Measuring the Benefits of Employee Engagement

  • V. Kumar and Anita Pansari
  • June 16, 2015

It’s well known that employees’ attitudes toward the organization have a significant effect on how they approach their jobs and how they treat customers. But recent research also suggests that high levels of employee engagement are associated with higher rates of profitability growth.

Over the years, the media and academia have paid close attention to various customer-driven strategies — aimed at improving measures such as customer satisfaction, customer loyalty and company profits. However, in recent years, the focus has changed. Although the ability to deliver a good product or service to customers who want it and are willing to pay for it is still seen as the key ingredient to success, there is a growing interest in understanding the impact of employees on the bottom line.

That some companies are choosing to invest in better-trained and more service-oriented workforces should be no surprise. With increasing competition, technological advances and globalization, many companies, especially those selling services, have come to realize that employee expenditures are more than a cost: Employees are the face of the business and sources of innovation and organizational knowledge. They interact with customers at every touch point and create lasting brand impressions. They personify the company’s service philosophy and are expected to live by its culture and values. While the products and services many companies offer can appear quite similar on the surface, exceptional service can be a competitive advantage. Competing through service is only possible when the organization treats its employees as a valuable resource.

Well-known service-focused companies, including Whole Foods Market, Starbucks, Marriott International and Southwest Airlines, have long invested in initiatives focused on maintaining a holistic framework of making both their customers and their employees happy. Herb Kelleher, the founder and chairman emeritus of Southwest, summarized this philosophy well when he said, “You put your employees first, and if you take care of them, then they will take good care of you, and then your customers will come back, and your shareholders will like that, so it’s really a unity.”1 Howard Schultz, the CEO of Starbucks, echoed this view: “[Employees] are the true ambassadors of our brand, the real merchants of romance and theater, and as such the primary catalysts for delighting customers.”2

Defining Employee Engagement

For the past two decades, employee engagement has been a topic of interest both in the academic literature and among managers.