There is ample evidence that improving employee experience leads to better business results. Briefly, firms that improve employee experience find that they get better work performance and more discretionary effort from employees.[i] Discretionary effort makes companies more effective and efficient, according to this study published in Harvard Business Review.[ii]
Better employee experience also leads to lower employee turnover and reduced recruitment costs. Starbucks has less than half the turnover rates of the retail industry’s and estimates that it saves $1.7 million for each 1% reduction in turnover.[iii] That means its annual savings from lower employee turnover are in the tens of millions of dollars.
And that’s not all. Better EX leads to better CX. For example, a 2016 Yale study with a large rental car company showed that employee engagement had a positive and statistically significant effect on Net Promoter Score.[iv]
Firms Fail To Improve EX Because They Take The Wrong Approach
The problem is that most companies take the wrong approach to improving EX. They focus on outcomes — like employee engagement — rather than root-cause factors that lead to good or bad employee experiences, such as meeting overload or lack of employee empowerment. That level of insight only comes from examining employee work-life in fine detail, but most companies don’t map employee journeys and so lack that level of insight.
Companies also neglect employee feedback. In a Medallia Institute survey of 1,000 frontline employees, 78% reported that their leaders claim customer experience is a top priority, but nearly 60% feel that their ideas for CX improvement go unheard.[v] And fewer than half believe they can count on leadership to remove obstacles to delighting customers.
Five Hallmarks Of A Good Employee Experience
The good news is that there is a better way. We know what makes a good employee experience. Employees care about:
- Progress. According to Teresa Amabile of the Harvard Business School and her coauthor Steven Kramer, people are happiest, and their engagement peaks, when they’re making headway in their work.[vi]
- Purpose. Why we work determines how we work. A study cited in Harvard Business Review makes this clear: “Researchers asked almost 2,500 workers to analyze medical images for ‘objects of interest.’ They told one group that the work would be discarded; they told the other group that the objects were ‘cancerous tumor cells.’ The workers were paid per image analyzed. The latter group, or ‘meaning’ group, spent more time on each image, earning 10% less, on average, than the ‘discard’ group — but the quality of their work was higher.”[vii]
- Mastery. Creating an environment where individuals feel a sense of autonomy — within reason — inspires intrinsic motivation for the work and engages employees more fully. Kip Tindell, cofounder and CEO of The Container Store, gets it right: “Life and certainly retail are too situational for you or me to be smart enough to tell everyone how to act in every given situation. But we don’t want to be 5,000 yahoos going in 5,000 different directions. So we agree on the ends, and then we liberate each employee to choose their means to the ends.”[viii]
- Autonomy. Self-efficacy is a person’s judgment of their own abilities. Several studies show that when people are learning, their self-efficacy increases and their tendency to procrastinate goes down.[ix]
- Connections. Helping form connections among employees is a powerful culture-shaping tool. Employees who believe they have supportive peers at work are more likely to rate the employee experience highly.[x]
To prioritize EX improvement, firms must focus on these hallmarks of great EX and examine their existing employee experiences in fine-grained detail.
[i] Source: “The Employee Experience Index,” IBM and Globoforce (http://www.globoforce.com/wp-content/uploads/2016/10/The_Employee_Experience_Index.pdf)
[ii] The researchers referred to the extra-role behaviors as “citizenship behaviors” and found that employees experienced benefits in the form of higher purpose but also costs in the form of depleted energy and increased stress from exhibiting citizenship behaviors. Source: Mark C. Bolino and Anthony C. Klotz, “How to Motivate Employees to Go Beyond Their Jobs,” Harvard Business Review, September 15, 2017 (https://hbr.org/2017/09/how-to-motivate-employees-to-go-beyond-their-jobs)
[iii] Source: “Fiscal 2016 Annual Report,” Starbucks (https://s22.q4cdn.com/869488222/files/doc_financials/annual/2016/FY16-Annual-Report-on-Form-10-K.pdf) and Sophie Sakellariadis, Alex Cole, and Jess Stein, “Making Sure the Cup Stays Full at Starbucks: Leveraging Narratives from Glassdoor.com to Improve Recruitment and Retention,” Huffington Post Blog, August 5, 2015 (http://www.huffingtonpost.com/sophie-sakellariadis/making-sure-the-cup-stays_b_7935760.html)
[iv]. Source: Ahmed Khwaja and Nathan Yang, “Quantifying the Link Between Employee Engagement and Customer Satisfaction in the Car Rental Industry,” Yale School of Management, November 10, 2016 (http://faculty.som.yale.edu/ahmedkhwaja/Papers-CV/EmpEngagement_KhwajaYang.pdf)
Net Promoter and NPS are registered service marks, and Net Promoter Score is a service mark, of Bain & Company, Inc., Satmetrix Systems, Inc., and Fred Reichheld.
[v] Source: Medallia Institute, “Finding The Way to Happy Customers Through the Voice of Your Employees,” 2016 (http://go.medallia.com/rs/669-VLQ-276/images/Medallia-Finding-the-Way-to-Happy-Customers-Through-the-Voice-of-your-Employees.pdf)
[vi] Source: Teresa Amabile and Steven Kramer, The Progress Principle: Using Small Wins to Ignite Joy, Engagement, and Creativity at Work, Harvard Business Review Press, 2011
[vii] The research found that employees are more productive when responding to internal motivators like purpose as opposed to external motivators like peer pressure or compensation. Source: Lindsay McGregor and Neel Doshi, “How Company Culture Shapes Employee Motivation,” Harvard Business Review, November 25, 2015 (https://hbr.org/2015/11/how-company-culture-shapes-employee-motivation)
[viii] The Container Store has a compound annual growth rate of 20% since its founding in 1978. Source: Jessica Rohman, “With An ‘Employee-First’ Mentality, Everyone Wins,” Great Place To Work, 2013 (https://s3.amazonaws.com/media.greatplacetowork.com/pdfs/the_container_store_greatplacetowork.pdf)
[ix] Source: Kristin Wäschle, Anne Allgaier, Andreas Lachner, Siegfried Fink, and Matthias Nückles, “Procrastination and self-efficacy: Tracing vicious and virtuous circles in self-regulated learning,” Learning and Instruction, ScienceDirect, Learning and Instruction, February 2014, Volume 29 (http://www.sciencedirect.com/science/article/pii/S0959475213000662)
[x] “A best friend at work” is one of Gallup’s 12 employee engagement questions. Gallup highlights that this is the most controversial element, but Gallup consistently finds that it does predict performance. Employees who agree that they have a best friend at work are better able to withstand adversity and be productive. Source: Jim Harter, “12: The Elements of Great Managing,” Gallup (http://www.gallup.com/press/176450/elements-great-managing.aspx)