Staff Loyalty = Customer Loyalty = Higher Profitability By Michael Lowenstein Michael Lowenstein, CPCM, is managing director of Customer Retention Associates, a customer and staff loyalty program development, research, and consulting firm located in Collingswood, New Jersey (www.customerloyalty.org). With over thirty years’ management and consulting experience in customer and staff loyalty research, CRM, loyalty program development and refinement, customer win-back, service quality, customer-driven corporate culture, and strategic marketing and planning to draw on, he is an active speaker, workshop facilitator, and trainer, and he is a regular featured contributor to three customer loyalty newsletters. His keynote, general session speaking, and workshop facilitation assignments have been in the United States and Canada, Europe, South America, and Africa. He also provides expert customer loyalty commentary and articles for several professional CRM sites on the Internet. Michael is the author of two widely-regarded books: Customer Retention: Keeping Your Best Customers (1995), and The Customer Loyalty Pyramid (1997). He is also co-author of Customer WinBack: How to Recapture Lost Customers – and Keep Them Loyal (2001). Additionally, he is a contributing author to Redefining Consumer Affairs (Society of Consumer Affairs Professionals, 1995), The Answer Book for Customer Service Managers (Bureau of Business Practice/International Customer Service Association, 2000), and Customer.Community: Unleashing the Power of Your Customer Base (Jossey-Bass, 2002) He has been a customer loyalty instructor for Pennsylvania State University and the American Management Association; and he holds an M.B.A. degree in marketing from the University of Pittsburgh, and a B.S. degree in economics and marketing from Villanova University. He is listed in several international, national, and professional Who’s Who directories. His clients include First Union, Toyota, Prudential, Westvaco, Cigna, Charles Schwab, Borg-Warner, Sygma, Comcast, Baptist Health Care, Metropolitan Life, Microsoft, Alliance of Community Health Plans (ACHP), Daimler-Chrysler, and Georgia-Pacific. Customer Retention Associates specializes in helping clients optimize customer loyalty and value through customer and staff loyalty research, loyalty program development and refinement, loyalty action training for front-line staff and management, and customer save and win-back protocol development. The company is a founding member of the CRM International Consortium (CRMIC), an affiliation of independent CRM and customer loyalty practitioners from around the world, which is based in Europe. The mission of CRMIC is to offer leading-edge customer loyalty and value solutions. Staff loyalty is a crucial element in any customer loyalty or CRM program; and, without requisite staff loyalty, the chances of a customer loyalty program succeeding are, in the long-run, not very good. In the United States, there are few industries not experiencing high pressure on finding, and keeping, qualified personnel. Employment rates are high, even with recent pressure on the economy; and staffing has become a critical priority. It‟s been suggested that companies should apply a marketing perspective to the challenge of attracting and keeping employees. The logic goes like this: You have a product called a „job‟ that is being sold to a customer called an „employee‟. When you think about employee loyalty as a marketing challenge, the question to ask is what actions should be taken to turn prospective employees into new hires and, once that happens, what action are required to turn new hires into longer term employees and ultimately, staunch company advocates? With every employee lifecycle comes predictable crisis points when staff defection risks are greatest. The better a company can predict and plan for these likely stress points, the more chance defection can be prevented and the employee can be retained. . Three common crisis periods for employees are: (1) New-hire hysteria. This condition can be brought on by a number of „new job‟ circumstances including under-whelming assignments, friction with a new boss or an unexpectedly heavy workload. It doesn‟t take much for the new employee to call a headhunter or even the old employer and say the four deadly words: “I made a mistake.” Solution: Pair the new recruit with an experienced associate who can help guide the employee through this difficult transition time. In addition, provide a new hire orientation to acclimate the new employee to the company. (2) Promotion peril. A employee is vulnerable to defection when he or she is ready for a promotion but a slot is unavailable. Ambitious, upwardly-mobile employees „waiting‟ for promotions are ripe for the picking from competitors who are only too happy to give them that next step up on the ladder. Solution: Buy some extra time by putting the employee in a special project role (2-3 months in duration) that recognizes his or her achievements. In the interim, find that promotion slot! (3) Boredom blues. The most productive employees typically don‟t tolerate boredom well. No promotion on the horizon? No new project to look forward to? New jobs outside your company will look more and more attractive. Solution: Find out what specific areas most interest the employee and find ways to tailor at least some of the bored employee‟s assignments around those areas. Here‟s where staggered stock options can also help. As a an additional safeguard, schedule a chunk of the options to vest about six months after the period when new employees would be most prone to boredom blues. But managing the employee lifecycle is more than simply managing employee crisis points. It‟s about laying a strong foundation that helps preempt employee defection issues before they even occur. That means creating a culture within the organization that nurtures staff loyalty from the moment the new hire walks through the door and throughout the lifecycle of the employee. The good news is that employees, by their very nature, desire to part of something bigger. As Fortune Magazine columnist Thomas Stewart says, “Human beings want to pledge allegiance to something. The desire to belong is a foundation value, underlying all others.” We‟ve identified nine „best practices‟ for building staff loyalty: 1. Build a Climate of Trust – That Works Both Ways 2. Train, Train, Train and Cross-Train 3. Make Sure Each Employee Has A Career Path 4. Provide Frequent Evaluations and Reviews 5. Seek To Inform, Seek To Debrief 6. Recognize and Reward Initiative 7. Ask Employees What They Want 8. By All Means, Have Fun 9. Hire The Right Employees In The First Place In this article, we‟ll look at two of these which are closely related: Building trust and creating communication pathways. Many firms are finding that with employee trust and empowerment comes profits. Several years ago, Southwestern Bell Yellow Pages increased the amount of billing adjustments allowed by call center representatives from $150 to $500 per customer. This way, any service rep could issue an adjustment voucher without any manager ever seeing it. What‟s more, virtually all customer complaints which use to require up to 5 days for resolution could now be resolved the same day. Though some people in the company were concerned this $500 adjustment limit would cause costs to skyrocket, adjustments showed only a modest increase of 6%. What has increased, however, is the company‟s revenues, which have shown continual improvement of 8 to 10 percent annually. Similar results have been found among the Fortune Magazine “100 Best Companies to Work for in America”, where high levels of diversity and training, and resulting low levels of staff turnover, have enabled companies on this list to dramatically outperform the aggregated annual returns of other large and small companies in the United States. To build more employee trust and empowerment into your company culture, consider the following: Insure staff trust and empowerment are key values in the firm‟s mission and vision statements Practice effective story-telling Create company rites and rituals that help reinforce the rewards of employee trust and empowerment Maintain a free flow of information between management and staff to reinforce the trust factor and help prevent negative communication and gossip. Teach senior managers the importance of „walking the talk‟ and inspiring employee trust. Employees often complain that while they are working harder than ever, their contributions or thoughts on anything beyond their immediate jobs are rarely sought. Says an employee in a communications company, “I have lots of ideas for how my company could move into the Internet but I‟m not one of the inner circle of people making those decisions and don‟t know how to approach them. They all sit in adjacent offices and seem to talk more to each other than anyone else. There‟s little reaching out to a broad array of employees for ideas and input.” Employees who feel underutilized or ignored become unproductive and often seek jobs elsewhere. That‟s why Michael Bonsignore, chairman and chief executive of Honeywell International spends two days a week traveling to Honeywell plants and offices in the U.S. and abroad to meet staff. While time- consuming and often exhaustive, these meetings are a crucial way, as Bonsignore sees it, to keep employees motivated. On a typical week Bonsignore will travel to one or two sites, hold a general town meeting followed by another meeting with 20 „high potential‟ employees, answering questions and listening to their thoughts. It‟s at the smaller gathering where the CEO‟s real learning often happens. Says Bonsignore, “Since no other executives but me is present at those small meetings, there‟s an atmosphere of candor and a chance to get a unique perspective I would never get if I stayed in my office.” Floors, not miles, are what separate employees of The Richards Group, an ad agency based in Dallas;.and that fact worries founder Stan Richards. Beginning in 1997, when the company became big enough to occupy two floors in the same building Richards worried something special would be lost. Says Richards, “Everything changes when you move to multiple floors. People become tribal. Communication becomes more formal---and less effective.” So Richards devised a unique solution. He began holding regular meetings in the stairwell between the two floors so that staffers could learn about company news directly from him. Today, those stairwell meetings continue, only now the staff numbers more than 400 and occupies four and half floors. Recognizing the importance of staff intimacy and open communication Richards notes, “Agencies can be hotbeds of paranoia. The best way to combat that tendency is simply not to keep secrets from each other.” To foster effective communication with staff, consider the following: Practice radical inclusion. Letting people hear news at exactly the same time sends a signal that everyone is valued and no one is excluded from „the know.‟ To minimize the rumor mill, practice spontaneous communication. Stan Richards strives to communicate with his employees within 15 minutes of receiving the information. His philosophy: people should hear good news or bad right way. The larger the group, the smaller the attention span. Keep larger group meetings short and sweet. Be engaging. Make e-mails, newsletters, intranet sites, bulletin boards, etc. fun and interesting to read. Employees love to see their names and pictures in print. This inclusion increases readership. Be on the lookout for unique and novel ways to communicate with staff. From panel discussions, to town meetings to special messages on payroll checks, use a variety of forums to connect with staff. Want to reinforce a number of staff loyalty best practices---demonstrating staff trust, training staff, informing and debriefing staff, etc.--- all at the same time? Easy. Include customer-touching staff, as a sampled group, in your customer loyalty research studies. It‟s a method we‟ve practiced for years and with great results. Here‟s how it works: We survey staff using the same customer loyalty questionnaire used with customers. Only this time we ask employees to respond to the questions the way they anticipate customers responding. Staff frequently have very different perspectives on how, and how well, the company is delivering customer value. Therefore, comparing customer perceptions against staff perceptions can be very revealing. What‟s more, sharing these gaps with staff can create a real awareness about what is and is not working with customers. Need more convincing? Here are three key reasons why you‟ll want to make staff a part of every customer survey: (1) Including staff in customer loyalty research enables staff to have a voice. This tells staff their opinions matter, which in turns helps trust to grow between the company and staff . (2) Surveying staff as part of the customer loyalty research process enables management to learn about specific process areas where there is disconnect between what staff perceives and what customers perceive. These revelations can open the door for needed changes in how customers are served. (3) Surveying staff as part of the loyalty research process helps pave the way for staff buy-in and support of new initiatives and changes, on behalf of customers, that may affect staff, directly or indirectly.