I’m Happy, You’re Happy. Yet More Evidence that Satisfied Employees Make Satisfied, and Loyal, Customers

We have known for a long time now that there is a link between how happy an organisation’s workers are and how happy its customers are.  New findings published in the May 2011 edition of the Journal of Service Research demonstrate yet again that, when studied empirically, the links between employee satisfaction and customer satisfaction are undeniable (1).

This study led by Heiner Evanschitzky from AstonUniversity reveals further that when employees are more satisfied in their roles, the link between customer satisfaction and intention to buy from the company again in the future is stronger.  Satisfied employees mean that satisfied customers report more likelihood to purchase in the future.

In this study, Evanschitzky and his co-researchers examined satisfaction levels at 50 franchised retail outlets and so the employees in the study directly interacted with the customers.  It probably seems intuitively correct that as a customer, if you are served by someone who is happy in their job, then you may come away feeling more positive about the organisation. A process of social contagion could explain at least some of the customers’ satisfaction: they might have been picking up and adopting some of the emotions of the employees during their interactions with them.  In addition, engaged and satisfied employees may care more about providing a good service, and work harder to do so, leading directly to a better customer experience.

However, the effect of employee satisfaction seems to go deeper than this, as evidenced in earlier work by Evanschitzky and his colleagues.  This research demonstrated that employee satisfaction was related to customer satisfaction regardless of whether the employees in question had a front line role in a customer service capacity (2).  So the satisfaction levels of employees in a back office, for example, are related to levels of customer satisfaction, even though there is no direct contact between the employees and the customers.

And what about cause and effect?  Do the happy customers of a successful business make for more satisfied employees, or is it the satisfied employees who create satisfied customers and ultimately a successful business?

It’s not entirely clear.   Common sense suggests a bit of both perhaps; leading customer service academics lean towards the latter through their proposals of concepts such as the service-profit chain; and empirical research tackles this issue much more rarely than more straightforward correlational studies.

However, research by Daniel Koys in 2001 using time-lagged analysis of business performance suggests that employee attitudes and behaviour are linked to later organisational effectiveness (3).  The implication of this is that employee satisfaction creates business success, rather than the reverse.

Factoring this in with the overwhelming majority of research that shows there is a link between employee and customer satisfaction, and combining it with the basic principle that it is generally better for humanity if people are happier in their work, then it is pretty well indisputable that organisations who want to create satisfied customers should look first to their own employees.

How do employers develop satisfied employees?

There is a wealth of literature and research centred on what organisations need to do to create satisfied and engaged employees – far too much to be included in this article (4).  But for a few fundamental activities that organisations need to invest time and resources into, the following are good starting points.

1.  Recruit the right person into the right job.  Be clear about what the job involves and what someone needs to know and be like in order to do it well.  Provide detailed information to candidates about the organisation and the job, and then use reliable and accurate methods of assessing applicants’ suitability for the role and the organisation. Remember they are selecting you too.

2.  Use an inclusive and informative induction process.  Introduce all aspects of the job, the department and the wider organisation. Keep customer focus the centre of all activities. Involve team members and colleagues in the welcoming and training of the new recruit.

3.  Design the job so it allows people the opportunity to a) use their talents and their judgment, b) do a range of different activities, and c) see tasks through to a meaningful end.

4.  Major on two-way communication.  Don’t use the “need-to-know” model:   tell people often how and why their role is valuable, how it fits with other roles in the organisation and give ongoing constructive information to allow people to evaluate their performance and find possibilities for development and advancement.  Even more importantly, listen to employees and create as many channels as you can for free, cross-organisation communication about all sorts of issues – and that means structures to support upward communication at every level and an organisational culture that values and encourages it.

5.  Recruit, train and support your management and executive to manage and support front-line customer service employees and to see their own success as fully dependent on that of the team(s) in front of them.

And so on.  There is much more that organisations should be doing, such as creating an organisation where every employee sees every other employee as a customer, making sure that everyone’s contribution is recognised, ensuring that people are rewarded for organisational citizenship behaviours, enabling employee participation in decision making, etc, etc, etc.

Maybe it seems like a mountain to climb and one that will take an organisation’s focus off the customer and off the competition.  How much easier it is to come up with some new products, open a new call centre and carry out some customer surveys.

But the compelling evidence that customers and business will benefit, along with the gratifying knowledge that it’s a win-win situation, must make the decision to invest in the workforce one of the easiest ones for a CEO to make.


1.    Evanschitzky, H.,  Groening, C.,   Mittal, V.,  and Wunderlich, M. (2011) “How Employer and Employee Satisfaction Affect Customer Satisfaction: An Application to Franchise Services” in Journal of Service Research, May, vol. 14 no. 2, pp136-148

2.   Wangenheim, F. v, Evanschitzky, H., and Wunderlich, M (2007) “Does the employee–customer satisfaction link hold for all employee groups?”  in Journal of Business Research, Volume 60, Issue 7, July, pp 690-697

3.  Koys, D. J. (2001) “The Effects Of Employee Satisfaction, Organizational Citizenship Behavior, And Turnover On Organizational Effectiveness: A Unit-Level, Longitudinal Study” in  Personnel Psychology, Vol 54, Issue 1, March, pp 101 – 114

4.  Any google search on employee engagement or well-being will give you an extensive reading list if you want to know more, but you could do worse than starting with  “Job and Work Design: Organizing Work to Promote Well-Being and Effectiveness” 1998 “, by Sharon K. Parker and Dr. Toby D. Wall


43 Comments to “I’m Happy, You’re Happy. Yet More Evidence that Satisfied Employees Make Satisfied, and Loyal, Customers”

  1. Great summary here! I would add two more points to the five you have surfaced up:
    (1) Organizations would do well to articulate a clear statement of intentions regarding customer centricity as a priority alongside the commitment to employees who serve customers. Call is a vision statement, a mission statement, a culture/climate statement if that helps; the key is to be explicit about the type of experience internal and external to which you aspire and toward which the company will hold itself accountable
    (2) All leaders with some P&L responsibilities must be accountable not only for their own patch, but also for the collaboration across functions and divisions as these collectively impact employee experience and the capacity to serve customers.

    And these seven recommendations in total span focus on individual agent of service delivery to focus on total organization, its culture and its aspirational vision.

  2. It’s no secret that happy employees will automatically be more apt to “spread their happiness” to their customers. Customers appreciate associates that appreciate them. And, in the long run, customers will appreciate those companies that appreciate their associates! Richard Shapiro, The Center For Client Retention

  3. Absolutely in a nutshell!

    Thanks for your comment Richard. What confounds me sometimes though is how often organisations don’t “walk the talk”. It’s not easy or everyone would be doing it, but it is clear that many organisations understand the principles but don’t follow through with the practices and culture that will create engaged employees and happy customers.

    I was very interested in the research on your website http://www.tcfcr.com that shows that use of social media to post positive or negative comments about companies has doubled in the last year – http://bit.ly/gEmhOl

    I would be intrigued to know if you see organisations reacting to this by also working with their internal customers to increase engagement and satisfaction or if most efforts are focused on the external customer.

  4. As a post-script to the article, I saw this exchange between a customer service academic and a practitioner in the FT this week http://on.ft.com/quBRyX

    Both agree on the link between employee engagement and customer experience, but they offer diffferent solutions if the customer experience is not good.

    One suggests making it clearer to employees that satisfying customers is a job requirement and specifically that not doing it is a deal-breaker. The other suggests the organisation look more closely at what systems and procedures prevents employees from offering great customer service and argues that leadership often fails to role model the behaviour it demands.

    Food for thought.

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