Developing Employee Loyalty Promotes Company Profits

During the 1990s, Sears analyzed complex mathematical data to determine if, and how, employee loyalty influences the bottom line and whether it pushes it up or down. The conclusion of this analysis, according to Harvard Business Review, was "for every 5% increase in employee satisfaction, there is a resultant 2% increase in customer satisfaction, returning up to 1.8% in net profit."

Do those connecting links fit your concept of how businesses work? That is, have you found that employee satisfaction causes customer satisfaction and, in turn, that customer satisfaction causes profit growth?

If not, ponder the research I've uncovered. Satisfied, happy workers influence a number of factors that can push up your profits. Consider the following effects satisfied employees exert on your customers and business.

Liking their jobs, they work with greater industry, apply their intelligence, and feel personal concern for good results. Thus, they increase their own productivity.

Liking their jobs, they tend to remain in your employ. They feel loyal to you and the company. That saves you the cost of hiring and training new employees.

Emitting a positive attitude, they influence their co-workers (even the manager) to enjoy their work more. That increases others' productivity.

Liking their jobs, they can better follow company policy and generate solutions on their own. That releases the manager to do management tasks.

Being happy, they radiate happiness to customers, and positively influence their moods. Happy customers tend to become loyal customers, so they return to purchase in your store.

Loyal customers tend to focus on the product and services they want, rather than on the price they'll pay. That frees them to buy higher-margin products.

Loyal customers like to relate their positive experiences to others. That makes it easy for them to refer their family and friends to buy at your store.

Loyal customers like to return to your store to rekindle relationships. They tend to return and buy again, and again, and again.

These eight effects boost profits. So, you and everyone else with a stake in the equation benefit when your employees feel satisfied and loyal to the company.

To the customer, your employees are your business. Your people are four times more likely than any advertising or marketing strategy to engender customer loyalty. Employees' moods and attitudes profoundly shape customers' impression of your entire company. So, employee attitudes can benefit or damage your business.

One common misconception is that the single most important influence on employee loyalty is take-home pay. In reality, it's more complex than that. A piece in past edition of Fortune magazine reads: "Every company claims that its people are its most important asset. The most admired companies, however, show they really mean it."

The entire, overall environment in your store is what builds employee loyalty. People are subject to their environment. The leader's job is to create an environment in which the work is interesting, challenging, involving, and achievement-oriented.

I have some recommendations to help guide you in your effort to build this kind of environment. Before I give them, however, I'd suggest you consider the current of moods and attitudes of your people.

Which of your workers are happy and which are not? One survey found that 50% of workers said they put into their work only enough effort to hold onto their jobs. And 84% of workers said they could work better - IF they wanted to. Some 90% of employees said they are willing to work harder to help their organization succeed. And about 75% believe they could be significantly more effective in their jobs.

If you haven't recently solicited candid feedback from your employees (and especially if you're skeptical about how truly candid they will be with you), your first move is to investigate and measure their happiness and loyalty.

Now, on to the recommendations. The first and most critical element in a satisfying environment requires that each employee understands the leader's clear expectations of performance. The second element requires that you provide all of the tools that an employee needs to perform his or her job well. (I discussed these two elements at length in my August 2001 column.)

The third critical element is "job fit." Effective managers recognize that no one, however talented, can excel at everything. When a person's job does not allow him to express his personal natural talents or gifts, that employee will not enjoy enough satisfaction and will not sufficiently invest his talents to become a top producer. Another study found that 35% of those in the typical salesforce do not possess the threshold talents necessary to do the job.

Therefore, putting the right person in the right job is critical. The Peter Principle - which hold that people are promoted to their individual levels of incompetence - is an example of the wrong fit. Great managers spend their time making sure each person is doing what he or she does best.

In my next installment of The Art of Retail Management, I'll recommend four additional elements that can help you increase your employees' satisfaction and loyalty. When I review the benefits that flow to so many people from this one source - that being employee satisfaction and loyalty - I realize that every minute I work on these elements is the best use of my time and company resources. It's hard to find something more worthwhile.

Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!

Sam Allman is president of Allman Consulting and Training. He is an internationally recognized motivational speaker, consultant, trainer and author who delivers inspiring programs in areas such as leadership, customer service, management development, team building, retail sales and personal quality management. He has developed many audio and video programs and has created hundreds of training and educational learning systems.