Customer and Employee Satisfaction: Impact on Business Profitability

Abstract

The role of employees in the workplace environment has been redefined by the emerging socio-economic and political changes in the global society. The success and profitability of an organization directly depends on how effectively employees can undertake their duties and their ability to embrace change in this digital age. As such, firms have realized the significance of assessing the attitude of employees and how the same influences their satisfaction at work. The study used various theoretical models to explain the impact of employee satisfaction on customer satisfaction and business profitability. The investigation reveals that there is a correlation between employee satisfaction and internal service quality, customer satisfaction and business profitability. Highly motivated employees tend to register impressive performance in their work. They will meet expectations of customers in the most effective way possible, making them satisfied. When customers are satisfied, they become loyal customers, which then enhances a firm’s profitability.

Introduction

Several studies have demonstrated a strong relationship between employee satisfaction and customer satisfaction, especially in a highly competitive business environment. Firms have to embrace unique ways of operations to ensure that they meet the expectations of different stakeholders within the firm. Understanding people’s attitude have become a critical aspect of both the marketing unit and human resource management department. The marketing department must understand the attitude of customers towards the brand and products of the company (Gounaris & Boukis, 2013). The goal is to always influence this attitude to ensure that it is as favorable as possible to the firm. On the other hand, the human resource management unit has to ensure that it maintains a team of highly skilled and talented employees. Just like customers, dissatisfied employees who are highly skilled can easily leave the firm for a rival company in the same industry. Such demoralized workers also tend to underperform compared with motivated workers. In this paper, the focus was to investigate the impact of employee satisfaction on customer satisfaction and business profitability.

Literature Review & Theoretical Background

Understanding Employee Attitude and Satisfaction

Human resource management is changing because of various socio-economic and political transformation that has been witnessed in the global economy. For a long time, the need to assess people’s attitude in the workplace was not of any significance to organizations. It was easy to hire and fire employees based on the needs of a firm. The authoritarian rule was the standard approach of governing workers (Vella et al., 2009). The majority of these workers had no option but to obey those in the position of management without question. However, the trend has been changing over the years as firms get to understand the significance of employees in the workplace.

The stiff market competition in the market requires firms to approach various activities from a unique perspective. Hendri (2019) explains that creativity and innovation in the current digital era have become essential for firms operating in a highly competitive market. Companies must always assess the current and emerging trends in the market, analyze customers’ attitude towards specific brands and products, and initiate necessary changes that would ensure that they meet customers’ needs in the best way possible. They have to remain as dynamic as possible to enable them to change their strategies effectively as and when necessary. Employees are always at the center-stage of all these necessary steps needed to ensure that firms are successful.

Highly innovating companies such as Amazon.com, Microsoft Corporation, and Apple Inc. have learned the need to empower employees so that they can play a leading role in promoting innovation. Abbott (2002) explains that these firms have created the right environment where individual employees can think of a creative way of undertaking a given task or a new product, share the idea with relevant authorities, and have it tested so that it can become a concept or a product. Instead of waiting for those at the top to initiate change, these employees take leading roles in ensuring that necessary changes are introduced within the firm. When a new policy is developed by the management, it is the responsibility of those who are in leadership to ensure that it is implemented accurately.

It means that the success of any organization depends on the efficiency of its workers. Large corporations have been keen on developing pools of highly skilled and talented employees. According to Lu (2016), having a mechanism of recruiting and hiring such top talents within the industry is just a step towards creating the needed pool. Once they are hired, it is the responsibility of those in the top management unit to ensure that these employees are satisfied to work for the firm. Employee satisfaction goes beyond offering attractive remuneration to the employees. It also involves creating an environment where they feel respected and cared for by the firm. Their concerns should be taken seriously and relevant measures are taken to address them. Pantouvakis and Mpogiatzidis (2013) believe that involving employees in decision-making processes, especially if it involves introducing changes that may affect their current positions within the firm, is also essential. It reduces cases of resistance to change that may limit the implementation of new policies.

Employee Satisfaction, Customer Satisfaction, and Organizational Performance

Studies have found that there is a direct correlation between employee satisfaction and organizational performance. Satisfied employees tend to register a high performance. When such employees are handling customers, they tend to be happy, always willing to go the extra mile to ensure that clients are served in the most effective way possible. Internal service quality within an organization is significantly affected by the attitude of the employees. The top management unit is responsible for defining the attitude of employees towards quality requirements. Some organizational culture tend to create an attitude where employees believe quality can always be compromised (Gounaris & Boukis, 2013). Issues such as delay in delivery of a product after purchase, delivering a substandard product, and ignoring communications from customers often depend on organizational culture.

Such an undesirable culture is often developed by the approach that the human resource unit takes when handling workers. When the management normalizes the practice of ignoring employees’ concerns, the same will be reflected when handling customers. The resentment that employees have towards those in positions of power will be directed to employees (Vella et al., 2009). Such workers will also feel less obliged to take extra time to meet the expectations of workers more effectively. Lau (2000) supports the same argument, stating that when employees are ignored for a long time, they tend to be less productive. Those who are highly talented will easily move to other firms where they are assured of career growth and respect to their needs. The less productive ones will remain within the firm because they lack a better opportunity outside the firm. Such a company’s performance will drop drastically.

Theoretical Background

It is evident that there is a direct relationship between employee satisfaction and customer satisfaction. Similarly, customer satisfaction directly influences profitability of a firm. As such, it is necessary to review theories that directly explain how a firm can maintain a pool of highly skilled, talented, and satisfied employees. Various models have been developed to help explain who people tend to behave in a given manner under various settings. Abbott (2002) explains that when two or more people are exposed to a specific environmental stress, some will cope with them well while others may not. Similarly, different people are motivated by different factors in the workplace environment. This section will use Maslow’s hierarchy of needs theory and job characteristics model to assess the attitude of employees and how they can be motivated in the workplace.

Maslow’s Hierarchy of Needs Theory

Maslow’s hierarchy of needs theory has widely been used to define human behavior. It provides five classes of needs that individuals may belong based on different factors. At the base of the pyramid are physiological needs. These are the very basic needs of a human being, which include food, water, warmth, and rest (Sheng & Liu, 2010). Irrespective of one’s social status, these needs must be met effectively for them to stay alive. These people tend to be less choosy and can take any job that can enable them to meet the basic need. The majority of such individuals are unskilled workers who need manual jobs and often accept any payment that a firm can offer. They do not care much about issues related to employee satisfaction.

The second class of needs of employees is safety and security needs. Once an individual has met the basic needs stated above, they will now focus on their personal safety. Such workers will be concerned about occupational safety. Although they may be willing to take any job available in the firm because of their low cadre and possibly minimal skills, they will demand safety and security at work. They will expect the management to ensure that systems and structures are put in place by the management to ensure that they are not exposed to dangers while at work (Keiningham & Perkins-Munn, 2005). Risk factors should be eliminated to ensure that these individuals are satisfied at work. When possible, the firm should ensure that their health needs are also met through available insurance policies.

The third level of needs, as shown in this model, is a sense of belongingness and love. When one’s basic needs are met, one will then focus on psychological needs. They start valuing friends and relationships both at work and in their private lives. Such individuals become concerned about work-life balance. They prefer working for an organization that understands and respect the need for them to have quality time away from work (Silvestro, 2002). Benefits such as paid holidays and get-together retreats are essential for such workers. They believe that for them to perform optimally, they need to work as a team within the firm. They value working in an environment where they can easily communicate with their colleagues and superiors without restrictions.

Esteem needs fall on the fourth category high up the pyramid, as shown in figure 1 below. Individuals in this class are highly skilled and experienced workers who know that their role in the firm is indispensable. The majority are at various levels of management. They are financially secured and can easily leave their current organization without their lifestyle being significantly affected. They have prestige and a feeling of accomplishment (Bellou & Andronikidis, 2008). They have made a mark within their organization and feel that they need to regularly be appreciated for their continued exemplary performance within the firm. Handling such employees within an organization may be highly challenging. Offering them attractive remuneration is just one step towards ensuring that they are satisfied. They also need to be recognized as individuals who can make independent decisions and work effectively without constant supervision (Sheng & Liu, 2010). Losing such an employee to a rival firm may be dangerous because it may leave the firm exposed to various external threats. As such, managing their wellbeing and meeting their esteem needs should be given priority.

At the apex of the pyramid are self-fulfillment or self-actualization needs. Lu (2016) notes that few people often reach this level within an organization. Such individuals feel that they have achieved their full potential. The chief executive officer and other top executives may fall in this category. They go beyond esteem needs because they know that everyone understands and appreciates what they have achieved (Pantouvakis & Mpogiatzidis, 2013). As such, they do not need a constant reminder from others to validate their feeling of success. At this stage, their primary need is always to mentor others to follow the same path of success. Hendri (2019) describes it as the highest level of self-fulfillment and achievement that one feels they need to serve instead of being served. They need their organization to create platforms through which they can serve younger, less-experienced, and less-skilled employees. They also need their space to make independent decisions, with minimal consultations whenever it is necessary to do so. Understanding the category in which one falls is critical because it defines the leadership approach that the management should take when handling them. The goal is to always ensure that these employees are satisfied at work.

Maslow’s Hierarchy of Needs Theory
Figure 1. Maslow’s Hierarchy of Needs Theory (Bartels & Jackson, 2021, p. 89).

The job characteristics model identifies three sets of factors that define employee motivation, performance, and satisfaction. The first is the meaningfulness of work, which is defined by skills variety, task identity, and task significance. Skill variety involves aligning the skills of employees with specific tasks. When allocating employees’ tasks, it is necessary to ensure that their skills and experience are taken into consideration. Task identity involves defining the specific role that every employee should undertake and how the outcome of their performance can be assessed. It motivates workers to know that their individual contributions are leading to the overall organizational success. Task significance involves explaining to the employee the importance of the task assigned to them. They should understand how important their performance is to the organization.

The second factor is the responsibility for work outcomes, defined by the autonomy of individual employees. According to Bellou and Andronikidis (2008), when a firm maintains a close supervision of employees, factors such as creativity and innovativeness will be lost. These workers also tend to forget that they need to be responsible for their actions, believing that the supervisor will be taking responsibilities. They also tend to be less motivated and with poor performance. It is essential for the management to allow workers to have some sense of supervised autonomy to improve their satisfaction, motivation, and performance.

The third factor is the knowledge of the results of work, which is defined by the feedback. Some organizations rarely provide employees with feedback unless it is a negative one. The problem is that in such an environment, these employees lack the motivation that is defined by a positive performance. Providing regular feedback, when it is positive or negative, is essential in enabling the workers to understand their capabilities. The feedback should not only be meant to facilitate continuous improvement but also act as a motivation to these workers to achieve greater results. When their performance is less than satisfactory, specific areas of weakness should be identified and corrective measures provided. If their performance is satisfactory, they need to be congratulated and assisted in registering greater success in their next assignments. Figure 2 below identifies how these factors lead to high employee satisfaction, motivation, and performance.

Job Characteristics Model
Figure 2. Job Characteristics Model (Fahed-Sreih, 2018, p. 56).

Conclusion

Successful firms have understood the fact that their profitability directly depends on customer satisfaction, which greatly depends on employee satisfaction. The review of the literature and discussion conducted above focused on employee satisfaction in the current competitive business environment. The study shows that the role of employees has evolved over the years. The success of a firm depends on how creative and committed employees are within their respective departments. However, their performance depends on their level of satisfaction and motivation. Human resource managers must find ways of ensuring that they motivate their workers to ensure that they have a pool of highly skilled and talented employees. Offering workers is just one of the ways of positively influencing their attitude towards work and ensuring that they are satisfied. They also need social and moral support to perform optimally and to ensure that they meet customers’ expectations.

References

Abbott, J. (2002). Does employee satisfaction matter? A study to determine whether low employee morale affects customer satisfaction and profits in the business-to-business sector. Journal of Communication Management, 7(4), 333-339.

Bartels, B., & Jackson, C. (2021). Meaning-centered leadership: Skills and strategies for increased employee well-being and organizational success. Rowman & Littlefield Publishers.

Bellou, V., & Andronikidis, A. (2008). The impact of internal service quality on customer service behavior: Evidence from the banking sector. International Journal of Quality & Reliability Management, 25(9), 943-954.

Fahed-Sreih, J. (Ed.). (2018). Human resource planning for the 21st century. IntechOpen.

Gounaris, S., & Boukis, A. (2013). The role of employee job satisfaction in strengthening customer repurchase intentions. Journal of Services Marketing, 27(4), 322-333.

Hendri, M. (2019). The mediation effect of job satisfaction and organizational commitment on the organizational learning effect of the employee performance. International Journal of Productivity and Performance Management, 68(7), 1208-1234.

Keiningham, T., & Perkins-Munn, T. (2005). Does customer satisfaction lead to profitability? The mediating role of share-of-wallet. Managing Service Quality, 15(2), 172-181.

Lau, R. (2000). Quality of work life and performance: An ad hoc investigation of two key elements in the service profit chain model. International Journal of Service Industry Management, 11(5), 422-437.

Lu, L. (2016). Work engagement, job satisfaction, and turnover intentions: A comparison between supervisors and line-level employees. International Journal of Contemporary Hospitality Management, 28(4), 737-761.

Pantouvakis, A., & Mpogiatzidis, P. (2013). The impact of internal service quality and learning organization on clinical leaders’ job satisfaction in hospital care services. Leadership in Health Services, 26(1), 34-49.

Sheng, T., & Liu, C. (2010). An empirical study on the effect of e-service quality on online customer satisfaction and loyalty. Nankai Business Review International, 1(3), 273-283.

Silvestro, R. (2002). Dispelling the modern Myth: Employee satisfaction and loyalty drive service profitability. International Journal of Operations & Production Management, 22(1), 30-49.

Vella, J., Gountas, J., & Walker, R. (2009). Employee perspectives of service quality in the supermarket sector. Journal of Services Marketing, 23(6), 407-421.

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NerdyRoo. (2022, August 13). Customer and Employee Satisfaction: Impact on Business Profitability. Retrieved from https://nerdyroo.com/customer-and-employee-satisfaction-impact-on-business-profitability/

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