Human Sigma Managing Employee Engagement

Year 2009 has been a tough year for economies around the world as credit markets and consumer spending remains constrained. The latest Gallup consumer research shows that consumer confidence in the United States is improving somewhat, but spending levels in 2009 remain well below those in 2008. According to the US Department of Commerce, retail sales in the US through July of 2009 (excluding automobiles) were down approximately 9 percent compared to the same period last year. None of this is good news. In these turbulent times, how well can managing a company's employee and customer engagement help?

Dr John H. Fleming Principal and Chief Scientist, Customer Engagement and HumanSigma for Gallup

In an exclusive two-part interview to Qatar Today, Dr John H Fleming, Principal and Chief Scientist, Customer Engagement and HumanSigma for Gallup throws light on what companies can do to keep employee engagement up so that it reflects positively on their customer interface.

The first of the five principles of HumanSigma talks about managing human systems in tandem, irrespective of whether it is the customer and the company or employee and the company. How would you advise companies to do that?

Most companies today have some sort of customer and employee measurement programme in place. Those that don't should think seriously about deploying one because it is no longer a 'nice to have' option, but an essential management process. In many of the companies we have worked with, these initiatives are housed and owned by different functional areas that often operate as isolated 'silos.' For example, the employee measurement programme is often owned by the (Human Resources) HR department. Customer metrics are usually owned by the marketing, operations, quality, or even sales function. Only rarely do these functional areas communicate. Even more rarely are these metrics (and the important actions that should follow from them) aligned and utilised together on a common platform by a single team. We contend that this lack of alignment and coordination limits a company's line-of-sight on its customer and employees and hampers their ability to use the information they collect effectively. But when employee and customer measures are brought together on a common platform, a new perspective emerges - one that is not visible when each metric is viewed in isolation. This perspective can provide executives with insights they otherwise would not have gained and solutions they might never have considered. Over the next 5 to 10 years we expect service economy companies around the world to begin to move toward more alignment between their HR, operations, and marketing organisations. In some companies this move has already happened and the HR and marketing functions have been merged into a department of human marketing. Others have begun to form coordinated HumanSigma steering committees made up of representatives from marketing, HR, and operations and headed by a single corporate champion.

If 'Feelings Are Facts' (second principle), how should, ideally, first-time business encounters happen between employees and customers?

I'm not sure there is an 'ideal' way, but I believe there is an optimal perspective that every employee can bring to their initial interactions with their customers. That perspective demands first that they recognise that customers are people first and customers second, and second that they understand that people have emotional needs that must be fulfilled in order to create a solid, long-term attachment to a company. We have researched this issue extensively and have found that there are really four 'lenses' or 'filters' through which customers evaluate companies. The first of these is Confidence. Is this organisation trustworthy? Can its employees be trusted to do what they say they will do day in and day out? Confidence is the foundation on which strong customer relationships are built. But Confidence alone is not enough to build long-term, sustainable, and emotionally connected customer relationships. Beyond Confidence lies Integrity, the essential dimension of fair play. Does this organisation treat me the way I deserve to be treated? If something goes awry, can I count on this company to fix it quickly?

The next requirement is Pride, a sense of positive association and identification with the organisation. Customers feel Pride not because of what their association with an organisation says to others, but more importantly, because of what it says to them about themselves. In other words, customers like to think of themselves as savvy, smart decision makers. Any company that causes a customer to question his or her own decision making abilities damages that customer's self-esteem. The ultimate expression of a strong emotional attachment is Passion. Passionate customers describe their relationship with the company as irreplaceable and a perfect fit. Passionate customers are customers for life and are worth their weight in gold. If staff keep these emotional requirements in mind and strive to fulfill them when interacting with customers, they will be ideally positioned to build strong, emotionally connected relationships. Remember, customers don't want transactions - they can get those anywhere. What they really want is relationships.

Our research reveals that across organisations of different types, customers who are fully engaged - those customers who have a strong emotional connection to the organisation - represent an average 23 percent premium in terms of share of wallet, profitability, revenue, and relationship growth over the average customer. In stark contrast, actively disengaged customers - those customers whose emotional connection to the organisation is weak or absent - represent a 13 percent discount.

Principle Three talks about 'Think Globally; Measure and Act Locally'. In the local business scenario, where most are global companies who have set base here, how do you advise global companies to achieve this maxim?

Local performance variation is a scourge to organisations that aspire to high performance. The basic idea here emerged from an analysis of customer and employee engagement data at the team or 'unit' level from companies around the globe. Consider the following: An apparel retailer claims to be an industry leader in customer satisfaction, citing an independent study of customers in the category. A retail bank announces that it has won an award for being one of the country's best places to work for the fifth year in a row. While each of these claims may be legitimate, candid conversations with customers who shop in the store's different locations or visits to different bank branches will inevitably reveal a large range in the quality of the customer and employee experience at those organisations. Within the same retailer, one store location may deliver exceptional service while another struggles to drag customers through the door. Within the bank, some branches may be exceptional places to work while others are oppressive. What we found - and continue to find in every company we work with - is that there is vast variation in customer and employee engagement from store to store, location to location, and team to team within the organisation. In fact, the variability within an organisation easily dwarfs the differences between competitors. Substantial variability in customer and employee engagement represents a significant threat to the sustainability of the enterprise and drags down financial and operational performance.

The existence of a broad range of variability in engagement levels within an organisation suggests that the only way to manage that variability and improve local performance is to provide performance feedback at the level where it originates. In practice, this means at the store, bank branch, local office, or sales team -the local level where employees spend most of their time, where customer interactions occur, and where the customer experience is created. Because most managers' spheres of influence are circumscribed and local, the metrics they rely on to manage must also be focused locally.

What is the likelihood of a company with a high/excellent Human Sigma translating into a highly profitable company?

Enormous. But first, let's define what we mean by 'a company with high/excellent HumanSigma performance'. To us, that means a company where the majority of their local 'units' or teams are optimised - in the top 50 percent on both employee and customer engagement. Gallup's HumanSigma model suggests that gains in team-level financial performance can be driven exponentially by simultaneously optimising both employee and customer engagement.

In fact, 'optimized' teams within an organisation generate a 240 percent boost in financial performance compared to teams that fail to engage their employees and their customers. Furthermore, these optimised teams also significantly out-perform those that scored high on one but not the other of these metrics. So companies that drive higher levels of HumanSigma performance would be expected to outperform companies that do not, and our research backs this up. In fact, in the original research into the HumanSigma construct, the 10 companies that deployed HumanSigma principles in their businesses outpaced their competition by 26 percent in gross margin and 85 percent in sales growth over a recent one-year period.

Could you list some of the transactional and transformational intervention activities that Principle 5 emphasises across business sectors?

Transactional interventions are those that help companies find ways to do what they already do, but to do it better at both a local and an enterprise level. Transactional intervention activities are problem-solving initiatives that include things such as local team action planning, compliance audits, SWAT team deployment, brain-storming, process improvement, and Six Sigma initiatives, to name a few. Transformational interventions tend to be enterprise wide and focus on creating new ways to do things: how to identify and recruit talent, position people within roles for success, reward, recognise, and develop their employees and, maybe even most importantly, manage them. Both transactional and transformational activities are essential for sustainable improvement in organisational performance.

Which specific business, within the service sector, is most likely to benefit from applying Human Sigma? Can you cite some cases in point?

Companies that can benefit from the application of HumanSigma principles run the gamut from large retailers and retail banks all the way to pharmaceutical sales organisations and IT outsourcing companies. It is a model designed to be applied to almost any organisation, but it has particular applicability to companies with a high degree of direct customer contact through a variety of touch points. HumanSigma focuses organisations on accepting human nature and capitalising on it to manage employees, motivate them, accelerate development, and unleash innovation and productivity to ultimately engage the emotions of the company's most valuable assets - the customers they serve.For example, one large consumer bank we have worked with has found that they can dramatically improve their branches' HumanSigma performance by doing a few core things. First, they made a company-wide commitment to taking disciplined and focused local action to improve employee and customer engagement. Creating engaged employees and emotionally-connected customers was more than mere lip service. Second, they deployed a broad array of both transactional and transformational intervention activities. The financial results of these activities were dramatic. In just one year the bank was able to move a large number of branches into a higher Human-Sigma performance level (there are 6 in our methodology). In fact, those branches that improved by at least one HumanSigma level, as well as those that performed consistently in the highest two levels, accounted for over 99 percent of the year-over-year proÔ¨Åt increase for the consumer bank.