Why Happy Employees Matter Just as Much as Happy Customers to Your Company’s Bottom Line

Who is more important to an organization: customers or employees? originally appeared on Quora: the place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Bruce Claver, Luxury Hospitality, Client Experience Expert, Trainer, and Speaker, on Quora:

Which comes first, the chicken or the egg … the customer or the employee? However this question is debated, there is a clear answer, but perhaps not the answer you are thinking.

ARGUMENT: The Customer is King:

If a business does not have a source of revenue, it will fail. No surprise there. This is an absolute whether it is a corporation, sole proprietorship, non-profit (foundation or charity), religious organization, e-commerce, or even a government entity. A business needs to have a source of revenue to pay the bills, invoices, employees, and expansion, etc. Customers support that. Without revenue, you cannot hire or support employees. But can an organization have hundreds or thousands of employees but little to no revenue and stay in business? Hasn’t Facebook and many other start-ups done that? Yes, but at some point investors need profits or they pull their funding which translates into a need for “customer comes first” or “build it and they will come” mentality (ie: Great products = Customers = Profits) Don’t customers need to receive excellent products and services in order to open their wallets? Of course yes, but who is going to provide them this exceptional product or service? Employees of course. But what happens if the employees are miserable in their jobs? How will this affect morale, innovation and customer relationships? Does it translate into a great product and/or service? Does it make sense to say, “build it and they will come?” Perhaps for Apple and their newest iPhone, but for the rest of us, it is not that simple.

One can argue that customers are more important than employees because without revenue, no business even a non-profit (Charities have 3 months funding in reserve) will not survive. A VC funded business will eventually dry up without revenue/customers. When the customer stops taking out their wallets, employees get laid off and a business teeters on the brink of filing for bankruptcy or closing. The customer is king!

ARGUMENT: Employees Come First

There are millions of websites that run on auto-pilot or have evergreen content where employees are not needed to maintain the page. An example might be a site like Ebay or Amazon where you don’t need employees to run a business. But we are looking at businesses that have employees who have direct contact with customers. How important are they, really? Can’t business owners simply hire new bodies as the old ones exit through the backdoor?

Happy employees tend to exhibit their enthusiasm when interacting with customers. How employees are treated, or the atmosphere of the internal culture, will dictate how your employees feel. Attitude is tied to an employee’s performance and is transformed into the quality of their work. Ultimately what is felt and experienced by customers from employees, turns into a decision to return back to your business or visit a competitor (assuming there is nothing wrong with the product itself and your business is not the only business selling a particular product).

REAL LIFE CASE: Happy vs. Unhappy Employees

In early 1994, Continental Airlines’ culture was toxic. Employee moral was virtually dead and the company experienced ten CEOs in ten years’ time. The low morale translated into being ranked last in every measurable airline performance category, and the airline was on the verge of its third bankruptcy. Then, Gordon Bethune took over as President in October of 1994. (In 1996, Bethune became the CEO and Chairman of the Board of Directors.) Bethune changed the culture of Continental by changing the culture starting at the top, the Executive Floor at the Corporate Headquarters. With a new “open door” policy, he eliminated company restricted access to the 20th floor, the Executive Floor, that could only be accessed by Senior Vice-Presidents with a key card. Security had patrolled the floor to remove any employee who was not a VP. That stopped and he removed key-card-only access and invited any employee to access to the floor. He fired 39 senior VPs who had trouble adjusting to this new “employees first” mantra. By looking inside, at the core of Continental’s culture, and starting with themselves, he transformed the airline from ranking dead last in every customer service ranking, to winning more J.D. Powers and Associates awards for Customer Service than any other airline in the world. The stock price rose from $2 a share to over $50 a share and the company was ranked as one of the top 100 companies to work for by Fortune Magazine.

Yes, there are unhappy employees at companies that generate profits but this will always be a short-term gain. If employees are not putting their hearts into their work, service can’t help but suffer, and innovation is repressed, killing any chance for the product to evolve and satisfy the customer’s growing needs. This is why every business owner should look at themselves and ask, “Are my employees feeling good about where they are?” Managers should be asking themselves the same question. Are your employees happy? Change must come from the inside if change is to take place and morale is to climb. This is true with all of us. Are you performing at your best when you are stressed, down and out or feeling blue inside? Chances are the answer is no. Controlling how an employee feels is in direct correlation to how happy a customer feels about their experience and whether they return to you or go to a competitor.

So which is the answer? Your customers are your lifeline. They pay the bills, salaries, and provide the resource needed for infrastructure, like expansion. Happy employees put their hearts into their work and can produce innovative ideas, products, and services which benefit both customer and company.

With unhappy customers and unhappy employees or with happy customers and happy employees, either way you slice it, the answer appears to derive from a cyclical process. How can we say which is more important? Each has their own unique qualities that are important, no, critical to the big picture and success or failure of the company.

When it comes down to it, we have come full circle and are back to asking what we first asked, which comes first, the chicken or the egg? Which is more important to an organization, the customers or the employees? To answer the question, lets think outside the box.

Who or what is the force to which we can turn to and say, “Without ______ (fill in the blank)” both customer and employee are either happy or unhappy? That force sets the course, tone and culture of the business as the “Captain of the ship”. This is the person setting the course for both customer and employee satisfaction and that person is your most senior executive, the President. Your senior leadership, specifically, the #1 person in charge at the top sets the tone for how happy or miserable both your customers and employees are. It is the leader who determines, even dictates the culture of the company. Without the Captain of the ship directing the culture by his or her own actions and where the team can see his/her actions in play, the question will pretty much remain a debate. It is an inside force leading both employee and customer. That inside force is the leader of the business, the CEO, the President, the owner. Employees and customers are both affected by how leadership runs the company by virtue of the product or service that the customer receives, which generates recommendations and more business, even repeat business (see Continental example above). Mr. Bethune changed the culture of Continental by setting a new course and the employees at the time were either with him or against him. You can conclude where 39 Vice-Presidents stood when he told them that in order to change to a profitable company, they needed to change the culture. I guess they ended up standing in the unemployment line.

When a company does not have to tell its customers why they are the best in their market, and it is naturally a business we gravitate to because we feel good about paying the company because the product is very good and the customer service is very good, we can conclude that employees have put their heart and soul in a great product, service and company. The employees radiate and feel it, the customers experience it and, the company benefits from all of it.

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