Foster "employee-customers" and hold on to your best ones

Citation

Hosmer, B.E. (2001), "Foster "employee-customers" and hold on to your best ones", Strategy & Leadership, Vol. 29 No. 6. https://doi.org/10.1108/sl.2001.26129fab.002

Foster "employee-customers" and hold on to your best ones

Bradley E. Hosmer

Employees who serve the longest are best bets to win prizes for being the most productive and most reliable. Long-service employees are often those who carry the company and account for a disproportionate share of its success. In fact, contrary to popular belief, this notion can even be quantified.

In his book, The Loyalty Effect, author Frederick Reichheld (1996) does just that by showing how to measure the bottom-line value of the presumably vaporous dynamic of employee loyalty. He cites, for example, one company that boosted its profitability 50 percent as a result of snipping employee turnover by just a few percentage points.

In terms of the larger picture, Reichheld observes that:

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  Loyal employees tend to create loyal customers.

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  Low turnover saves the company money by reducing recruiting, hiring and training expenses.

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  Long-service employees have learned more and are more productive.

The combined effect, he explains, will be high-end productivity and even higher-end profits.

The truth is that a stable employee base makes it easier for companies to cope with change. Less than half of the firms that have downsized, for example, have managed to increase their profit in the ensuing years. More alarmingly, less than one-third have increased their productivity after downsizing. Though downsizing companies usually think that they are "trimming the fat" and that they won't miss those they lay off, their actions guarantee instead that many of the best and brightest survivors will be departing just when their traumatized company needs them most.

So, who needs whom?

Many organizations still operate under the antiquated belief that employees need them more than the organizations need their employees. But alas, such is no longer true, especially when speaking of the most talented and productive human resources.

In fact, today's world is transforming employees more and more into "consumers." Rather than remaining with a single company until retirement, many of these new consumers are finding themselves faced with the enviable prospect of choosing from among many employers competing for their services. They are thus more willing to jump ship and change jobs for a better opportunity than has ever been true in the past.

So, as we enter the new century, it appears that people are the most constrained resource around, when ranked against capital, equipment and facilities. This means that attracting and retaining good people become a critical strategic issue for most companies, as effective business performance is inextricably linked with the hiring and retention of good employees.

Let us look at what companies can do to place themselves in the most favorably competitive positions for attracting and retaining great employees:

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  Remember that employees are customers. To improve their ability to hire and keep the people they want to retain, many smart companies are adopting employment practices that would have been quite rare in former times, when employees were thought of as the "hired help." This may be especially true in the information-systems area, where capable people can write their own tickets these days. But what exactly are these companies doing? A change in the way your company looks at its employees can produce positive recruitment and retention results. The smart companies see salary and other benefits as the products these employee-customers are purchasing. In turn, employee-customers' ability and willingness to work become the currency with which they purchase these products from employers. Companies have always had to work hard to sell their products to customers. They chiefly do this by developing products with the designs and features that produce the benefits their customers want. And in this new model of companies and their employee-customers the same rules apply. Companies now have to work just as hard to sell their money to their employees, since these employee-customers know that they have plenty of other places where to shop and "purchase money." Thus, smart companies must learn to serve their employees. A customer, after all, is a customer. The only difference in this case is that, rather than existing outside the company, the customer now resides inside its walls.

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  Research what your "inside customers," i.e. employees, want. While retaining customers has always represented the corner-stone of building a good business, now retaining employees is a corner-stone, too, this time for building the kind of team that can enable the company to retain those same outside customers who will increase the business. One company, for example, offered a product aimed at a particular industry, but the product was not selling. In-depth market research revealed that each of its customers seemed to view this product differently. This meant that the product suggested different values to different customers, each planning to make use of it in different ways. But until these differences were identified, no action could be taken to bring all customers' perspectives in line, so that the product could sell. Similarly, an employer may have a certain package of compensation and working conditions to offer its employee-customers. However, not all employees may value that package in precisely the same way. For some, money may be most important; for others it is schedule, job content, flexibility, or some other aspect of the situation. Companies must discover and respond to employees' wants and needs in the same manner in which they respond to customers' wants and needs. Thorough, in-house "market" research will often be required. One caveat: Begin such research by viewing each employee as a market of one. Do not presume to know every individual's mind without asking. Frequently, top executives make this mistake, assuming that most of their employees are just like themselves and share their own needs and values. The fact is that your market research may turn up some very surprising things. Just as your potential customers may not even realize that they have a problem that needs to be solved, so your employees may be running into work situations they assume cannot be changed. This condition drives good employees right out of the company.

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  Give employee-customers what they want! Once a company understands the wants and needs of its employee-customers, these factors must be addressed. This means, wherever feasible, giving them what they want. By doing this, levels of loyalty are created with the potential to dramatically upgrade business performance beyond all expectations. A company in the oil services industry, for example, had been very technology-driven, relying on a sizeable and capable engineering department. In particular, one individual was responsible for a high percentage of company innovations, including the ability to commercialize those innovations. The boss was naturally concerned that this very productive engineer/inventor might be hired away but had no clue what to do to keep him. So, despite the fact that the engineer worked several levels below in the organization's structure, this boss called him into his office and asked him one simple question: "What do you want?" To his surprise, the valued engineer did not mention money at all. "What I really want," he responded, "is to move my development lab from the engineering center to a small unused building at the other end of the company industrial complex. I also want to take one particular technician with me, and I want a free hand in my development projects and innovation." Such is the power of in-house, one-to-one, market research! At once, the boss realized that his engineer's requests were all very feasible and saw to it that the changes were made. In the end, both company and employee benefited greatly. Here was a boss smart enough to recognize and meet the needs of his exceptional employee and flexible enough to take the requisite action to keep him. As a bonus, his actions had an enormously positive effect on the company's morale and its bottom line. Of course, it also kept the company's best employee happy and productive for a long time. Extraordinary? Not really, because that is how proactive a company needs to be in these fiercely competitive times. It is the boss who strategizes retention plans before they are needed who is more likely to retain good people in times of trouble. In other words, employers now need to earn their employees' loyalty before circumstances cause such loyalty to be tested.

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  Install mechanisms to promote "employee service." Market research reveals that markets are always changing. Opportunities come and go. What once worked works no more. What formerly did not work is now appropriate. Employees may see the company as static, when the reality is that things are changing. If they are taught how, or coached through these changes, they may end up taking advantage of change for their benefit. That is why solid career development and mentoring programs can be likened to customer-service initiatives and customer education, a kind of "employee-service" initiative. Many business-to-business companies have established dealer or customer councils to serve as a two-way sounding board for problems and ideas. Such companies find that this technique produces useful customer information as well as building stronger relationships and more open communications with their customers. Improved communication leads to greater customer loyalty with all of its benefits. The same thing can be achieved with employees meeting in groups or one-on-one with management. Again, serving inside customers using methods developed for outside traditional customers can produce the same effects. The best and brightest people are not so much being hired by a company these days as actually hiring a company. They "purchase" money and non-cash value in exchange for their time and talent. Increasingly, employees are realizing this new dynamic and that they are now squarely in the driver's seat. Thus, they expect their needs to be met by their employers, and employers who do not meet this standard will suffer. Smart employers, who can meet employee-customers' needs, will enjoy a return in productivity and loyalty that knows no bounds. At the least, they will reap rewards in overall company performance, retaining their best people as they do so.

Reference

Reichheld, F. (1996), The Loyalty Effect, Harvard Business School Press, Boston, MA.