As companies seek to enhance their customer relationships, they recognize that employees who interact with customers are critical to the ongoing success of customer relationship strategies. The brand promise will be either fulfilled or compromised on the basis of an employee's desire and ability to promote it. The rationale is inescapable: if you desire valued relationships with your customers, you need valued relationships with your employees.

Companies are recognizing the transferability of customer relationship practices to the employee management domain. New approaches have been identified to both raising employee satisfaction and increasing the ability to execute on customer strategies.

The similarities between customer relationships and employee relationships begin with the strategic goals of each initiative. As customer relationship practices seek to acquire and retain a company's best customers and optimize the value of all of its customers, employee relationship practices seek to attract and retain the best employees and to optimize the behavior of all employees. If employee behavior is consistent with the goals a firm has in relating to its customers, then the company will find success in each arena and, very importantly, will build significant shareholder value.

Relationships with employees were historically left to individual supervisors and managers. Companies focused their training budgets on making better supervisors and managers in the hopes that they could universally and consistently promote and apply the merits of the company as an employer. That approach has met with a level of success that until now has been the benchmark for best practices. Today, however, there is a powerful new management framework evolving for supporting the supervisor / employee relationship.

Customer Loyalty: How Employees Matter

A major US Bank surveyed customers and employees to learn how employees could more positively impact customers, and, in turn, how that impact affected corporate performance. The study revealed a direct link between employee commitment and capabilities, customer loyalty and corporate performance.

...49 percent of the impact on customer loyalty came from employee commitment (27 percent) and employee capability (22 percent)...

According to the Bank study, high customer loyalty was a key measure of company performance, resulting in increased profitability, more long-term customer relationships, increased cross sell activity, increased share of wallet from individual customers, and more frequent recommendations as a preferred place to bank. Loyalty was clearly impacted not just by the obvious factors—products, pricing, and total customer experience—but also to a large extent by two newly identified factors; employee commitment and employee capability.

The study indicated that 49 percent of the impact on customer loyalty came from employee commitment (27 percent) and employee capability (22 percent), while the remaining 51 percent came from the expected sources: 20 percent from product and pricing, and 31 percent from total customer experience.

Furthermore, the research revealed the drivers behind employee capability and commitment. The five variables affecting employee capability were identified as caliber, authority, process, infrastructure and capacity, developed simultaneously. Employee commitment is advanced by emotional reward, trust, and identity, and to a lesser extent by economic interdependence and fit.

Understanding these drivers in the work environment and how to measure them facilitates decision-making around employee investments aimed at the highest return on investment relative to business performance. For example, the statistical analysis revealed that an increase of only 1 percent in employee commitment drove $20-30 million in cost and revenue improvements within only one line of business. Instead of benchmarking best practices or making an educated guess about how to influence employees to better serve the customer, management developed a framework for deciding on which specific employee initiatives might result in the 1 percent commitment improvement at the best possible rate of return.

This framework recognized the importance of the following three factors:

1. An Employer Brand

Many companies believe that the consumer brand satisfies the requirements of who they are as a company. An employer brand certainly begins with the consumer brand, but needs to continue to include the internal brand message and thereby create the platform for alignment of employee, supervisor and management behaviors. A well-formulated employer brand carries the essence of what the organization stands for and creates the platform for what is required of employees to integrate well within the culture of their company. As these behaviors align, the culture is formed and enhanced. Most importantly, these behaviors can be connected to the brand promise being made to the customer and thereby create the basis for a high-performance organization.

2. The Power of Internal Marketing Communication

The business of promotion is the business of marketing, and there are no better vehicles for promoting an employer brand than the techniques that are used for promoting the consumer brand. Employees need information to continually refine and enhance their understanding of what is both promised and required of them to fulfill the company/employee contract. The brand is built through the exchange required to validate and enhance that contract in an ongoing fashion.

To accomplish this, companies are developing personalized marketing communications that have an explicit objective: optimize the behaviors of the employees and supervisors that promote the company's values in actions and words.

3. Great Execution

Southwest Airlines was one of the earliest companies to recognize the value of the employer brand and its impact on customer loyalty and retention. By aligning internal brand positioning with external brand positioning, the company created one of the highest customer satisfaction and employee satisfaction rates in the industry. See Figure 1 below.

Figure 1. Southwest Airlines Example

Southwest's external brand promise to customers is "Freedom." More specifically, "Southwest Airlines makes it possible for more people to experience things firsthand: To see and do more things more often than ever before." The same message is reinforced in the company's internal positioning, with the understanding that employees are key to communicating the brand message to customers:

"Southwest helps employees create freedom internally by offering them a wide range of resources and tools that can help day to day as well as in planning for the future. We provide this support because we believe that helping employees create freedom in their lives will enhance the freedom they in turn deliver to customers. In short, we'd like employees to say: 'at Southwest Airlines, freedom begins with me'..."

Southwest has relied on employees to establish brand and indirectly drive market share and to a large extent the strategy has paid off. The airline has one of the best profitability ratings in its industry, and its attrition rate of 9 percent for staff and 6 percent for management points to high employee satisfaction. In fact, Fortune Magazine has regularly rated it one of the Best Companies to Work For.

Employee satisfaction also correlates to the company's high customer satisfaction. The airline has regularly had the fewest customer complaints in the industry according to the Department of Transportation. Southwest received the Wall Street Journal's rating for Highest Customer Satisfaction and was named Fortune Magazine's Most Admired Airline in the World many times.

In summary, adopting these new practices will position a company with lasting improvements in operating efficiency and the behavioral "people" engine to increase customer satisfaction and to perpetuate growth.