010 | Follow this author | RSS Feed | Short URL http://nut.bz/_5l8vx7y/
Posted in Wikinut>Business>Business Opportunities

Happy employees create happy customers. Employees who create happy customers are more likely to emerge from the interaction happy….And so on and on the interaction spiral, virtually feeding on itself.. Hence, employee satisfaction leads to customer satisfaction and it leads to business results through customer loyalty

Increased Business results through Employee loyalty


Employee loyalty leading to Customer satisfaction and their Retention

01. Need for developing employee loyalty

Employees are the bread and butter of an organization. Their productivity gets reduced, if they are not properly recognized, despite the fact that their organization has great ideas, products and good location. In fact, when employees develop apathy, it will lead to dissent; job hunting and finally they leave their organizations. Hence, building a strong employee loyalty for the organizations` growth has assumed a lot of importance now a day.

It is reported that some organizations, consumed by fears of a shrinking bottom line, have turned micromanagement activities into an art form only and this has resulted in dissatisfaction in the minds of employees. The article examines how recognition leads to an increase in productivity of the employees, besides increasing both top line and bottom line.

When economy continues to rebound and the existing workers find job-hopping an increasingly viable option, a situation may develop leading to exacerbation that would result in an impending exodus of valuable workers.
In a survey conducted by Ernst &Young, it is observed that the cost of replacing a high level employee may be as much as 150% of that of departing employees` CTC. Hence, it is imperative that organizations should develop a mechanism to build a strong employee loyalty so that there would not be any problem of employees developing apathy.

02. Employees` Loyalty and its impact on Customer Retention

Employees’ loyalty can be defined as “employees being committed to the success of the organization and believing that working for this organization is their best option. Not only do they plan to remain with the organization, but they do not actively search for alternative employment and are not responsive to offers”.

Employees are a vital resource for nearly all organizations, especially since they represent a significant investment in terms of locating, recruiting, and training let alone salaries, healthcare plans, bonuses, etc. There is considerable expense for replacing an employee whether it is the shoe salesman who sold you your last pair of cross trainers or the lawyer who wrote your will. Most managers do not realize how expensive losing workers can be.

A number of businesses focus on satisfying the customer and a business can have millions of satisfied customers. Unfortunately, having satisfied customers is not enough to have sustainable growth. A satisfied customer does not imply that they will talk about your organization or service to others and that they might refer others to you. An organization can lose out on potential increments in revenue, customers and profits, if it fails to “WOW” the customer; that is to exceed the customers` expectations all times. Alternatively an impressed customer is not only a satisfied customer but also a LOYAL customer. In order to develop customer loyalty and the WOW effect, organizations need to consistently provide service quality that is above and beyond the customer’s expectations. In other words, every interaction that the customer has with your organization needs to have the WOW factor. In doing so, the organization gains customer loyalty and increased customer retention. Loyal Customers and customers that feel that you met and exceeded their expectations will talk positively about their experience and will refer others to you. This is critical, because the longer a customer stays with the company, the higher the revenue and profitability from the customer. The lifetime value of a customer increases exponentially with the number of years they have been your customers.

Hence, it is imperative that in order to develop customer loyalty and there from customer retention, organizations have to deploy employees who have developed loyalty towards the organizations. Only such employees can extend WOW effect in their service to their customers that would lead to a service level more than the expectations of customers at all times.

03.Reasons for employee dissatisfaction and how to overcome this situation

It is observed that employees are dissatisfied on account of management forcing them to take larger workloads leading to additional stress without suitable compensation either in monetary terms or recognizing their good work. This problem can be solved with flexible work schedules or we can call it as “work/life balance programme”.

It is reported that a IT company provided onsite hardware support for their customers. In order to comply with the requirement, the customer support engineers were forced to wear pagers 24/7, resulting in increased calls, leading to breaking the boundaries of normal working hours of their service engineers. This resulted in soaring of the company`s overtime costs coupled with the suffering of morale of their employees. Then, how did the company could solve this problem?

The Corporate have allowed their employees to create their own work schedule. Some employees volunteered for three day 12 hour schedule, with four hours of work on one day, enabling those employees to be involved in their family activities during the remaining period. The change allowed the service engineers to make personal plans for the weekend, as others are covering those shifts. The overtime costs fell by 36% and good number of engineers who were thinking of leaving the job stayed on their jobs, holding recruitment and training costs down.

In addition to flexible work hours to increase employee satisfaction, the following measures can also be adopted to boost worker’s loyalty and dedication.

04. Recognition of good work done by employees.

It so happen that some business people chose to blame their own employees. This has resulted in growing number of employees feel like they are being viewed as the enemy not as loyal partners. Hence it is very important that employees are to be valued by telling that how they are valuable to their organization, their good works are to be recognized by extending a pizza party, recognition of one employee every month and anything that can be done to disclose how much we do care for them. By doing so, the organizations can earn and win the enhanced dedication and productivity of their employees, which is on account of loyalty developed due to the recognition given to them.

05. Genuine growth path for career prospects for employees

There is a saying “With the passage of time, some people grow up in their life and some others grow old”. In the same way, some employees are content to remain where they are in an organization, but some others desire to grow up in their careers over a period of time. Nowadays, annual performance reviews have become a mere perfunctory and subjectivity plays a vital role. If the managers really want to increase worker satisfaction, they should establish genuine growth paths for all their employees, not just for their senior level executives.

06. Pay for Performance system

Organizations can introduce, Pay for Performance system. This is a system in which pay decisions are based on defined performance levels rather than entitlement. Pay decisions include
01. Merit based pay increase 02.Lump sum bonuses.
The above system has got the following benefits.
01. Rewards high performers
02. Provides opportunities for developing poor performing employees
03. Increases employee motivation
04. Contribution to employee retention

As this system is very transparent, the employees could understand how the system could impact them and they know their role and responsibilities, which are directly linked to their rewards. Naturally, they develop loyalty towards their organization, leading to more productivity, which results in an increase in their bottom line.

07. Bottom up and Top down support

With all the measures discussed as above, it is possible to reverse the trend towards job dissatisfaction and even employees with low morale can become motivated and enthusiastic again. But it takes work on employer’s part. It is informed that there must be both bottom up and top down support. In other words, senior level management should set the tone, creates an environment in which these initiatives can happen and then provides the resources. However, the top-level commitment must be combined with mid-level and front line managerial support coupled with grassroots employees’ involvement, if it is to be really successful.
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Tags

Bottom Line, Customer, Loyalty, Recognition, Retention, Satisfaction, Top Line, Wow Effect

Meet the author

author avatar suyam
Retired executive of Canara Bank,with 31 years experience-Good exposure in Finance,Banking,Foreign Exchange,Credit Management and Risk Management-Interested in English Literature,writing articles.

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